File No. 811-3700
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 46 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 45 [ X ]
(Check appropriate box or boxes.)
THE DREYFUS/LAUREL TAX FREE MUNICIPAL FUNDS
(formerly The Laurel Tax-Free Municipal Funds)
___________________________________________________
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6000
John E. Pelletier
Secretary
The Dreyfus/Laurel Tax-Free
Municipal Funds
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box)
immediately upon filing pursuant to paragraph (b)
----
X on November 1, 1996 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.
----
Registrant has registered an indefinite number of shares of beneficial
interest under the Securities Act of 1933 pursuant to Section 24(f) of the
Investment Company Act of 1940, Registrant's Rule 24f-2 Notice for fiscal
year ended June 30, 1996 was filed on or about August 29, 1996.
PREMIER LIMITED TERM MUNICIPAL FUND
PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND
DREYFUS BASIC NEW YORK MUNICIPAL MONEY MARKET FUND
DREYFUS BASIC CALIFORNIA MUNICIPAL MONEY MARKET FUND
Cross-Reference Sheet Pursuant to Rule 495(a)
________________________________________________________
Items in
Part A of Prospectus
Form N-1A Caption 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
PREMIER LIMITED TERM MUNICIPAL FUND
PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND
DREYFUS BASIC NEW YORK MUNICIPAL MONEY MARKET FUND
DREYFUS BASIC CALIFORNIA 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 Distribution and Service
Securities Being Offered Plans; Redemption of Shares;
Valuation of Shares
20 Tax Status Taxes
21 Underwriters Purchase of Shares;
Distribution and Service
Plans;
Amounts Expended
PREMIER LIMITED TERM MUNICIPAL FUND
PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND
DREYFUS BASIC NEW YORK MUNICIPAL MONEY MARKET FUND
DREYFUS BASIC CALIFORNIA MUNICIPAL MONEY MARKET FUND
Cross-Reference Sheet Pursuant to Rule 495(a) (Continued)
_______________________________________________________
Items in
Part C of
Form N-1A
_________
22 Calculation of Performance Data
Performance Data
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
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PROSPECTUS NOVEMBER 1, 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 (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. SINCE THE FUND MAY
INVEST A SIGNIFICANT PORTION OF ITS ASSETS IN THE SECURITIES OF A SINGLE
ISSUER, AN INVESTMENT IN THE FUND MAY INVOLVE GREATER RISK THAN INVESTMENTS
IN CERTAIN OTHER TYPES OF MONEY MARKET FUNDS.
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 DATED NOVEMBER 1, 1996 (THE
"SAI"), 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. THE SEC
MAINTAINS A WEB SITE (HTTP://WWW.SEC.GOV) THAT CONTAINS THE SAI, MATERIAL
INCORPORATED BY REFERENCE, AND OTHER INFORMATION REGARDING THE FUND. FOR A
FREE COPY OF THE SAI, WRITE TO THE FUND AT 144 GLENN CURTISS BOULEVARD,
UNIONDALE, NEW YORK 11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK
FOR OPERATOR 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. (THE "DISTRIBUTOR").
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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
SHAREHOLDER SERVICES............................ 12
HOW TO REDEEM FUND SHARES....................... 14
PERFORMANCE INFORMATION......................... 16
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES........ 17
GENERAL INFORMATION............................. 18
Page 2
[This Page Intentionally Left Blank]
Page 3
<TABLE>
<CAPTION>
EXPENSE SUMMARY
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Check Redemption Fee........................................... $2.00
Exchange Fee................................................... $5.00
Account Closeout Fee........................................... $5.00
ESTIMATED ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fee................................................. .45%
Other Expenses*................................................ .00%
Total Fund Operating Expenses.................................. .45%
</TABLE>
<TABLE>
<CAPTION>
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:
<S> <C>
1 YEAR $ 10
3 YEARS $ 19
5 YEARS $ 30
10 YEARS $ 62
</TABLE>
* Does not include fees and expenses of the non-interested Trustees
(including counsel). The investment manager is contractually
required to reduce its Management Fee in an amount equal to the Fund's
allocable portion of such fees and expenses, which are estimated to be 0.01%
of the Fund's net assets. (See "Management of the Fund.")
- ------------------------------------------------------------------------------
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. The information in the foregoing table does not reflect any fee waiver
or expense reimbursement arrangements that may be in effect. 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 management 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, taking into account such limitations or
reimbursement, would be: Management Fees_.35%; Other Expenses_.00%; and Total
Fund Operating Expenses_.35%. 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 exchange
out of the Fund, wire redemption or Dreyfus TELETRANSFER 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."
FINANCIAL HIGHLIGHTS
The following table is 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, 1996, and are incorporated by reference into the SAI.
The financial statements and related notes, as well as the information in the
table below insofar as it relates to the fiscal period or years ended June
30, 1994, 1995 and 1996, have been audited by KPMG Peat Marwick LLP,
independent auditors, whose report thereon appears in the Fund's Annual
Report. The information in the table below for the years or periods prior to
the fiscal period ended June 30, 1994, has been audited by other independent
auditors.
<TABLE>
<CAPTION>
DREYFUS BASIC CALIFORNIA MUNICIPAL MONEY MARKET FUND
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
PERIOD YEAR YEAR
Ended Ended Ended
YEAR OR PERIOD ENDED NOVEMBER 30, JUNE 30, JUNE 30, JUNE 30,
--------------------------------------------------
1988 1989 1990 1991 1992 1993 1994# 1995## 1996
----- ----- ----- ----- ----- ----- -------- -------- -------
<S> <C> <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 $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 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) (0.031)
----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period $1.00 $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% 3.19%
===== ===== ===== ===== ===== ===== ===== ===== =====
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 $36,728
Ratio of expenses to
average net assets..... 0.67%** 0.32% 0.32% 0.32% 0.32% 0.32% 0.47%** 0.60% 0.44%
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% 3.36%
</TABLE>
* The Fund commenced operations on March 2, 1988. On February 1, 1993,
existing shares of the Fund were designated the Retail Class and the Fund
began offering the Institutional Class and Investment Class of shares.
Effective April 4, 1994, the Retail and Institutional Classes of Shares were
reclassified as a single class known as Investor shares and the Investment
Class shares were reclassified as Trust shares. Effective October 17, 1994,
the Trust shares were redesignated as Class R shares. The Fund's Investor
shares were subject to a Distribution Plan adopted by the Fund pursuant to
Rule 12b-1 under the Investment Company Act of 1940, under which the Fund
paid a fee of 0.25% of average daily net assets attributable to Investor
shares for shareholder servicing and activities and expenses primarily
intended to result in the sale of Investor 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 and its Distribution Plan was terminated. The Financial
Highlights for the fiscal year ended June 30, 1996 were calculated using
the performance of an Investor share outstanding from July 1, 1995
to November 19, 1995, and the performance of a Fund share outstanding
from November 20, 1995 to June 30, 1996. The Financial Highlights for the
year ended June 30, 1995 are based upon an Investor share outstanding. The
amounts shown for the period ended June 30, 1994 were calculated using the
performance of a Retail share outstanding from December 1, 1993 to April 3,
1994, and the performance of an Investor share outstanding from April 4, 1994
to June 30, 1994. The Financial Highlights for the year ended November 30,
1993 and prior periods are based upon a Retail share outstanding. The
Financial Highlights for periods prior to November 20, 1995 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 served as the Fund's investment
manager. Effective October 17, 1994, Dreyfus 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 year ended June 30, 1996, 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 0.51%, 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.
+++The expense ratio for the fiscal year ended June 30, 1996 includes the
expenses attributable to the Fund's Distribution Plan, which was terminated
on November 20, 1995, for the period from July 1, 1995 through
November 19, 1995. No distribution or shareholder servicing expenses were
incurred for the period from November 20, 1995 through June 30, 1996.
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 short-term rating
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.
Because many issuers of California Municipal Obligations may choose
not to have their obligations rated, it is possible that a large portion of
the Fund's portfolio may consist of unrated obligations. Unrated obligations
are not necessarily of lower quality than rated obligations, but to the
extent the Fund invests in unrated obligations, the Fund will be more reliant
on Dreyfus' judgment, analysis and experience than would be the case if the
Fund invested only in rated obligations. 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. The Fund seeks
to maintain a constant net asset value of $1.00 per share, although there is
no assurance it can do so on a continuing basis, using the amortized cost
method of
Page 6
valuing its securities pursuant to Rule 2a-7 under the Investment Company Act
of 1940, as amended (the "1940 Act"), which Rule includes various maturity,
quality and diversification requirements.
OTHER INVESTMENT POLICIES AND RISK FACTORS
FLOATING RATE AND VARIABLE RATE OBLIGATIONS. The Fund may purchase
floating rate and variable rate obligations. These obligations bear interest
at rates that are not fixed, but vary with changes in specified market rates
or indices. Some of these obligations may carry a demand feature that permits
the Fund to receive the par value upon demand prior to maturity. The Fund may
invest in floating rate and variable rate obligations carrying stated
maturities in excess of thirteen months at the date of purchase if these
obligations carry demand features that comply with conditions established by
the SEC. The Fund will 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. Changes in the
credit quality of banks and other financial institutions that provide such
credit or liquidity enhancements to the Fund's portfolio securities could
cause losses to the Fund and affect its share price.
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
Page 7
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.
CERTAIN RISK CONSIDERATIONS REGARDING INVESTING IN CALIFORNIA
MUNICIPAL OBLIGATIONS. Since the Fund is concentrated in securities issued by
California or entities within California, an investment in the Fund may
involve greater risk than investments in certain other types of money market
funds. You also 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. The State had an operating surplus of
approximately $109 million in 1992-93 and $836 million in fiscal 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 over the last three fiscal years
has been that the State depleted its available cash resources and has had to
use a series of external borrowings to meet its cash needs. To meet its cash
flow needs in the 1994-95 fiscal year, the State issued, in July and August
1994, $4.0 billion of revenue anticipation warrants and $3.0 billion of
revenue anticipation notes. The 1994-95 Budget Act contained a plan to retire
a projected $1.025 billion deficit in the 1995-96 fiscal year. As a result
of the deterioration in the State's budget and cash situation between October
1991 and July 1994, the rating on the State's general obligation bonds was
reduced by Standard & Poor's Ratings Group ("S&P") from AAA to A, by Moody's
Investor's Service, Inc. ("Moody's") from Aa to A1 and by Fitch Investors
Services, Inc. ("Fitch") from AAA to A. There can be no assurance that
California will not face substantial deficits in the current or future fiscal
years. The rating on the State's general obligation bonds has been reduced in
the past. These and other factors may have the effect of impairing the
ability of the issuers of California Municipal Obligations to pay interest
on, or repay principal of, such Municipal Obligations. You should obtain and
review a copy of the SAI which more fully sets forth these and other risk
factors. Other considerations relating to the Fund's investments in
California Municipal Obligations are summarized in the SAI.
LIMITING INVESTMENT RISKS AND CERTAIN RISK CONSIDERATIONS. The Fund
is subject to a number of investment limitations. Certain limitations are
matters of fundamental policy and may not be changed without the affirmative
vote of the holders of a majority of the Fund's outstanding shares. The SAI
describes all of the Fund's fundamental and non-fundamental investment
restrictions.
The investment objective, policies, restrictions, practices and
procedures of the Fund, unless otherwise specified, may be changed without
shareholder approval. If the Fund's investment objective, policies,
restrictions, practices or procedures change, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current position and needs.
The Fund is classified as a "non-diversified" investment company, as
defined under the 1940 Act. 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 require-
Page 8
ments, 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. Furthermore, under rules established by the
SEC, the Fund may not purchase, with respect to 75% of its total assets, a
security if, as a result, more than 5% of its total assets would be invested
in the securities of any issuer. The Fund may invest more than 5% of its
total assets in the securities of one issuer only if the securities are in
the highest short-term rating category or are determined to be of comparable
quality by Dreyfus.
The ability of the Fund to meet its investment objective is subject
to the ability of municipal issuers to meet their payment obligations. In
addition, the Fund's portfolio will be affected by general changes in
interest rates which may result in increases or decreases in the value of
Fund holdings. Investors should recognize that, in periods of declining
interest rates, the Fund's yield will tend to be somewhat higher than
prevailing market rates, and in periods of rising interest rates, the Fund's
yield will tend to be somewhat lower. Also, when interest rates are falling,
the influx of new money to the Fund will likely be invested in portfolio
instruments producing lower yields than the balance of the Fund's portfolio,
thereby reducing the Fund's current yield. In periods of rising interest
rates, the opposite can be expected to occur.
The Fund may invest without limit in California Municipal Obligations
which are repayable out of revenue streams generated from economically
related projects or facilities or whose issuers are located in the State of
California. Sizable investments in these obligations could increase risk to
the Fund should any of the related projects or facilities experience
financial difficulties. To the extent the Fund may 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.
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 September 30, 1996, Dreyfus managed or administered
approximately $81 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 supervises and assists in the overall
management of the Fund's affairs subject to the overall authority of the
Trust's Board of Trustees in accordance with Massachusetts law. Pursuant to
the Investment Management Agreement, Dreyfus provides, or arranges for one or
more third parties to provide, investment advisory, administrative, custody,
fund accounting and transfer agency services to the 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.
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 $220 billion in assets as of
June 30, 1996, including $83 bil-
Page 9
lion in mutual fund assets. As of June 30, 1996, Mellon, through various
subsidiaries, provided non-investment services, such as custodial or
administration services, for more than $876 billion in assets, including
approximately $57 billion in mutual fund assets.
Under the terms of the Prior Management Agreement, which was
terminated on November 20, 1995, the Fund agreed to pay Dreyfus a fee,
computed daily and paid monthly, at the annual rate of .35% of the Fund's
average daily net assets. Under the Investment Management Agreement, the Fund
pays a fee, computed daily and paid monthly, at the annual rate of .45% of
the Fund's average daily net assets less certain expenses described below.
Dreyfus has agreed to limit its management fee, or to reimburse the Fund for
its expenses, in order to ensure that the Fund's total operating expenses do
not exceed .35% of the Fund's average daily net assets for the period from
November 20, 1995 through November 19, 1996. In addition, the Investment
Management Agreement provides that certain redemption, exchange and account
closeout charges are payable directly by the Fund's shareholders to the
Fund's transfer agent and that the fee payable by the Fund to Dreyfus is not
reduced by the amount of these charges payable to the transfer agent. Under
the Investment Management Agreement, Dreyfus pays all of the expenses of the
Fund except brokerage fees, taxes, interest, Rule 12b-1 fees (if applicable)
and extraordinary expenses. Although Dreyfus is not obligated to pay for the
fees and expenses of the non-interested Trustees (including counsel fees),
Dreyfus is contractually required to reduce its investment management fee in
an amount equal to the Fund's allocable share of such fees and expenses. From
time to time, Dreyfus may waive additional investment management fees and/or
assume certain expenses of the Fund (either voluntarily or pursuant to
applicable state limitations), which would have the effect of lowering the
overall expense ratio of the Fund and increasing yield to investors.
For the fiscal year ended June 30, 1996, the Fund paid Dreyfus at the
effective annual rate of .35% of its average daily net assets in investment
management fees, less fees and expenses of the non-interested Trustees
(including counsel fees), which reflects the fees under the Prior Management
Agreement and the Investment Management Agreement, including an undertaking
by Dreyfus in effect during such period.
For the fiscal year ended June 30, 1996, total operating expenses
(excluding Rule 12b-1 fees) of the Fund were 0.35% of the Fund's average
daily net assets, which reflects an undertaking in effect during such period.
Dreyfus may pay the Fund's 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.
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 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 is located at 60 State Street, 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.
Page 10
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 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, reevaluate
the Agent's intent and access to funds. DISD will discontinue the waiver as
to new accounts to be opened through an Agent if DISD determines that the
average size of accounts opened through that Agent is less than $25,000 and
the Agent does not have the requisite intent and access to funds. Subsequent
investments must be at least $1,000 (or at least $100 in the case of persons
who have held Fund shares as of November 20, 1995). The initial investment
must be accompanied by the Fund's Account Application.
You may purchase Fund shares by check or wire, or through the Dreyfus
TELETRANSFER Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds." Payments to open new accounts which are mailed
should be sent to The Dreyfus Family of Funds, P.O. Box 9387, Providence,
Rhode Island 02940-9387, together with your Account Application. For
subsequent investments, your Fund account number should appear on the check
and an investment slip should be enclosed and sent to The Dreyfus Family of
Funds, P.O. Box 105, Newark, New Jersey 07101-0105. Neither initial nor
subsequent investments should be made by third party check. Purchase orders
may be delivered in person only to a Dreyfus Financial Center. THESE ORDERS
WILL BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY.
For the location of the nearest Dreyfus Financial Center, please call the
telephone number listed under "General Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to Boston Safe Deposit and Trust Company, DDA# 043508
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
Page 11
Taxpayer Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable. If your initial purchase of
Fund shares is by wire, you should call 1-800-645-6561 after completing your
wire payment in order to obtain your Fund account number. Please include your
Fund account number on the Fund's Account Application and promptly mail the
Account Application to the Fund, as no redemptions will be permitted until
the Account Application is received. You may obtain further information about
remitting funds in this manner from your bank. All payments should be made in
U.S. dollars and, to avoid fees and delays, should be drawn only on U.S.
banks. A charge will be imposed if any check used for investment in your
account does not clear. The Fund makes available to certain large institutions
the ability to issue purchase instructions through compatible computer
facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House ("ACH") member. You must
direct the institution to transmit immediately available funds through the
ACH System to Boston Safe Deposit and Trust Company with instructions to
credit your Fund account. The instructions must specify your Fund account
registration and Fund account number PRECEDED BY THE DIGITS "4540."
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Other Distributions and
Taxes" and the Fund's Account Application for further information concerning
this requirement. Failure to furnish a certified TIN to the Fund could
subject you to a $50 penalty imposed by the Internal Revenue Service (the
"IRS").
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.
SHAREHOLDER SERVICES
Fund Exchanges. You may purchase, in exchange for shares of the Fund,
shares of certain other funds managed or administered by Dreyfus, to the
extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
If you desire
Page 12
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 SINCE NOVEMBER 20, 1995). This fee will be deducted
from your account and paid to the Transfer Agent.
To request an exchange, you or your Agent acting on your behalf must
give exchange instructions to the Transfer Agent in writing or by telephone.
Before any exchange, you must obtain and should review a copy of the current
prospectus of the fund into which the exchange is being made. Prospectuses
may be obtained by calling 1-800-645-6561. The shares being exchanged must
have a current value of at least $1,000; 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, by a separate Shareholder Services Form, available by calling
1-800-645-6561 or, by oral request from any of the authorized signatories on
the account, also by calling 1-800-645-6561. If you previously have
established the Telephone Exchange Privilege, you may telephone exchange
instructions (including over The Dreyfus TouchRegistration Mark automated
telephone system) by calling 1-800-645-6561. If you are calling from
overseas, call 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. Shareholders are
limited to four exchanges per calendar year.
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.
DREYFUS DIVIDEND SWEEP
Dreyfus Dividend Sweep enables you to invest automatically dividends
or dividends and capital gain distributions, if any, paid by the fund in
shares of certain other funds in the Dreyfus Family of Funds of which you are
an investor. Shares of the other fund will be purchased at the then-current
NAV; however, a sales load may be charged with respect to investments in
shares of a fund sold with a sales load. If you are investing in a fund that
charges a sales load, you may qualify for share prices which do not include
the sales load or which reflect a reduced sales load. If you are investing in
a fund that charges a contingent deferred sales charge, the shares purchased
will be subject to the contingent deferred sales charge, if any, applicable
to the purchased shares. See "Shareholder Services" in the SAI. For more
information concerning this
Page 13
privilege, or to request a Dividend Options Form, please call toll free
1-800-645-6561. You may cancel your participation in this privilege by
mailing written notification to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. To select a new fund after cancellation,
you must submit a new Dividend Options Form. Enrollment in or cancellation of
this Privilege is effective three business days following receipt. This
Privilege is available only for existing accounts and may not be used to open
new accounts. Minimum subsequent investments do not apply. The Fund may
modify or terminate this Privilege at any time or charge a service fee. No
such fee currently is contemplated.
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
SINCE NOVEMBER 20, 1995). The fee will be deducted from your redemption
proceeds and paid to the Transfer Agent. The account closeout fee does not
apply to exchanges out of the Fund or to wire or Dreyfus TELETRANSFER
redemptions, for each of which a $5.00 fee applies. Agents may charge a
nominal fee for effecting redemptions of Fund shares. Any certificates
representing Fund shares being redeemed must be submitted with the redemption
request. The value of the shares redeemed may be more or less than their
original cost, depending upon the Fund's then current NAV.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the SEC. HOWEVER, IF YOU HAVE
PURCHASED FUND SHARES BY CHECK OR BY THE DREYFUS TELETRANSFER PRIVILEGE AND
SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER AGENT, THE
REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE
OF YOUR PURCHASE CHECK OR DREYFUS TELETRANSFER PURCHASE ORDER, WHICH MAY TAKE
UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL NOT HONOR
REDEMPTION CHECKS UNDER THE CHECK REDEMPTION PRIVILEGE, AND WILL REJECT
REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR PURSUANT TO THE DREYFUS
TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY
THE TRANSFER AGENT OF THE PURCHASE CHECK OR THE DREYFUS TELETRANSFER PURCHASE
ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT
APPLY IF YOUR SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE
A SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE REDEMPTION
REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH
SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE ALL
OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares will not be redeemed until
the Transfer Agent has received your Account Application.
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
Page 14
you refuse it), you authorize the Transfer Agent to act on telephone
instructions (including over The Dreyfus TouchRegistration Mark automated
telephone system) from any person representing himself or herself to be you,
or a representative of your Agent, and reasonably believed by the Transfer
Agent to be genuine. The Fund will require the Transfer Agent to employ
reasonable procedures, such as requiring a form of personal identification,
to confirm that instructions are genuine and, if it does not follow such
procedures, the Fund or the Transfer Agent may be liable for any losses due
to unauthorized or fraudulent instructions. Neither the Fund nor the Transfer
Agent will be liable for following telephone instructions reasonably believed
to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used.
REGULAR REDEMPTION. Under the regular redemption procedure, you may
redeem your shares by written request mailed to The Dreyfus Family of Funds,
P.O. Box 9671, Providence, Rhode Island 02940-9671. Redemption requests may
be delivered in person only to a Dreyfus Financial Center. THESE REQUESTS
WILL BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT
THEREBY. For the location of the nearest financial center, please call the
telephone number listed under "General Information." Redemption requests must
be signed by each shareholder, including each owner of a joint account, and
each signature must be guaranteed. The Transfer Agent has adopted standards
and procedures pursuant to which signature-guarantees in proper form
generally will be accepted from domestic banks, brokers, dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations, as well as from participants in
the New York Stock Exchange Medallion Signature Program, the Securities
Transfer Agents Medallion Program ("STAMP"), and the Stock Exchanges
Medallion Program. For more information with respect to signature-guarantees,
please call the telephone number listed under "General Information."
Redemption proceeds of at least $5,000 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 $1,000 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 since 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 $5,000) 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 since November 20,
1995), which will be deducted from your account and paid to the Transfer
Agent. To establish the Wire Redemption
Page 15
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 $5,000 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 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 since 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
Page 16
expenses pursuant to any undertaking that may be in effect. See "Management
of the Fund." Since yields fluctuate, yield data cannot necessarily be used
to compare an investment in the Fund with bank deposits, savings accounts,
and similar investment alternatives which often provide an agreed-upon or
guaranteed fixed yield for a stated period of time, or other investment
companies which may use a different method of computing yield. The Fund's
tax-equivalent yield shows the level of taxable yield needed to produce an
after-tax equivalent to the Fund's tax-free yield. This is done by increasing
the Fund's yield by the amount necessary to reflect the payment of federal
income tax (and state income tax, if applicable) at a stated tax rate.
Any fees charged by an Agent directly to its customers' account in
connection with investments in the Fund will not be included in calculations
of yield.
The Fund may compare its performance with various industry standards
of performance including Lipper Analytical Services, Inc. ratings.
Performance rankings as reported in CHANGING TIMES, BUSINESS WEEK,
INSTITUTIONAL INVESTOR, THE WALL STREET JOURNAL, IBC/DONOGHUE'S MONEY FUND
REPORT, MUTUAL FUND FORECASTER, NO LOAD INVESTOR, MONEY MAGAZINE, MORNINGSTAR
MUTUAL FUND VALUES, U.S. NEWS AND WORLD REPORT, FORBES, FORTUNE, BARRON'S and
similar publications may also be used in comparing the Fund's performance.
Furthermore, the Fund may quote its yields in advertisements or in
shareholder reports.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund declares daily and pays monthly (on the first business day
of the following month) dividends from its net investment income, if any, and
distributes any net long-term capital gains on an annual basis. The Board of
Trustees may elect not to distribute capital gains in whole or in part to
take advantage of capital loss carryovers.
Unless you choose to receive dividend and/or capital gains
distributions in cash, your distributions will be automatically reinvested in
additional shares at NAV. You may change the method of receiving
distributions at any time by writing to the Fund. Checks which are sent to
shareholders who have requested distributions to be paid in cash and which
are subsequently returned by the United States Postal Service as not
deliverable or which remain uncashed for six months or more will be
reinvested in additional Fund shares in the shareholder's account at the then
current NAV. Subsequent Fund distributions will be automatically reinvested
in additional Fund shares in the shareholder's account.
Shares purchased on a day on which the Fund calculates its NAV will
not begin to accrue dividends until the following business day. Except as
provided below, redemption orders effected on any particular day will receive
all dividends declared through the day of redemption. However, if immediately
available funds are received by the Transfer Agent prior to 12:00 noon,
Eastern time, you may receive the dividend 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.
Page 17
Interest on indebtedness incurred or continued to purchase or carry
shares of the Fund will not be deductible for Federal income tax purposes to
the extent that the Fund's distributions (other than capital gains
distributions) consist of exempt-interest dividends. The Fund may invest in
"private activity bonds," the interest on which is treated as a tax
preference item for shareholders in determining their liability for the
alternative minimum tax. Proposals may be introduced before Congress for the
purpose of restricting or eliminating the Federal income tax exemption for
interest on municipal securities. If such a proposal were enacted, the
availability of such securities for investment by the Fund and the value of
its portfolio would be affected. In such event, the Fund would reevaluate its
investment objective and policies.
Dividends and other distributions, to the extent taxable, are taxable
to you regardless of whether they are received in cash or reinvested in
additional Fund shares, even if the value of your shares is below your cost.
If you purchase shares shortly before a taxable distribution (i.e., any
distribution other than an exempt-interest dividend paid by the Fund), you
must pay income taxes on the distribution, even though the value of your
investment (plus cash received, if any) remains the same. In addition, the
share price at the time you purchase shares may include unrealized gains in
the securities held in the Fund. If these portfolio securities are
subsequently sold and the gains are realized, they will, to the extent not
offset by capital losses, be paid to you as a capital gain distribution and
will be taxable to you.
In January of each year, the Fund will send you a Form 1099-DIV
notifying you of the status for Federal income tax purposes of your
distributions for the preceding year. The Fund also will advise shareholders
of the percentage, if any, of the dividends paid by the Fund that are exempt
from Federal income tax and the portion, if any, of those dividends that is a
tax preference item for purposes of the alternative minimum tax.
You must furnish the Fund with your taxpayer identification number
("TIN") and state whether you are subject to withholding for prior
under-reporting, certified under penalties of perjury as prescribed by the
Code and the regulations thereunder. Unless previously furnished, investments
received without such a certification will be returned. The Fund is required
to withhold a portion of all dividends, capital gains distributions and
redemption proceeds payable to any individuals and certain other non-corporate
shareholders who do not provide the Fund with a correct TIN; withholding
from dividends and capital gains distributions also is required for such
shareholders who otherwise are subject to backup withholding.
In addition, in order to avoid the application of a 4% nondeductible
excise tax on certain undistributed amounts of ordinary income and capital
gains, the Fund may make an additional distribution 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 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
authorized to issue an unlimited number of shares of beneficial interest,
each without par value. The Trust may also create an unlimited number of
separate investment portfolios (each a "fund"). Effective November 20, 1995
the Fund's "Investor" and "Class R" designations were eliminated, the Fund
Page 18
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. The Trust is registered with the SEC as an open-end management
investment company, commonly known as a mutual fund. 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
objective and substantially the same investment policies and restrictions as
those applicable to the Fund. Shareholders of the Fund will be given at least
30 days' prior notice of any such investment.
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
BASIC California Municipal Money Market Fund
Prospectus
Registration Mark
Copy Rights 1996 Dreyfus Service Corporation
307/707p110196
Page 20
- ------------------------------------------------------------------------------
PROSPECTUS NOVEMBER 1, 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 (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 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. SINCE THE FUND MAY
INVEST A SIGNIFICANT PORTION OF ITS ASSETS IN THE SECURITIES OF A SINGLE
ISSUER, AN INVESTMENT IN THE FUND MAY INVOLVE GREATER RISK THAN INVESTMENTS
IN CERTAIN OTHER TYPES OF MONEY MARKET FUNDS.
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 DATED NOVEMBER 1, 1996 (THE
"SAI"), 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. THE SEC
MAINTAINS A WEB SITE (HTTP://WWW.SEC.GOV) THAT CONTAINS THE SAI, MATERIAL
INCORPORATED BY REFERENCE, AND OTHER INFORMATION REGARDING THE FUND. FOR A
FREE COPY OF THE SAI, WRITE TO THE FUND AT 144 GLENN CURTISS BOULEVARD,
UNIONDALE, NEW YORK 11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK
FOR OPERATOR 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. (THE "DISTRIBUTOR").
- ------------------------------------------------------------------------------
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
SHAREHOLDER SERVICES............................ 13
HOW TO REDEEM FUND SHARES....................... 14
PERFORMANCE INFORMATION......................... 17
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES........ 17
GENERAL INFORMATION............................. 19
Page 2
[This Page Intentionally Left Blank]
Page 3
<TABLE>
<CAPTION>
EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES:
<S> <C>
Check Redemption Fee........................................... $2.00
Exchange Fee................................................... $5.00
Account Closeout Fee........................................... $5.00
ESTIMATED ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fee .................................................. .45%
Other Expenses*.................................................. .00%
-----
Total Fund Operating Expenses.................................... .45%
</TABLE>
<TABLE>
<CAPTION>
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:
<S> <C>
1 YEAR $ 10
3 YEARS $ 19
5 YEARS $ 30
10 YEARS $ 62
</TABLE>
* Does not include fees and expenses of the non-interested Trustees
(including counsel). The investment manager is contractually required
to reduce its Management Fee in an amount equal to the Fund's allocable
portion of such fees and expenses, which are estimated to be 0.01% of
the Fund's net assets. (See "Management of the Fund.")
- ------------------------------------------------------------------------------
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. The information in the foregoing table does not reflect any fee waiver
or expense reimbursement arrangements that may be in effect. 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, taking into account such limitations or reimbursement,
would be: Management Fees_.35%; Other Expenses_.00%; and Total Fund Operating
Expenses_.35%. 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 exchange out of the Fund,
wire redemption or Dreyfus TELETRANSFER 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 table is 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, 1996, and are incorporated by reference into the SAI.
The financial statements and related notes, as well as the information in the
table below insofar as it relates to the fiscal years or period ended June
30, 1994, 1995 and 1996, have been audited by KPMG Peat Marwick LLP,
independent auditors, whose report thereon appears in the Fund's Annual
Report. The information in the table below for the years or periods prior to
the fiscal period ended June 30, 1994, has been audited by other independent
auditors.
<TABLE>
<CAPTION>
DREYFUS BASIC NEW YORK MUNICIPAL MONEY MARKET FUND
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
PERIOD YEAR YEAR
Ended Ended Ended
YEAR OR PERIOD ENDED NOVEMBER 30, JUNE 30, JUNE 30, JUNE 30,
--------------------------------------------------
1988 1989 1990 1991 1992 1993 1994# 1995# 1996
----- ----- ----- ----- ----- ----- ------- ------- -------
<S> <C> <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 $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 0.031
LESS DISTRIBUTIONS:
Dividends from net investment income (0.032) (0.058) (0.054) (0.046) (0.031) (0.021) (0.012) (0.029) (0.031)
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 $1.00
===== ===== ===== ===== ===== ===== ===== ===== =====
Total Return................. 3.19% 5.90% 5.53% 4.65% 3.10% 2.15% 1.23% 2.95% 3.14%
----- ----- ----- ----- ----- ----- ----- ----- -----
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 $156,491
Ratio of expenses to average net assets 0.65%** 0.32% 0.32% 0.32% 0.32% 0.31% 0.44%** 0.60% 0.43%##
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% 3.43%
</TABLE>
* The Fund commenced operations on March 2, 1988. On February 1, 1993,
existing shares of the Fund were designated the Retail Class and the Fund
began offering the Institutional Class and Investment Class of shares.
Effective April 4, 1994, the Retail and Institutional Classes were
reclassified as a single class of shares known as Investor shares and the
Investment Class shares were reclassified as Trust shares. Effective
October 17, 1994, the Trust shares were redesignated as Class R shares.
The Fund's Investor shares were subject to a Distribution Plan adopted by
the Fund pursuant to Rule 12b-1 under the Investment Company Act of 1940,
under which the Fund paid a fee of 0.25% of average daily net assets
attributable to Investor shares for shareholder servicing and activities
and expenses primarily intended to result in the sale of Investor 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 and its Distribution Plan was terminated.
The Financial Highlights for the fiscal year ended June 30, 1996
were calculated using the performance of an Investor share outstanding
from July 1, 1995 to December 7, 1995, and the performance of a Fund
share outstanding from December 8, 1995 to June 30, 1996.
The Financial Highlights for the year ended June 30, 1995 are based
upon an Investor share outstanding. The amounts shown for the period
ended June 30, 1994 were calculated using the performance of a Retail
share outstanding from December 1, 1993 to April 3, 1994, and the
performance of an Investor share outstanding from April 4, 1994 to June
30, 1994. The Financial Highlights for the year ended November 30, 1993
and prior periods are based upon a Retail share outstanding. The Financial
Highlights for periods prior to December 8, 1995 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 year ended June 30, 1996, 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 0.52%, 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 served as the
Fund's investment manager. Effective October 17, 1994, Dreyfus began
serving as the Fund's investment manager.
## The expense ratio for the fiscal year ended June 30, 1996 includes
the expenses attributable to the Fund's Distribution Plan, which was
terminated on December 8, 1995, for the period from July 1, 1995 through
December 7, 1995. No distribution or shareholder servicing expenses were
incurred for the period from December 8, 1995 through June 30, 1996.
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 short-term rating 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.
Because many issuers of New York Municipal Obligations may choose not
to have their obligations rated, it is possible that a large portion of the
Fund's portfolio may consist of unrated obligations. Unrated obligations are
not necessarily of lower quality than rated obligations, but to the extent
the Fund invests in unrated obligations, the Fund will be more reliant on
Dreyfus' judgment, analysis and experience than would be the case if the Fund
invested only in rated obligations. 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. The Fund seeks
to maintain a constant net asset value of $1.00 per share, although there is
no assurance it can do so on a continuing basis, using the amortized cost
method
Page 6
of valuing its securities pursuant to Rule 2a-7 under the Investment
Company Act of 1940, as amended (the "1940 Act"), which Rule includes various
maturity, quality and diversification requirements.
OTHER INVESTMENT POLICIES AND RISK FACTORS
FLOATING RATE AND VARIABLE RATE OBLIGATIONS. The Fund may purchase
floating rate and variable rate obligations. These obligations bear interest
at rates that are not fixed, but vary with changes in specified market rates
or indices. Some of these obligations may carry a demand feature that permits
the Fund to receive the par value upon demand prior to maturity. The Fund may
invest in floating rate and variable rate obligations carrying stated
maturities in excess of thirteen months at the date of purchase if these
obligations carry demand features that comply with conditions established by
the SEC. The Fund will 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. Changes in the
credit quality of banks and other financial institutions that provide such
credit or liquidity enhancements to the Fund's portfolio securities could
cause losses to the Fund and affect its share price.
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
Page 7
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.
CERTAIN RISK CONSIDERATIONS REGARDING INVESTING IN NEW YORK MUNICIPAL
OBLIGATIONS. Since the Fund is concentrated in securities issued by New York
or entities within New York, an investment in the Fund may involve greater
risk than investments in certain other types of money market funds. You also
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 improved, however, during the
1993 and 1994 fiscal years. After reflecting a 1993 year-end deposit to the
State's refund reserve account of $671 million, reported 1993 General Fund
receipts were $45 million higher than originally projected in April 1992. The
State completed the 1994 fiscal year with an operating surplus in the General
Fund of $914 million. The State reported a General Fund operating deficit of
$1.426 billion for the 1995 fiscal year. There can be no assurance that New
York will not face substantial potential budget gaps in future years. In
January 1992, Moody's Investors Service, Inc. ("Moody's") lowered from A to
Baal its ratings of certain appropriation-backed debt of New York State and
its agencies. The State's general obligation, state-guaranteed and New York
State Local Government Assistance Corporation bonds continued to be rated A
by Moody's. In January 1992, Standard & Poor's Ratings Group ("S&P") lowered
from A to A- its ratings of New York State general obligation bonds and
stated that it continued to assess the ratings outlook as negative. S&P also
lowered its ratings of various agency debt, State moral obligations,
contractual obligations, lease purchase obligations and State guarantees. In
February 1991, Moody's lowered its rating of New York City's general
obligation bonds from A to Baal. The bond ratings of various state general
obligations and agency debt, state moral obligations, contractual
obligations, lease purchase obligations and state guarantees have been
lowered. The rating changes reflected 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.
Page 8
LIMITING INVESTMENT RISKS AND CERTAIN RISK CONSIDERATIONS. The Fund
is subject to a number of investment limitations. Certain limitations are
matters of fundamental policy and may not be changed without the affirmative
vote of the holders of a majority of the Fund's outstanding shares. The SAI
describes all of the Fund's fundamental and non-fundamental investment
restrictions.
The investment objective, policies, restrictions, practices and
procedures of the Fund, unless otherwise specified, may be changed without
shareholder approval. If the Fund's investment objective, policies,
restrictions, practices or procedures change, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current position and needs.
The Fund is classified as a "non-diversified" investment company, as
defined under the 1940 Act. 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. Furthermore, under rules established by the
SEC, the Fund may not purchase, with respect to 75% of its total assets, a
security if, as a result, more than 5% of its total assets would be invested
in the securities of any issuer. The Fund may invest more than 5% of its
total assets in securities of one issuer only if the securities are in the
highest short-term rating category, or are determined to be of comparable
quality by Dreyfus.
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.
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 September 30, 1996, Dreyfus managed or administered
approximately $81 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 supervises and assists in the overall
management of the Fund's affairs subject to the overall authority of the
Trust's Board of Trustees in accordance with Massachusetts law. Pursuant to
Page 9
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.
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 $220 billion in assets as of
June 30, 1996, including $83 billion in mutual fund assets. As of June 30,
1996, Mellon, through various subsidiaries, provided non-investment services,
such as custodial or administration services, for more than $876 billion in
assets, including approximately $57 billion in mutual fund assets.
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. Although Dreyfus is not obligated to pay for the
fees and expenses of the non-interested Trustees (including counsel fees),
Dreyfus is contractually required to reduce its investment management fee in
an amount equal to the Fund's allocable share of such fees and expenses. From
time to time, Dreyfus may waive additional investment management fees and/or
assume certain expenses of the Fund (either voluntarily or pursuant to
applicable state limitations), which would have the effect of lowering the
overall expense ratio of the Fund and increasing yield to investors.
For the fiscal year ended June 30, 1996, the Fund paid Dreyfus at the
effective annual rate of .35% of its average daily net assets in investment
management fees, less fees and expenses of the non-interested Trustees
(including counsel fees), which reflects the fees under the Prior Management
Agreement and the Investment Management Agreement, including an undertaking
by Dreyfus in effect during such period.
For the fiscal year ended June 30, 1996, total operating expenses
(excluding Rule 12b-1 fees) of the Fund were 0.35% of the Fund's average
daily net assets which reflects an undertaking in effect during such period.
Dreyfus may pay the Fund's 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.
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
man-
Page 10
aged, 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 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 is located at 60 State Street, 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 and Dreyfus TELET
RANSFER redemption fees and the $2.00 checkwriting charge, described below. A
sufficient number of your shares will be redeemed automatically to pay these
amounts. These payments will not reduce the management fee payable by the
Fund to Dreyfus. By purchasing Fund shares, you are deemed to have consented
to this procedure. Premier Mutual Fund Services, Inc. is the 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, 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
Page 11
new accounts which are mailed should be sent to The Dreyfus Family of Funds,
P.O. Box 9387, Providence, Rhode Island 02940-9387, together with your
Account Application. For subsequent investments, your Fund account number
should appear on the check and an investment slip should be enclosed and sent
to The Dreyfus Family of Funds, P.O. Box 105, Newark, New Jersey 07101-0105.
Neither initial nor subsequent investments should be made by third party
check. Purchase orders may be delivered in person only to a Dreyfus Financial
Center. THESE ORDERS WILL BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY
UPON RECEIPT THEREBY. For the location of the nearest Dreyfus Financial
Center, please call the telephone number listed under "General Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to Boston Safe Deposit and Trust Company, DDA # 043508
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
Page 12
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.
SHAREHOLDER SERVICES
Fund Exchanges. You may purchase in exchange for shares of the Fund,
shares of certain other funds managed or administered by Dreyfus, to the
extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
If you desire to use this service, please call 1-800-645-6561 to determine if
it is available and whether any conditions are imposed on its use. YOU WILL
BE CHARGED A $5.00 FEE FOR EACH EXCHANGE YOU MAKE OUT OF THE FUND (UNLESS YOU
HAVE HELD FUND SHARES SINCE 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 $1,000; 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, by a separate Shareholder Services Form, available by calling
1-800-645-6561 or, by oral request from any of the authorized signatories on
the account, also by calling 1-800-645-6561. If you previously have
established the Telephone Exchange Privilege, you may telephone exchange
instructions (including over The Dreyfus TouchRegistration Mark automated
telephone system) by calling 1-800-645-6561. If you are calling from
overseas, call 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. Shareholders are
limited to four exchanges per calendar year.
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.
Page 13
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
DREYFUS DIVIDEND SWEEP
Dreyfus Dividend Sweep enables you to invest automatically dividends
or dividends and capital gain distributions, if any, paid by the Fund in
shares of certain other funds in the Dreyfus Family of Funds of which you are
an investor. Shares of the other fund will be purchased at the then-current
NAV; however, a sales load may be charged with respect to investments in
shares of a fund sold with a sales load. If you are investing in a fund that
charges a sales load, you may qualify for share prices which do not include
the sales load or which reflect a reduced sales load. If you are investing in
a fund that charges a contingent deferred sales charge, the shares purchased
will be subject to the contingent deferred sales charge, if any, applicable
to the purchased shares. See "Shareholder Services" in the SAI. For more
information concerning this Privilege, or to request a Dividend Options Form,
please call toll free 1-800-645-6561. You may cancel your participation in
this Privilege by mailing written notification to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. To select a new
fund after cancellation, you must submit a new Dividend Options Form.
Enrollment in or cancellation of this Privilege is effective three business
days following receipt. This Privilege is available only for existing
accounts and may not be used to open new accounts. Minimum subsequent
investments do not apply. The Fund may modify or terminate this Privilege at
any time or charge a service fee. No such fee currently is contemplated.
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
SINCE 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.
Page 14
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 (including over The Dreyfus TouchRegistration Mark automated
telephone system) from any person representing himself or herself to be you,
or a representative of your Agent, and reasonably believed by the Transfer
Agent to be genuine. The Fund will require the Transfer Agent to employ
reasonable procedures, such as requiring a form of personal identification,
to confirm that instructions are genuine and, if it does not follow such
procedures, the Fund or the Transfer Agent may be liable for any losses due
to unauthorized or fraudulent instructions. Neither the Fund nor the Transfer
Agent will be liable for following telephone instructions reasonably believed
to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used.
REGULAR REDEMPTION. Under the regular redemption procedure, you may
redeem your shares by written request mailed to The Dreyfus Family of Funds,
P.O. Box 9671, Providence, Rhode Island 02940-9671. Redemption requests may
be delivered in person only to a Dreyfus Financial Center. THESE REQUESTS
WILL BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT
THEREBY. For the location of the nearest financial center, please call the
telephone number listed under "General Information." Redemption requests must
be signed by each shareholder, including each owner of a joint account, and
each signature must be guaranteed. The Transfer Agent has adopted standards
and procedures pursuant to which signature-guarantees in proper form
generally will be accepted from domestic banks, brokers, dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations, as well as from participants in
the New York Stock Exchange Medallion Signature Program, the Securities
Transfer Agents Medallion Program ("STAMP"), and the Stock Exchanges
Medallion Program. For more information with respect to signature-guarantees,
please call the telephone number listed under "General Information."
Redemption proceeds of at least $5,000 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 $1,000 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 since 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
Page 15
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 $5,000) 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 since 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 $5,000 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 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 since 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.
Page 16
PERFORMANCE INFORMATION
From time to time, the Fund may advertise its yield and
tax-equivalent yield. YIELD AND TAX-EQUIVALENT YIELD FIGURES ARE BASED ON
HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. It
can be expected that these yield figures will fluctuate substantially.
The Fund's "yield" refers to the income generated by an investment in
the Fund's over a seven-day period identified in the advertisement. This
income is then "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a
52-week period and is shown as a percentage of the investment. The "effective
yield" is calculated similarly, but, when annualized, the income earned by an
investment in the Fund is assumed to be reinvested. The "effective yield"
will be slightly higher than the "yield" because of the compounding effect of
this assumed reinvestment. The Fund's "yield" and "effective yield" may
reflect absorbed expenses pursuant to any undertaking that may be in effect.
See "Management of the Fund." Since yields fluctuate, yield data cannot
necessarily be used to compare an investment in the Fund with bank deposits,
savings accounts, and similar investment alternatives which often provide an
agreed-upon or guaranteed fixed yield for a stated period of time, or other
investment companies which may use a different method of computing yield. The
Fund's tax-equivalent yield shows the level of taxable yield needed to
produce an after-tax equivalent to the Fund's tax-free yield. This is done by
increasing the Fund's yield by the amount necessary to reflect the payment of
federal income tax (and state income tax, if applicable) at a stated tax
rate.
Any fees charged by an Agent directly to its customers' account in
connection with investments in the Fund will not be included in calculations
of yield.
The Fund may compare its performance with various industry standards
of performance including Lipper Analytical Services, Inc. ratings.
Performance rankings as reported in CHANGING TIMES, BUSINESS WEEK,
INSTITUTIONAL INVESTOR, THE WALL STREET JOURNAL, IBC/DONOGHUE'S MONEY FUND
REPORT, MUTUAL FUND FORECASTER, NO LOAD INVESTOR, MONEY MAGAZINE, MORNINGSTAR
MUTUAL FUND VALUES, U.S. NEWS AND WORLD REPORT, FORBES, FORTUNE, BARRON'S and
similar publications may also be used in comparing the Fund's performance.
Furthermore, the Fund may quote its yields in advertisements or in
shareholder reports.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund declares daily and pays monthly (on the first business day
of the following month) dividends from its net investment income, if any, and
distributes any net long-term capital gains on an annual basis. The Board of
Trustees may elect not to distribute capital gains in whole or in part to
take advantage of capital loss carryovers.
Unless you choose to receive dividend and/or capital gains
distributions in cash, your distributions will be automatically reinvested in
additional Fund shares at NAV. You may change the method of receiving
distributions at any time by writing to the Fund. Checks which are sent to
shareholders who have requested distributions to be paid in cash and which
are subsequently returned by the United States Postal Service 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.
Page 17
It is expected that the Fund will qualify for treatment as a
regulated investment company under the Code so that it will be relieved of
Federal income tax on that part of its investment company taxable income
(consisting generally of taxable net investment income and net short-term
capital gain) and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) that is distributed to its shareholders. In
addition, the Fund intends to continue to qualify to pay "exempt-interest"
dividends, which requires, among other things, that at the close of each
quarter of its taxable year at least 50% of the value of its total assets
must consist of municipal securities.
Dividends from the Fund's investment company taxable income are
taxable to you as ordinary income, to the extent of the Fund's earnings and
profits. Distributions by the Fund that are designated by it as
"exempt-interest dividends" generally may be excluded by you from your gross
income. Distributions by the Fund of net capital gain, when designated as
such, are taxable to you as long-term capital gains, regardless of the length
of time you have owned your shares.
Interest on indebtedness incurred or continued to purchase or carry
shares of the Fund will not be deductible for Federal income tax purposes to
the extent that the Fund's distributions (other than capital gains
distributions) consist of exempt-interest dividends. The Fund may invest in
"private activity bonds," the interest on which is treated as a tax
preference item for shareholders in determining their liability for the
alternative minimum tax. Proposals may be introduced before Congress for the
purpose of restricting or eliminating the Federal income tax exemption for
interest on municipal securities. If such a proposal were enacted, the
availability of such securities for investment by the Fund and the value of
its portfolio would be affected. In such event, the Fund would reevaluate its
investment objective and policies.
Dividends and other distributions, to the extent taxable, are taxable
to you regardless of whether they are received in cash or reinvested in
additional Fund shares, even if the value of your shares is below your cost.
If you purchase shares shortly before a taxable distribution (i.e., any
distribution other than an exempt-interest dividend paid by the Fund), you
must pay income taxes on the distribution, even though the value of your
investment (plus cash received, if any) remains the same. In addition, the
share price at the time you purchase shares may include unrealized gains in
the securities held in the Fund. If these portfolio securities are
subsequently sold and the gains are realized, they will, to the extent not
offset by capital losses, be paid to you as a capital gain distribution and
will be taxable to you.
In January of each year, the Fund will send you a Form 1099-DIV
notifying you of the status for Federal income tax purposes of your
distributions for the preceding year. The Fund also will advise shareholders
of the percentage, if any, of the dividends paid by the Fund that are exempt
from Federal income tax and the portion, if any, of those dividends that is a
tax preference item for purposes of the alternative minimum tax.
You must furnish the Fund with your taxpayer identification number
("TIN") and state whether you are subject to withholding for prior
under-reporting, certified under penalties of perjury as prescribed by the
Code and the regulations thereunder. Unless previously furnished, investments
received without such a certification will be returned. The Fund is required
to withhold a portion of all dividends, capital gains distributions and
redemption proceeds payable to any individuals and certain other non-corporate
shareholders who do not provide the Fund with a correct TIN; withholding
from dividends and capital gains distributions also is required for such
shareholders who otherwise are subject to backup withholding.
In addition, in order to avoid the application of a 4% nondeductible
excise tax on certain undistributed amounts of ordinary income and capital
gains, the Fund may make an additional distribution 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
Page 18
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 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
authorized to issue an unlimited number of shares of beneficial interest,
each without par value. The Trust may also create an unlimited number of
separate investment portfolios (each a "fund"). Effective December 8, 1995,
the Fund's "Investor" and "Class R" designations were eliminated, 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. The Trust is registered with the SEC as an open-end management
investment company, commonly known as a mutual fund. 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
objective and substantially the same investment policies and restrictions as
those applicable to the Fund. Shareholders of the Fund will be given at least
30 days' prior notice of any such investment.
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
BASIC New York Municipal Money Market Fund
Prospectus
Copy Rights 1996 Dreyfus Service Corporation
316/716p110196
Registration Mark
Page 20
PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND
PROSPECTUS NOVEMBER 1, 1996
Premier Limited Term California Municipal Fund, Premier
Limited Term Massachusetts Municipal Fund and Premier
Limited Term New York Municipal Fund (each a "Fund" and collectively the
"Funds") are separate, non-diversified portfolios of The Dreyfus/Laurel
Tax-Free Municipal Funds, an open-end management investment company (the
"Company"), known as a mutual fund. The Funds seek to maximize current
income exempt from Federal income taxes and state personal income taxes
for resident shareholders of the named state consistent with what is
believed to be the prudent risk of capital by investing in municipal
obligations of the named state which are of investment-grade quality and
generally of intermediate maturities.
By this Prospectus, each Fund is offering four Classes of
shares_Class A, Class B, Class C and Class R.
The Dreyfus Corporation serves as the Funds' investment
manager. The Dreyfus Corporation is referred to as "Dreyfus."
You can purchase or redeem Fund shares by telephone using the
TELETRANSFER Privilege.
This Prospectus sets forth concisely information about the
Funds that you should know before investing. It should be read carefully
before you invest and retained for future reference.
The Statement of Additional Information dated November 1,
1996 (the "SAI"), 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. The SEC maintains a web site (http://www.sec.gov) that
contains the SAI, material incorporated by reference, and other
information regarding the Funds. For a free copy of the SAI, write to the
Funds at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or
call 1-800-554-4611. When telephoning, ask for Operator 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY. ALL MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THE FEES TO WHICH EACH FUND IS SUBJECT ARE SUMMARIZED IN THE
"EXPENSE SUMMARY" SECTION OF THE FUNDS' PROSPECTUS. THE FUNDS PAY AN
AFFILIATE OF MELLON BANK, N.A. ("MELLON BANK") TO BE ITS INVESTMENT
MANAGER. MELLON BANK OR AN AFFILIATE MAY BE PAID FOR PERFORMING OTHER
SERVICES FOR THE FUNDS, SUCH AS CUSTODIAN, TRANSFER AGENT OR FUND
ACCOUNTANT SERVICES. THE FUNDS ARE DISTRIBUTED BY PREMIER MUTUAL FUND
SERVICES, INC. (THE "DISTRIBUTOR").
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
(Continued from page 1)
Class A shares are subject to a sales charge imposed at the
time of purchase. (Class A shares of each Fund were formerly called
Investor Shares.) Class B shares are subject to a contingent deferred
sales charge imposed on redemptions made within five years of purchase.
Class C shares are subject to a .75% contingent deferred sales charge
imposed on redemptions made within the first year of purchase. Class R
shares are sold primarily to bank trust departments and other financial
service providers (including Mellon Bank and its affiliates) ("Banks")
acting on behalf of customers having a qualified trust or investment
account or relationship at such institution. (Class R shares of each Fund
were formerly called Trust Shares.) Other differences among the Classes
include the services offered to and the expenses borne by each Class and
certain voting rights, as described herein. These alternatives are
offered so that an investor may choose the method of purchasing shares
that is most beneficial given the amount of purchase, the length of time
the investor expects to hold the shares and other relevant circumstances.
TABLE OF CONTENTS
Expense Summary.................................... 3
Financial Highlights............................... 554
Alternative Purchase Methods....................... 17
Description of the Funds........................... 18
Management of the Funds............................ 25
How to Buy Fund Shares............................. 27
Shareholder Services............................... 32
How to Redeem Fund Shares.......................... 35
Distribution Plans (Class A Plan and Class B and
Class C Plans) 39
Dividends, Other Distributions and Taxes........... 40
Performance Information............................ 41
General Information................................ 43
Page 2
<TABLE>
<CAPTION>
EXPENSE SUMMARY
CLASS A CLASS B CLASS C CLASS R
______ ______ ______ ______
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
...... (as a percentage of offering price) 3.00%. none .none .none
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge) .none* 3.00% .75% .none
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
Management Fee.......................... .50% .50% .50% .50%
12b-1 Fee(1)............................ .25% .75% .75% none
Other Expenses(2) ...................... .00% .00% .00% .00%
______ ______ ______ ______
Total Fund Operating Expenses........... .75% 1.25% 1.25% .50%
</TABLE>
<TABLE>
<CAPTION>
Example
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) except where noted, redemption
at the end of each time period:
<C> <C> <C> <C> <C>
1 YEAR $ 37 $43/$13 3 $20/$13 3 $ 5
3 YEARS $ 53 $60/$40 3 $40 $16
5 YEARS $ 70 $79/$69 3 $69 $28
10 YEARS $120 $125** $151 $63
</TABLE>
* A contingent deferred sales charge may be imposed on the redemption of
Class A shares that are purchased without an initial
sales charge. See "How to Buy Fund Shares_Class A shares."
**Assumes conversion of Class B shares to Class A shares approximately six
years after the date of purchase and, therefore, reflects Class A expenses
for years seven through ten.
1 See "Distribution Plans (Class A Plan and Class B and Class C Plans)" for
a description of each Fund's Distribution Plan and
Service Plan for Class A, B and C shares.
2 Does not include fees and expenses of the non-interested Trustees
(including counsel). The investment manager is contractually
required to reduce its Management Fee in an amount equal to each Fund's
allocable portion of such fees and expenses, which are estimated to be .02%
of each Fund's net assets. (See "Management of the Funds.")
3 Assuming no redemption of shares.
The amounts listed in the example should not be considered as
representative of future expenses and actual expenses may
be greater or less than those indicated. Moreover, while the example assumes
a 5% annual return, the Funds' actual performance will vary and may result in
an actual return greater or less than 5%.
The purpose of the foregoing table is to assist you in understanding
the various costs and expenses that investors will bear, directly or
indirectly, the payment of which will reduce investors' return on an annual
basis. Long-term investors in Class A, B or C shares could pay more in 12b-1
fees than the economic equivalent of paying the maximum front-end sales
charges applicable to mutual funds sold by members of the National
Association of Securities Dealers, Inc. ("NASD"). The information in the
foregoing table does not reflect any fee waivers or expense reimbursement
arrangements that may be in effect. Certain Service Agents (as defined below)
may charge their clients direct fees for effecting transactions in Fund
shares; such fees are not reflected in the foregoing table. See "Management
of the Funds," "How to Buy Fund Shares" and "Distribution Plans (Class A Plan
and Class B and Class C Plans)."
The Company understands that banks, securities dealers ("Selected
Dealers") or other financial institutions (including Dreyfus and its
affiliates) (collectively "Service Agents") may charge fees to their clients
who are owners of a Fund's Class A, B or C shares for various services
provided in connection with a client's account. These fees would be in
addition to any amounts received by a Service Agent under its Selling
Agreement ("Agreement") with the Distributor. The Agreement requires each
Service Agent to disclose to its clients any compensation payable to such
Service Agent by the Distributor and any other compensation payable by the
client for various services provided in connection with their accounts.
Page 3
FINANCIAL HIGHLIGHTS
The following tables are based upon a single Class A, Class
B, Class C or Class R share outstanding throughout each fiscal year
(period) and should be read in conjunction with the financial statements
and related notes that appear in each Fund's Annual Report dated June 30,
1996 and are incorporated by reference into the SAI. The financial
statements and related notes, as well as the information in the tables
below insofar as it relates to the fiscal years (periods) ended after
June 30, 1993, for Massachusetts Municipal Fund and November 30, 1993 for
California and New York Municipal Funds have been audited by KPMG Peat
Marwick LLP, independent auditors, whose report thereon appears in the
Funds' Annual Reports. Further information about, and management's
discussion of, the performance of each Fund is also included in each
Fund's Annual Report, which may be obtained without charge by writing to
the address or calling the number set forth on the cover page of this
Prospectus. The information in the tables below for fiscal years
(periods) prior the to the fiscal year (period) ended June 30, 1994, has
been audited by other independent auditors.
<TABLE>
<CAPTION>
PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
For a Class A share outstanding throughout each year or period.*
Period
Ended
Year Ended June 30, June 30, Year Ended November 30,
__________________ _____ _________________________________________________________
PER SHARE DATA: 1996 1995## 1994@## 1993 1992 1991 1990 1989 1988*
______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning
of year......... $12.80 $12.61 $13.07 $12.81 $12.53 $12.29 $12.16 $11.84 $12.00
______ ______ ______ ______ ______ ______ ______ ______ ______
Income from investment operations:
Net investment income*** 0.60 0.59 0.34 0.67 0.70 0.73 0.73 0.76 0.47
Net realized and unrealized gain/
(loss) on investments 0.10 0.21 (0.46) 0.66 0.44 0.24 0.20 0.32 (0.16)
______ ______ ______ ______ ______ ______ ______ ______ ______
Total from investment operations..... 0.70 0.80 (0.12) 1.33 1.14 0.97 0.93 1.08 0.31
______ ______ ______ ______ ______ ______ ______ ______ ______
Less distributions:
Distributions from net
investment income (0.60) (0.60) (0.34) (0.67) (0.70) (0.73) (0.73) (0.76) (0.47)
Distributions from net realized
capital gains (0.02) (0.01) (0.00)**** (0.40) (0.16) ._ (0.07) ._ ._
______ ______ ______ ______ ______ ______ ______ ______ ______
Total distributions.............. (0.62) (0.61) (0.34) (1.07) (0.86) (0.73) (0.80) (0.76) (0.47)
______ ______ ______ ______ ______ ______ ______ ______ ______
Net Asset Value, end of year..... $12.88 $12.80 $12.61 $13.07 $12.81 $12.53 $12.29 $12.16 $11.84
====== ====== ====== ====== ====== ====== ====== ====== ======
Total return............... 5.43% 6.48% (0.95)% 10.58% 9.27% 8.07% 7.96% 9.38% 2.61%
Ratios to average net assets/
supplemental data:
Net assets, end of year (000's) $7,745 $8,506 $10,143 $10,971 $21,831 $16,203 $12,481 $5,132 $3,202
Ratio of expenses to average
net assets 0.75% 0.75% 0.58%** 0.45% 0.45% 0.45% 0.45%... 0.45% 0.68%**.
Ratio of net income to average
net assets 4.59% 4.71% 4.51%** 5.09% 5.38% 5.84% 6.07%... 6.28% 5.43%**
Portfolio turnover rate........... 39.09% 49% 5% 38% 41% 27% 75% 59%..... ._
</TABLE>
Page 4
* The Fund commenced operations on March 7, 1988. On February 1, 1993,
existing shares of the Fund were designated the Retail
Class and the Fund began offering the Institutional Class and Investment
Class of shares. Effective April 4, 1994, the Retail and Institutional
Classes were reclassified as a single class of shares known as Investor
shares. Effective October 17, 1994, the Investor Class was redesignated
Class A. The Financial Highlights for the year ended June 30, 1995 and
subsequent years are based upon a Class A share (formerly Investor
shares) outstanding. The amounts shown for the period ended June 30,
1994 were calculated using the performance of a Retail share outstanding
from December 1, 1993 to April 3, 1994 and the performance of an Investor
Share outstanding from April 4, 1994 to June 30, 1994. The Financial
Highlights for the year ended November 30, 1993 and prior years are
based upon a Retail share outstanding.
** Annualized.
***Net investment income per share before waiver of fees and reimbursement
of expenses by the investment manager and/or custodian and/or transfer
agent for the period ended June 30, 1994, for the years ended November
30, 1993, 1992, 1991, 1990, 1989 and for the period ended November 30,
1988 were $0.31, $0.67, $0.64, $0.66, $0.66, $0.59, and $0.33,
respectively.
**** Amount represents less than $0.01
per share.
+ Annualized expense ratios before voluntary waiver of fees and
reimbursement of expenses by the investment manager and/or
custodian and/or transfer agent for the period ended June 30, 1994, for
the years ended November 30, 1993, 1992, 1991, 1990, 1989 and for the
period ended November 30, 1988 were 0.95%, 1.10%, 0.93%, 1.03%, 1.03%,
1.85% and 2.33%, respectively.
++ The expense ratio excludes interest expense. The expense ratio
including interest expense was 0.46% for the year ended
November 30, 1993.
+++ Total return represents aggregate total return for the periods
indicated and does not reflect the deduction of any
applicable sales charge.
@ The Fund changed its fiscal year end to June 30. Prior to this, the
Fund's fiscal year end was November 30.
## Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager. From April 4, 1994 through October 16,
1994, Mellon Bank served as the Fund's investment manager. Prior to
April 4, 1994, The Boston Company Advisors, Inc. served as the Fund's
investment manager.
Page 5
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
For a Class B share outstanding throughout each year or period.*
YEAR PERIOD
ENDED ENDED
6/30/96 6/30/95
________ ________
<S> <C> <C>
Net Asset Value, beginning of period $12.80 $12.28
________ ________
Income from investment operations:
Net investment income 0.53 0.27
Net realized and unrealized gain on investments 0.10 0.53
________ ________
Total from investment operations 0.63 0.80
Less distributions:
Dividends from net investment income (0.53) (0.28)
Dividends from net realized gain on investments (0.02) ._
________ ________
Total Distributions (0.55) (0.28)
________ ________
Net Asset Value, end of period $12.88 $12.80
======= ========
Total return 4.89% 6.51%
======= ========
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 78 $ 9
Ratio of expenses to average net assets 1.25% 1.25%**
Ratio of net investment income to average net assets 4.08% 4.20%**
Portfolio turnover rate 39% 49%
* The Fund commenced selling Class B shares on December 28, 1994.
**Annualized.
Total return represents aggregate total return for the
periods indicated
and does not reflect deduction of the applicable
sales charge.
</TABLE> Page 6
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
For a Class C share outstanding throughout each year or period.*
YEAR PERIOD
ENDED ENDED
6/30/96 6/30/95
________ ________
<S> <C> <C>
Net Asset Value, beginning of period $12.80 $12.28
________ ________
Income from investment operations:
Net investment income 0.53 0.28
Net realized and unrealized gain on investments 0.13 0.52
________ ________
Total from investment operations 0.66 0.80
Less distributions:
Dividends from net investment income (0.53) (0.28)
Dividends from net realized gain on investments (0.02) ._
________ ________
Total Distributions (0.55) (0.28)
________ ________
Net Asset Value, end of period $12.91 $12.80
======= ========
Total return 5.14% 6.51%
======= ========
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 25 $ 25
Ratio of expenses to average net assets 1.25% 1.25%**
Ratio of net investment income to average net assets 4.06% 4.22%**
Portfolio turnover rate 39% 49%
* The Fund commenced selling Class C shares on December 28, 1994.
**Annualized.
Total return represents aggregate total return for the periods
indicated and does not reflect deduction of the applicable
sales charge.
</TABLE>
Page 7
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
For a Class R share outstanding throughout each year or period.*
Year Year Period Period
Ended Ended Ended Ended
6/30/96 6/30/95## 6/30/94@## 11/30/93*
__________ ________ ____________ _________
<S> <C> <C> <C> <C>
Net Asset Value, beginning of period $12.80 $12.61 $13.07 $12.96
_______ _______ ________ _______
Income from investment operations:
Net investment income*** 0.63 0.63 0.35 0.55
Net realized and unrealized gain/(loss)
on investments 0.10 0.20 (0.46) 0.52
_______ _______ ________ _______
Total from investment operations 0.73 0.83 (0.11) 1.07
Less distributions:
Distributions from net investment income (0.63) (0.63) (0.35) (0.56)
Distributions from net realized capital gains (0.02) (0.01) (0.00)**** (0.40)
_______ _______ ________ _______
Total distributions (0.65) (0.64) (0.35) (0.96)
_______ _______ ________ _______
Net Asset Value, end of period $12.88 $12.80 $12.61 $13.07
======= ======= ====== =======
Total return 5.68% 6.75% (0.87)% 8.32%
======= ======= ====== ========
Ratios to average net assets/supplemental
data:
Net assets, end of period (000's) $12,384 $8,813 $12,235 $8,291
Ratio of expenses to average net assets 0.50% 0.50% 0.42%** 0.40%**
Ratio of net investment income to average
net assets 4.84% 4.96% 4.68%** 5.04%**
Portfolio turnover rate 30% 49% 5% 38%
* The Fund commenced selling Investment shares on February 1, 1993.
Effective April 4, 1994, the Investment Class was reclassified as the
Trust shares. Effective October 17, 1994 Trust shares were redesignated
Class R shares. The table above is based upon an Investment share
outstanding from February 1, 1993 to April 3, 1994, a Trust share
outstanding from April 4, 1994 to October 16, 1994, and a Class R share
thereafter.
**Annualized.
***Net investment income per share before waiver of fees and reimbursement
of expenses by the investment manager and/or custodian and/or transfer
agent for the periods ended June 30, 1994 and November 30, 1993 were
$0.32 and $0.49, respectively.
**** Amount represents less than $0.01
per share.
Annualized expense ratios before voluntary waiver of fees and
reimbursement of expenses by the investment manager and/or custodian
and/or transfer agent for the periods ended June 30, 1994 and November
30, 1993 were 0.79% and 1.06%, respectively.
The expense ratio excludes interest expense. The expense ratio
including interest expense was 0.41% for the period ended November 30,
1993.
Total return represents aggregate total return for the periods indicated.
@ The Fund changed its fiscal year end to June 30. Prior to this, the Fund's
fiscal year end was November 30.
##Effective October 17, 1994, Dreyfus began serving as the Fund's investment
manager. From April 4, 1994 through October 16,
1994, Mellon Bank served as the Fund's investment manager. Prior to
April 4, 1994, The Boston Company Advisors, Inc. served as the Fund's
investment manager.
</TABLE>
Page 8
<TABLE>
<CAPTION>
#
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
For a Class A share outstanding throughout each year.*
Year Ended June 30,
_______________________________________________________________________________________
1996 1995## 1994## 1993 1992 1991 1990 1989 1988 1987
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning
of year............. $11.91 $11.74 $12.38 $11.83 $11.23 $11.09 $11.25 $10.89 $10.74 $10.78
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Income from investment
operations:
Net investment income**... 0.54 0.55 0.54 0.64 0.73 0.73 0.72 0.74 0.72 0.72
Net realized and unrealized
gain/(loss)
on investments 0.08 0.20 (0.36) 0.55 0.60 0.14 (0.16) 0.36 0.15 (0.04)
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Total from investment
operations 0.62 0.75 0.18 1.19 1.33 0.87 0.56 1.10 0.87 0.68
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Less distributions:
Distributions from net
investment income....... (0.54) (0.54) (0.54) (0.64) (0.73) (0.73) (0.72) (0.74) (0.72) (0.72)
Distributions from net realized
capital gains.. (0.02) (0.04) (0.28) ._ ._ ._ ._ ._ ._ ._
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Total distributions............ (0.56) (0.58) (0.82) (0.64) (0.73) (0.73) (0.72) (0.74) (0.72). (0.72)
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Net Asset Value, end of year....$11.97 $11.91 $11.74 $12.38 $11.83 $11.23 $11.09 $11.25 $10.89 $10.74
====== ====== ====== ====== ====== ====== ====== ====== ====== =======
Total return................... 5.22% 6.60% 1.38% 10.27% 12.21% 8.13% 5.13% 10.44% 8.37% 6.27%
====== ====== ====== ====== ====== ====== ====== ====== ====== =======
Ratios to average net assets/
supplemental data:
Net assets, end of year (000's) $15,689 $16,501 $21,276 20,106 $20,513 $16,337 $16,093 14,957 $14,702 $15,355
Ratio of expenses to average
net assets........ 0.75% 0.75% 0.76% 0.75% 0.76% 0.88% 0.92% 0.96% 0.96% 0.79%
Ratio of net income to average
net assets...... 4.44% 4.65% 4.40% 5.30% 6.34% 6.59% 6.45% 6.70% 6.69% 6.45%
Portfolio turnover rate....... 39% 25% 19% 60% 23% 41% 99% 93% 104% 127%
* The Fund commenced operations on September 24, 1985. On February 1,
1993, existing shares of the Fund were designated the
Retail Class and the Fund began offering the Institutional Class and
Investment Class of shares. Effective April 4, 1994, the Retail and
Institutional Classes were reclassified as a single class of shares known as
Investor shares. Effective October 17, 1994, the Investor shares were
redesignated Class A. The Financial Highlights for the year ended June 30,
1995 and subsequent years are based upon a Class A share (formerly Investor
shares) outstanding.The amounts shown for the year ended June 30, 1994 were
calculated using the performance of a Retail share outstanding from July 1,
1993 to April 3, 1994, and the performance of an Investor share outstanding
from April 4, 1994 to June 30, 1994. The Financial Highlights for the year
ended June 30, 1993 and prior years are based upon a Retail share
outstanding.
**Net investment income per share before waiver of fees and reimbursement
of expenses by investment manager and/or custodian and/or transfer agent
for the years ended June 30, 1994, 1993 were $0.53, $0.62 and $0.70,
respectively.
Annualized expense ratios before voluntary waiver of fees and
reimbursement of expenses by the investment manager and/or custodian
and/or transfer agent for the year ended June 30, 1994, 1993 and 1987
and the period ended June 30, 1986 were 0.89%, 0.92%, 0.95% and 1.15%,
respectively.
Total return represents aggregate total return for the periods indicated
and does not reflect the deduction of any
applicable sales charge.
##Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager. From April 4, 1994 through October 16, 1994, Mellon
Bank served as the Fund's investment manager. Prior to April 4, 1994,
The Boston Company Advisors, Inc. served as the Fund's investment
manager.
</TABLE>
Page 9
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND*
For a Class B share outstanding throughout the year.
Year
Ended
6/30/96
________
<S> <C>
Net Asset Value, beginning of year $11.91
________
Income from investment operations:
Net investment income 0.48
Net realized and unrealized gain on investments 0.10
________
Total from investment operations 0.58
Less distributions:
Dividends from net investment income (0.48)
Dividends from net realized gain on investments (0.02)
________
Total Distributions (0.50)
________
Net Asset Value, end of year $11.99
=======
Total return 4.87%
=======
Ratios to average net assets/supplemental data:
Net assets, end of year (000's) $ 452
Ratio of expenses to average net assets 1.25%
Ratio of net investment income to average net assets 3.67%
Portfolio turnover rate 39%
* The Fund commenced selling Class B shares on December 28, 1994.
++ Total return represents aggregate total return for the period indicated
and does not reflect deduction of the applicable
sales charge.
</TABLE>
Page 10
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
For a Class C share outstanding throughout each year or period.*
Year Period
Ended Ended
6/30/96 6/30/95
_______ ______
<S> <C> <C>
Net Asset Value, beginning of period $11.91 $11.45
_______ ______
Income from investment operations:
Net investment income 0.48 0.26
Net realized and unrealized gain on investments 0.08 0.45
_______ ______
Total from investment operations 0.56 0.71
_______ ______
Less distributions:
Dividends from net investment income (0.48) (0.25)
_______ ______
Dividends from net realized gain on investments (0.02) ._
_______ ______
Total Distributions (0.50) (0.25)
_______ ______
Net Asset Value, end of period $11.97 $11.91
======== =======
Total return 4.68% 6.24%
======== =======
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 16 $ 18
Ratio of expenses to average net assets 1.25% 1.25%**
Ratio of net investment income to average net assets 3.93% 4.15%**
Portfolio turnover rate 39% 25%
* The Fund commenced selling Class C shares on December 28, 1994.
** Annualized.
Not Annualized.
Total return represents aggregate total return for the periods indicated
and does not reflect deduction of the applicable
sales charge.
</TABLE>
Page 11
<TABLE>
<CAPTION>
#
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
For a Class R share outstanding throughout each year or period.*
Year Year Period Period
Ended Ended Ended Ended
6/30/96 6/30/95## 6/30/94@## 6/30/93
__________ ________ ____________ _________
<S> <C> <C> <C> <C>
Net Asset Value, beginning of period $11.91 $11.74 $12.38 $12.08
_______ _______ ________ _______
Income from investment operations:
Net investment income*** 0.57 0.57 0.55 0.25
Net realized and unrealized gain/(loss)
on investments 0.08 0.21 (0.35) 0.29
_______ _______ ________ _______
Total from investment operations 0.65 0.78 0.20 0.54
Less distributions:
Distributions from net investment income (0.57) (0.57) (0.56) (0.24)
Distributions from net realized capital gains (0.02) (0.04) (0.28) ._
_______ _______ ________ _______
Total distributions (0.59) (0.61) (0.84) (0.24)
_______ _______ ________ _______
Net Asset Value, end of period $11.97 $11.91 $11.74 $12.38
======== ======== ======== =======
Total return 5.46% 6.87% 1.53% 4.53%
======== ======== ======== =======
Ratios to average net assets/
supplemental data:
Net assets, end of period (000's) $25,981 $19,700 $15,681 $9,411
Ratio of expenses to average net assets 0.50% 0.50% 0.62% 0.65%**
Ratio of net investment income to average
net assets 4.68% 4.90% 4.54% 4.84%**
Portfolio turnover rate 39% 25% 19% 60%
* The Fund commenced selling Investment shares on February 1, 1993.
Effective April 4, 1994, the Investment Class was reclassified as the
Trust shares. Effective October 17, 1994, Trust shares were redesignated
Class R shares. The table above is based upon an Investment share
outstanding from February 1, 1993 to April 3, 1994, a Trust share
outstanding from April 4, 1994 to October 16, 1994, and a Class R share
thereafter.
**Annualized.
***Net investment income per share before waiver of fees and reimbursement
of expenses by the investment manager and/or custodian and/or transfer
agent for the year ended June 30, 1994 and period ended June 30, 1993
were $0.54 and $0.24, respectively.
Annualized expense ratios before voluntary waiver of fees and
reimbursement of expenses by the investment manager and/or custodian
and/or transfer agent for the year ended June 30, 1994 and for the
period ended June 30, 1993 were 0.75% and 0.87%, respectively.
Total return represents aggregate total return for the periods indicated.
##Effective October 17, 1994, Dreyfus began serving as the Fund's investment
manager. From April 4, 1994 through October 16,
1994, Mellon Bank served as the Fund's investment manager. Prior to
April 4, 1994, The Boston Company Advisors, Inc. served as the Fund's
investment manager.
</TABLE>
Page 12
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND
For a Class A share outstanding throughout each year or period.*
PERIOD ENDED PERIOD ENDED
YEAR ENDED JUNE 30, JUNE 30, YEAR ENDED NOVEMBER 30, NOVEMBER 30,
___________________ __________ ___________________________________ ___________
PER SHARE DATA: 1996 1995## 1994@## 1993 1992 1991 1990 1989 1988
_____ _____ ______ _____ _____ _____ _____ _____ _____
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of year... $12.71 $12.59 $13.04 $12.70 $12.34 $12.02 $11.90 $11.75 $12.00
______ ______ ______ _____ _____ _____ _____ _____ _____
Income from investment operations:
Net investment income***.................... 0.59 0.60 0.35 0.66 0.68 0.70 0.73 0.72 0.47
Net realized and unrealized gain/
(loss) on investments............. (0.06) 0.17 (0.45) 0.46 0.36 0.32 0.11 0.15 (0.24)
______ ______ ______ _____ _____ _____ _____ _____ _____
Total from investment operations........ 0.53 0.77 (0.10) 1.12 1.04 1.02 0.84 0.87 0.23
______ ______ ______ _____ _____ _____ _____ _____ _____
Less distributions:
Distributions from net investment income. (0.59) (0.60) (0.35) (0.66) (0.68) (0.70) (0.72) (0.72) (0.48)
Distributions from net realized capital gains ._ (0.04) ._ (0.12) ._ ._ ._ ._ ._
Distributions in excess of net
realized capital gains............ ._ (0.01) ._ ._ ._ ._ ._ ._ ._
______ ______ ______ _____ _____ _____ _____ _____ _____
Total distributions...................... (0.59) (0.65) (0.35) (0.78) (0.68) (0.70) (0.72) (0.72) (0.48)
______ ______ ______ _____ _____ _____ _____ _____ _____
Net Asset Value, end of year...............$12.65 $12.71 $12.59 $13.04 $12.70 $12.34 $12.02 $11.90 $11.75
====== ======= ======= ====== ====== ====== ====== ====== =======
Total return............................. 4.23% 6.39% (0.80%) 9.00% 8.65% 8.71% 7.35% 7.60%. 1.95%
====== ======= ======= ====== ====== ====== ====== ====== =======
Ratios to average net assets/supplemental
data:
Net assets, end of year (000's).... $2,106 $2,340 $2,922 $2,100 $5,308 $5,202 $3,959 $3,535 $2,315
Ratio of expenses to average net assets.. 0.75% 0.75% 0.57%** 0.46% 0.45% 0.45% 0.45% 0.44% 0.70%**
Ratio of net investment income to average
net assets............... 4.62% 4.83% 4.66%** 5.11% 5.43% 5.74% 6.14% 6.30% 5.54%**
Portfolio turnover rate................... 43% 32% 13% 32% 0% 0% 45% 7% 74%
* The Fund commenced operations on March 7, 1988. On February 1, 1993,
existing shares of the Fund were designated the Retail
Class and the Fund began offering the Institutional Class and Investment
Class of shares. Effective April 4, 1994, the Retail and Institutional
Classes were reclassified as a single class of shares known as Investor
shares. Effective October 17, 1994, the Investor Class was redesignated
Class A shares. The Financial Highlights for the year ended June 30,
1995 and subsequent years are based upon a Class A share (formerly
Investor shares) outstanding.The amounts shown for the period ended June
30, 1994 were calculated using the performance of a Retail share
outstanding from December 1, 1993 to April 3, 1994 and the performance
of an Investor share outstanding from April 4, 1994 to June 30, 1994.
The Financial Highlights for the year ended November 30, 1993 and prior
years are based upon a Retail share outstanding.
**Annualized.
***Net investment income per share before waiver of fees and reimbursement
of expenses by the investment manager and/or custodian and/or transfer
agent for the period ended June 30, 1994, for the years ended November
30, 1993, 1992, 1991, 1990, 1989, and for the period ended November 30,
1988 were $0.28, $0.42, $0.52, $0.52, $0.59, $0.45, and $0.31,
respectively.
Annualized expense ratios before voluntary waiver of fees and
reimbursement of expenses by the investment manager and/or
custodian and/or transfer agent for the period ended June 30, 1994, for
the years ended November 30, 1993, 1992, 1991, 1990, 1989 and for the
period ended November 30, 1988 were 1.51%, 2.32%, 1.70%, 1.88%, 1.61%,
2.67% and 2.61%, respectively.
Total return represents aggregate total return for the periods indicated
and does not reflect the deduction of any
applicable sales charge.
@ The Fund changed its fiscal year end to June 30. Prior to this, the
Fund's fiscal year end was November 30.
##Effective October 17, 1994, Dreyfus began serving as the Fund's investment
manager. From April 4, 1994 through October 16,
1994, Mellon Bank served as the Fund's investment manager. Prior to
April 4, 1994, The Boston Company Advisors, Inc. served as the Fund's
investment manager.
</TABLE>
Page 13
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND*
For a Class B share outstanding throughout the year.
YEAR
Ended
6/30/96
______
<S> <C>
Net Asset Value, beginning of year $12.71
______
Income from investment operations:
Net investment income 0.54
Net realized and unrealized loss on investments (0.05)
______
Total from investment operations 0.49
Less distributions:
Distributions from net investment income (0.54)
______
Net Asset Value, end of year $12.66
========
Total return 3.85%
========
Ratios to average net assets/supplemental data:
Net assets, end of year (000's) $ 120
Ratio of expenses to average net assets 1.25%
Ratio of net investment income to average net assets 3.97%
Portfolio turnover rate 43%
* The Fund commenced selling Class B Shares on December 28, 1994.
++ Total return represents aggregate total return for the period indicated
and does not reflect deduction of the applicable
sales charge.
</TABLE>
Page 14
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND
For a Class C share outstanding throughout each year or period.*
Year Period
Ended Ended
6/30/96 6/30/95
Net Asset Value, beginning of year $12.71 $12.21
________ ________
<S> <C> <C>
Income from investment operations:
Net investment income 0.54 0.28
Net realized and unrealized gain/(loss) on investments (0.03) 0.49
________ ________
Total from investment operations 0.51 0.77
________ ________
Less distributions:
Distributions from net investment income (0.54) (0.27)
________ ________
Net Asset Value, end of year $12.68 $12.71
======== ==========
Total return 4.02% 6.39%
======== ==========
Ratios to average net assets/supplemental data:
Net assets, end of year (000's) $ 52 $ 68
Ratio of expenses to average net assets 1.25% 1.25%**
Ratio of net investment income to average net assets 4.15% 4.34%**
Portfolio turnover rate 43% 32%
* The Fund commenced selling Class C Shares on December 28, 1994.
** Annualized.
Not Annualized.
Total return represents aggregate total return for the periods indicated
and does not reflect deduction of the applicable
sales charge.
</TABLE>
Page 15
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND
For a Class R Share outstanding throughout each year or period.*
Year Year Period Period
Ended Ended Ended Ended
6/30/96 6/30/95## 6/30/94@## 11/30/93*
________ ________ _________ ________
<S> <C> <C> <C> <C>
Net Asset Value, beginning of year $12.71 $12.59 $13.04 $12.85
________ ________ _________ ________
Income from investment operations:
Net investment income*** 0.63 0.64 0.37 0.57
Net realized and unrealized gain/(loss)
on investments (0.06) 0.17 (0.45) 0.31
________ ________ _________ ________
Total from investment operations 0.57 0.81 (0.08) 0.88
________ ________ _________ ________
Less distributions:
Distributions from net investment income (0.63) (0.64) (0.37) (0.57)
Distributions from net realized capital gains ._ (0.04) ._ (0.12)
Distributions in excess of net realized
capital gains ._ (0.01) .- .-
________ ________ _________ ________
Total distributions (0.63) (0.69) (0.37) (0.69)
________ ________ _________ ________
Net Asset Value, end of year $12.65 $12.71 $12.59 $13.04
========= ========= ========== =========
Total return 4.49% 6.65% (0.67%) 6.95%
========= ========= ========== =========
Ratios to average net assets/
supplemental data:
Net assets, end of year (000's) $4,060 $2,844 $2,388 $2,542
Ratio of expenses to average net assets 0.50% 0.50% 0.29%** 0.25%**
Ratio of net investment income to average
net assets 4.87% 5.08% 4.94%** 5.20%**
Portfolio turnover rate 43.43% 32% 13% 32%
* The Fund commenced selling Investment Class shares on February 1, 1993.
Effective April 4, 1994, the Investment Class was reclassified as Trust
shares. Effective October 17, 1994, Trust shares were redesignated Class
R shares. The table above is based upon a Retail share outstanding from
February 1, 1993 to April 3, 1994, a Trust share outstanding from April
4, 1994 to October 16, 1994, and a Class R share thereafter.
**Annualized.
***Net investment income per share before waiver of fees and reimbursement
of expenses by the investment manager and/or custodian and/or transfer
agent for the periods ended June 30, 1994 and November 30, 1993 were
$0.30 and $0.36, respectively.
Annualized expense ratios before voluntary waiver of fees and
reimbursement of expenses by the investment manager and/or custodian
and/or transfer agent for the periods ended June 30, 1994 and November
30, 1993 were 1.23% and 2.22%, respectively.
Total return represents aggregate total return for the periods indicated.
@ The Fund changed its fiscal year end to June 30. Prior to this, the Fund's
fiscal year end was November 30.
##Effective October 17, 1994, Dreyfus began serving as the Fund's investment
manager. From April 4, 1994 through October 16,
1994, Mellon Bank served as the Fund's investment manager. Prior to
April 4, 1994, The Boston Company Advisors, Inc. served as the Fund's
investment manager.
</TABLE>
Page 16
ALTERNATIVE PURCHASE METHODS
The Funds offer you four methods of purchasing Fund shares; you
may choose the Class of shares that best suits your needs, given the
amount of your purchase, the length of time you expect to hold your
shares and any other relevant circumstances. Each Fund share represents
an identical pro rata interest in a Fund's investment portfolio. All Fund
shares are sold on a continuous basis.
Class A shares are sold at net asset value per share plus a
maximum initial sales charge of 3.0% of the public offering price imposed
at the time of purchase. The initial sales charge may be reduced or
waived for certain purchases. See "How to Buy Fund Shares _ Class A
shares." These shares are subject to an annual 12b-1 fee at the rate of
0.25 of 1% of the value of the average daily net assets of Class A. See
"Distribution Plan _ Class A shares."
Class B shares are sold at net asset value per share with no
initial sales charge at the time of purchase; as a result, the entire
purchase price is immediately invested in a Fund. Class B shares are
subject to a maximum 3% contingent deferred sales charge ("CDSC"), which
is assessed only if you redeem Class B shares within five years of
purchase. See "How to Buy Fund Shares _ Class B shares" and "How to
Redeem Fund Shares _ Contingent Deferred Sales Charge _ Class B shares."
These shares also are subject to an annual distribution fee at the rate
of 0.50 of 1% of the value of the average daily net assets of Class B. In
addition, Class B shares are subject to an annual service fee at the rate
of 0.25 of 1% of the value of the average daily net assets of Class B.
See "Distribution and Service Plans _ Class B and C." The distribution
and service fees paid by Class B will cause such Class to have a higher
expense ratio and to pay lower dividends than Class A. Approximately six
years after the date of purchase (or, in the case of Class B shares of a
Fund acquired through exchanges of Class B shares of another fund advised
by Dreyfus, the date of purchase of the original Class B shares of the
fund exchanged), Class B shares automatically will convert to Class A
shares, based on the relative net asset values for shares of each such
Class, and will no longer be subject to the service plan fee of Class B
shares and will be subject to the lower distribution plan fee of Class A
shares. (Such conversion is subject to suspension by the Board of
Trustees if adverse tax consequences might result.) Class B shares that
have been acquired through the reinvestment of dividends and other
distributions will be converted on a pro rata basis together with other
Class B shares, in the proportion that a shareholder's Class B shares
converting to Class A shares bears to the total Class B shares not
acquired through the reinvestment of dividends and other distributions.
Class C shares are sold at net asset value per share with no
initial sales charge at the time of purchase; as a result, the entire
purchase price is immediately invested in a Fund. Class C shares are
subject to a .75% CDSC, which is assessed only if you redeem Class C
shares within one year of purchase. See "How to Redeem Fund Shares _
Class C shares." These shares also are subject to an annual distribution
fee at the rate of 0.50 of 1% of the value of the average daily net
assets of Class C. Class C shares also are subject to an annual service
fee at the rate of 0.25 of 1% of the value of the average daily net
assets of Class C. See "Distribution and Service Plans _ Class B and C."
The distribution and service fees paid by Class C will cause such Class
to have a higher expense ratio and to pay lower dividends than Class A.
Class R shares generally may not be purchased directly by
individuals, although eligible institutions may purchase Class R shares
for accounts maintained by individuals. Class R shares are sold at net
asset value per share primarily to Banks acting on behalf of customers
having a qualified trust or investment account or relationship at such
institution, or to customers who have received and hold shares of a Fund
distributed to them by virtue of such an
Page 17
account or relationship. Class
A, Class B and Class C shares are sold primarily to clients of Service
Agents that have entered into Agreements with the Distributor.
The decision as to which Class of shares is most beneficial
to you depends on the amount and the intended length of your investment.
You should consider whether, during the anticipated life of your
investment in a Fund, the accumulated distribution fee, service fee and
CDSC, if any, on Class B or Class C shares would be less than the
accumulated distribution fee and initial sales charge on Class A shares
purchased at the same time, and to what extent, if any, such differential
would be offset by the return of Class A shares. Additionally, investors
qualifying for reduced initial sales charges who expect to maintain their
investment for an extended period of time might consider purchasing Class
A shares because the accumulated continuing distribution and service
fees on Class B or Class C shares may exceed the accumulated distribution
fee and initial sales charge on Class A shares during the life of the
investment. Finally, you should consider the effect of the CDSC period
and any conversion rights of the Classes in the context of your own
investment time frame. For example, while Class C shares have a shorter
CDSC period than Class B shares, Class C shares do not have a conversion
feature and, therefore, are subject to ongoing distribution and service
fees. Thus, Class B shares may be more attractive than Class C shares to
investors with longer term investment outlooks. Generally, Class A shares
may be more appropriate for investors who invest $1,000,000 or more in
Fund shares, but will not be appropriate for investors who invest less
than $100,000 in Fund shares.
DESCRIPTION OF THE FUNDS
INVESTMENT OBJECTIVE
Each Fund seeks to maximize current income exempt from
Federal income taxes and state personal income taxes for resident
shareholders of the named state, consistent with what is believed to be
the prudent risk of capital. In addition, the Premier Limited Term New
York Municipal Fund seeks to maximize current income exempt from New York
City personal income taxes. Each Fund pursues its objective by investing
in Municipal Obligations of such Fund's named state which are of
"investment-grade" quality and generally of intermediate maturities.
MANAGEMENT POLICIES
Under normal market conditions, each Fund attempts to invest
100%, and will invest a minimum of 80%, of its total assets in Municipal
Obligations of such Fund's named state. When, in Dreyfus' opinion,
adverse market conditions exist for Municipal Obligations, and a
"defensive" investment posture is warranted, each Fund may temporarily
invest more than 20% of its total assets in money market instruments
having maturity and quality characteristics comparable to those
(discussed below) for Municipal Obligations, but which produce income
exempt from Federal, but not the state personal income taxes for resident
shareholders of a Fund's named state, or more than 20% of its total
assets in taxable obligations (including obligations the interest on
which is included in the calculation of alternative minimum tax for
individuals). Periods when a defensive posture is warranted include those
periods when a Fund's monies available for investment exceed the relevant
state's Municipal Obligations available for purchase to meet such Fund's
rating, maturity and other investment criteria. Each Fund does not
anticipate that it will find it necessary to make any investments in
securities the interest from which is not exempt from Federal income and
the respective state's personal income taxes. Each Fund's policy of
investing a minimum of 80% of its total assets in Municipal Obligations
of such Fund's named state is a fundamental policy of the Fund.
Page 18
QUALITY OF MUNICIPAL OBLIGATIONS
The Funds invest only in Municipal Obligations rated at the
time of purchase within the four highest quality ratings of Moody's
Investors Service, Inc. ("Moody's") (currently at least Baa or above for
bonds, at least MIG 3 or above for notes and at least Prime-2 or above
for commercial paper) or Standard & Poor's Ratings Group ("S&P") (at
least BBB or above for bonds, at least SP-2 or above for notes and at
least A-2 or above for commercial paper) or, if not rated by Moody's or
S&P, of comparable quality to the above ratings as determined by Dreyfus.
Municipal Obligations rated within the four highest ratings are
considered to be of investment-grade quality, although bonds rated in the
lowest of these four categories (Baa by Moody's or BBB by S&P) have some
speculative characteristics and involve greater risks and potentially
higher yields. A discussion of the categories of Municipal Obligations
and the rating systems appears in the SAI.
Because many issuers of Municipal Obligations may choose not
to have their obligations rated, it is possible that a large portion of a
Fund's bond portfolio may consist of unrated obligations. Unrated
obligations are not necessarily of lower quality than rated obligations,
but to the extent the Funds invest in unrated obligations, the Funds will
be more reliant on Dreyfus' judgment, analysis and experience than would
be the case if the Funds invested only in rated obligations.
The taxable instruments in which each Fund is permitted to
invest under certain circumstances include U.S. Government Securities and
short-term, high quality money market instruments. In addition, each Fund
may, on occasion, purchase securities issued by other investment
companies that invest primarily in high quality debt obligations of the
kinds in which the Fund may invest.
PRICE AND PORTFOLIO MATURITY
The Funds generally invest in Municipal Obligations having
intermediate-term maturities, which can be expected to pay higher yields
and experience greater fluctuations in value than bonds with short-term
maturities. The average weighted maturity of the Municipal Obligations in
each Fund's individual portfolio is not expected to exceed ten years.
There is no limit on the maturity of any individual security. The market
value of the Municipal Obligations in a Fund's portfolio and,
accordingly, a Fund's net asset value typically will vary inversely with
changes in interest rates, declining when interest rates rise and rising
when interest rates decline. Under normal market conditions, the longer
the average maturity of a Fund's holdings, the greater its expected yield
and price volatility.
INVESTMENT TECHNIQUES
In connection with its investment objective and policies,
each Fund may employ, among others, the following investment techniques:
WHEN-ISSUED SECURITIES. The Funds may purchase Municipal
Obligations on a "when-issued" basis (i.e., delivery of and payment for
the Municipal Obligations normally take place within 45 days after the
date of the purchase commitment). The payment obligation and the interest
rate on such securities are fixed at the time of the purchase commitment.
Although the Funds generally will purchase Municipal Obligations on a
when-issued basis with the intention of acquiring the securities, the
Funds may sell such securities before the settlement date. Municipal
Obligations purchased on a when-issued basis, like other investments made
by the Funds, may decline or appreciate in value prior to their actual
delivery to the Funds.
MUNICIPAL BOND INDEX AND INTEREST RATE FUTURES CONTRACTS AND
OPTIONS ON MUNICIPAL BOND INDEX AND INTEREST RATE FUTURES CONTRACTS. The
Funds may enter into municipal bond
Page 19
index futures contracts and interest
rate futures contracts and purchase and sell options on these futures
contracts that are traded on a United States exchange or board of trade.
Such investments, if any, by a Fund will be made solely for the purpose
of hedging against changes in the value of its portfolio securities and
in the value of securities it intends to purchase due to anticipated
changes in interest rates and market conditions and when the transactions
are economically appropriate to the reduction of risks inherent in the
management of the Funds.
A municipal bond index futures contract, which is based on an
index of long-term, tax-exempt municipal bonds, is an agreement in which
two parties agree to take or make delivery of an amount of cash equal to
a specified dollar amount times the difference between the value of the
index at the close of the last trading day of the contract and the price
at which the index contract was originally written. An interest rate
futures contract provides for the future purchase or sale of specified
interest rate sensitive debt securities such as United States Treasury
bills, bonds and notes, obligations of the Government National Mortgage
Association and bank certificates of deposit. Although most interest rate
futures contracts require the delivery of the underlying securities, some
settle in cash. Each contract designates the price, date, time and place
of delivery. Entering into a futures contract to deliver the index or
instrument underlying the contract is referred to as entering into a
"short" position in the futures contract, whereas entering into a futures
contract to take delivery of the index or instrument is referred to as
entering into a "long" position in the futures contract.
A put or call on a municipal bond index or interest rate
futures contract gives the purchaser the right, in return for the premium
paid, to assume a short or long position, respectively, in the underlying
futures contract as a specified exercise price at any time prior to the
expiration date of the option. The Funds may purchase put and call
options on both municipal bond index and interest rate futures contracts.
The Funds will sell options on these futures contracts only as part of
closing purchase transactions to terminate its options position, although
no assurance can be given that closing transactions can be effected.
Entering into a futures contract for the purchase or sale of
a municipal bond index or debt security or purchasing options on index or
interest rate futures contracts will enable a Fund to protect its assets
from fluctuations in interest rates on tax-exempt securities without
initially buying or selling the securities. The Funds may enter into
futures contracts to sell an index or debt security or may purchase
options when Dreyfus believes that interest rates will increase and
consequently the value of the Funds' portfolio securities will decrease.
The Funds may enter into futures contracts to buy an index or debt
security or may purchase call options when Dreyfus anticipates purchasing
portfolio securities at a time of declining interest rates.
There are several risks in connection with the issue of
municipal bond index and interest rate futures contracts and options on
these futures contracts as hedging devices. There can be no assurance
that there will be a correlation between price movements in the municipal
bond index or interest rate futures, on the one hand, and price movements
in municipal bonds which are the subject of the hedge, on the other hand.
Positions in futures contracts and options on futures contracts may be
closed out only by entering into offsetting positions on the exchange on
which the contract was initiated, and no assurance can be given that an
active market will exist for the contract or the option at any particular
time. Consequently, the Funds may realize a loss on a futures contract
that is not offset by an increase in the price of the municipal bonds
that are being hedged or may not be able to close a futures position in
the event of adverse price movements. Any income earned by the Funds from
transactions in futures contracts and options on futures contracts will
be taxable. Accordingly, it is anticipated
Page 20
that such investments will be
made only in unusual circumstances, such as when Dreyfus anticipates an
extreme change in interest rates or market conditions. Successful use of
futures contracts by the Funds is subject to the ability of Dreyfus to
correctly predict movements in the direction of interest rates.
The Funds may not enter into futures contracts or purchase
options on futures contracts if, immediately thereafter, the sum of the
amount of margin deposits on the Funds' existing futures contracts and
premiums paid for options would exceed 5% of the value of a Fund's total
assets, after taking into account unrealized profits and losses on any
existing contracts. When a Fund enters into futures contracts, purchases
an index or debt security or purchases call options, an amount of cash,
U.S. Government Securities or other high grade debt securities equal to
the market value of the contract will be deposited and maintained in a
segregated account with the Fund's custodian to collateralize the
positions, thereby insuring that the use of the contract is unleveraged.
At present the Funds are considering investments in futures
contracts and options on futures contracts as described above. However,
the Funds reserve the right to invest in other kinds of futures contracts
and options on futures contracts subject to the policies the Board of
Trustees may establish from time to time.
CERTAIN PORTFOLIO SECURITIES
FLOATING RATE AND VARIABLE RATE OBLIGATIONS. The Funds may
purchase floating rate and variable rate obligations. These obligations
bear interest at rates that are not fixed, but vary with changes in
specified market rates or indices. Some of these obligations may carry a
demand feature that permits the Funds to receive the par value upon
demand prior to maturity. The Funds will limit their purchases of
floating rate and variable rate Municipal Obligations to those meeting
the quality standards applicable to such Fund. Frequently, such
obligations are secured by letters of credit or other credit support
arrangements provided by banks. The quality of the underlying creditor or
the bank, as determined by Dreyfus under the supervision of the Board of
Trustees must also be equivalent to the quality standards applicable to
the Fund. In addition, Dreyfus monitors the earning power, cash flow and
other liquidity ratios of the issuers of such obligations, as well as the
creditworthiness of the institution responsible for paying the principal
amount of the obligations under the demand feature.
The Funds may invest in participation interests purchased
from banks in floating or variable rate Municipal Obligations owned by
banks. Participation interests carry a demand feature permitting the
Funds to tender them back to the bank. Each participation is backed by an
irrevocable letter of credit or guarantee of a bank which Dreyfus under
the supervision of the Board of Trustees has determined meets the
prescribed quality standards for the Funds.
Other types of tax-exempt instruments that may become
available in the future may be purchased by the Funds as long as Dreyfus
believes the quality of these instruments meets the Funds' quality
standards.
MUNICIPAL LEASE OBLIGATIONS. The Funds may purchase municipal
lease obligations and certificates of participation in municipal lease
obligations. A municipal lease obligation does not constitute a general
obligation of the municipality for which the municipality's taxing power
is pledged. Ordinarily, a lease obligation will contain a
"non-appropriation" clause which provides that the municipality has no
obligation to make lease payments in future years unless money is
appropriated for such purpose on a yearly basis. Because of the risk of
non-appropriation, some lease obligations are issued with third-party
credit enhancements, such as insurance or a letter of credit. Lease
obligations are a relatively new type of financing that has
Page 21
not yet
developed the depth of marketability associated with more conventional
municipal obligations. For these reasons, before investing in a lease
obligation Dreyfus will consider, among other things, whether (1) the
leased property is essential to a governmental function of the
municipality, (2) the municipality is prohibited from substituting or
purchasing similar equipment if lease payments are not appropriated, and
(3) the municipality has maintained good market acceptability for its
lease obligations in the past. The Board of Trustees has established
guidelines for determining whether a Municipal Lease Obligation is a
liquid security. Such determination will be made based upon all relevant
factors including, the frequency of trades and quotes for the obligation,
the number of dealers willing to purchase or sell the security and the
number of potential buyers, the willingness of dealers to undertake to
make a market in the securities, and the nature of the marketplace
trades.
OTHER INVESTMENT COMPANIES. Each Fund may invest in
securities issued by other investment companies to the extent that such
investments are consistent with the Fund's investment objective and
policies and permissible under the Investment Company Act of 1940, as
amended (the "1940 Act"). As a shareholder of another investment company,
the Fund would bear, along with other shareholders, its pro rata portion
of the other investment company's expenses, including advisory fees.
These expenses would be in addition to the advisory and other expenses
that the Fund bears directly in connection with its own operations.
TENDER OPTION BONDS. Each Fund may invest up to 10% of the
value of its assets in tender option bonds. A tender option bond is a
Municipal Obligation (generally held pursuant to a custodial arrangement)
having a relatively long maturity and bearing interest at a fixed rate
substantially higher than prevailing short-term tax-exempt rates, that has
been coupled with the agreement of a third party, such as a bank,
broker-dealer or other financial institution, pursuant to which such
institution grants the security holders the option, at periodic
intervals, to tender their securities to the institution and receive the
face value thereof. As consideration for providing the option, the
financial institution receives periodic fees equal to the difference
between the Municipal Obligation's fixed coupon rate and the rate, as
determined by a remarketing or similar agent at or near the commencement
of such period, that would cause the securities, coupled with the tender
option, to trade at par on the date of such determination. Thus, after
payment of this fee, the security holder effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt
rate. Dreyfus on behalf of the Funds, will consider on an ongoing basis
the creditworthiness of the issuer of the underlying Municipal
Obligation, of any custodian and the third-party provider of the tender
option. In certain instances and for certain tender option bonds, the
option may be terminable in the event of a default in payment of
principal or interest on the underlying Municipal Obligations and for
other reasons. Each Fund will not invest more than 15% of the value of
such Fund's net assets in illiquid securities, which would include tender
option bonds for which the required notice to exercise the tender feature
is more than seven days if there is no secondary market available for
these obligations.
CERTAIN RISK CONSIDERATIONS REGARDING THE STATE OF
CALIFORNIA. Because the Premier Limited Term California Municipal Fund
concentrates in the obligations of California issuers, it is more
susceptible to factors adversely affecting such issuers than mutual funds
that do not concentrate in the obligations of issuers of a single state.
You should consider carefully the special risks inherent in the Premier
Limited Term California Municipal 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
Page 22
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. The State had an operating surplus of approximately
$109 million in 1992-93 and $836 million in fiscal 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 over the last three fiscal
years has been that the State depleted its available cash resources and
has had to use a series of external borrowings to meet its cash needs. To
meet its cash flow needs in the 1994-95 fiscal year, the State issued, in
July and August 1994, $4.0 billion of revenue anticipation warrants and
$3.0 billion of revenue anticipation notes. The 1994-95 Budget Act
contained a plan to retire a projected $1.025 billion deficit in the
1995-96 fiscal year. As a result of the deterioration in the State's
budget and cash situation between October 1991 and July 1994, the rating
on the State's general obligation bonds was reduced by S&P from AAA to A,
by Moody's from Aa to A1 and by Fitch Investors Service, L.P. from AAA
to A. 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.
CERTAIN RISK CONSIDERATIONS REGARDING THE COMMONWEALTH OF
MASSACHUSETTS. Because the Premier Limited Term Massachusetts Municipal
Fund concentrates in the obligations of Massachusetts issuers, it is more
susceptible to factors adversely affecting such issuers than mutual funds
that do not concentrate in the obligations of issuers of a single state.
You should consider carefully the special risks inherent in the Premier
Limited Term Massachusetts Municipal Fund's investment in Massachusetts
Municipal Obligations. Since 1989, Massachusetts has experienced growth
rates significantly below the average and an economic recession in 1990
and 1991 caused negative growth rates in Massachusetts. Massachusetts'
economic difficulties and fiscal problems in the late 1980s and 1990s
caused several rating agencies to lower their ratings of Massachusetts
Municipal Obligations. A return of persistent serious financial
difficulties could adversely affect the market values and marketability
of, or result in default in payment on, outstanding Massachusetts
Municipal Obligations. 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 investment in Massachusetts
Municipal Obligations are summarized in the SAI.
CERTAIN RISK CONSIDERATIONS REGARDING THE STATE OF NEW YORK
AND NEW YORK CITY. Because the Premier Limited Term New York Municipal
Fund concentrates in the obligations of New York issuers, it is more
susceptible to factors adversely affecting such issuers than mutual funds
that do not concentrate in the obligations of issuers of a single state.
You should consider carefully the special risks inherent in the Premier
Limited Term New York Municipal Fund's investment 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,
Page 23
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 improved, however, during the 1993 and 1994 fiscal
years. After reflecting a 1993 year-end deposit to the State's refund
reserve account of $671 million, reported 1993 General Fund receipts were
$45 million higher than originally projected in April 1992. The State
completed the 1994 fiscal year with an operating surplus in the General
Fund of $914 million. The State reported a General Fund operating deficit
of $1.426 billion for the 1995 fiscal year. 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 its ratings of certain
appropriation-backed debt of New York State and its agencies. The State's
general obligation, state-guaranteed and New York State Local Government
AssistanceCorporation bonds continued to be rated A by Moody's. In
January 1992, S&P lowered from A to A- its ratings of New York State
general obligation bonds and stated that it continued to assess the
ratings outlook as negative. S&P also lowered its ratings of various
agency debt, State moral obligations, contractual obligations, lease
purchase obligations and State guarantees. In February 1991, Moody's
lowered its rating of New York City's general obligation bonds from A to
Baa1. The rating changes reflected 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 of 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.
PORTFOLIO TURNOVER. While securities are purchased for the
Funds on the basis of potential for current income and not for short-term
trading profits, the Funds' turnover rate may exceed 100%. A portfolio
turnover rate of 100% would occur, for example, if all the securities held
by the Funds were replaced once in a period of one year. A higher rate of
portfolio turnover (100% or greater) involves correspondingly greater
brokerage commissions and other expenses that must be borne directly by
the Funds and, thus, indirectly by its shareholders. In addition, a high
rate of portfolio turnover may result in the realization of larger
amounts of short-term and/or long-term capital gains that, when
distributed to the Funds' shareholders, are taxable to them at the
then-current rate. Nevertheless, securities transactions for the Funds
will be based only upon investment considerations and will not be limited
by any other considerations when Dreyfus deems it appropriate to make
changes in the Funds' assets.
LIMITING INVESTMENT RISKS AND CERTAIN RISK CONSIDERATIONS. The
Funds are subject to a number of investment limitations. Certain limitations
are matters of fundamental policy and may not be changed without the
affirmative vote of the holders of a majority of the Funds' outstanding
shares. The SAI describes all of the Funds' fundamental and
non-fundamental restrictions.
The investment objectives, policies, restrictions, practices
and procedures of the Funds, unless otherwise specified, may be changed
without shareholder approval. If a Fund's investment
Page 24
objective, policies, restrictions, practices or procedures change,
shareholders should consider whether the Fund remains an appropriate
investment in light of the shareholder's then-current position and needs.
Each Fund is classified as a "non-diversified" investment
company, as defined under the 1940 Act, and therefore, each Fund could
invest all of its assets in the obligations of a single issuer or
relatively few
issuers. However, the Funds intend to conduct their operations so that each
Fund will qualify under the Internal Revenue Code of 1986, as amended
(the "Code"),
as a "regulated investment company." To continue to qualify, among other
requirements, each Fund will be required to limit its investments so that at
the close of each quarter of the taxable year, with respect to at least 50%
of its total assets, not more than 5% of such assets will be invested in the
securities of a single issuer. In addition, not more than 25% of the value
of each Fund's total assets may be invested in the securities of a single
issuer at the close of each quarter of the taxable year. Additionally,
due to the Funds' non-diversified status, changes in the financial
condition or in the market`s assessment of an individual issuer may cause
a Fund's share price to fluctuate to a greater degree than if the Fund were
diversified. However, the provisions of the Code place limits on the extent
to which a Fund's portfolio may be non-diversified.
The ability of the Funds to meet their investment objectives
is subject to the ability of municipal issuers to meet their payment
obligations. In addition, the portfolio of each Fund will be affected by
general changes in interest rates which may result in increases or
decreases in the value of Fund holdings. Investors should recognize that,
in periods of declining interest rates, the yield of each Fund will tend
to be somewhat higher than prevailing market rates, and in periods of
rising interest rates, the yield of each Fund will tend to be somewhat
lower. Also, when interest rates are falling, the influx of new money to
each Fund will likely be invested in portfolio instruments producing
lower yields than the balance of that Fund's portfolio, thereby reducing
the current yield of the Fund. In periods of rising interest rates, the
opposite can be expected to occur.
The Funds may invest without limit in Municipal Obligations
which are repayable out of revenue streams generated from economically
related projects or facilities or whose issuers are located in the same
state. Sizable investments in these obligations could increase risk to
the Funds should any of the related projects or facilities experience
financial difficulties. To the extent the Funds may invest in private
activity bonds, each Fund may invest only up to 5% of its total assets in
bonds where payment of principal and interest are the responsibility of a
company with less than three years operating history. Each Fund is
authorized to borrow up to 10% of its total assets for temporary or
emergency purposes and to pledge its assets to the same extent in
connection with such borrowings.
MANAGEMENT OF THE FUNDS
INVESTMENT MANAGER. Dreyfus, located at 200 Park Avenue, New
York, New York 10166, was formed in 1947. Dreyfus is a wholly-owned
subsidiary of Mellon Bank, which is a wholly-owned subsidiary of Mellon
Bank Corporation ("Mellon"). As of September 30, 1996, Dreyfus managed or
administered approximately $81 billion in assets for more than 1.7
million investor accounts nationwide.
Dreyfus serves as the Funds' investment manager. Dreyfus
supervises and assists in the overall management of the Funds' affairs
under an Investment Management Agreement with the Funds, subject to the
overall authority of the Company's Board of Trustees in accordance with
Massachusetts law. Pursuant to the Investment Management Agreement,
Dreyfus provides, or arranges for one or more third parties to provide,
investment advisory, administrative,
Page 25
custody, fund accounting and transfer agency services to the Funds. As
the Funds' investment manager, Dreyfus manages the Funds by making
investment decisions based on the Funds' investment objectives, policies
and restrictions.
Kristin D. Lindquist has been employed by Dreyfus as the
portfolio manager of Premier Limited Term Massachusetts Municipal Fund
and Premier Limited Term New York Municipal Fund since October 17, 1994.
Ms. Lindquist is also a Vice President of Boston Safe Deposit and Trust
Company, a subsidiary of The Boston Company and Mellon Bank, where she is
responsible for managing Tax-Exempt Fixed Income Fund Portfolios for the
Private Asset Management Group. Prior to joining Boston Safe Deposit and
Trust Company in 1991, Ms. Lindquist was an Assistant Vice President at
Shawmut Bank, N.A. where she traded municipal securities. She received
her Bachelor of Arts degree in economics from Colby College in 1986.
The Premier Limited Term California Municipal Fund is managed
by Collette O'Brien, a portfolio manager of Dreyfus and Boston Safe
Deposit and Trust Company, a subsidiary of The Boston Company and Mellon
Bank. Ms. O'Brien is responsible for managing Tax-Exempt Fixed Income
Portfolios for the Private Asset Management Group at Boston Safe Deposit
and Trust Company and is a member of Boston Safe Deposit and Trust
Company's Bond Strategy and Asset Review Committees. Ms. O'Brien is a
member of the New York Society of Security Analysts and the Association
for Investment Management and Research. She holds a Bachelor of Science
degree in Marketing from Fairfield University and is a Chartered
Financial Analyst. Prior to joining the Private Asset Management Group in
1995, Ms. O'Brien was a portfolio manager at Neuberger and Berman where
she managed over $350 million in assets. Before Neuberger and Berman, she
was with Swiss Bank and Marinvest Inc., a subsidiary of Hong Kong
Shanghai Bank, and managed municipal assets. Ms. O'Brien has
approximately 9 years of experience in the municipal bond industry.
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 $220 billion in assets as of June 30, 1996,
including $83 billion in mutual fund assets. As of June 30, 1996, Mellon,
through various subsidiaries, provided non-investment services, such as
custodial or administration services, for approximately $876 billion in
assets, including approximately $57 billion in mutual fund assets.
Under the Investment Management Agreement, the Funds have
agreed to pay Dreyfus a monthly fee at the annual rate of 0.50 of 1% of
the value of the Funds' average daily net assets. Dreyfus pays all of the
Funds' expenses, except brokerage fees, taxes, interest, Rule 12b-1 fees
(if applicable) and extraordinary expenses. Although Dreyfus is not
obligated under the Investment Management Agreement to pay the fees and
expenses of the non-interested Trustees (including counsel fees), Dreyfus
is contractually required to reduce its investment management fee in an
amount equal to the Funds' allocable share of such fees and expenses. In
order to compensate Dreyfus for paying virtually all of the Funds'
expenses, the Funds' investment management fee is higher than the
investment advisory fees paid by most investment companies. Most, if not
all, such companies also pay for additional non-investment advisory
Page 26
expenses that are not paid by such companies' investment advisers. From
time to time, Dreyfus may waive (either voluntarily or pursuant to
applicable state limitations) a portion of the investment management fees
payable by the Funds.
For the fiscal year ended June 30, 1996, each Fund paid
Dreyfus 0.50% of its average daily net assets in investment management
fees, less fees and expenses of the non-interested Trustees (including
counsel fees).
For the fiscal year ended June 30, 1996 total operating
expenses (excluding Rule 12b-1 fees) of each Class of each Fund were
0.50% of the Fund's average daily net assets.
In addition, Class A, B and C shares are subject to certain
distribution and shareholder servicing fees. See "Distribution Plans
(Class A Plan and Class B and Class C Plans)."
Dreyfus may pay the Distributor for shareholder services from
Dreyfus' own assets, including past profits but not including the
management fee paid by the Funds. The Distributor may use part or all of
such payments to pay Service Agents in respect of these services.
In allocating brokerage transactions for the Funds, 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
Funds or other funds managed, administered or advised by Dreyfus as
factors in the selection of broker-dealers to execute portfolio
transactions for the Funds. See "Portfolio Transactions" in the SAI.
Dreyfus is authorized to allocate purchase and sale orders
for portfolio securities to certain financial institutions, including, in
the case of agency transactions, financial institutions that are
affiliated with Dreyfus or Mellon Bank or that have sold shares of the
Funds, if Dreyfus believes that the quality of the transaction and the
commission are comparable to what they would be with other qualified
brokerage firms. From time to time, to the extent consistent with their
investment objectives, policies and restrictions, the Funds may invest in
securities of companies with which Mellon Bank has a lending
relationship.
DISTRIBUTOR _ The Distributor is located at 60 State Street,
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 Holdings, Inc., the parent company of which is Boston Institutional
Group, Inc.
CUSTODIAN; TRANSFER AND DIVIDEND DISBURSING AGENT; AND
SUB-ADMINISTRATOR _ Mellon Bank, One Mellon Bank Center, Pittsburgh, PA
15258 is each Fund's custodian. Each Fund's Transfer and Dividend
Disbursing Agent is Dreyfus Transfer, Inc. (the "Transfer Agent"), a
wholly-owned subsidiary of Dreyfus, located at One American Express
Plaza, Providence, Rhode Island 02903. The Distributor serves as the
Funds' sub-administrator and, pursuant to a Sub-Administration Agreement,
provides various administrative and corporate secretarial services to the
Funds.
HOW TO BUY FUND SHARES
GENERAL _ Class A shares, Class B shares and Class C shares
may be purchased only by clients of Service Agents, except that full-time
or part-time employees or directors of Dreyfus or any of its affiliates
or subsidiaries, Board members of a fund advised by Dreyfus, including
members of the Company's Board, or the spouse or minor child of any of
the foregoing may purchase Class A shares directly through the
Distributor.
Class R shares are sold primarily to Banks acting on behalf
of customers having a qualified trust or investment account or
relationship at such institution, or to customers who have received and
hold shares of the Fund distributed to them by virtue of such an account
or relationship. In addition, holders of Class R shares of a Fund who
have held their shares since April
Page 27
4, 1994, may continue to purchase
Class R shares of the Fund, whether or not they otherwise would be
eligible to do so. Institutions effecting transactions in Class R shares
for the accounts of their clients may charge their clients direct fees in
connection with such transactions.
When purchasing Fund shares, you must specify which Class is
being purchased. Stock certificates are issued only upon your written
request. No certificates are issued for fractional shares. The Funds
reserve the right to reject any purchase order.
Service Agents may receive different levels of compensation
for selling different Classes of shares. Management understands that some
Service Agents may impose certain conditions on their clients which are
different from those described in this Prospectus, and, to the extent
permitted by applicable regulatory authority, may charge their clients
direct fees which would be in addition to any amounts which might be
received under the Distribution and Service Plans. Each Service Agent has
agreed to transmit to its clients a schedule of such fees. You should
consult your Service Agent in this regard.
The minimum initial investment is $1,000. Subsequent
investments must be at least $100. The initial investment must be
accompanied by the Fund's Account Application.
You may purchase Fund shares by check or wire, or through the
TELETRANSFER Privilege described below. Checks should be made payable to
"Premier Limited Term California Municipal Fund," "Premier Limited Term
Massachusetts Municipal Fund", or "Premier Limited Term New York
Municipal Fund." Payments to open new accounts which are mailed should be
sent to Premier Limited Term California Municipal Fund, Premier Limited
Term Massachusetts Municipal Fund, or Premier Limited Term New York
Municipal Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587,
together with your Account Application indicating which Class of shares
is being purchased. For subsequent investments, your Fund account number
should appear on the check and an investment slip should be enclosed and
sent to Premier Limited Term California Municipal Fund, Premier Limited
Term Massachusetts Municipal Fund, or Premier Limited Term New York
Municipal Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587.
Neither initial nor subsequent investments should be made by third party
check.
Wire payments may be made if your bank account is in a
commercial bank that is a member of the Federal Reserve System or any
other bank having a correspondent bank in New York City. Immediately
available funds may be transmitted by wire to Boston Safe Deposit & Trust
Company, DDA# 044350/Name of Fund and applicable Class, 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 the wire payment in order to obtain
your Fund account number. Please include your Fund account number on the
Funds' Account Application and promptly mail the Account Application to
the Funds, as no redemptions will be permitted until the Account
Application is received. You may obtain further information about
remitting funds in this manner from your bank. All payments should be
made in U.S. dollars and, to avoid fees and delays, should be drawn only
on U.S. banks. A charge will be imposed if any check used for investment
in your account does not clear. The Funds makes available to certain
large institutions the ability to issue purchase instructions through
compatible computer facilities.
Subsequent investments also may be made by electronic
transfer of funds from an account maintained in a bank or other domestic
financial institution that is an Automated Clearing
Page 28
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.
Federal regulations require that you provide a certified TIN
upon opening or reopening an account. See "Dividends, Other Distributions
and Taxes" and the Funds' Account Application for further information
concerning this requirement. Failure to furnish a certified TIN to the
Funds could subject you to a $50 penalty imposed by the Internal Revenue
Service (the "IRS").
NET ASSET VALUE PER SHARE ("NAV") _ An investment
portfolio's NAV refers to the worth of one share. The NAV for shares of
each Class of the Funds is computed by adding, with respect to such Class
of shares, the value of the Funds' investments, cash, and other assets
attributable to that Class, deducting liabilities of the Class and
dividing the result by the number of shares of that Class outstanding.
Shares of each Class of the Funds offered on a continuous basis. For
purposes of determining NAV for the Funds, bonds are valued by an
independent pricing service approved by the Company's Board of Trustees
at fair value as determined by the pricing service. See "Determination of
Net Asset Value" in the SAI. Options and financial futures on municipal and
U.S. treasury securities are valued at the last sales price on the
securities exchange on which such securities are primarily traded or at the
last sales price on the national securities market on each business day.
Investments not listed on an exchange or the national securities market,
or securities for which there were no transactions, are valued at the
average of the most recent bid and asked prices. Bid price is used when
no asked price is available.
Orders for the purchase of Fund shares received by dealers by
the close of trading on the floor of the New York Stock Exchange
("NYSE")on any business day and transmitted to the Distributor or its
designee by the close of its business day (normally 5:15 p.m., New York
time) will be based on the public offering price per share determined as
of the close of trading on the floor of the NYSE on that day. Otherwise,
the orders will be based on the next determined public offering price. It
is the dealers' responsibility to transmit orders so that they will be
received by the Distributor or its designee before the close of its
business day.
NAV is determined on each day that the NYSE is open (a
"business day"), as of the close of business of the regular session of
the NYSE (usually 4 p.m. Eastern Time). For purposes of determining NAV,
options and futures contracts will be valued 15 minutes after the close
of trading on the floor of the NYSE. Investments and requests to exchange
or redeem shares received by the Funds in proper form before such close
of business are effective on, and will receive the price determined on,
that day. Investment, exchange and redemption requests received after
such close of business are generally effective on and receive the share
price determined on the next business day.
CLASS A SHARES
The public offering price of Class A shares is the NAV of
that Class plus a sales load as shown below:
<TABLE>
<CAPTION>
Total Sales Load
__________________________________________
As a % of As a % of Dealers' Reallowance
Offering Price Net Asset Value as a % of
Amount of Transaction Per Share Per Share Offering Price
____________ ________ ________ _____________
<S> <C> <C> <C>
Less than $100,000........ 3.00 3.10 2.75
$100,000 to less than $250,000 2.75 2.80 2.50
$250,000 to less than $500,000 2.25 2.30 2.00
$500,000 to less than $1,000,000 2.00 2.00 1.75
</TABLE>
Page 29
There is no initial sales charge on purchases of $1,000,000 or
more of Class A shares. However, if you purchase Class A shares without an
initial sales charge as part of an investment of at least $1,000,000 and
redeem all or a portion of those shares within one year after purchase, a
CDSC of 1.00% will be imposed at the time of redemption. The terms contained
in the sections of the Funds' Prospectus entitled "How to Redeem Fund
Shares - Contingent Deferred Sales Charge _ Class B" (other than the amount
of the CDSC and its time periods) and "How to Redeem Fund Shares _ Waiver
of CDSC" are applicable to the Class A shares subject to a CDSC. Letter of
Intent and Right of Accumulation apply to such purchases of Class A shares.
Full-time employees of NASD member firms and full-time
employees of other financial institutions which have entered into an
agreement with the Distributor pertaining to the sale of Fund shares (or
which otherwise have a brokerage related or clearing arrangement with an
NASD member firm or financial institution with respect to the sale of
such shares) may purchase Class A shares for themselves directly or
pursuant to an employee benefit plan or other program, or for their
spouses or minor children, at net asset value, provided that they have
furnished the Distributor with such information as it may request from
time to time in order to verify eligibility for this Privilege. This
privilege also applies to full-time employees of financial institutions
affiliated with NASD member firms whose full-time employees are eligible
to purchase Class A shares at NAV. In addition, Class A shares are
offered at net asset value to full-time or part-time employees or
directors of Dreyfus or any of its affiliates or subsidiaries, Board
members of a fund advised by Dreyfus, including members of the Company's
Board, or the spouse or minor child of any of the foregoing.
Holders of Class A accounts of the Funds as of December 28,
1994 may continue to purchase Class A shares of the Funds at NAV.
However, investments by such holders in other funds advised by Dreyfus
will be subject to the applicable front end sales load.
Class A shares may be purchased at NAV through certain
broker-dealers and other financial institutions which have entered into
an agreement with the Distributor, which includes a requirement that such
shares be sold for the benefit of clients participating in a "wrap
account" or a similar program under which such clients pay a fee to such
broker-dealer or other financial institution.
Class A shares also may be purchased at NAV, subject to
appropriate documentation, through a broker-dealer or other financial
institution with the proceeds from the redemption of shares of a
registered open-end management investment company not managed by Dreyfus
or its affiliates. The purchase of Class A shares of a Fund must be made
within 60 days of such redemption and the shareholder must have either
(i) paid an initial sales charge or a contingent deferred sales charge or
(ii) been obligated to pay at any time during the holding period, but did
not actually pay on redemption, a deferred sales charge with respect to
such redeemed shares.
Class A shares also may be purchased at NAV, subject to
appropriate documentation, by (i) qualified separate accounts maintained
by an insurance company pursuant to the laws of any State or territory of
the United States, (ii) a State, county or city or instrumentality
thereof, (iii) a charitable organization (as defined in Section 501(c)(3)
of the Code) investing $50,000 or more in Fund shares, and (iv) a
charitable remainder trust (as defined in Section 501(c)(3) of the Code).
The dealer reallowance may be changed from time to time but
will remain the same for all dealers. The Distributor, at its expense,
may provide additional promotional incentives to dealers that sell shares
of funds advised by Dreyfus which are sold with a sales load, such as
Class A shares. In some instances, those incentives may be offered only
to certain dealers who have sold or may sell significant amounts of
shares. Dealers receive a larger percentage of the sales load from the
Distributor than they receive for selling most other funds.
Page 30
CLASS B SHARES
The public offering price for Class B shares is the NAV of
that Class. No initial sales charge is imposed at the time of purchase. A
CDSC is imposed, however, on certain redemptions of Class B shares as
described under "How to Redeem Fund Shares." The Distributor compensates
certain Service Agents for selling Class B shares at the time of purchase
from the Distributor's own assets. The proceeds of the CDSC and the
distribution fee, in part, are used to defray these expenses.
CLASS C SHARES
The public offering price for Class C shares is the NAV of
that Class. No initial sales charge is imposed at the time of purchase. A
CDSC is imposed, however, on redemptions of Class C shares made within
the first year of purchase. See "Class B shares" above and "How to Redeem
Fund Shares."
CLASS R SHARES
The public offering price for Class R shares is the NAV of
that Class.
RIGHT OF ACCUMULATION_ CLASS A SHARES
Reduced sales loads apply to any purchase of Class A shares,
shares of other funds in the Premier Family of Funds, shares of certain
other funds advised by Dreyfus which are sold with a sales load and
shares acquired by a previous exchange of such shares (hereinafter
referred to as "Eligible Funds"), by you and any related "purchaser" as
defined in the SAI, where the aggregate investment, including such
purchase, is $100,000 or more. If, for example, you previously purchased
and still hold Class A shares, or shares of any other Eligible Fund or
combination thereof, with an aggregate current market value of $80,000
and subsequently purchase Class A shares or shares of an Eligible Fund
having a current value of $40,000, the sales load applicable to the
subsequent purchase would be reduced to 2.75% of the offering price. All
present holdings of Eligible Funds may be combined to determine the current
offering price of the aggregate investment in ascertaining the sales load
applicable to each subsequent purchase.
To qualify for reduced sales loads, at the time of purchase
you or your Service Agent must notify the Distributor if orders are made
by wire, or the Transfer Agent if orders are made by mail. The reduced
sales load is subject to confirmation of your holdings through a check of
appropriate records.
TELETRANSFER PRIVILEGE
You may purchase Fund shares (minimum $500 and maximum
$150,000 per day) by telephone if you have checked the appropriate box
and supplied the necessary information on the Funds' Account Application
or have a filed Shareholder Services Form with the Transfer Agent. The
proceeds will be transferred between the bank account designated in one
of these documents and your Fund account. Only a bank account maintained
in a domestic financial institution which is an ACH member may be so
designated. The Funds may modify or terminate this Privilege at any time
or charge a service fee upon notice to shareholders. No such fee
currently is contemplated.
If you have selected the TELETRANSFER Privilege, you may
request a TELETRANSFER purchase of Fund shares by telephoning
1-800-645-6561 or, if calling from overseas, 516-794-5452.
Page 31
SHAREHOLDER SERVICES
The services and privileges described under this heading may
not be available to clients of certain Service Agents and some Service
Agents may impose certain conditions on their clients which are different
from those described in this Prospectus. You should consult your Service
Agent in this regard.
FUND EXCHANGES
You may purchase, in exchange for shares of a Class, shares
of the same class of certain other funds managed or administered by
Dreyfus, to the extent such shares are offered for sale in your state of
residence. These funds have different investment objectives which may be
of interest to you. If you desire to use this service, please call
1-800-645-6561 to determine if it is available and whether any conditions
are imposed on its use.
To request an exchange, your Service Agent acting on your
behalf must give exchange instructions to the Transfer Agent in writing
or by telephone. Before any exchange, you must obtain and should review a
copy of the current prospectus of the fund into which the exchange is
being made. Prospectuses may be obtained by calling 1-800-645-6561. The
shares being exchanged must have a current value of at least $500;
furthermore, when establishing a new account by exchange, the shares
being exchanged must have a value of at least the minimum initial
investment required for the fund into which the exchange is being made.
The ability to issue exchange instructions by telephone is given to all
Fund shareholders automatically, unless you check the relevant "No" box
on the Account Application, indicating that you specifically refuse this
privilege. The Telephone Exchange Privilege may be established for an
existing account by written request, signed by all shareholders on the
account, by a Separate Shareholder Services Form, available by calling
1-800-645-6561, or, by oral request from any of the authorized
signatories on the account, also by calling 1-800-645-6561. If you
previously have established the Telephone Exchange Privilege, you may
telephone exchange instructions (including over The Dreyfus Touch
Registration Mark Automated Telephone System) by calling 1-800-645-6561.
If calling from overseas, call 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, TELETRANSFER Privilege and the dividends and
distributions payment option (except for Dividend Sweep) selected by the
investor.
Shares will be exchanged at the next determined NAV; however,
a sales load may be charged with respect to exchanges of Class A shares
into funds sold with a sales load. No CDSC will be imposed on Class B or
C shares at the time of an exchange; however, Class B or C shares
acquired through an exchange will be subject to the higher CDSC
applicable to the exchanged or acquired shares. The CDSC applicable on
redemption of the acquired Class B or C shares will be calculated from
the date of the initial purchase of the Class B or C shares exchanged, as
the case may be. If you are exchanging Class A shares into a fund that
charges a sales load, you may qualify for share prices which do not
include the sales load or which reflect a reduced sales load, if the
shares of the fund from which you are exchanging were: (a) purchased with
a sales load, (b) acquired by a previous exchange from shares purchased
with a
sales load, or (c) acquired through reinvestment of dividends or other
distributions paid with respect to the foregoing categories of shares. To
qualify, at the time of the exchange your Service Agent must notify the
Distributor. Any such qualification is subject to confirmation of your
holdings through a check of appropriate records. See "Shareholder
Services" in the SAI. No fees currently are charged shareholders directly
in connection with exchanges,
Page 32
although each Fund reserves the right, upon
not less than 60 days' written notice, to charge shareholders a nominal
fee in accordance with rules promulgated by the SEC. Each Fund reserves
the right to reject any exchange request in whole or in part. The
availability of fund exchanges may be modified or terminated at any time
upon notice to shareholders.
The exchange of shares of one fund for shares of another is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder and, therefore, an exchanging shareholder may
realize a taxable gain or loss.
AUTO-EXCHANGE PRIVILEGE
Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares
of a Fund, in shares of the same class of other funds in the Premier
Family of Funds or certain other funds in the Dreyfus Family of Funds of
which you are currently an investor. The amount you designate, which can
be expressed either in terms of a specific dollar or share amount ($100
minimum), will be exchanged automatically on the first and/or fifteenth
day of the month according to the schedule you have selected. Shares will
be exchanged at the then-current NAV; however, a sales load may be
charged with respect to exchanges of Class A shares into funds sold with
a sales load. No CDSC will be imposed on Class B or C shares at the time
of an exchange; however, Class B or C shares acquired through an exchange
will be subject to the higher CDSC applicable to the exchanged or
acquired shares. The CDSC applicable on redemption of the acquired Class
B or C shares will be calculated from the date of the initial purchase of
the Class B or C shares exchanged, as the case may be. See "Shareholder
Services" in the SAI. The right to exercise this Privilege may be
modified or canceled by the Funds or the Transfer Agent. You may modify
or cancel your exercise of this Privilege at any time by mailing written
notification to Premier Limited Term California Municipal Fund, Premier
Limited Term Massachusetts Municipal Fund, or Premier Limited Term New
York Municipal Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587.
The Funds may charge a service fee for the use of this Privilege. No such
fee currently is contemplated. The exchange of shares of one fund for
shares of another is treated for Federal income tax purposes as a sale of
the shares given in exchange by the shareholder and, therefore, an
exchanging shareholder may realize a taxable gain or loss. For more
information concerning this Privilege and the funds in the Premier Family
of Funds or the Dreyfus Family of Funds eligible to participate in this
Privilege, or to obtain an Auto-Exchange Authorization Form, please call
toll free 1-800-645-6561.
DREYFUS-AUTOMATIC ASSET BUILDER[Registration Mark]
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund
shares (minimum of $100 and maximum of $150,000 per transaction) at
regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you. At your
option, the bank account designated by you will be debited in the
specified amount, and Fund shares will be purchased, once a month, on
either the first or fifteenth day, or twice a month, on both days. Only
an account maintained at a domestic financial institution which is an ACH
member may be so designated. To establish a Dreyfus-AUTOMATIC Asset
Builder account, you must file an authorization form with the Transfer
Agent. You may obtain the necessary authorization form by calling
1-800-645-6561. You may cancel your participation in this Privilege or
change the amount of purchase at any time by mailing written notification
to Premier Limited Term California Municipal Fund, Premier Limited Term
Massachusetts Municipal Fund, or Premier Limited Term New York Municipal
Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587, and the
notification will be effective three business
Page 33
days following receipt. The Funds may modify or terminate this Privilege
at any time or charge a service fee. No such fee currently is contemplated.
DIVIDEND OPTIONS
Dividend Sweep enables you to invest automatically dividends
or dividends and other distributions, if any, paid by a Fund in shares of
the same class of another fund in the Premier Family of Funds or certain
other funds in the Dreyfus Family of Funds of which you are an investor.
Shares of the other fund will be purchased at the then-current net asset
value; however, a sales load may be charged with respect to investments
in shares of a fund sold with a sales load. If you are investing in a
fund that charges a sales load, you may qualify for share prices which do
not include the sales load or which reflect a reduced sales load. If you
are investing in a fund or class that charges a CDSC, the shares
purchased will be subject on redemption to the CDSC, if any, applicable
to the purchased shares. See "Shareholder Services" in the SAI. Dividend
ACH permits you to transfer electronically on the payment date dividends
or dividends and other distributions, if any, from a Fund to a designated
bank account. Only an account maintained at a domestic financial
institution which is an ACH member may be so designated. Banks may charge
a fee for this service.
For more information concerning these Privileges, or to
request a Dividend Options Form, please call toll free 1-800-645-6561.
You may cancel these Privileges by mailing written notification to
Premier Limited Term California Municipal Fund, Premier Limited Term
Massachusetts Municipal Fund, or Premier Limited Term New York Municipal
Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. To select a new
fund after cancellation, you must submit a new Dividend Options Form.
Enrollment in or cancellation of these Privileges is effective three
business days following receipt. These Privileges are available only for
existing accounts and may not be used to open new accounts. Minimum
subsequent investments do not apply for Dividend Sweep. The Funds may
modify or terminate these Privileges at any time or charge a service fee.
No such fee currently is contemplated.
GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Government Direct Deposit Privilege enables you to purchase
Fund shares (minimum of $100 and maximum of $50,000 per transaction) by
having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into
your Fund account. You may deposit as much of such payments as you elect.
You should consider whether Direct Deposit of your entire payment into a
fund with fluctuating NAV, such as the Funds, may be appropriate for you.
To enroll in Government Direct Deposit, you must file with the Transfer
Agent a completed Direct Deposit Sign-Up Form for each type of payment
that you desire to include in this Privilege. The appropriate form may be
obtained by calling 1-800-645-6561. Death or legal incapacity will
terminate your participation in this Privilege. You may elect at any time
to terminate your participation by notifying in writing the appropriate
Federal agency. Further, the Funds may terminate your participation upon
30 days' notice to you.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request
withdrawal of a specified dollar amount (minimum of $50) on either a
monthly or quarterly basis if you have a $5,000 minimum account.
An application for the Automatic Withdrawal Plan can be
obtained by calling 1-800-645-6561. The Automatic Withdrawal Plan may be
ended at any time by the shareholder, the Funds or the Transfer Agent.
Shares for which certificates have been issued may not be redeemed
through the Automatic Withdrawal Plan.
Page 34
Shares withdrawn pursuant to the Automatic Withdrawal Plan
will be subject to any applicable CDSC. Purchases of additional Class A
shares where the sales load is imposed concurrently with withdrawals of
Class A shares generally are undesirable.
LETTER OF INTENT _ CLASS A SHARES
By signing a Letter of Intent form, available from the
Distributor, you become eligible for the reduced sales load applicable to
the total number of Eligible Fund shares purchased in a 13-month period
pursuant to the terms and conditions set forth in the Letter of Intent. A
minimum initial purchase of $5,000 is required. To compute the applicable
sales load, the offering price of shares you hold (on the date of
submission of the Letter of Intent) in any Eligible Fund that may be used
toward "Right of Accumulation" benefits described above may be used as a
credit toward completion of the Letter of Intent. However, the reduced
sales load will be applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount
indicated in the Letter of Intent for payment of a higher sales load if
you do not purchase the full amount indicated in the Letter of Intent.
The escrow will be released when you fulfill the terms of the Letter of
Intent by purchasing the specified amount. If your purchases qualify for
a further sales load reduction, the sales load will be adjusted to
reflect your total purchase at the end of 13 months. If total purchases
are less than the amount specified, you will be requested to remit an
amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If
such remittance is not received within 20 days, the Transfer Agent, as
attorney-in-fact pursuant to the terms of the Letter of Intent, will
redeem an appropriate number of Class A shares of the Funds held in
escrow to realize the difference. Signing a Letter of Intent does not
bind you to purchase, or the Funds to sell, the full amount indicated at
the sales load in effect at the time of signing, but you must complete
the intended purchase to obtain the reduced sales load. At the time you
purchase Class A shares, you must indicate your intention to do so under
a Letter of Intent.
HOW TO REDEEM FUND SHARES
GENERAL
You may request redemption of your shares at any time.
Redemption requests should be transmitted to the Transfer Agent as
described below. When a request is received in proper form, the Funds
will redeem the shares at the next determined NAV as described below. If
you hold Fund shares of more than one Class, any request for redemption
must specify the Class of shares being redeemed. If you fail to specify
the Class of shares to be redeemed or if you own fewer shares of the
Class than specified to be redeemed, the redemption request may be
delayed until the Transfer Agent receives further instructions from you
or your Service Agent.
The Funds impose no charges (other than any applicable CDSC)
when shares are redeemed. Service Agents or other institutions may charge
their clients a nominal fee for effecting redemptions of Fund shares. Any
certificates representing Fund shares being redeemed must be submitted
with the redemption request. The value of the shares redeemed may be more
or less than their original cost, depending upon the Funds' then-current
net asset value.
The Funds ordinarily will make payment for all shares
redeemed within seven days after receipt by the Transfer Agent of a
redemption request in proper form, except as provided by the rules of the
SEC. HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY THE
TELETRANS FER PRIVILEGE OR THROUGH DREYFUS-AUTOMATIC ASSET BUILDER AND
SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER AGENT, THE
REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK
CLEARANCE OF YOUR PURCHASE CHECK, TELETRANSFER
Page 35
PURCHASE OR DREYFUS-AUTOMATIC ASSET BUILDER ORDER, WHICH MAY TAKE UP TO
EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUNDS WILL REJECT REQUESTS
TO REDEEM SHARES PURSUANT TO THE TELETRANSFER PRIVILEGE FOR A PERIOD OF
EIGHT BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE
CHECK, THE TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC ASSET BUILDER
ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES WILL
NOT APPLY IF YOUR SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU
OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE
REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS
ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED TO
EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares will not
be redeemed until the Transfer Agent has received your Account Application.
The Funds reserve the right to redeem your account at its
option upon not less than 45 days' written notice if the NAV of your
account is $500 or less and remains so during the notice period.
CONTINGENT DEFERRED SALES CHARGE _ CLASS B SHARES
A CDSC payable to the Distributor is imposed on any
redemption of Class B shares which reduces the current NAV of your Class
B shares to an amount which is lower than the dollar amount of all
payments by you for the purchase of Class B shares of the Funds held by
you at the time of redemption. No CDSC will be imposed to the extent that
the NAV of the Class B shares redeemed does not exceed (i) the current
NAV of Class B shares acquired through reinvestment of dividends or other
distributions, plus (ii) increases in the NAV of your Class B shares
above the dollar amount of all your payments for the purchase of Class B
shares held by you at the time of redemption.
If the aggregate value of Class B shares redeemed has
declined below their original cost as a result of the Funds' performance,
a CDSC may be applied to the then-current net asset value rather than the
purchase price.
In circumstances where the CDSC is imposed, the amount of the
charge will depend on the number of years from the time you purchased the
Class B shares until the time of redemption of such shares. Solely for
purposes of determining the number of years from the time of any payment
for the purchase of Class B shares, all payments during a month will be
aggregated and deemed to have been made on the first day of the month.
The following table sets forth the rates of the CDSC:
<TABLE>
<CAPTION>
Year Since CDSC as a % of Amount
Purchase Payment Invested or Redemption
Was Made Proceeds
_________ _______________________
<S> <C>
First.................................................... 3.00
Second................................................... 3.00
Third.................................................... 2.00
Fourth................................................... 2.00
Fifth.................................................... 1.00
Sixth.................................................... .00
</TABLE>
In determining whether a CDSC is applicable to a redemption,
the calculation will be made in a manner that
results in the lowest possible rate. It will be assumed that the
redemption is made first of amounts representing shares acquired pursuant
to the reinvestment of dividends and other distributions; then of amounts
representing the increase in NAV of Class B shares above the total amount
of payments for the purchase of Class B shares made during the preceding
five years; then of amounts representing the cost of shares purchased
five years prior to the redemption; and finally, of amounts representing
the cost of shares held for the longest period of time within the
applicable five-year period.
Page 36
For example, assume an investor purchased 100 shares at $10
share for a cost of $1,000. Subsequently, the shareholder acquired five
additional shares through dividend reinvestment. During the second year
after the purchase the investor decided to redeem $500 of his or her
investment. Assuming at the time of the redemption the NAV had
appreciated to $12 per share, the value of the investor's shares would be
$1,260 (105 shares at $12 per share). The CDSC would not be applied to
the value of the reinvested dividend shares and the amount which
represents appreciation ($260). Therefore, $240 of the $500 redemption
proceeds ($500 minus $260) would be charged at a rate of 3% (the
applicable rate in the second year after purchase) for a total CDSC of
$7.20.
CONTINGENT DEFERRED SALES CHARGE _ CLASS C SHARES
A CDSC of .75% payable to the Distributor is imposed on any
redemption of Class C shares within one year of the date of purchase. The
basis for calculating the payment of any such CDSC will be the method
used in calculating the CDSC for Class B shares. See "Contingent Deferred
Sales Charge _ Class B shares" above.
WAIVER OF CDSC
The CDSC applicable to Class B and Class C shares will be
waived in connection with (a) redemptions made within one year after the
death or disability, as defined in Section 72(m)(7) of the Code, of the
shareholder, (b) redemptions as a result of a combination of any
investment company with the Funds by merger, acquisition of assets or
otherwise, and (c) redemptions by such shareholders as the SEC or its
staff may permit. If the Company's Board of Trustees determine to
discontinue the waiver of the CDSC, the disclosure in the Funds'
prospectus will be revised appropriately. Any Fund shares subject to a
CDSC which were purchased prior to the termination of such waiver will
have the CDSC waived as provided in the Funds' prospectus at the time of
the purchase of such shares.
To qualify for a waiver of the CDSC, at the time of
redemption you must notify the Transfer Agent or your Service Agent must
notify the Distributor. Any such qualification is subject to confirmation
of your entitlement.
PROCEDURES
You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, through the TELETRANSFER Privilege
or, if you are a client of a Selected Dealer, through the Selected
Dealer. If you have given your Service Agent authority to instruct the
Transfer Agent to redeem shares and to credit the proceeds of such
redemptions to a designated account at your Service Agent, you may redeem
shares only in this manner and in accordance with the regular redemption
procedure described below. If you wish to use the other redemption
methods described below, you must arrange with your Service Agent for
delivery of the required application(s) to the Transfer Agent. Other
redemption procedures may be in effect for clients of certain Service
Agents and institutions. The Funds makes available to certain large
institutions the ability to issue redemption instructions through
compatible computer facilities.
You may redeem or exchange Fund shares by telephone if you
have checked the appropriate box on the Funds' Account Application or
have filed a Shareholder Services Form with the Transfer Agent. If you
select the TELETRANSFER Privilege or telephone exchange privilege (which
is granted automatically unless you refuse it), you authorize the
Transfer Agent to act on telephone instructions (including over The
Dreyfus TouchRegistration Mark Automated Telephone System) from any
person representing himself or herself to be you, or a representative of
your Service Agent, and reasonably believed by the Transfer Agent to be
genuine. The Funds
Page 37
will require the Transfer Agent to employ reasonable
procedures, such as requiring a form of personal identification, to
confirm that instructions are genuine and, if it does not follow such
procedures, the Funds or the Transfer Agent may be liable for any losses
due to unauthorized or fraudulent instructions. Neither the Funds nor the
Transfer Agent will be liable for following telephone instructions
reasonably believed to be genuine.
During times of drastic economic or market conditions, you
may experience difficulty in contacting the Transfer Agent by telephone
to request a TELETRANSFER redemption or an exchange of Fund shares. In
such cases, you should consider using the other redemption procedures
described herein. Use of these other redemption procedures may result in
your redemption request being processed at a later time than it would
have been if TELETRANSFER redemption had been used. During the delay, the
Funds' net asset value may fluctuate.
REGULAR REDEMPTION. Under the regular redemption procedure,
you may redeem your shares by written request mailed to Premier Limited
Term California, Massachusetts, or New York Municipal Fund, P.O. Box
6587, Providence, Rhode Island 02940-6587. Redemption requests 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 contact your Service Agent or call the
telephone number listed on the cover of this Prospectus.
Redemption proceeds of at least $1,000 will be wired to any
member bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
TELETRANSFER PRIVILEGE. You may redeem Fund shares (minimum
$500 per day) by telephone if you have checked the appropriate box and
supplied the necessary information on the Funds' Account Application or
have filed a Shareholder Services Form with the Transfer Agent. The
proceeds will be transferred between your Fund account and the bank
account designated in one of these documents. Only such an account
maintained in a domestic financial institution which is an ACH member may
be so designated. Redemption proceeds will be on deposit in your account
at an ACH member bank ordinarily two days after receipt of the redemption
request or, at your request, paid by check (maximum $150,000 per day) and
mailed to your address. Holders of jointly registered Fund or bank
accounts may redeem through the TELETRANSFER Privilege for transfer to
their bank account only up to $250,000 within any 30-day period. The
Funds reserves the right to refuse any request made by telephone,
including requests made shortly after a change of address, and may limit
the amount involved or the number of such requests. The Funds may modify
or terminate this Privilege at any time or charge a service fee upon
notice to shareholders. No such fee currently is contemplated.
If you have selected the TELETRANSFER Privilege, you may
request a TELETRANSFER redemption of Fund shares by telephoning
1-800-645-6561 or, if calling from overseas, 516-794-5452. Shares issued
in certificate form are not eligible for this Privilege.
REDEMPTION THROUGH A SELECTED DEALER. If you are a customer
of a Selected Dealer, you may make redemption requests to your Selected
Dealer. If the Selected Dealer transmits the redemption request so that
it is received by the Transfer Agent prior to the close of trading on the
floor of the NYSE (currently 4:00 p.m., New York time), the redemption
request will be effective on that day. If a redemption request is
received by the Transfer Agent after the close of trading
Page 38
on the floor of the NYSE, the redemption request will be effective on
the next business day. It is the responsibility of the Selected Dealer
to transmit a request so that it is received in a timely manner. The
proceeds of the redemption are credited to your account with the Selected
Dealer. See "How to Buy Fund Shares" for a discussion of additional
conditions or fees that may be imposed upon redemption.
In addition, the Distributor or its designee will accept
orders from Selected Dealers with which the Distributor has sales
agreements for the repurchase of shares held by shareholders. Repurchase
orders received by dealers by the close of trading on the floor of the
NYSE on any business day and transmitted to the Distributor or its
designee prior to the close of its business day (normally 5:15 p.m., New
York time) are effected at the price determined as of the close of
trading on the floor of the NYSE on that day. Otherwise, the shares will
be redeemed at the next determined NAV. It is the responsibility of the
Selected Dealer to transmit orders on a timely basis. The Selected Dealer
may charge the shareholder a fee for executing the order. This repurchase
arrangement is discretionary and may be withdrawn at any time.
REINVESTMENT PRIVILEGE
CLASS A SHARES. Upon written request, you may reinvest up to
the number of Class A shares you have redeemed, within 30 days of
redemption, at the then-prevailing NAV without a sales load, or reinstate
your account for the purpose of exercising the Fund Exchanges. The
Reinvestment Privilege may be exercised only once.
DISTRIBUTION PLANS
(CLASS A PLAN AND CLASS B AND CLASS C PLANS)
Class A shares are subject to a Distribution Plan adopted
pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1"). Class B and C
shares are subject to a Distribution Plan and a Service Plan, each
adopted pursuant to Rule 12b-1. Potential investors should read this
Prospectus in light of the terms governing Agreements with their Service
Agents. A Service Agent entitled to receive compensation for selling and
servicing the Funds' shares may receive different compensation with
respect to one class of shares over another. A Fund and the Distributor
may suspend or reduce payments under a Plan at any time, and payments are
subject to the continuation of a Plan and the Agreements described below.
From time to time, the Service Agents, the Distributor and a Fund may
agree to reduce voluntarily the maximum fees payable under a Plan. See
the SAI for more details on the Plans.
DISTRIBUTION PLAN
CLASS A SHARES _ The Class A shares of the Funds bear some
of the cost of selling those shares under the Distribution Plan (the
"Plan"). The Plan allows the Funds to spend annually up to 0.25% of their
average daily net assets attributable to Class A shares to compensate
Dreyfus Service Corporation, an affiliate of Dreyfus, for shareholder
servicing activities and the Distributor for shareholder servicing
activities and for activities and expenses primarily intended to result
in the sale of Class A shares of the Funds. The Plan allows the
Distributor to make payments from the Rule 12b-1 fees it collects from
the Funds to compensate Service Agents that have entered into Agreements
with the Distributor. Under the Agreements, the Service Agents are
obligated to provide distribution related services with regard to the
Funds and/or shareholder services to the Service Agent's clients that own
Class A shares of the Funds.
DISTRIBUTION AND SERVICE PLANS _ CLASS B AND CLASS C
Under a Distribution Plan adopted pursuant to Rule 12b-1,
each Fund pays the Distributor for distributing the Fund's Class B and C
shares at an aggregate annual rate of .50 of 1% of the value of the
average daily net assets of Class B and C. Under a Service Plan
Page 39
adopted pursuant to Rule 12b-1, the Funds pay Dreyfus Service Corporation
or the Distributor for the provision of certain services to the holders of
Class B and C shares a fee at the annual rate of .25 of 1% of the value of
the average daily net assets of Class B and C. The Distributor may pay one
or more Service Agents for providing such services for these Classes of
shares. The services provided may include personal services relating to
shareholder accounts, such as answering shareholder inquiries regarding
the Funds and providing reports and other information, and providing
services related to the maintenance of such shareholder accounts. With
regard to such services, each Service Agent is required to disclose to
its clients any compensation payable to it by the Funds and any other
compensation payable by their clients in connection with the investment
of their assets in Class B and C shares. The Distributor determines the
amounts, if any, to be paid to Service Agents under the Service Plan and
the basis on which such payments are made. The fees payable under the
Distribution and Service Plans are payable without regard to actual
expenses incurred.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
Each Fund declares daily and pays dividends monthly from its
net investment income, if any, and distributes any net realized capital
gains on an annual basis, but it may make distributions on a more
frequent basis to comply with the distribution requirements of the Code,
in all events in a manner consistent with the provisions of the 1940 Act.
The Fund will not make distributions from net realized capital gains
unless all capital loss carryovers, if any, have been utilized or have
expired. All expenses are accrued daily and deducted before declaration
of dividends to investors. Shares purchased on a day on which a Fund
calculates its NAV will begin to accrue dividends on that day, and
redemption orders effected on any particular day will receive dividends
declared only through the business day prior to the day of redemption.
Dividends paid by each Class are calculated at the same time and in the
same manner and are in the same amount, except that the expenses
attributable solely to a particular Class will be borne exclusively by
that Class. Class B and C shares will receive lower per share dividends
than Class A shares which will receive lower per share dividends than
Class R shares, because of the higher expenses borne by the relevant
Class. See "Expense Summary."
Investors may choose whether to receive dividends and other
distributions in cash, to receive dividends in cash, and reinvest other
distributions in additional Fund shares at NAV, or to reinvest both
dividends and other distributions in additional Fund shares at NAV.
It is expected that the Funds will qualify for treatment as a
"regulated investment company" under the Code so long as such
qualification is in the best interests of its shareholders. Such
qualification will relieve the Funds of any liability for Federal income
tax to the extent its earnings and realized gains are distributed in
accordance with applicable provisions of the Code.
Dividends derived from taxable investments, together with
distributions from net realized short-term capital gains and all or a
portion of any gains realized from the sale or other disposition of
certain market discount bonds (collectively "dividends distributions")
paid by the Funds are taxable to U.S. shareholders as ordinary income, to
the extent of the Fund's earnings and profits, whether received in cash
or reinvested in Fund shares. Distributions from the Funds' capital gain
(the excess of net long-term capital gain over short-term capital loss)
are taxable to such shareholders as long-term capital gains, regardless
of how long the shareholders have held their Fund shares and whether such
distributions are received in cash or reinvested in additional Fund
shares. The net capital gain of an individual generally will not be
subject to Federal income tax at a rate in excess of 28%. Dividends and
other distributions also may be subject to state and local taxes.
Page 40
Dividend distributions paid by the Funds to a non-resident
foreign investor generally are subject to U.S. withholding tax at the
rate of 30%, unless the non-resident foreign investor claims the benefit
of a lower rate specified in a tax treaty. Capital gain distributions
paid by the Funds to a non-resident foreign investor, as well as the
proceeds of any redemptions by such an investor, regardless of the extent
to which gain or loss may be realized, generally are not subject to U.S.
withholding tax. However, such distributions may be subject to backup
withholding, as described below, unless the foreign investor certifies
his non-U.S. residency status.
Notice as to the tax status of your dividends and
distributions other will be mailed to you annually. You also will receive
periodic summaries of your account which will include information as to
dividends and capital gain distributions, if any, paid during the year.
The Code provides for the "carryover" of some or all of the
sales load imposed on Class A shares if (1) an investor redeems those
shares or exchanges those shares for shares of another fund advised or
administered by Dreyfus within 91 days of purchase and (2) in the case of
a redemption, acquires other Fund Class A shares through exercise of the
Reinvestment Privilege or, in the case of an exchange, such other fund
reduces or eliminates its otherwise applicable sales load for the purpose
of the exchange. In this case, the amount of the sales load charged the
investor for the original Class A shares, up to the amount of the
reduction of the sales load pursuant to the Reinvestment Privilege or on
the exchange, as the case may be, is not included in the basis of such
shares for purposes of computing gain or loss on the redemption or the
exchange, and instead is added to the basis of the fund shares received
pursuant to the Reinvestment Privilege or the exchange.
With respect to individual investors, Federal laws and
regulations generally require the Funds to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of taxable dividends,
capital gain distributions and any redemption proceeds, regardless of the
extent to which gain or loss may be realized, paid to a shareholder if
the shareholder fails to certify either that the TIN furnished in
connection with opening an account is correct or that such shareholder
has not received notice from the IRS that the shareholder is subject to
backup withholding as a result of a failure to properly report taxable
dividend or interest income on a Federal income tax return. Furthermore,
the IRS may notify the Funds to institute backup withholding if the IRS
determines the shareholder's TIN is incorrect or if that shareholder has
failed to properly report taxable dividend and interest income on a
Federal income tax return.
A TIN is either the Social Security number or employer
identification number of the record owner of the account. Any tax
withheld as a result of backup withholding does not constitute an
additional tax imposed on the record owner of the account and may be
claimed as a credit on the record owner's Federal income tax return.
The Funds may be subject to a non-deductible 4% excise tax,
measured with respect to certain undistributed amounts of taxable
investment income and capital gains.
You should consult your tax advisers regarding specific
questions as to Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance for each Class may
be calculated on the basis of average annual total return and/or total
return. These total return figures reflect changes in the price of the
shares and assume that any income dividends and/or capital gains
distributions made by the Funds during the measuring period were
reinvested in shares of the same Class. These figures also take into
account any applicable service and distribution fees. As a result, at any
given time, the performance of Class B and C should be expected to
Page 41
be lower than that of Class A and the performance of Class A, B and C
should be expected to be lower than that of Class R. Performance for
each Class will be calculated separately.
Average annual total return is calculated pursuant to a
standardized formula which assumes that an investment was purchased with
an initial payment of $1,000 and that the investment was redeemed at the
end of a stated period of time, after giving effect to the reinvestment
of dividends and other distributions during the period. The return is
expressed as a percentage rate which, if applied on a compounded annual
basis, would result in the redeemable value of the investment at the end
of the period. Advertisements of the Funds' performance will include the
Funds' average annual total return for one, five and ten year periods, or
for shorter periods depending upon the length of time during which the
Funds have operated. Computations of average annual total return for
periods of less than one year represent an annualization of the Funds'
actual total return for the applicable period.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and other distributions. Total return generally
is expressed as a percentage rate which is calculated by combining the
income and principal changes for a specified period and dividing by the
NAV (or maximum offering price per share in the case of Class A shares)
at the beginning of the period. Advertisements may include the percentage
rate of total return or may include the value of a hypothetical
investment at the end of the period which assumes the application of the
percentage rate of total return. Total return also may be calculated by
using the NAV per share at the beginning of the period instead of the
maximum offering price per share at the beginning of the period for Class
A shares or without giving effect to any applicable CDSC at the end of
the period for Class B or C shares. Calculations based on the NAV per
share do not reflect the deduction of the sales load on the Funds' Class
A shares, which, if reflected, would reduce the performance quoted.
The Funds may also advertise the yield and tax-equivalent
yield on a Class of shares. The Funds' yield is calculated by dividing a
Class of shares' annualized net investment income per share during a
recent 30-day (or one month) period by the NAV (or maximum public
offering price in the case of Class A shares) per Class of such share on
the last day of that period. Since yields fluctuate, yield data cannot
necessarily be used to compare an investment in a Class of shares with
bank deposits, savings accounts, and similar investment alternatives
which often provide an agreed-upon or guaranteed fixed yield for a stated
period of time. The tax-equivalent yield of a Fund shows the level of
taxable yield needed to produce an after-tax equivalent to such Fund's
tax-free yield. This is done by increasing a class' yield by the amount
necessary to reflect the payment of Federal income tax (and state income
tax, if applicable) at a stated tax rate.
Performance will vary from time to time and past results are
not necessarily representative of future results. You should remember
that performance is a function of portfolio management in selecting the
type and quality of portfolio securities and is affected by operating
expenses. Performance information, such as that described above, may not
provide a basis for comparison with other investments or other investment
companies using a different method of calculating performance.
The Funds may compare the performance of its shares with
various industry standards of performance including Lipper Analytical
Services, Inc. ratings. Performance rankings as reported in CHANGING
TIMES, BUSINESS WEEK, INSTITUTIONAL INVESTOR, THE WALL STREET JOURNAL,
MUTUAL FUND FORECASTER, NO LOAD INVESTOR, MONEY MAGAZINE, MORNINGSTAR
MUTUAL FUND VALUES, U.S. NEWS AND WORLD REPORT, FORBES, FORTUNE, BARRON'S
and similar publications may also be used in comparing the Funds'
performance. Furthermore, the Funds may quote its shares' total returns
and yields in advertisements or in shareholder reports. The Funds may
also advertise non-standardized
Page 42
performance information, such as total
return for periods other than those required to be shown or cumulative
performance data. The Funds may advertise a quotation of yield or other
similar quotation demonstrating the income earned or distributions made
by the Funds.
GENERAL INFORMATION
The Company was organized as a Massachusetts business trust
under the laws of the Commonwealth of Massachusetts on March 28, 1983,
under the name The Boston Company Tax-Free Municipal Funds. The Company
changed its name to The Laurel Tax-Free Municipal Funds on March 31,
1994, and changed its name to The Dreyfus/Laurel Tax-Free Municipal Funds
on October 17, 1994. The Company is registered with the SEC as an
open-end management investment company, commonly known as a mutual fund.
The Company is authorized to issue an unlimited number of shares of
beneficial interest, each without par value. The Company may also create
an unlimited number of separate investment portfolios (each a "fund").
The Trustees have authorized shares of each Fund to be issued in four
classes _ Class A, Class B, Class C and Class R. The Company may in the
future seek to achieve a Fund's investment objective by investing all of
the Fund's assets in another investment company having the same
investment objective and substantially the same investment policies and
restrictions as those applicable to such Fund. Shareholders of a Fund
will be given at least 30 days' prior notice of any such investment.
Each share (regardless of Class) has one vote. All shares of
all funds (and Classes thereof) vote together as a single class, except
as to any matter for which a separate vote of any fund or Class is
required by the 1940 Act, and except as to any matter which affects the
interests of one or more particular funds or Classes, in which case only
the shareholders of the affected fund or Classes are entitled to vote,
each as a separate class. Only holders of Class A, B or C shares, as the
case may be, will be entitled to vote on matters submitted to
shareholders pertaining to the Distribution and Service Plans relating to
that Class.
Unless otherwise required by the 1940 Act, ordinarily it will
not be necessary for the Funds to hold annual meetings of shareholders.
As a result, Fund shareholders may not consider each year the election of
Trustees or the appointment of auditors. However, pursuant to the Funds'
By-Laws, the holders of at least 10% of the shares outstanding and
entitled to vote may require the Funds to hold a special meeting of
shareholders for purposes of removing a Trustee from office and for any
other purpose. Fund shareholders may remove a Trustee by the affirmative
vote of two-thirds of the Company's outstanding voting shares. In
addition, the Board of Trustees will call a meeting of shareholders for
the purpose of electing Trustees if, at any time, less than a majority of
the Trustees then holding office have been elected by shareholders.
The Transfer Agent maintains a record of your ownership and
will send you confirmations and statements of account.
Shareholder inquiries may be made to your Service Agent or by
writing to the Funds at 144 Glenn Curtiss Boulevard, Uniondale, New York
11556-0144.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS
AND IN THE FUNDS' OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER
OF THE FUNDS' SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
FUNDS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN
WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFERING MAY NOT LAWFULLY BE MADE.
LTSTP110196
Page 43
PREMIER LIMITED TERM MUNICIPAL FUND
PROSPECTUS NOVEMBER 1, 1996
Premier Limited Term Municipal Fund (the "Fund") is a
separate, non-diversified portfolio of The Dreyfus/Laurel Tax-Free
Municipal Funds, an open-end management investment company (the
"Company"), known as a mutual fund. The Fund seeks to maximize current
income exempt from Federal income taxes consistent with the prudent risk
of capital by investing in municipal securities which are of
investment-grade quality and generally of intermediate maturities.
By this Prospectus, the Fund is offering four Classes of
shares -- Class A, Class B, Class C and Class R.
The Dreyfus Corporation serves as the Fund's investment
manager. The Dreyfus Corporation is referred to as "Dreyfus."
You can purchase or redeem Fund shares by telephone using the
TELETRANSFER Privilege.
This Prospectus sets forth concisely information about the
Fund that you should know before investing. It should be read carefully
before you invest and retained for future reference.
The Statement of Additional Information dated November 1,
1996 (the "SAI"), 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. The SEC maintains a web site (http://www.sec.gov) that
contains the SAI, material incorporated by reference, and other
information regarding the Fund. For a free copy of the SAI, write to the
Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or
call 1-800-645-6561. When telephoning, ask for Operator 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY. ALL MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THE FEES TO WHICH 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. (THE "DISTRIBUTOR").
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE
- ------------------------------------------------------------------------------
(CONTINUED FROM PAGE 1)
Class A shares are subject to a sales charge imposed at the
time of purchase. (Class A shares of the Fund were formerly called
Investor Shares.) Class B shares are subject to a contingent deferred
sales charge imposed on redemptions made within five years of purchase.
Class C shares are subject to a .75% contingent deferred sales charge
imposed on redemptions made within the first year of purchase. Class R
shares are sold primarily to bank trust departments and other financial
service providers (including Mellon Bank, and its affiliates) ("Banks")
acting on behalf of customers having a qualified trust or investment
account or relationship at such institution. (Class R shares of the Fund
were formerly called Trust Shares.) Other differences among the Classes
include the services offered to and the expenses borne by each Class and
certain voting rights, as described herein. These alternatives are
offered so that an investor may choose the method of purchasing shares
that is most beneficial given the amount of purchase, the length of time
the investor expects to hold the shares and other relevant circumstances.
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
Expense Summary............................................. 3
Financial Highlights........................................ 4
Alternative Purchase Methods................................ 9
Description of the Fund..................................... 10
Management of the Fund...................................... 15
How to Buy Fund Shares...................................... 17
Shareholder Services........................................ 21
How to Redeem Fund Shares................................... 24
Distribution Plans (Class A Plan and Class B and Class C Plans) 28
Dividends, Other Distributions and Taxes.................... 28
Performance Information..................................... 30
General Information......................................... 31
Page 2
<TABLE>
<CAPTION>
EXPENSE SUMMARY
CLASS A CLASS B CLASS C CLASS R
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 3.00% none none none
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge) none* 3.00% .75% none
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
Management Fee .......................... 0.50% 0.50% 0.50% 0.50%
12b-1 Fee(1)............................. 0.25% 0.75% 0.75% none
Other Expenses(2)........................ 0.00% 0.00% 0.00% 0.00%
------- ------- ------- -------
Total Fund Operating Expenses ........... 0.75% 1.25%** 1.25% 0.50%
</TABLE>
<TABLE>
<CAPTION>
Example:
You would pay the following expenses on a
$1,000 investment, assuming (1) a 5% annual
return and (2) except where noted, redemption
at the end of each time period:
<S> <C> <C> <C> <C>
1 YEAR............................... $ 37 $43/$13(3) $20/$13(3) $ 5
3 YEARS.............................. $ 53 $60/$40(3) $ 40 $16
5 YEARS.............................. $ 70 $79/$69(3) $ 69 $28
10 YEARS............................. $120 $125** $151 $63
</TABLE>
* A contingent deferred sales charge may be imposed on the redemption of
Class A shares that are purchased without an initial sales charge. See "
How to Buy Fund Shares_Class A shares."
**Assumes conversion of Class B shares to Class A shares approximately six
years after the date of purchase and, therefore, reflects Class A expenses
for years seven through ten.
(1) See "Distributions Plans (Class A Plan and Class B and Class C Plans)"
for a description of the Fund's Distribution Plan and Service Plan for
Class A, B and C shares.
(2) Does not include fees and expenses of the non-interested Trustees
(including counsel). The investment manager is contractually required to
reduce its Management Fee in an amount equal to the Fund's allocable portion
of such fees and expenses, which are estimated to be 0.02% of the Fund's net
assets. (See "Management of the Fund.")
(3) Assuming no redemption of shares.
- ------------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE
OF FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN, THE FUND'S
ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN GREATER OR
LESS THAN 5%.
- ------------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in understanding
the various costs and expenses that investors will bear, directly or
indirectly, the payment of which will reduce investors' return on an annual
basis. Long-term investors in Class A, B or C shares could pay more in 12b-1
fees than the economic equivalent of paying the maximum front-end sales
charges applicable to mutual funds sold by members of the National
Association of Securities Dealers, Inc. ("NASD"). The information in the
foregoing table does not reflect any fee waivers or expense reimbursement
arrangements that may be in effect. Certain Service Agents (as defined below)
may charge their clients direct fees for effecting transactions in Fund
shares; such fees are not reflected in the foregoing table. See "Management
of the Fund," "How to Buy Fund Shares" and "Distribution Plan (Class A Plan
and Class B and Class C Plans)."
The Company understands that banks, securities dealers ("Selected
Dealers") or other financial institutions (including Dreyfus and its
affiliates) (collectively "Service Agents") may charge fees to their clients
who are owners of the Fund's Class A, B or C shares for various services
provided in connection with a client's account. These fees would be in
addition to any amounts received by a Service Agent under its Selling
Agreement ("Agreement") with the Distributor. The Agreement requires each
Service Agent to disclose to its clients any compensation payable to such
Service Agent by the Distributor and any other compensation payable by the
client for various services provided in connection with their accounts.
Page 3
FINANCIAL HIGHLIGHTS
The following tables are based upon a single Class A, Class B, Class
C or Class R share outstanding throughout each fiscal year (period) and
should be read in conjunction with the financial statements and related notes
that appear in the Fund's Annual Report dated June 30, 1996 and are
incorporated by reference into the SAI. The financial statements and related
notes, as well as the information in the tables below insofar as it relates
to the fiscal years (periods) ended after June 30, 1993, have been audited
by KPMG Peat Marwick LLP, independent auditors, whose report thereon appears
in the Fund's Annual Report. Further information about, and management's
discussion of, the Fund's performance is contained in the Fund's Annual
Report, which may be obtained without charge by writing to the address or
calling the number set forth on the cover page of this Prospectus. The
information in the tables below for fiscal years (periods) prior to the
fiscal year ended June 30, 1994 has been audited by other independent
auditors.
<TABLE>
<CAPTION>
PREMIER LIMITED TERM MUNICIPAL FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR.*
YEAR ENDED JUNE 30,
1996 1995# 1994# 1993 1992 1991 1990 1989 1988 1987
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period $11.82 $11.66 $12.61 $12.21 $11.58 $11.44 $11.95 $11.36 $11.23 $11.06
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Income from investment operations:
Net investment income** 0.54 0.53 0.54 0.60 0.70 0.74 0.76 0.78 0.76 0.76
Net realized and unrealized gains
and losses on investments 0.08 0.19 (0.41) 0.68 0.65 0.14 (0.18) 0.67 0.13 0.17
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Total from investment operations 0.62 0.72 0.13 1.28 1.35 0.88 0.58 1.45 0.89 0.93
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Less distributions:
Distributions from net
investment income (0.55) (0.53) (0.54) (0.60) (0.70) (0.74) (0.77) (0.79) (0.74) (0.76)
Distributions from net realized
capital gains .-- (0.03) (0.54) (0.28) (0.02) ._ (0.32) (0.07) (0.02) ._
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Total Distributions (0.55) (0.56) (1.08) (0.88) (0.72) (0.74) (1.09) (0.86) (0.76) (0.76)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Net Asset Value, end of period $11.89 $11.82 $11.66 $12.61 $12.21 $11.58 $11.44 $11.95 $11.36 $11.23
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total Return 5.25% 6.37% 0.96% 10.95% 11.94% 7.97% 5.06% 13.29% 8.21% 8.47%
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Ratios to average net assets/
Supplemental data:
Net Assets, end of year (in 000's) $18,751 $21,375 $23,715 $18,251 $26,192 $18,042 $15,209 $13,304 $10,150 $9,225
Ratio of expenses to average
net assets 0.75% 0.75% 0.76% 1.03% 0.97% 0.81% 0.82% 0.79% 0.79% 0.78
Ratio of net investment income to
average net assets 4.53% 4.59% 4.43% 4.91% 5.82% 6.43% 6.45% 6.82% 6.73% 6.58%
Portfolio turnover rate 55% 61% 57% 103% 30% 54% 76% 101% 81% 241%
</TABLE>
* The Fund commenced operations on October 1, 1985. On February 1,
1993, existing shares of the Fund were designated the
Retail Class and the Fund began offering the Institutional Class and
Investment Class of shares. Effective April 4, 1994, the Retail and
Institutional classes of shares were reclassified as a single class of
shares known as Investor Shares. On October 17, 1994, Investor shares
were redesignated as Class A shares. The Financial Highlights for the
year ended June 30, 1995 and subsequent years are based on a Class A
share outstanding. The Financial Highlights shown for the year ended June
30, 1994, were calculated using the performance of a Retail Share
outstanding from July 1, 1993 to April 3, 1994, and the performance of an
Investor Share outstanding from April 4, 1994, to June 30, 1994. The
Financial Highlights for the year ended June 30, 1993 and prior periods
are based upon a Retail Share outstanding.
** Net investment income per share before waiver of fees and/or
reimbursement of expenses by the investment manager and/or custodian
and/or transfer agent for the years ended June 30, 1994, 1993, 1992,
1991, 1990, 1989, 1988 and 1987 were $0.49, $0.59, $0.68, $0.68, $0.70,
$0.68, $0.70 and $0.71, respectively.
Page 4
Annualized expense ratios before voluntary waiver of fees and/or
reimbursement of expenses by the investment manager and/or custodian
and/or transfer agent for the years ended June 30, 1994, 1993, 1992, 1991,
1990, 1989, 1988 and 1987 were 1.09%, 1.11%, 1.12%, 1.31%, 1.32%, 1.65%,
1.29% and 1.21%, respectively.
Total return represents aggregate total return for the periods
indicated.
# Effective October 17,1994, Dreyfus began serving as the investment
manager to the Fund. From April 4, 1994 through October 16, 1994, Mellon
Bank served as the investment manager for the Fund. Prior to April 4,
1994, The Boston Company Advisors, Inc. served as the investment manager
for the Fund.
Page 5
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM MUNICIPAL FUND
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
Year Period
Ended Ended
6/30/96 6/30/95*
--------- --------
<S> <C> <C>
Net Asset Value, beginning of period $11.82 $11.32
--------- --------
Income from investment operations:
Net investment income 0.48 0.24
Net realized and unrealized gain on investments 0.07 0.50
--------- --------
Total from investment operations 0.55 0.74
--------- --------
Less distributions:
Distributions from net investment income (0.48) (0.24)
--------- --------
Net Asset Value, end of period $11.89 $11.82
========= ========
Total Return 4.71% 6.59%
========= ========
Ratios to average net assets/Supplemental data:
Net Assets, end of period (in 000's) $ 500 $ 85
Ratio of expenses to average net assets 1.25% 1.25%
Ratio of net investment income to average net assets 3.98% 4.09%
Portfolio turnover rate 55% .61%
* The Fund commenced selling Class B shares on December 28, 1994.
Annualized.
Not annualized.
Total return represents aggregate total return for the periods
indicated and does not reflect any applicable sales charge.
</TABLE>
Page 6
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM MUNICIPAL FUND
FOR A CLASS C SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
Year Period
Ended Ended
6/30/96 6/30/95*
--------- --------
<S> <C> <C>
Net Asset Value, beginning of period $11.82 $11.32
--------- --------
Income from investment operations:
Net investment income 0.48 0.25
Net realized and unrealized gain on investments 0.08 0.49
--------- --------
Total from investment operations 0.56 0.74
--------- --------
Less distributions:
Distributions from net investment income (0.48) (0.24)
--------- --------
Net Asset Value, end of period $11.90 $11.82
========= ========
Total Return 4.81% 6.59%
========= ========
Ratios to average net assets/Supplemental data:
Net Assets, end of period (in 000's) $ 150 $ 84
Ratio of expenses to average net assets 1.24% 1.25%
Ratio of net investment income to average net assets 4.00% 4.09%
Portfolio turnover rate 55% 61%
* The Fund commenced selling Class C shares on December 28, 1994.
Annualized.
Not annualized.
Total return represents aggregate total return for the periods
indicated and does not reflect any applicable sales charge.
Page 7
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM MUNICIPAL FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
Year Year Year Period
Ended Ended Ended Ended
6/30/96 6/30/95# 6/30/94# 6/30/93
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of year $11.82 $11.66 $12.61 $12.21
-------- -------- -------- ---------
Income from investment operations:
Net investment income*** 0.57 0.56 0.58 0.25
Net Realized and unrealized
gains and losses on investments 0.08 0.19 (0.43) 0.40
-------- -------- -------- ---------
Total from investment operations 0.65 0.75 0.15 0.65
-------- -------- -------- ---------
Less distributions:
Distributions from net investment income (0.58) (0.56) (0.56) (0.25)
Distributions from net realized capital gains ._ (0.03) (0.54) ._
-------- -------- -------- ---------
Total Distributions (0.58) (0.59) (1.10) (0.25)
-------- -------- -------- ---------
Net Asset Value, end of year $11.89 $11.82 $11.66 $12.61
======== ======== ======== =========
Total Return 5.51% 6.64% 1.08% 5.36%
======== ======== ======== =========
Ratios to average net assets/Supplemental data:
Net Assets, end of year (in 000's) $17,870 $16,727 $12,581 $8,974
Ratio of expenses to average net assets 0.50% 0.50% 0.50% 0.68%**
Ratio of net investment income to
average net assets 4.77% 4.84% 4.69% 4.82%**
Portfolio turnover rate 55% 61% 57% 103%
</TABLE>
* The Fund commenced selling Investment shares on February 1, 1993.
Effective April 4, 1994, the Investment Class of shares
was reclassified as Trust Class of shares. Effective October 17, 1994,
the Trust Class Shares were redesignated as Class R shares. The table
above is based upon a single Investment Share outstanding from February
1, 1993 to April 3, 1994, a Trust Class share outstanding from April 4,
1994 to October 16, 1994, and a Class R share thereafter.
**Annualized.
*** Net investment income per share before waiver of fees and/or
reimbursement of expenses by the investment manager and/or custodian
and/or transfer agent for the year ended June 30, 1994 and for the
period ended June 30, 1993 were $0.54 and $0.24, respectively.
Annualized expense ratios before voluntary waiver of fees and/or
reimbursement of expenses by the investment manager and/or custodian
and/or transfer agent for the year ended June 30, 1994 and for the
period ended June 30, 1993 were 0.83% and 0.93%, respectively.
Total return represents aggregate total return for the periods
indicated.
# Effective October 17, 1994, Dreyfus began serving as the investment
manager to the Fund. From April 4, 1994 through October 16, 1994. Mellon
Bank served as the investment manager for the Fund. Prior to April 4,
1994, The Boston Company Advisors, Inc. served as the investment adviser
for the Fund.
Page 8
ALTERNATIVE PURCHASE METHODS
The Fund offers you four methods of purchasing Fund shares;
you may choose the Class of shares that best suits your needs, given the
amount of your purchase, the length of time you expect to hold your
shares and any other relevant circumstances. Each Fund share represents
an identical pro rata interest in the Fund's investment portfolio. All
Fund shares are sold on a continuous basis.
Class A shares are sold at net asset value per share plus a
maximum initial sales charge of 3.0% of the public offering price imposed
at the time of purchase. The initial sales charge may be reduced or
waived for certain purchases. See "How to Buy Fund Shares_Class A
shares." These shares are subject to an annual 12b-1 fee at the rate of
0.25 of 1% of the value of the average daily net assets of Class A. See
"Distribution Plan_Class A shares."
Class B shares are sold at net asset value per share with no
initial sales charge at the time of purchase; as a result, the entire
purchase price is immediately invested in the Fund. Class B shares are
subject to a maximum 3% contingent deferred sales charge ("CDSC"), which
is assessed only if you redeem Class B shares within five years of
purchase. See "How to Buy Fund Shares _ Class B shares" and "How to
Redeem Fund Shares _ Contingent Deferred Sales Charge _ Class B shares."
These shares also are subject to an annual distribution fee at the rate
of 0.50 of 1% of the value of the average daily net assets of Class B. In
addition, Class B shares are subject to an annual service fee at the rate
of 0.25 of 1% of the value of the average daily net assets of Class B.
See "Distribution and Service Plans _ Class B and C." The distribution
and service fees paid by Class B will cause such Class to have a higher
expense ratio and to pay lower dividends than Class A. Approximately six
years after the date of purchase (or, in the case of Class B shares of
the Fund acquired through exchanges of Class B shares of another fund
advised by Dreyfus, the date of purchase of the original Class B shares
of the Fund exchanged), Class B shares automatically will convert to
Class A shares, based on the relative net asset values for shares of each
such Class, and will no longer be subject to the service plan fee of
Class B shares and will be subject to the lower distribution fee of Class
A shares. (Such conversion is subject to suspension by the Board of
Trustees if adverse tax consequences might result.) Class B shares that
have been acquired through the reinvestment of dividends and other
distributions will be converted on a pro rata basis together with other
Class B shares, in the proportion that a shareholder's Class B shares
converting to Class A shares bears to the total Class B shares not
acquired through the reinvestment of dividends and other distributions.
Class C shares are sold at net asset value per share with no
initial sales charge at the time of purchase; as a result, the entire
purchase price is immediately invested in the Fund. Class C shares are
subject to a .75% CDSC, which is assessed only if you redeem Class C
shares within one year of purchase. See "How to Redeem Fund Shares _
Class C shares." These shares also are subject to an annual distribution
fee at the rate of 0.50 of 1% of the value of the average daily net
assets of Class C. Class C shares also are subject to an annual service
fee at the rate of 0.25 of 1% of the value of the average daily net
assets of Class C. See "Distribution and Service Plans _ Class B and C."
The distribution and service fees paid by Class C will cause such Class
to have a higher expense ratio and to pay lower dividends than Class A.
Class R shares generally may not be purchased directly by
individuals, although eligible institutions may purchase Class R shares
for accounts maintained by individuals. Class R shares are sold at net
asset value per share primarily to Banks acting on behalf of customers
having a qualified trust or investment account relationship at such
institution, or to customers who have received and hold shares of the
Fund distributed to them by virtue of such an account or relationship.
Class A, Class B and Class C shares are sold primarily to clients of
Service Agents that have entered into Agreements with the Distributor.
Page 9
The decision as to which Class of shares is most beneficial
to you depends on the amount and the intended length of your investment.
You should consider whether, during the anticipated life of your
investment in the Fund, the accumulated distribution fee, service fee and
CDSC, if any, on Class B or Class C shares would be less than the
accumulated distribution fee and initial sales charge on Class A shares
purchased at the same time, and to what extent, if any, such differential
would be offset by the return of Class A shares. Additionally, investors
qualifying for reduced initial sales charges who expect to maintain their
investment for an extended period of time might consider purchasing Class
A shares because the accumulated continuing distribution and service fees
on Class B or Class C shares may exceed the accumulated distribution fee
and initial sales charge on Class A shares during the life of the
investment. Finally, you should consider the effect of the CDSC period
and any conversion rights of the Classes in the context of your own
investment time frame. For example, while Class C shares have a shorter
CDSC period than Class B shares, Class C shares do not have a conversion
feature and, therefore, are subject to an ongoing distribution and service
fees. Thus, Class B shares may be more attractive than Class C shares to
investors with longer term investment outlooks. Generally, Class A shares
may be more appropriate for investors who invest $1,000,000 or more in
Fund shares, but will not be appropriate for investors who invest less
than $100,000 in Fund shares.
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE.
The Fund seeks to maximize current income exempt from Federal
income taxes consistent with the prudent risk of capital. The Fund seeks
to achieve its objective by investing in debt obligations issued by
states, cities, counties, municipalities, municipal agencies and regional
districts and generally of intermediate maturities which are of
"investment-grade" quality and generally of intermediate maturities the
interest from which is, in the opinion of counsel to the respective
issuers, exempt from Federal income taxes ("Municipal Obligations").
MANAGEMENT POLICIES.
Under normal market conditions, the Fund attempts to invest
100%, and will invest a minimum of 80%, of its total assets in Municipal
Obligations. However, the Fund has the ability under certain conditions
to invest 20% of its total assets in taxable obligations (including
obligations the interest on which is included in the calculation of the
alternative minimum tax for individuals) and may, for defensive purposes
under abnormal market conditions, temporarily invest more than 20% of its
total assets in taxable obligations. The Fund has not made any such
investments, and does not expect such action will be necessary. In
managing the Fund, Dreyfus seeks to take advantage of market
developments, yield disparities and variations in the creditworthiness of
issuers. The Fund's policy of investing a minimum of 80% of its total
assets in Municipal Obligations is a fundamental policy of the Fund.
QUALITY OF MUNICIPAL OBLIGATIONS.
The Fund invests only in Municipal Obligations rated at the
time of purchase within the four highest quality ratings of Moody's
Investors Service, Inc. ("Moody's") (currently at least Baa or above for
bonds, at least MIG 3 or above for notes and at least Prime-2 or above
for commercial paper) or Standard and Poor's Ratings Group ("S&P") (at
least BBB or above for bonds, at least SP-2 or above for notes and at
least A-2 or above for commercial paper) or, if not rated by Moody's or
S&P, of comparable quality to the above ratings as determined by Dreyfus.
Municipal Obligations rated within the four highest ratings are
considered to be of investment-grade quality, although bonds rated in the
lowest of these four categories (Baa by Moody's or BBB by S&P) have some
speculative characteristics and involve greater risks and potentially
higher yields. A discussion of the categories of Municipal Obligations
and the rating systems appears in the SAI.
Page 10
Because many issuers of Municipal Obligations may choose not
to have their obligations rated, it is possible that a large portion of
the Fund's bond portfolio may consist of unrated obligations. Unrated
obligations are not necessarily of lower quality than rated obligations,
but to the extent the Fund invests in unrated obligations, it will be
more reliant on Dreyfus' judgment, analysis and experience than would be
the case if it invested only in rated obligations.
The taxable instruments in which the Fund is permitted to
invest under certain circumstances include U.S. Government securities and
short-term, high quality money market instruments. In addition, the Fund
may, on occasion, purchase securities issued by other investment
companies that invest primarily in high quality debt obligations of the
kinds in which the Fund may invest.
PRICE AND PORTFOLIO MATURITY.
The Fund generally invests in Municipal Obligations having
intermediate-term maturities, which can be expected to pay higher yields
and experience greater fluctuation in value than bonds with short-term
maturities. The average weighted maturity of the Municipal Obligations in
the portfolio is not expected to exceed ten years. There is no limit on
the maturity of any individual security. The market value of the
Municipal Obligations in the Fund's portfolio and, accordingly, the
Fund's net asset value typically will vary inversely with changes in
interest rates, declining when interest rates rise and rising when
interest rates decline. Under normal market conditions, the longer the
average maturity of the Fund's holdings, the greater its expected yield
and price volatility.
INVESTMENT TECHNIQUES
In connection with its investment objective and policies, the
Fund may employ, among others, the following investment techniques:
WHEN-ISSUED SECURITIES. The Fund may purchase Municipal
Obligations on a "when-issued" basis (i.e., delivery of and payment for
the Municipal Obligations normally take place within 45 days after the
date of the purchase commitment). The payment obligation and the interest
rate on such securities are fixed at the time of the purchase commitment.
Although the Fund generally will purchase Municipal Obligations on a
when-issued basis with the intention of acquiring the securities, the
Fund may sell such securities before the settlement date. Municipal
Obligations purchased on a when-issued basis, like other investments made
by the Fund, may decline or appreciate in value prior to their actual
delivery to the Fund.
MUNICIPAL BOND INDEX AND INTEREST RATE FUTURES CONTRACTS AND
OPTIONS ON MUNICIPAL BOND INDEX AND INTEREST RATE FUTURES CONTRACTS. The
Fund may enter into municipal bond index futures contracts and interest
rate futures contracts and purchase and sell options on these futures
contracts that are traded on a United States exchange or board of trade.
Such investments, if any, by the Fund will be made solely for the purpose
of hedging against changes in the value of its portfolio securities and
in the value of securities it intends to purchase due to anticipated
changes in interest rates and market conditions and when the transactions
are economically appropriate to the reduction of risks inherent in the
management of the Fund.
A municipal bond index futures contract, which is based on an
index of long-term, tax-exempt municipal bonds, is an agreement in which
two parties agree to take or make delivery of an amount of cash equal to
a specified dollar amount times the difference between the value of the
index at the close of the last trading day of the contract and the price
at which the index contract was originally written. An interest rate
futures contract provides for the future purchase or sale of specified
interest rate sensitive debt securities such as United States Treasury
bills, bonds and notes, obligations of the Government National Mortgage
Association and bank certificates of deposit. Although most interest rate
futures contracts require the delivery
Page 11
of the underlying securities, some settle in cash. Each contract
designates the price, date, time and place of delivery. Entering into
a futures contract to deliver the index or instrument underlying the
contract is referred to as entering into a "short" position in the
futures contract, whereas entering into a futures contract to take
delivery of the index or instrument is referred to as entering into a
"long" position in the futures contract.
A put or call on a municipal bond index or interest rate
futures contract gives the purchaser the right, in return for the premium
paid, to assume a short or long position, respectively, in the underlying
futures contract as a specified exercise price at any time prior to the
expiration date of the option. The Fund may purchase put and call options
on both municipal bond index and interest rate futures contracts. The
Fund will sell options on these futures contracts only as part of closing
purchase transactions to terminate its options position, although no
assurance can be given that closing transactions can be effected.
Entering into a futures contract for the purchase or sale of
a municipal bond index or debt security or purchasing options on index or
interest rate futures contracts will enable the Fund to protect its
assets from fluctuations in interest rates on tax-exempt securities
without initially buying or selling the securities. The Fund may enter
into futures contracts to sell an index or debt security or may purchase
options when Dreyfus believes that interest rates will increase and
consequently the value of the Fund's portfolio securities will decrease.
The Fund may enter into futures contracts to buy an index or debt
security or may purchase call options when Dreyfus anticipates purchasing
portfolio securities at a time of declining interest rates.
There are several risks in connection with the issue of
municipal bond index and interest rate futures contracts and options on
these futures contracts as hedging devices. There can be no assurance
that there will be a correlation between price movements in the municipal
bond index or interest rate futures, on the one hand, and price movements
in municipal bonds which are the subject of the hedge, on the other hand.
Positions in futures contracts and options on futures contracts may be
closed out only by entering into offsetting positions on the exchange on
which the contract was initiated, and no assurance can be given that an
active market will exist for the contract or the option at any particular
time. Consequently, the Fund may realize a loss on a futures contract
that is not offset by an increase in the price of the municipal bonds
that are being hedged or may not be able to close a futures position in
the event of adverse price movements. Any income earned by the Fund from
transactions in futures contracts and options on futures contracts will
be taxable. Accordingly, it is anticipated that such investments will be
made only in unusual circumstances, such as when Dreyfus anticipates an
extreme change in interest rates or market conditions.
The Fund may not enter into futures contracts or purchase
options on futures contracts if, immediately thereafter, the sum of the
amount of margin deposits on the Fund's existing futures contracts and
premiums paid for options would exceed 5% of the value of the Fund's
total assets, after taking into account unrealized profits and losses on
any existing contracts. When a Fund enters into futures contracts,
purchases an index or debt security or purchases call options, an amount
of cash, U.S. Government Securities or other high grade debt securities
equal to the market value of the contract will be deposited and
maintained in a segregated account with the Fund's custodian to
collateralize the positions, thereby insuring that the use of the
contract is unleveraged.
At present the Fund is considering investments in futures
contracts and options on futures contracts as described above. However,
the Fund reserves the right to invest in other kinds of futures contracts
and options on futures contracts subject to the policies the Board of
Trustees may establish from time to time.
Page 12
CERTAIN PORTFOLIO SECURITIES
FLOATING RATE AND VARIABLE RATE OBLIGATIONS. The Fund may
purchase floating rate and variable rate obligations. These obligations
bear interest at rates that are not fixed, but vary with changes in
specified market rates or indices. Some of these obligations may carry a
demand feature that permits the Fund to receive the par value upon demand
prior to maturity. The Fund will limit its purchases of floating rate and
variable rate Municipal Obligations to those meeting the quality
standards applicable to the Fund. Frequently, such obligations are secured
by letters of credit or other credit support arrangements provided by
banks. The quality of the underlying creditor or the bank, as determined
by Dreyfus under the supervision of the Board of Trustees must also be
equivalent to the quality standards applicable to the Fund. In addition,
Dreyfus monitors the earning power, cash flow and other liquidity ratios
of the issuers of such obligations, as well as the creditworthiness of
the institution responsible for paying the principal amount of the
obligations under the demand feature.
The Fund may invest in participation interests purchased from
banks in floating or variable rate Municipal Obligations owned by banks.
Participation interests carry a demand feature permitting the Fund to
tender them back to the bank. Each participation is backed by an
irrevocable letter of credit or guarantee of a bank which Dreyfus under
the supervision of the Board of Trustees has determined meets the
prescribed quality standards for the Fund.
Other types of tax-exempt instruments that may become
available in the future may be purchased by the Fund as long as Dreyfus
believes the quality of these instruments meets the Fund's quality
standards.
MUNICIPAL LEASE OBLIGATIONS. The Fund may purchase municipal
lease obligations and certificates of participation in municipal lease
obligations. A municipal lease obligation does not constitute a general
obligation of the municipality for which the municipality's taxing power
is pledged. Ordinarily, a lease obligation will contain a
"non-appropriation" clause which provides that the municipality has no
obligation to make lease payments in future years unless money is
appropriated for such purpose on a yearly basis. Because of the risk of
non-appropriation, some lease obligations are issued with third-party
credit enhancements, such as insurance or a letter of credit. Lease
obligations are a relatively new type of financing that has not yet
developed the depth of marketability associated with more conventional
municipal obligations. For these reasons, before investing in a lease
obligation Dreyfus will consider, among other things, whether (1) the
leased property is essential to a governmental function of the
municipality, (2) the municipality is prohibited from substituting or
purchasing similar equipment if lease payments are not appropriated, and
(3) the municipality has maintained good market acceptability for its
lease obligations in the past. The Board of Trustees has established
guidelines for determining whether a Municipal Lease Obligation is a
liquid security. Such determinations will be made based upon all relevant
factors including, the frequency of trades and quotes for the obligation,
the number of dealers willing to purchase or sell the security and the
number of potential buyers, the willingness of dealers to undertake to
make a market in the securities, and the nature of the marketplace
trades.
TENDER OPTION BONDS. The Fund may invest up to 10% of the
value of its assets in tender option bonds. A tender option bond is a
Municipal Obligation (generally held pursuant to a custodial arrangement)
having a relatively long maturity and bearing interest at a fixed rate
substantially higher than prevailing short-term tax-exempt rates, that
has been coupled with the agreement of a third party, such as a bank,
broker-dealer or other financial institution, pursuant to which such
institution grants the security holders the option, at periodic
intervals, to tender the option, to tender their securities to the
institution and receive the face value thereof. As consideration for
providing the option, the financial institution receives periodic fees
equal
Page 13
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 15%
of the value of its net assets in illiquid securities, which would
included tender option bonds for which the required notice to exercise
the tender feature is more than seven days if there is no secondary
market available for these obligations.
OTHER INVESTMENT COMPANIES. The Fund may invest in securities
issued by other investment companies to the extent that such investments
are consistent with the Fund's investment objective and policies and
permissible under the Investment Company Act of 1940, as amended (the
"1940 Act"). As a shareholder of another investment company, the Fund
would bear, along with other shareholders, its pro rata portion of the
other investment company's expenses, including advisory fees. These
expenses would be in addition to the advisory and other expenses that the
Fund bears directly in connection with its own operations.
CERTAIN RISK CONSIDERATIONS. The ability of the Fund to meet
its investment objective is subject to the ability of municipal issuers
to meet their payment obligations. In addition, the Fund's portfolio will
be affected by general changes in interest rates which may result in
increases or decreases in the value of Fund holdings. Investors should
recognize that, in periods of declining interest rates, the yield of the
Fund will tend to be somewhat higher than prevailing market rates, and in
periods of rising interest rates, the yield of the Fund will tend to be
somewhat lower. Also, when interest rates are falling, the influx of new
money to the Fund will likely be invested in portfolio instruments
producing lower yields than the balance of that Fund's portfolio, thereby
reducing the current yield of the Fund. In periods of rising interest
rates, the opposite can be expected to occur.
The Fund may invest without limitation in Municipal
Obligations which are repayable out of revenue streams generated from
economically related projects or facilities or whose issuers are located
in the same state. Sizable investments in these obligations could
increase risk to the Fund should any of the related projects or
facilities experience financial difficulties. To the extent the Fund may
invest in private activity bonds, the Fund may invest only up to 5% of
its total assets in bonds where payment of principal and interest are the
responsibility of a company with less than three years operating history.
The Fund is authorized to borrow up to 10% of its total assets for
temporary or emergency purposes and to pledge its assets to the same
extent in connection with such borrowings.
The Fund is classified as a "non-diversified" investment
company, as defined under the 1940 Act, and therefore, the Fund could
invest all of its assets in the obligations of a single issuer or
relatively few issuers. However, the Fund intends to conduct its
operations so that it will qualify under the Internal Revenue Code of
1986, as amended (the "Code"), as a "regulated investment company." To
continue to qualify, among other requirements, the Fund will be required
to limit its investments so that, at the close of each quarter of the
taxable year, with respect to at least 50% of its total assets, not more
than 5% of such assets will be invested in the securities of a single
issuer. In addition, not more than 25% 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. Additionally, due to the Fund's
non-diversified status, changes in the financial con-
Page 14
dition or in the market's assessment of an individual issuer may cause
the Fund's share price to fluctuate to a greater degree than if the Fund
were diversified. However, the provisions of the Code place limits on the
extent to which a Fund's portfolio may be non-diversified.
PORTFOLIO TURNOVER. While securities are purchased for the
Fund on the basis of potential for current income and not for short-term
trading profits, in the past the portfolio turnover rate of the Fund has
exceeded 100% and may exceed 100% in the future. A portfolio turnover
rate of 100% would occur, for example, if all the securities held by the
Fund were replaced once in a period of one year. In past years the Fund's
rate of portfolio turnover exceeded that of certain other mutual funds
with the same investment objective. A higher rate of portfolio turnover
(100% or greater) involves correspondingly greater brokerage commissions
and other expenses that must be borne directly by the Fund and, thus,
indirectly by its shareholders. In addition, a high rate of portfolio turn
over may result in the realization of larger amounts of short-term and/or
long-term capital gains that, when distributed to the Fund's shareholders,
are taxable to them at the then-current rate. Nevertheless, securities
transactions for the Fund will be based only upon investment
considerations and will not be limited by any other considerations when
Dreyfus deems it appropriate to make changes in the Fund's assets.
LIMITING INVESTMENT RISKS. The Fund is subject to a number of
investment limitations. Certain limitations are matters of fundamental
policy and may not be changed without the affirmative vote of the holders
of a majority of the Fund's outstanding shares. The SAI describes all of
the Fund's fundamental and non-fundamental restrictions.
The investment objective, policies, restrictions, practices
and procedures of the Fund, unless otherwise specified, may be changed
without shareholder approval. If the Fund's investment objective,
policies, restrictions, practices or procedures change, shareholders
should consider whether the Fund remains an appropriate investment in
light of the shareholder's then-current position and needs.
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 September 30, 1996, Dreyfus managed or administered
approximately $81 billion in assets for more than 1.7 million investor
accounts nationwide.
Dreyfus serves as the Fund's investment manager. Dreyfus
supervises and assists in the overall management of the Fund's affairs
under an Investment Management Agreement with the Fund, subject to the
overall authority of the Company's Board of Trustees in accordance with
Massachusetts law. Pursuant to the Investment Management Agreement,
Dreyfus provides, or arranges for 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.
John F. Flahive has been employed by Dreyfus as portfolio
manager of the Fund since November 14, 1994. Prior to employment with
Dreyfus, Mr. Flahive was senior portfolio manager and Vice President with
Neuberger & Berman. A 1984 graduate of St. Michael's College with a
degree in Business Administration, Mr. Flahive also earned a M.B.A. from
Clarkson University in 1985, and attended the New York University
Graduate School of Business Administration for Visiting Professionals in
1986.
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.
Page 15
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 $220 billion in assets as
of June 30, 1996, including $83 billion in proprietary mutual fund assets.
As of June 30, 1996, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services,
for approximately $876 billion in assets, including approximately $57
billion in mutual fund assets.
Under the Investment Management Agreement, the Fund has
agreed to pay Dreyfus a monthly fee at the annual rate of 0.50 of 1% of
the value of the Fund's average daily net assets. Dreyfus pays all of the
Fund's expenses, except brokerage fees, taxes, interest, Rule 12b-1 fees
(if applicable) and extraordinary expenses. Although Dreyfus is not
obligated under the Investment Management Agreement to pay the fees and
expenses of the non-interested Trustees (including counsel fees), Dreyfus
is contractually required to reduce its investment management fee in an
amount equal to the Fund's allocable share of such fees and expenses. In
order to compensate Dreyfus for paying virtually all of the Fund's
expenses, the Fund's investment management fee is higher than the
investment advisory fees paid by most investment companies. Most, if not
all, such companies also pay for additional non-investment advisory
expenses that are not paid by such companies' investment advisers. From
time to time, Dreyfus may waive (either voluntarily or pursuant to
applicable state limitations) a portion of the investment management fees
payable by the Fund.
For the fiscal year ended June 30, 1996, the Fund paid
Dreyfus .50% of its average daily net assets in investment management
fees, less fees and expenses of the non-interested Trustees (including
counsel fees).
For the fiscal year ended June 30, 1996, total operating
expenses (excluding Rule 12b-1 fees) of each Class of the Fund were .50%
of the Fund's average daily net assets.
In addition, Class A, B and C shares are subject to certain
distribution and shareholder servicing fees. See "Distribution Plans
(Class A Plan and Class B and Class C Plans)."
Dreyfus may pay the Distributor for shareholder services from
Dreyfus' own assets, including past profits but not including the
management fee paid by the Fund. The Distributor may use part or all of
such payments to pay Service Agents in respect of these services.
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, administered or advised by Dreyfus as
factors in the selection of broker-dealers to execute portfolio
transactions for the Fund. See "Portfolio Transactions" in the SAI.
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 Distributor is located at 60 State Street,
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 Holdings, Inc., the parent company of which is Boston Institutional
Group, Inc.
Page 16
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., a
wholly-owned subsidiary of Dreyfus, is located at One American Express
Plaza, Providence, Rhode Island 02903, and serves as the Fund's Transfer
and Dividend Disbursing Agent (the "Transfer Agent"). The Distributor
serves as the Fund's sub-administrator and, pursuant to a
Sub-Administration Agreement, provides various administrative and
corporate secretarial services to the Fund.
HOW TO BUY FUND SHARES
GENERAL -- Class A shares, Class B shares and Class C shares
may be purchased only by clients of Service Agents, except that full-time
or part-time employees or directors of Dreyfus or any of its affiliates
or subsidiaries, Board members of a fund advised by Dreyfus, including
members of the Company's Board, or the spouse or minor child of any of
the foregoing may purchase Class A shares directly through the
Distributor.
Class R shares are sold primarily to Banks acting on behalf
of customers having a qualified trust or investment account or
relationship at such institution, or to customers who have received and
hold shares of the Fund distributed to them by virtue of such an account
or relationship. In addition, holders of Class R shares of the Fund who
have held their shares since April 4, 1994, may continue to purchase
Class R shares of the Fund, whether or not they otherwise would be
eligible to do so. Institutions effecting transactions in Class R shares
for the accounts of their clients may charge their clients direct fees in
connection with such transactions.
When purchasing Fund shares, you must specify which Class is
being purchased. Stock certificates are issued only upon your written
request. No certificates are issued for fractional shares. The Fund
reserves the right to reject any purchase order.
Service Agents may receive different levels of compensation
for selling different Classes of shares. Management understands that some
Service Agents may impose certain conditions on their clients which are
different from those described in this Prospectus, and, to the extent
permitted by applicable regulatory authority, may charge their clients
direct fees which would be in addition to any amounts which might be
received under the Distribution and Service Plans. Each Service Agent has
agreed to transmit to its clients a schedule of such fees. You should
consult your Service Agent in this regard.
The minimum initial investment is $1,000. Subsequent
investments must be at least $100. The initial investment must be
accompanied by the Fund's Account Application.
You may purchase Fund shares by check or wire, or through the
TELETRANSFER Privilege described below. Checks should be made payable to
"Premier Limited Term Municipal Fund". Payments to open new accounts
which are mailed should be sent to Premier Limited Term Municipal Fund,
P.O. Box 6587, Providence, Rhode Island 02940-6587, together with your
Account Application indicating which Class of shares is being purchased.
For subsequent investments, your Fund account number should appear on the
check and an investment slip should be enclosed and sent to Premier
Limited Term Municipal Fund, P.O. Box 6587, Providence, Rhode Island
02940-6587. Neither initial nor subsequent investments should be made by
third party check.
Wire payments may be made if your bank account is in a
commercial bank that is a member of the Federal Reserve System or any
other bank having a correspondent bank in New York City. Immediately
available funds may be transmitted by wire to Boston Safe Deposit & Trust
Company, DDA# 044350/Premier Limited Term Municipal Fund and applicable
class 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
Page 17
number, if applicable. If your initial purchase of Fund shares is by wire,
you should call 1-800-645-6561 after completing your wire payment in order
to obtain your Fund account number. Please include your Fund account
number on the Fund's Account Application and promptly mail the Account
Application to the Fund, as no redemptions will be permitted until the
Account Application is received. You may obtain further information about
remitting funds in this manner from your bank. All payments should be
made in U.S. dollars and, to avoid fees and delays, should be drawn only
on U.S. banks. A charge will be imposed if any check used for investment
in your account does not clear. The Fund makes available to certain large
institutions the ability to issue purchase instructions through
compatible computer facilities.
Subsequent investments also may be made by electronic
transfer of funds from an account maintained in a bank or other domestic
financial institution that is an ACH member. You must direct the
institution to transmit immediately available funds through the ACH
System to Boston Safe Deposit & Trust Company with instructions to credit
your Fund account. The instructions must specify your Fund account
registration and Fund account number PRECEDED BY THE DIGITS "4310" for
Class A shares, "4320" for Class B shares, "4330" for Class C shares and
"4940" for Class R shares.
Federal regulations require that you provide a certified TIN
upon opening or reopening an account. See "Dividends, Other Distributions
and Taxes" and the Fund's Account Application for further information
concerning this requirement. Failure to furnish a certified TIN to the
Fund could subject you to a $50 penalty imposed by the Internal Revenue
Service (the "IRS").
NET ASSET VALUE PER SHARE ("NAV")--An investment portfolio's
NAV refers to the worth of one share. The NAV for shares of each Class of
the Fund is computed by adding, with respect to such Class of shares, the
value of the Fund's investments, cash, and other assets attributable to
that Class, deducting liabilities of the Class and dividing the result by
the number of shares of that Class outstanding. Shares of each Class of
the Fund are offered on a continuous basis. For purposes of determining
NAV for the Fund, bonds are valued by an independent pricing service
approved by the Company's Board of Trustees at fair value as determined
by the pricing service. See "Determination of Net Asset Value" in the
SAI.
Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange
on which such securities are primarily traded or at the last sales price
on the national securities market on each business day. Investments not
listed on an exchange or the national securities market, or securities
for which there were no transactions, are valued at the average of the
most recent bid and asked prices. Bid price is used when no asked price
is available.
Orders for the purchase of Fund shares received by dealers by
the close of trading on the floor of the New York Stock Exchange ("NYSE")
on any business day and transmitted to the Distributor or its designee by
the close of its business day (normally 5:15 p.m., New York time) will be
based on the public offering price per share determined as of the close
of trading on the floor of the NYSE on that day. Otherwise, the orders
will be based on the next determined public offering price. It is the
dealers' responsibility to transmit orders so that they will be received
by the Distributor or its designee before the close of its business day.
NAV is determined on each day that the NYSE is open (a
"business day"), as of the close of business of the regular session of
the NYSE (usually 4 p.m. Eastern Time). For purposes of determining NAV,
options and futures contracts will be valued 15 months after the close of
trading on the floor of the NYSE. Investments and requests to exchange or
redeem shares received by the Fund in proper form before such close of
business are effective on, and will receive the price determined on, that
day. Investment, exchange and redemption requests received after such
close of business are generally effective on and receive the share price
determined on the next business day.
Page 18
<TABLE>
<CAPTION>
CLASS A SHARES -- The public offering price of Class A shares
is the NAV per share of that Class plus a sales load as shown below:
Total Sales Load
----------------------------------------------
As a % of As a % of Dealers' Reallowance
Offering Price Net Asset Value as a % of
Amount of Transaction Per Share Per Share Offering Price
----------------------- ---------------- ---------------- --------------------------
<S> <C> <C> <C>
Less than $100,000........ 3.00 3.10 2.75
$100,000 to less than $250,000 2.75 2.80 2.50
$250,000 to less than $500,000 2.25 2.30 2.00
$500,000 to less than $1,000,000 2.00 2.00 1.75
</TABLE>
There is no initial sales charge on purchases of $1,000,000 or
more of Class A shares. However, if you purchase Class A shares without
an initial sales charge as part of an investment of at least $1,000,000
and redeem all or a portion of those shares within one year after
purchase, a CDSC of 1.00% will be imposed at the time of redemption. The
terms contained in the sections of the Fund's Prospectus entitled "How to
Redeem Fund Shares _ Contingent Deferred Sales Charge _ Class B" (other
than the amount of the CDSC and its time periods) and "How to Redeem Fund
Shares -- Waiver of CDSC" are applicable to the Class A shares subject to
a CDSC. Letter of Intent and Right of Accumulation apply to such purchases
of Class A shares.
Full-time employees of NASD member firms and full-time
employees of other financial institutions which have entered into an
agreement with the Distributor pertaining to the sale of Fund shares (or
which otherwise have a brokerage related or clearing arrangement with an
NASD member firm or financial institution with respect to the sale of
such shares) may purchase Class A shares for themselves directly or
pursuant to an employee benefit plan or other program, or for their
spouses or minor children, at net asset value, provided that they have
furnished the Distributor with such information as it may request from
time to time in order to verify eligibility for this Privilege. This
Privilege also applies to full-time employees of financial institutions
affiliated with NASD member firms whose full-time employees are eligible
to purchase Class A shares at net asset value. In addition, Class A
shares are offered at net asset value to full-time or part-time employees
or directors of Dreyfus or any of its affiliates or subsidiaries, Board
members of a fund advised by Dreyfus, including members of the Company's
Board, or the spouse or minor child of any of the foregoing.
Holders of Class A accounts of the Fund as of December 28,
1994 may continue to purchase Class A shares of the Fund at NAV. However,
investments by such holders in other funds advised by Dreyfus will be
subject to the applicable front end sales load.
Class A shares may be purchased at NAV through certain
broker-dealers and other financial institutions which have entered into
an agreement with the Distributor, which includes a requirement that such
shares be sold for the benefit of clients participating in a "wrap
account" or a similar program under which such clients pay a fee to such
broker-dealer or other financial institution.
Class A shares also may be purchased at NAV, subject to
appropriate documentation, through a broker-dealer or other financial
institution with the proceeds from the redemption of shares of a
registered open-end management investment company not managed by Dreyfus
or its affiliates. The purchase of Class A shares of the Fund must be
made within 60 days of such redemption and the shareholder must have
either (i) paid an initial sales charge or a contingent deferred sales
charge or (ii) been obligated to pay at any time during the holding
period, but did not actually pay on redemption, a deferred sales charge
with respect to such redeemed shares.
Page 19
Class A shares also may be purchased at NAV, subject to
appropriate documentation, by (i) qualified separate accounts maintained
by an insurance company pursuant to the laws of any State or territory of
the United States, (ii) a State, county or city or instrumentality
thereof, (iii) a charitable organization (as defined in Section 501(c)(3)
of the Code) investing $50,000 or more in Fund shares, and (iv) a
charitable remainder trust (as defined in Section 501(c)(3) of the Code).
The dealer reallowance may be changed from time to time but
will remain the same for all dealers. The Distributor, at its expense,
may provide additional promotional incentives to dealers that sell shares
of funds advised by Dreyfus which are sold with a sales load, such as
Class A shares. In some instances, those incentives may be offered only
to certain dealers who have sold or may sell significant amounts of
shares. Dealers receive a larger percentage of the sales load from the
Distributor than they receive for selling most other funds.
CLASS B SHARES--The public offering price for Class B shares
is the NAV of that Class. No initial sales charge is imposed at the time
of purchase. A CDSC is imposed, however, on certain redemptions of Class
B shares as described under "How to Redeem Fund Shares." The Distributor
compensates certain Service Agents for selling Class B shares at the time
of purchase from the Distributor's own assets. The proceeds of the CDSC
and the distribution fee, in part, are used to defray these expenses.
CLASS C SHARES--The public offering price for Class C shares
is the NAV of that Class. No initial sales charge is imposed, however, at
the time of purchase. A CDSC is imposed however, on redemptions of Class
C shares made within the first year of purchase. See "Class B shares"
above and "How to Redeem Fund Shares."
CLASS R SHARES--The public offering price for Class R shares
is the NAV of that Class.
RIGHT OF ACCUMULATION--CLASS A SHARES--Reduced sales loads
apply to any purchase of Class A shares, shares of other funds in the
Premier Family of Funds, shares of certain other funds advised by Dreyfus
which are sold with a sales load and shares acquired by a previous
exchange of such shares (hereinafter referred to as "Eligible Funds"), by
you and any related "purchaser" as defined in the SAI, where the
aggregate investment, including such purchase, is $100,000 or more. If,
for example, you previously purchased and still hold Class A shares, or
shares of any other Eligible Fund or combination thereof, with an
aggregate current market value of $80,000 and subsequently purchase Class
A shares or shares of an Eligible Fund having a current value of $40,000,
the sales load applicable to the subsequent purchase would be reduced to
2.75% of the offering price. All present holdings of Eligible Funds may
be combined to determine the current offering price of the aggregate
investment in ascertaining the sales load applicable to each subsequent
purchase.
To qualify for reduced sales loads, at the time of purchase
you or your Service Agent must notify the Distributor if orders are made
by wire, or the Transfer Agent if orders are made by mail. The reduced
sales load is subject to confirmation of your holdings through a check of
appropriate records.
TELETRANSFER PRIVILEGE -- You may purchase Fund shares
(minimum $500 and maximum $150,000 per day) by telephone if you have
checked the appropriate box and supplied the necessary information on the
Fund's Account Application or have a filed Shareholder Services Form with
the Transfer Agent. The proceeds will be transferred between the bank
account designated in one of these documents and your Fund account. Only
a bank account maintained in a domestic financial institution which is an
ACH member may be so designated. The Fund may modify or terminate this
privilege at any time or charge a service fee upon notice to
shareholders. No such fee currently is contemplated.
If you have selected the TELETRANSFER Privilege, you may
request a TELETRANSFER purchase of Fund shares by telephoning
1-800-645-6561 or, if calling from overseas, call 516-794-5452.
Page 20
SHAREHOLDER SERVICES
The services and privileges described under this heading may
not be available to clients of certain Service Agents and some Service
Agents may impose certain conditions on their clients which are different
from those described in this Prospectus. You should consult your Service
Agent in this regard.
FUND EXCHANGES
You may purchase, in exchange for shares of a Class, shares
of the same class of certain other funds managed or administered by
Dreyfus, to the extent such shares are offered for sale in your state of
residence. These funds have different investment objectives which may be
of interest to you. If you desire to use this service, please call
1-800-645-6561 to determine if it is available and whether any conditions
are imposed on its use.
To request an exchange, your Service Agent acting on your
behalf must give exchange instructions to the Transfer Agent in writing
or by telephone. Before any exchange, you must obtain and should review a
copy of the current prospectus of the fund into which the exchange is
being made. Prospectuses may be obtained by calling 1-800-645-6561. The
shares being exchanged must have a current value of at least $500;
furthermore, when establishing a new account by exchange, the shares
being exchanged must have a value of at least the minimum initial
investment required for the fund into which the exchange is being made.
The ability to issue exchange instructions by telephone is given to all
Fund shareholders automatically, unless you check the relevant "NO" box
on the Account Application, indicating that you specifically refuse this
Privilege. The Telephone Exchange Privilege may be established for an
existing account by written request, signed by all shareholders on the
account, by a Separate Shareholder Services Form, available by calling
1-800-645-6561 or, by oral request from any of the authorized signatories
on the account, also by calling 1-800-645-6561. If you previously have
established the Telephone Exchange Privilege, you may telephone exchange
instructions (including over The Dreyfus TouchRegistration Mark Automated
Telephone System) by calling 1-800-645-6561. If calling from overseas,
call 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,
TELETRANSFER Privilege and the dividends and distributions payment option
(except for Dividend Sweep) selected by the investor.
Shares will be exchanged at the next determined NAV; however,
a sales load may be charged with respect to exchanges of Class A shares
into funds sold with a sales load. No CDSC will be imposed on Class B or
C shares at the time of an exchange; however, Class B or C shares
acquired through an exchange will be subject to the higher CDSC
applicable to the exchanged or acquired shares. The CDSC applicable on
redemption of the acquired Class B or C shares will be calculated from
the date of the initial purchase of the Class B or C shares exchanged, as
the case may be. If you are exchanging Class A shares into a fund that
charges a sales load, you may qualify for share prices which do not
include the sales load or which reflect a reduced sales load, if the
shares of the fund from which you are exchanging were: (a) purchased with
a sales load, (b) acquired by a previous exchange from shares purchased
with a sales load, or (c) acquired through reinvestment of dividends or
other distributions paid with respect to the foregoing categories of
shares. To qualify, at the time of the exchange your Service Agent must
notify the Distributor. Any such qualification is subject to confirmation
of your holdings through a check of appropriate records. See "Shareholder
Services" in the SAI. No fees currently are charged shareholders directly
in connection with exchanges, although the Fund reserves the right, upon
not less than 60 days' written notice, to charge shareholders a nominal
fee in accordance with rules promulgated by the SEC. The Fund reserves the
right to reject any exchange request in
Page 21
whole or in part. The availability of fund exchanges may be modified or
terminated at any time upon notice to shareholders.
The exchange of shares of one fund for shares of another is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder and, therefore, an exchanging shareholder may
realize a taxable gain or loss.
AUTO-EXCHANGE PRIVILEGE
Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares
of the Fund, in shares of the same class of other funds in the Premier
Family of Funds or certain other funds in the Dreyfus Family of Funds of
which you are currently an investor. The amount you designate, which can
be expressed either in terms of a specific dollar or share amount ($100
minimum), will be exchanged automatically on the first and/or fifteenth
day of the month according to the schedule you have selected. Shares will
be exchanged at the then-current NAV; however, a sales load may be
charged with respect to exchanges of Class A shares into funds sold with
a sales load. No CDSC will be imposed on Class B or C shares at the time
of an exchange; however, Class B or C shares acquired through an exchange
will be subject to the higher CDSC applicable to the exchanged or
acquired shares. The CDSC applicable on redemption of the acquired Class
B or C shares will be calculated from the date of the initial purchase of
the Class B or C shares exchanged, as the case may be. See "Shareholder
Services" in the SAI. The right to exercise this Privilege may be
modified or canceled by the Fund or the Transfer Agent. You may modify or
cancel your exercise of this Privilege at any time by mailing written
notification to Premier Limited Term Municipal Fund, P.O. Box 6587,
Providence, Rhode Island 02940-6587. The Fund may charge a service fee
for the use of this Privilege. No such fee currently is contemplated. The
exchange of shares of one fund for shares of another is treated for
Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss. For more information concerning this Privilege and
the funds in the Premier Family of Funds or the Dreyfus Family of Funds
eligible to participate in this privilege, or to obtain an Auto-Exchange
Authorization Form, please call toll free 1-800-645-6561.
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund
shares (minimum of $100 and maximum of $150,000 per transaction) at
regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you. At your
option, the bank account designated by you will be debited in the
specified amount, and Fund shares will be purchased, once a month, on
either the first or fifteenth day, or twice a month, on both days. Only
an account maintained at a domestic financial institution which is an ACH
member may be so designated. To establish a Dreyfus-AUTOMATIC Asset
Builder account, you must file an authorization form with the Transfer
Agent. You may obtain the necessary authorization form by calling
1-800-645-6561. You may cancel your participation in this Privilege or
change the amount of purchase at any time by mailing written notification
to Premier Limited Term Municipal Fund, P.O. Box 6587, Providence, Rhode
Island 02940-6587, and the notification will be effective three business
days following receipt. The Fund may modify or terminate this privilege at
any time or charge a service fee. No such fee currently is contemplated.
DIVIDEND OPTIONS
Dividend Sweep enables you to invest automatically dividends
or dividends and other distributions, if any, paid by the Fund in shares
of the same class of another fund in the Premier Family of Funds or
certain of the Dreyfus Family of Funds of which you are an investor.
Shares
Page 22
of the other fund will be purchased at the then-current net asset
value; however, a sales load may be charged with respect to investments
in shares of a fund sold with a sales load. If you are investing in a
fund that charges a sales load, you may qualify for share prices which do
not include the sales load or which reflect a reduced sales load. If you
are investing in a fund or class that charges a CDSC, the shares
purchased will be subject on redemption to the CDSC, if any, applicable
to the purchased shares. See "Shareholder Services" in the SAI. Dividend
ACH permits you to transfer electronically on the payment date dividends
or dividends and other distributions, if any, from the Fund to a
designated bank account. Only an account maintained at a domestic
financial institution which is an ACH member may be so designated. Banks
may charge a fee for this service.
For more information concerning these Privileges, or to
request a Dividend Options Form, please call toll free 1-800-645-6561.
You may cancel these Privileges by mailing written notification to
Premier Limited Term Municipal Fund, P.O. Box 6587, Providence, Rhode
Island 02940-6587. To select a new fund after cancellation, you must
submit a new Dividend Options Form. Enrollment in or cancellation of
these Privileges is effective three business days following receipt.
These Privileges are available only for existing accounts and may not be
used to open new accounts. Minimum subsequent investments do not apply
for Dividend Sweep. The Fund may modify or terminate these Privileges at
any time or charge a service fee. No such fee currently is contemplated.
GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Government Direct Deposit Privilege enables you to purchase
Fund shares (minimum of $100 and maximum of $50,000 per transaction) by
having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into
your Fund account. You may deposit as much of such payments as you elect.
You should consider whether Direct Deposit of your entire payment into a
fund with fluctuating NAV, such as the Fund, may be appropriate for you.
To enroll in Government Direct Deposit, you must file with the Transfer
Agent a completed Direct Deposit Sign-Up Form for each type of payment
that you desire to include in this Privilege. The appropriate form may be
obtained by calling 1-800-645-6561. Death or legal incapacity will
terminate your participation in this Privilege. You may elect at any time
to terminate your participation by notifying in writing the appropriate
Federal agency. Further, the Fund may terminate your participation upon
30 days' notice to you.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request
withdrawal of a specified dollar amount (minimum of $50) on either a
monthly or quarterly basis if you have a $5,000 minimum account.
An application for the Automatic Withdrawal Plan can be
obtained by calling 1-800-645-6561. The Automatic Withdrawal Plan may be
ended at any time by the shareholder, the Fund or the Transfer Agent.
Shares for which certificates have been issued may not be redeemed through
the Automatic Withdrawal Plan.
Shares withdrawn pursuant to the Automatic Withdrawal Plan
will be subject to any applicable CDSC. Purchases of additional Class A
shares where the sales load is imposed concurrently with withdrawals of
Class A shares generally are undesirable.
LETTER OF INTENT--CLASS A SHARES
By signing a Letter of Intent form, available from the
Distributor, you become eligible for the reduced sales load applicable to
the total number of Eligible Fund shares purchased in a 13-month period
pursuant to the terms and conditions set forth in the Letter of Intent. A
minimum initial
Page 23
purchase of $5,000 is required. To compute the applicable sales load, the
offering price of shares you hold (on the date of submission of the Letter
of Intent) in any Eligible Fund that may be used toward "Right of
Accumulation" benefits described above may be used as a credit toward
completion of the Letter of Intent. However, the reduced sales load will
be applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount
indicated in the Letter of Intent for payment of a higher sales load if
you do not purchase the full amount indicated in the Letter of Intent.
The escrow will be released when you fulfill the terms of the Letter of
Intent by purchasing the specified amount. If your purchases qualify for
a further sales load reduction, the sales load will be adjusted to
reflect your total purchase at the end of 13 months. If total purchases
are less than the amount specified, you will be requested to remit an
amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If
such remittance is not received within 20 days, the Transfer Agent, as
attorney-in-fact pursuant to the terms of the Letter of Intent, will
redeem an appropriate number of Class A shares of the Fund held in escrow
to realize the difference. Signing a Letter of Intent does not bind you
to purchase, or the Fund to sell, the full amount indicated at the sales
load in effect at the time of signing, but you must complete the intended
purchase to obtain the reduced sales load. At the time you purchase Class
A shares, you must indicate your intention to do so under a Letter of
Intent.
HOW TO REDEEM FUND SHARES
GENERAL -- You may request redemption of your shares at any
time. Redemption requests should be transmitted to the Transfer Agent as
described below. When a request is received in proper form, the Fund will
redeem the shares at the next determined NAV as described below. If you
hold Fund shares of more than one Class, any request for redemption must
specify the Class of shares being redeemed. If you fail to specify the
Class of shares to be redeemed or if you own fewer shares of the Class
than specified to be redeemed, the redemption request may be delayed
until the Transfer Agent receives further instructions from you or your
Service Agent.
The Fund imposes no charges (other than any applicable CDSC)
when shares are redeemed. Service Agents or other institutions may charge
their clients a nominal fee for effecting redemptions of Fund shares. Any
certificates representing Fund shares being redeemed must be submitted
with the redemption request. The value of the shares redeemed may be more
or less than their original cost, depending upon the Fund's then-current
net asset value.
The Fund ordinarily will make payment for all shares redeemed
within seven days after receipt by the Transfer Agent of a redemption
request in proper form, except as provided by the rules of the SEC.
HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY THE TELETRANSFER
PRIVILEGE OR THROUGH DREYFUS-AUTOMATIC ASSET BUILDER AND SUBSEQUENTLY
SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION
PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR
PURCHASE CHECK, TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC ASSET BUILDER
ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE
FUND WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR
PURSUANT TO THE TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS DAYS
AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE
TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER AGAINST
WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT APPLY IF
YOUR SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A
SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE REDEMPTION
REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH
SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE
ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares will not be redeemed
until the Transfer Agent has received your Account Application.
Page 24
The Fund reserves the right to redeem your account at its
option upon not less than 45 days' written notice if the NAV of your
account is $500 or less and remains so during the notice period.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES--A CDSC
payable to the Distributor is imposed on any redemption of Class B shares
may reduce the current NAV of your Class B shares to an amount which is
lower than the dollar amount of all payments by you for the purchase of
Class B shares of the Fund held by you at the time of redemption. No CDSC
will be imposed to the extent that the NAV of the Class B shares redeemed
does not exceed (i) the current NAV of Class B shares acquired through
reinvestment of dividends or other distributions, plus (ii) increases in
the NAV of your Class B shares above the dollar amount of all your
payments for the purchase of Class B shares held by you at the time of
redemption.
If the aggregate value of Class B shares redeemed has
declined below their original cost as a result of the Fund's performance,
a CDSC may be applied to the then-current net asset value rather than the
purchase price.
In circumstances where the CDSC is imposed, the amount of the
charge will depend on the number of years from the time you purchased the
Class B shares until the time of redemption of such shares. Solely for
purposes of determining the number of years from the time of any payment
for the purchase of Class B shares, all payments during a month will be
aggregated and deemed to have been made on the first day of the month.
The following table sets forth the rates of the CDSC:
<TABLE>
<CAPTION>
Year Since CDSC as a % of Amount
Purchase Payment Invested or Redemption
Was Made Proceeds
----------------- ------------------------
<S> <C>
First.................................................... 3.00
Second................................................... 3.00
Third.................................................... 2.00
Fourth................................................... 2.00
Fifth.................................................... 1.00
Sixth.................................................... 0.00
</TABLE>
In determining whether a CDSC is applicable to a redemption,
the calculation will be made in a manner that results in the lowest
possible rate. It will be assumed that the redemption is made first of
amounts representing shares acquired pursuant to the reinvestment of
dividends and other distributions; then of amounts representing the
increase in NAV of Class B shares above the total amount of payments for
the purchase of Class B shares made during the preceding five years; then
of amounts representing the cost of shares purchased five years prior to
the redemption; and finally, of amounts representing the cost of shares
held for the longest period of time within the applicable five-year
period.
For example, assume an investor purchased 100 shares at $10
share for a cost of $1,000. Subsequently, the shareholder acquired five
additional shares through dividend reinvestment. During the second year
after the purchase the investor decided to redeem $500 of his or her
investment. Assuming at the time of the redemption the NAV had
appreciated to $12 per share, the value of the investor's shares would be
$1,260 (105 shares at $12 per share). The CDSC would not be applied to
the value of the reinvested dividend shares and the amount which
represents appreciation ($260). Therefore, $240 of the $500 redemption
proceeds ($500 minus $260) would be charged at a rate of 3% (the
applicable rate in the second year after purchase) for a total CDSC of
$7.20.
CONTINGENT DEFERRED SALES CHARGE--CLASS C SHARES--A CDSC of
.75% payable to the Distributor is imposed on any redemption of Class C
shares within one year of the date of purchase. The basis for calculating
the payment of any such CDSC will be the method used
Page 25
in calculating the CDSC for Class B shares. See "Contingent Deferred Sales
Charge_Class B shares" above.
WAIVER OF CDSC--The CDSC applicable to Class B and Class C
shares will be waived in connection with (a) redemptions made within one
year after the death or disability, as defined in Section 72(m)(7) of the
Code, of the shareholder, (b) redemptions as a result of a combination of
any investment company with the Fund by merger, acquisition of assets or
otherwise, and (c) redemptions by such shareholders as the SEC or its
staff may permit. If the Company's Board of Trustees determine to
discontinue the waiver of the CDSC, the disclosure in the Fund's
prospectus will be revised appropriately. Any Fund shares subject to a
CDSC which were purchased prior to the termination of such waiver will
have the CDSC waived as provided in the Fund's prospectus at the time of
the purchase of such shares.
To qualify for a waiver of the CDSC, at the time of
redemption you must notify the Transfer Agent or your Service Agent must
notify the Distributor. Any such qualification is subject to confirmation
of your entitlement.
PROCEDURES--You may redeem Fund shares by using the regular
redemption procedure through the Transfer Agent, through the TELETRANSFER
Privilege or, if you are a client of a Selected Dealer, through the
Selected Dealer. If you have given your Service Agent authority to
instruct the Transfer Agent to redeem shares and to credit the proceeds
of such redemptions to a designated account at your Service Agent, you
may redeem shares only in this manner and in accordance with the regular
redemption procedure described below. If you wish to use the other
redemption methods described below, you must arrange with your Service
Agent for delivery of the required application(s) to the Transfer Agent.
Other redemption procedures may be in effect for clients of certain
Service Agents and institutions. The Fund makes available to certain
large institutions the ability to issue redemption instructions through
compatible computer facilities.
You may redeem or exchange Fund shares by telephone if you
have checked the appropriate box on the Fund's Account Application or
have filed a Shareholder Services Form with the Transfer Agent. If you
select the TELETRANSFER Privilege or telephone exchange privilege (which
is granted automatically unless you refuse it), you authorize the
Transfer Agent to act on telephone instructions (including over The
Dreyfus TouchRegistration Mark Automated Telephone System) from any
person representing himself or herself to be you, or a representative of
your Service Agent, and reasonably believed by the Transfer Agent to be
genuine. The Fund will require the Transfer Agent to employ reasonable
procedures, such as requiring a form of personal identification, to
confirm that instructions are genuine and, if it does not follow such
procedures, the Fund or the Transfer Agent may be liable for any losses
due to unauthorized or fraudulent instructions. Neither the Fund nor the
Transfer Agent will be liable for following telephone instructions
reasonably believed to be genuine.
During times of drastic economic or market conditions, you
may experience difficulty in contacting the Transfer Agent by telephone
to request a TELETRANSFER redemption or an exchange of Fund shares. In
such cases, you should consider using the other redemption procedures
described herein. Use of these other redemption procedures may result in
your redemption request being processed at a later time than it would
have been if TELETRANSFER redemption had been used. During the delay, the
Fund's NAV may fluctuate.
REGULAR REDEMPTION. Under the regular redemption procedure,
you may redeem shares by written request mailed to Premier Limited Term
Municipal Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587.
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 securi-
Page 26
ties 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 contact
your Service Agent or call the telephone number listed on the cover of
this Prospectus.
Redemption proceeds of at least $1,000 will be wired to any
member bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
TELETRANSFER PRIVILEGE. You may redeem Fund shares (minimum
$500 per day) by telephone if you have checked the appropriate box and
supplied the necessary information on the Fund's Account Application or
have filed a Shareholder Services Form with the Transfer Agent. The
proceeds will be transferred between your Fund account and the bank
account designated in one of these documents. Only such an account
maintained in a domestic financial institution which is an ACH member may
be so designated. Redemption proceeds will be on deposit in your account
at an ACH member bank ordinarily two days after receipt of the redemption
request or, at your request, paid by check (maximum $150,000 per day) and
mailed to your address. Holders of jointly registered Fund or bank
accounts may redeem through the TELETRANSFER Privilege for transfer to
their bank account only up to $250,000 within any 30-day period. The Fund
reserves the right to refuse any request made by telephone, including
requests made shortly after a change of address, and may limit the amount
involved or the number of such requests. The Fund may modify or terminate
this privilege at any time or charge a service fee upon notice to
shareholders. No such fee currently is contemplated.
If you have selected the TELETRANSFER Privilege, you may
request a TELETRANSFER redemption of Fund shares by telephoning
1-800-645-6561 or, if calling from overseas, 516-794-5452. Shares issued
in certificate form are not eligible for this Privilege.
REDEMPTION THROUGH A SELECTED DEALER. If you are a customer
of a Selected Dealer, you may make redemption requests to your Selected
Dealer. If the Selected Dealer transmits the redemption request so that
it is received by the Transfer Agent prior to the close of trading on the
floor of the NYSE (currently 4:00 p.m., New York time), the redemption
request will be effective on that day. If a redemption request is
received by the Transfer Agent after the close of trading on the floor of
the NYSE, the redemption request will be effective on the next business
day. It is the responsibility of the Selected Dealer to transmit a
request so that it is received in a timely manner. The proceeds of the
redemption are credited to your account with the Selected Dealer. See
"How to Buy Fund Shares" for a discussion of additional conditions or
fees that may be imposed upon redemption.
In addition, the Distributor or its designee will accept
orders from Selected Dealers with which the Distributor has sales
agreements for the repurchase of shares held by shareholders. Repurchase
orders received by dealers by the close of trading on the floor of the
NYSE on any business day and transmitted to the Distributor or its
designee prior to the close of its business day (normally 5:15 p.m., New
York time) are effected at the price determined as of the close of
trading on the floor of the NYSE on that day. Otherwise, the shares will
be redeemed at the next determined net asset value. It is the
responsibility of the Selected Dealer to transmit orders on a timely
basis. The Selected Dealer may charge the shareholder a fee for executing
the order. This repurchase arrangement is discretionary and may be
withdrawn at any time.
REINVESTMENT PRIVILEGE--CLASS A SHARES. Upon written request,
you may reinvest up to the number of Class A shares you have redeemed,
within 30 days of redemption, at the then-prevailing net asset value
without a sales load, or reinstate your account for the purpose of
exercising Fund Exchanges. The Reinvestment Privilege may be exercised
only once.
Page 27
DISTRIBUTION PLANS
(CLASS A PLAN AND CLASS B AND CLASS C PLANS)
Class A shares are subject to a Distribution Plan adopted
pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1"). Class B and C
shares are subject to a Distribution Plan and a Service Plan, each
adopted pursuant to Rule 12b-1. Potential investors should read this
Prospectus in light of the terms governing Agreements with their Service
Agents. A Service Agent entitled to receive compensation for selling and
servicing the Fund's shares may receive different compensation with
respect to one class of shares over another. The Fund and the Distributor
may suspend or reduce payments under a Plan at any time, and payments are
subject to the continuation of the Fund's Plan and the Agreements
described below. From time to time, the Service Agents, the Distributor
and the Fund may agree to reduce voluntarily the maximum fees payable
under a Plan. See the SAI for more details on the Plans.
DISTRIBUTION PLAN--CLASS A SHARES--The Class A shares of the
Fund bear some of the cost of selling those shares under the Distribution
Plan (the "Plan"). The Plan allows the Fund to spend annually up to 0.25%
of its average daily net assets attributable to Class A shares to
compensate Dreyfus Service Corporation, an affiliate of Dreyfus, for
shareholder servicing activities and the Distributor for shareholder
servicing activities and for activities or expenses primarily intended to
result in the sale of Class A shares of the Fund. The Plan allows the
Distributor to make payments from the Rule 12b-1 fees it collects from
the Fund to compensate Service Agents that have entered into Agreements
with the Distributor. Under the Agreements, the Service Agents are
obligated to provide distribution related services with regard to the
Fund and/or shareholder services to the Service Agent's clients that own
Class A shares of the Fund.
DISTRIBUTION AND SERVICE PLANS--CLASS B AND C. Under a
Distribution Plan adopted pursuant to Rule 12b-1, the Fund pays the
Distributor for distributing the Fund's Class B and C shares at an
aggregate annual rate of .50 of 1% of the value of the average daily net
assets of Class B and C. Under a Service Plan adopted pursuant to Rule
12b-1, the Fund pays Dreyfus Service Corporation or the Distributor for
the provision of certain services to the holders of Class B and C shares
a fee at the annual rate of .25 of 1% of the value of the average daily
net assets of Class B and C. The Distributor may pay one or more Service
Agents for providing such services for these Classes of shares. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Fund and
providing reports and other information, and providing services related
to the maintenance of such shareholder accounts. With regard to such
services, each Service Agent is required to disclose to its clients any
compensation payable to it by the Fund and any other compensation payable
by their clients in connection with the investment of their assets in
Class B and C shares. The Distributor determines the amounts, if any, to
be paid to Service Agents under the Service Plan and the basis on which
such payments are made. The fees payable under the Distribution and
Service Plans are payable without regard to actual expenses incurred.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund declares daily and pays dividends monthly from its
net investment income, if any, and distributes any net realized capital
gains on an annual basis, but it may make distributions on a more
frequent basis to comply with the distribution requirements of the Code,
in all events in a manner consistent with the provisions of the 1940 Act.
The Fund will not make distributions from net realized capital gains
unless all capital loss carryovers, if any, have been utilized or have
expired. All expenses are accrued daily and deducted before declaration
of dividends to investors. Shares purchased on a day on which the Fund
calculates its NAV will begin
Page 28
to accrue dividends on that day, and redemption orders effected on any
particular day will receive dividends declared only through the business
day prior to the day of redemption. Dividends paid by each Class are
calculated at the same time and in the same manner and are in the same
amount, except that the expenses attributable solely to a particular
Class will be borne exclusively by that Class. Class B and C shares will
receive lower per share dividends than Class A shares which will receive
lower per share dividends than Class R shares, because of the higher
expenses borne by the relevant Class. See "Expense Summary."
Investors may choose whether to receive dividends and other
distributions in cash, to receive dividends in cash and reinvest other
distributions in additional Fund shares at NAV, or to reinvest both
dividends and other distributions in additional Fund shares at NAV.
It is expected that the Fund will qualify for treatment as a
"regulated investment company" under the Code so long as such
qualification is in the best interests of its shareholders. Such
qualification will relieve the Fund of any liability for Federal income
tax to the extent its earnings and realized gains are distributed in
accordance with applicable provisions of the Code.
Dividends derived from taxable investments, together with
distributions from net realized short-term capital gains and all or a
portion of any gains realized from the sale or other disposition of
certain market discount bonds (collectively, "dividend distributions"),
paid by the Fund are taxable to U.S. shareholders as ordinary income, to
the extent of the Fund's earnings and profits, whether received in cash
or reinvested in Fund shares. Distributions from the Fund's net capital
gain (the excess of net long-term capital gain over short-term capital
loss) are taxable to such shareholders as long-term capital gains,
regardless of how long the shareholders have held their Fund shares and
whether such distributions are received in cash or reinvested in
additional Fund shares. The net capital gain of an individual generally
will not be subject to Federal income tax at a rate in excess of 28%.
Dividends and other distributions also may be subject to state and local
taxes.
Dividend distributions paid by the Fund to a non-resident
foreign investor generally are subject to U.S. withholding tax at the
rate of 30%, unless the non-resident foreign investor claims the benefit
of a lower rate specified in a tax treaty. Capital gain distributions
paid by the Fund to a non-resident foreign investor, as well as the
proceeds of any redemptions by such an investor, regardless of the extent
to which gain or loss may be realized, generally are not subject to U.S.
withholding tax. However, such distributions may be subject to backup
withholding, as described below, unless the foreign investor certifies
his non-U.S. residency status.
Notice as to the tax status of your dividends and other
distributions will be mailed to you annually. You also will receive
periodic summaries of your account which will include information as to
dividends and capital gain distributions, if any, paid during the year.
The Code provides for the "carryover" of some or all of the
sales load imposed on Class A shares if (1) an investor redeems those
shares or exchanges those shares for shares of another fund advised or
administered by Dreyfus within 91 days of purchase and (2) in the case of
a redemption, acquires other Fund Class A shares through exercise of the
Reinvestment privilege or, in the case of an exchange, such other fund
reduces or eliminates its otherwise applicable sales load for the purpose
of the exchange. In this case, the amount of the sales load charged the
investor for the original Class A shares, up to the amount of the
reduction of the sales load pursuant to the Reinvestment Privilege or on
the exchange, as the case may be, is not included in the basis of such
shares for purposes of computing gain or loss on the redemption or the
exchange, and instead is added to the basis of the fund shares received
pursuant to the Reinvestment Privilege or the exchange.
With respect to individual investors, Federal laws and
regulations generally require the Fund to withhold ("backup withholding")
and remit to the U.S. Treasury 31% of taxable divi-
Page 29
dends, capital gain distributions and of any redemption proceeds,
regardless of the extent to which gain or loss may be realized, paid to a
shareholder if the shareholder fails to certify either that the TIN
furnished in connection with opening an account is correct or that such
shareholder has not received notice from the IRS that the shareholder is
subject to backup withholding as a result of a failure to properly report
taxable dividend or interest income on a Federal income tax return.
Furthermore, the IRS may notify the Fund to institute backup withholding
if the IRS determines that shareholder's TIN is incorrect or if that
shareholder has failed to properly report taxable dividend and interest
income on a Federal income tax return.
A TIN is either the Social Security number or employer
identification number of the record owner of the account. Any tax
withheld as a result of backup withholding does not constitute an
additional tax imposed on the record owner of the account and may be
claimed as a credit on the record owner's Federal income tax return.
The Fund may be subject to a non-deductible 4% excise tax,
measured with respect to certain undistributed amounts of taxable
investment income and capital gains.
You should consult your tax advisers regarding specific
questions as to Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance for each Class may
be calculated on the basis of average annual total return and/or total
return. These total return figures reflect changes in the price of the
shares and assume that any income dividends and/or capital gains
distributions made by the Fund during the measuring period were
reinvested in shares of the same Class. These figures also take into
account any applicable service and distribution fees. As a result, at any
given time, the performance of Class B and C should be expected to be
lower than that of Class A and the performance of Class A, B and C should
be expected to be lower than that of Class R. Performance for each Class
will be calculated separately.
Average annual total return is calculated pursuant to a
standardized formula which assumes that an investment was purchased with
an initial payment of $1,000 and that the investment was redeemed at the
end of a stated period of time, after giving effect to the reinvestment
of dividends and other distributions during the period. The return is
expressed as a percentage rate which, if applied on a compounded annual
basis, would result in the redeemable value of the investment at the end
of the period. Advertisements of the Fund's performance will include the
Fund's average annual total return for one, five and ten year periods, or
for shorter periods depending upon the length of time during which the
Fund has operated. Computations of average annual total return for
periods of less than one year represent an annualization of the Fund's
actual total return for the applicable period.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and other distributions. Total return generally
is expressed as a percentage rate which is calculated by combining the
income and principal changes for a specified period and dividing by the
NAV (or maximum offering price per share in the case of Class A shares)
at the beginning of the period. Advertisements may include the percentage
rate of total return or may include the value of a hypothetical
investment at the end of the period which assumes the application of the
percentage rate of total return. Total return also may be calculated by
using the NAV at the beginning of the period instead of the maximum
offering price per share at the beginning of the period for Class A
shares or without giving effect to any applicable CDSC at the end of the
period for Class B or C shares. Calculations based on the NAV do not
reflect the deduction of the sales load on the Fund's Class A shares,
which, if reflected, would reduce the performance quoted.
Page 30
The Fund may also advertise the yield and tax-equivalent
yield on a Class of shares. The Fund's yield is calculated by dividing a
Class of shares' annualized net investment income per share during a
recent 30-day (or one month) period by the NAV (or maximum public
offering price in the case of Class A shares) per Class of such share on
the last day of that period. Since yields fluctuate, yield data cannot
necessarily be used to compare an investment in a Class of shares with
bank deposits, savings accounts, and similar investment alternatives
which often provide an agreed-upon or guaranteed fixed yield for a stated
period of time. The tax-equivalent yield shows the level of taxable yield
needed to produce an after-tax equivalent to the tax-free yield. This is
done by measuring a class' yield by the amount necessary to reflect the
payment of Federal income tax (and state income tax, if applicable) at a
stated tax rate.
Performance will vary from time to time and past results are
not necessarily representative of future results. You should remember
that performance is a function of portfolio management in selecting the
type and quality of portfolio securities and is affected by operating
expenses. Performance information, such as that described above, may not
provide a basis for comparison with other investments or other investment
companies using a different method of calculating performance.
The Fund may compare the performance of its shares with
various industry standards of performance including Lipper Analytical
Services, Inc. ratings. Performance rankings as reported in CHANGING
TIMES, BUSINESS WEEK, INSTITUTIONAL INVESTOR, THE WALL STREET JOURNAL,
MUTUAL FUND FORECASTER, NO LOAD INVESTOR, MONEY MAGAZINE, MORNINGSTAR
MUTUAL FUND VALUES, U.S. NEWS AND WORLD REPORT, FORBES, FORTUNE, BARRON'S
and similar publications may also be used in comparing the Fund's
performance. The Fund may also advertise non-standardized performance
information, such as total return for periods other than those required
to be shown or cumulative performance data. Furthermore, the Fund may
quote its shares' returns and yields in advertisements or in shareholder
reports.
GENERAL INFORMATION
The Company was organized as a Massachusetts business trust
under the laws of the Commonwealth of Massachusetts on March 28, 1983,
under the name The Boston Company Tax-Free Municipal Funds. The Company
changed its name to The Laurel Tax-Free Municipal Funds on March 31,
1994, and changed its name to The Dreyfus/Laurel Tax-Free Municipal Funds
on October 17, 1994. The Company is registered with the SEC as an
open-end management investment company, commonly known as a mutual fund.
The Company is authorized to issue an unlimited number of shares of
beneficial interest, each without par value. The Company may also create
an unlimited number of separate investment portfolios (each a "fund").
The Trustees have authorized shares of the Fund to be issued in four
Classes_Class A, Class B, Class C and Class R. The Company may in the
future seek to achieve the Fund's investment objective by investing all
of the Fund's net investable assets in another investment company having
the same investment objective and substantially the same investment
policies and restrictions as those applicable to the Fund. Shareholders
of the Fund will be given at least 30 days' prior notice of any such
investment.
Each share (regardless of Class) has one vote. All shares of
all funds (and Classes thereof) vote together as a single class, except
as to any matter for which a separate vote of any fund or Class is
required by the 1940 Act, and except as to any matter which affects the
interests of one or more particular funds or Classes, in which case only
the shareholders of the affected fund or Classes are entitled to vote,
each as a separate class. Only holders of Class A, B or C shares, as the
case may be, will be entitled to vote on matters submitted to
shareholders pertaining to the Distribution and Service Plans relating to
that Class.
Page 31
Unless otherwise required by the 1940 Act, ordinarily it will
not be necessary for the Fund to hold annual meetings of shareholders. As
a result, Fund shareholders may not consider each year the election of
Trustees or the appointment of auditors. However, pursuant to the Fund's
By-Laws, the holders of at least 10% of the shares outstanding and
entitled to vote may require the Fund to hold a special meeting of
shareholders for purposes of removing a Trustee from office and for any
other purpose. Fund shareholders may remove a Trustee by the affirmative
vote of two-thirds of the Company's outstanding voting shares. In
addition, the Board of Trustees will call a meeting of shareholders for
the purpose of electing Trustees if, at any time, less than a majority of
the Trustees then holding office have been elected by shareholders.
The Transfer Agent maintains a record of your ownership and
will send you confirmations and statements of account.
Shareholder inquiries may be made to your Service Agent or by
writing to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York
11556-0144.
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 32
PLT/P110196
DREYFUS BASIC CALIFORNIA MUNICIPAL MONEY MARKET FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
NOVEMBER 1, 1996
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
the Dreyfus BASIC California Municipal Money Market Fund (formerly, the
Dreyfus/Laurel California Tax-Free Money Fund) (the "Fund"), dated November
1, 1996, as it may be revised from time to time. The Fund is a separate, non-
diversified portfolio of The Dreyfus/Laurel Tax-Free Municipal Funds (the
"Trust"), an open-end management investment company, known as a mutual fund.
To obtain a copy of the Fund's 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
Investment Policies B-11
Redemption of Fund Shares B-24
Shareholder Services B-26
Determination of Net Asset Value B-27
Performance Information B-28
Dividends, Other Distributions and Taxes B-29
Information About the Fund B-31
Principal Shareholders B-32
Custodian and Transfer Agent B-32
Counsel and Independent Auditors B-33
Financial Statements B-33
Appendix A Risk Factors - Investing in
California Municipal Obligations B-34
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 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 eleven 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; Director,
Access Capital Strategic Community Investment Fund, Inc. - Institutional
Investment Portfolio. Age: 81 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, Access Capital Strategic Community
Investment Fund, Inc. - Bank Portfolio; Director, Boston Mutual
Insurance Company; Director and Vice Chairman of the Board. Home Owners
Federal Savings and Loan (prior to May 1990). Age: 79 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. Director, Access Capital
Strategic Community Investment Fund, Inc. - Bank Portfolio and
Institutional Investment Portfolio. He is also Chairman of the Board
of Noel Group, Inc., a venture capital company; and a director of the
Muscular Dystrophy Association, HealthPlan Services Corporation, Belding
Heminway, Inc., Curtis Industries, Inc., Simmons Outdoor Corporation and
Staffing Resources, Inc. For more than five years prior to January
1995, 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. 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.; Director, Access Capital
Strategic Community Investment Fund, Inc. - Bank Portfolio. Age: 61
years old. Address: 40 Norfolk Road, Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Trustee of the Trust; Partner, Reed, Smith, Shaw &
McClay (law firm). Director, Access Capital Strategic Community
Investment Fund, Inc. - Bank Portfolio. Age: 68 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; Director, Access Capital
Strategic Community Investment Fund, Inc. - Institutional Investment
Portfolio. From 1988-1989 Director, Rexene Corporation. Since May
1991, Mr. Goeschel has served as a Trustee of Sewickley Valley Hospital.
Age: 74 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.; Director, Access Capital Strategic Community Investment
Fund, Inc. - Bank Portfolio; 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. Director,
Access Capital Strategic Community Investment Fund, Inc. - Institutional
Investment Portfolio. Age: 78 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.; Director,
Access Capital Strategic Community Investment Fund, Inc. - Institutional
Investment Portfolio. Age: 48 years old. Address: 401 Edgewater
Place, Wakefield, Massachusetts 01880.
o+JOHN J. SCIULLO. Trustee of the Trust; Dean Emeritus and Professor of Law,
Duquesne University Law School; Director, Urban Redevelopment Authority
of Pittsburgh; Director, Access Capital Strategic Community Investment
Fund, Inc. - Institutional Investment Portfolio. Age: 64 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/Pilgrim
Community Health Plan, Inc.; Director, Access Capital Strategic
Community Investment Fund, Inc. - Bank Portfolio; 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: 46 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: 27
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: 60 State Street, Boston, Massachusetts 02109.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Trust, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Funds, Inc. (since
July 1996); Supervisor of Treasury Services and Administration of Funds
Distributor, Inc. From April 1993 to January 1995, Mr. Conroy was a
Senior Fund Accountant for Investors Bank & Trust Company. From
December 1991 to March 1993, Mr. Conroy was employed as a Fund
Accountant at TBC. Prior to December 1991, Mr. Conroy attended
Merrimack College where he received a bachelors degree in Business
Administration. Age: 27 years old. Address: 60 State Street, Boston,
Massachusetts 02109.
#RICHARD W. INGRAM. Vice President and Assistant Treasurer of the Trust, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Funds, Inc. (since
July 1996); Senior Vice President and Director of Client Services and
Treasury Operations of Funds Distributor, Inc. From March 1994 to
November 1995, Mr. Ingram was Vice President and Division Manager for
First Data Investor Services Group. From 1989 to 1994, Mr. Ingram was
Vice President, Assistant Treasurer and Tax Director-Mutual Funds of
TBC. Age: 40 years old. Address: 60 State Street, Boston,
Massachusetts 02109.
MARK A. KARPE, Vice President and Assistant Secretary of the Trust, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Funds, Inc. Senior
Paralegal of the Distributor and an officer of other investment
companies advised or administered by the Manager. From August 1993 to
May 1996, he attended Hofstra University School of Law. Prior to August
1993, he was employed as an Associate Examiner at the National
Association of Securities Dealers. Age: 27 years old. Address: 200
Park Avenue, New York, New York 10166.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Trust, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Funds, Inc. (since
July 1996); Vice President and Manager of Treasury Services and
Administration of Funds Distributor, Inc. From 1989 to July 1994, Ms.
Nelson was an Assistant Vice President and Client Manager for TBC. Age:
32 years old. Address: 60 State Street, Boston, Massachusetts 02109.
#JOHN E. PELLETIER. Vice President and Secretary of the Trust, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Funds, Inc. (since
September 1994); Senior Vice President, General Counsel and Secretary,
Funds Distributor, Inc. (since April 1994); Senior Vice President,
General Counsel and Secretary, Premier Mutual Fund Services, Inc. (since
August 1994); Counsel, The Boston Company Advisors, Inc. (February 1992
to March 1994); Associate, Ropes & Gray (August 1990 to February 1992).
Age: 31 years old. Address: 60 State Street, Boston, Massachusetts
02109.
#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. From July 1988 to August 1994, he was
employed by TBC where he held various management positions in the
Corporate Finance and Treasury areas. Age: 33 years old. Address: 60
State Street, Boston, Massachusetts 02109.
_____________________________________
* "Interested person" of the Trust, as defined in the Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies advised
by Dreyfus.
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 $25,000 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 October 21,
1996.
For the fiscal year ended June 30, 1996, 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>
Total Compensation
Pension or from the Trust
Aggregate Retirement Benefits Estimated Annual and Fund &
Name of Board Compensation from Accrued as Part of Benefits Upon Complex Paid to
Member the Trust# Trust's Expenses Retirement Board Member+
______________ __________________ ___________________ ________________ ________________
<S> <C> <C> <C>
Ruth Marie Adams $ 6,420 none none $ 34,500
Francis P. Brennan* 16,853 none none 97,000
Joseph S. DiMartino** none none none 448,618***
James M. Fitzgibbons 6,365 none none 32,500
J. Tomlinson Fort** none none none none
Arthur L. Goesche 6,420 none none 34,500
Kenneth A. Himme 5,448 none none 31,750
Arch S. Jeffery** none none none none
Stephen J. Lockwood 6,420 none none 34,500
John J. Sciullo 6,365 none none 33,500
Roslyn M. Watson 6,365 none none 33,500
_____________________________
# 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 fact paid directly by Dreyfus to the non-interested Trustees.
Amount does not include reimbursed expenses for attending Board meetings, which
amounted to $2,749 for the Trust.
* Compensation of Francis P. Brennan includes retainer paid by the Dreyfus/Laurel
Funds to be the Chairman of the Board. Effective May 1, 1996, the retainer was
reduced from $75,000 to $25,000 annually.
** Joseph S. DiMartino, J. Tomlinson Fort and Arch S. 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, 1996, the aggregate
amount of fees and expenses received by Joseph S. DiMartino, J. Tomlinson Fort and
Arch S. Jeffery from Dreyfus for serving as a Board member of the Trust were
$6,269, $6,420 and $6,420, respectively, and for serving as a Board member of all
funds in the Dreyfus/Laurel Funds (including the Trust) were $31,750, $34,500 and
$34,500, respectively. In addition, Dreyfus reimbursed Messrs. DiMartino, Fort
and Jeffery a total of $1,043 for expenses attributable to the Trust's Board
meetings which is not included in the $2,749 amount noted above.
*** Amount paid to Joseph S. DiMartino from the funds in the Fund Complex for the year
ended December 31, 1995.
+ The Dreyfus Family of Funds consists of 161 mutual funds.
</TABLE>
Management Arrangements
Dreyfus serves as the investment manager for the Fund pursuant to an
Investment Management Agreement (the "Investment Management Agreement") with
the Trust dated November 20, 1995. Dreyfus is a wholly-owned subsidiary of
Mellon Bank. 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 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 last 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 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 and last 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 Investment Management
Agreement, which was last approved by the Trust's Board of Trustees on July
26, 1995 and approved by Fund shareholders on November 15, 1995.
The Investment 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. Although, under
the Investment Management Agreement, Dreyfus is not required to pay the fees
and expenses of the non-interested Trustees (including counsel fees), Dreyfus
is required to reduce its management fee by the amount of such fees and
expenses. 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 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 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 Investment 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 Investment
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 Investment Management Agreement upon 60
days' written notice to the Fund. The Investment Management Agreement will
terminate immediately and automatically upon its assignment.
The following persons are officers and/or directors of the Dreyfus: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, 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; William T. Sandalls, Jr.,
Senior Vice President and Chief Financial Officer; Elie M. Genadry, Vice
President-Institutional Sales; William F. Glavin, Jr., Vice President-
Corporate Development; Mark N. Jacobs, Vice President, General Counsel and
Secretary; Patrice M. Kozlowski, Vice President-Corporate Communications;
Mary Beth Leibig, Vice President-Human Resources; Jeffrey N. Nachman, Vice
President-Mutual Fund Accounting; Andrew S. Wasser, Vice President-
Information Systems; Elvira Oslapas, Assistant Secretary; and 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 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, during the Fund's fiscal years ended
June 30, 1994, 1995 and 1996.
<TABLE>
1996 1995 * 1994 * (1) 1993
---- ---- --------- ----
Fees Fees Fees Fees Fees Fees Fees Fees
Waived Paid Paid (2) Waived (3) Paid (4) Waived (5) Paid Waived
----- ---- ---------- ------------ ------ --------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dreyfus BASIC $17,286 $88,979 $90,816 $22,135 $45,706 $56,403 (6) $103,006 $165,734 (7)
California Municipal
Money Market Fund
_______________________________
* For the fiscal year ended June 30. The Fund changed its fiscal year end from
November 30 to June 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, 1994.
(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, 1996.
In addition, under a distribution plan adopted by the Fund pursuant to
Rule 12b-1 under the Act (the "Plan"), 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 primarily intended to result in the sale of Investor
shares, at the annual rate of .25 of 1% attributable to its Investor shares.
For the period from July 1, 1995 to November 19, 1995 the Fund paid $13,250
in distribution fees attributable to its then existing Investor Shares.
PURCHASE OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
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. The Fund shares are offered on a
continuous basis.
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 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' 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 net asset value
("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 the activities contemplated under these
arrangements are consistent with 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 Board of Trustees
would seek an alternative provider(s) of such services.
INVESTMENT POLICIES
The following information supplements and should be read in connection
with the section in the Fund's Prospectus entitled "Investment Objective and
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 Ratings Group ("S&P") and Moody's
Investors Service, Inc. ("Moody's") represent the opinions of these agencies
as to the quality of Municipal Obligations which they rate. It should be
emphasized, however, that such ratings are relative and subjective and are
not absolute standards of quality. These ratings will be used by the 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 short-term
and 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 in Appendix A.
This summary information is derived principally from official statements and
prospectuses relating to securities offerings of the State of California,
available as of the date of this Statement of Additional Information, and
does not purport to be a complete description of any of the considerations
mentioned herein. The accuracy and completeness of the information contained
in such official statements has not been verified independently.
Risk Factors
Investing in California Municipal Obligations. Investors should
consider carefully the special risks inherent in the Fund's investment in
California Municipal Obligations. These risks result from certain amendments
to the California Constitution and other 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 the five fiscal years ended June 30,
1992. The State had operating surpluses of approximately $109 million in
1992-93 and $836 million in fiscal 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 over the last three fiscal years has been that the State depleted
its available cash resources and has had to use a series of external
borrowings to meet its cash needs. To meet its cash flow needs in the 1994-
95 fiscal year, the State issued, in July and August 1994, $4.0 billion of
revenue anticipation warrants and $3.0 billion of revenue anticipation notes.
The 1994-95 Budget Act contains a plan to retire a projected $1.025 billion
deficit in the 1995-96 fiscal year. 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 Investor Services, Inc. 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, 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.
The Trust may in the future seeks to achieve the Fund's investment
objective by investing all of the Fund's assets in another investment company
having the same investment objective and substantially the same investment
policies and restrictions as those applicable to the Fund. Shareholders of
the Fund will be given at least 30 days' prior notice of any such investment.
Such 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.
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, 1996, 1995, and for the periods from
December 1, 1993 to June 30, 1994 and from December 1, 1992 to November 30,
1993, the Fund paid no stated brokerage commissions.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem 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 $1,000 or more. An
investor (other than one who has held fund shares since November 20, 1995),
will be charged $2.00 for each check redemption. 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 (other than one
who has held Fund shares since November 20, 1995) 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 ($5,000 minimum) 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, or to a correspondent bank
if the investors bank is not a member of the Federal Reserve System. 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 (other than one who has held Fund shares since November
20, 1995) 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 "Redemption 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.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services."
Fund Exchanges. Fund shares may be exchanged for shares of certain
other funds advised or administered by Dreyfus. Shares of other funds
purchased by exchange will be purchased on the basis of relative net asset
value per shares 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 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 (including over The Dreyfus Touchr automated
telephone system) 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 (other than those who has held Fund shares since
November 20, 1995) 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. Exchanges out of the Fund pursuant to Fund Exchanges are
limited to four per calendar year.
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.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest on the payment date their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of certain other funds in the
Dreyfus Family of Funds of which the investor is a shareholder. Shares of
the other funds purchased pursuant to this Privilege will be purchased on the
basis of relative net asset value per share as follows:
A. Dividends and other distributions paid by a fund may be
invested without imposition of a sales load in shares of other
funds that are offered without a sales load.
B. Dividends and other distributions paid by a fund which does
not charge a sales load may be invested in shares of other funds
sold with a sales load, and the applicable sales load will be
deducted.
C. Dividends and other distributions paid by a fund which charges
a sales load may be invested in shares of other funds sold with a
sales load (referred to herein as "Offered Shares"), provided
that, if the sales load applicable to the Offered Shares exceeds
the maximum sales load charged by the fund from which dividends
or other distributions are being swept, without giving effect to
any reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be
invested in shares of other funds that impose a contingent
deferred sales charge ("CDSC") and the applicable CDSC, if any,
will be imposed upon redemption of such shares.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund 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 Fund 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 INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Performance Information."
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.
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 June 30, 1996, the Fund's yield was 3.01%,
effective yield was 3.05% and equivalent taxable yield* was 5.60%. 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 June 30, 1996, would have been 2.91%,
2.95% and 5.41%, respectively. See "Management of the Fund" in the
Prospectus.
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.
_______________
* Example assumes a Federal marginal tax rate of 36% and a California
marginal tax rate of 10% (combined effective rate of 42.40%).
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends, Other
Distributions and Taxes."
The Fund intends to satisfy the requirements for qualifying as a
"regulated investment company" under Subchapter M of the Code. Provided 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.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "General Information."
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 October 21, 1996, the following companies/individuals owned
beneficially 5% or more of the outstanding shares of the Fund: Boston
Company, Attention: John Kacinko, Three Mellon Bank Center, Pittsburgh, PA
15259, 37.6% record.
CUSTODIAN AND TRANSFER AGENT
Mellon Bank, which is located at One 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, 345 Park Avenue, New York, New York 10154, was
appointed by the Board of Trustees to serve as the Fund's independent
auditors for the year ending June 30, 1997, 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, 1996
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) projected $42.4 billion of General Fund revenues and
transfers and $41.7 billion of budgeted expenditures. In addition, the 1994-
95 Budget Act anticipates deferring retirement of about $1 billion of the
accumulated budget deficit to the 1995-96 fiscal year when it is intended to
be fully retired by June 30, 1996.
The Governor's Budget for 1995-96 proposes General Fund revenues and
transfers of $42.5 billion and expenditures of $41.7 billion, which was
estimated to leave a balance of approximately $92 million in the budget
reserve, the SFEU, at June 30, 1996 after repayment of the accumulated budget
deficits. The Budget proposal is based on a number of assumptions, including
receipt of $830 million from the Federal government to offset costs of
undocumented and refugee immigrants.
On December 6, 1994, Orange County, California (the "County"), together
with its pooled investment funds (the "County Funds") filed for protection
under Chapter 9 of the Federal Bankruptcy Code, after reports that the County
Funds had suffered significant market losses in their investments, causing a
liquidity crisis for the County Funds and the County. More than 1200 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, faced cash interim and/or extended flow
difficulties because of the bankruptcy filing and may be required to reduce
programs or capital projects. The County has embarked on a fiscal recovery
plan based on sharp reductions in services and personnel, and rescheduling of
outstanding short term debt using certain new revenues transferred to the
County from other local governments pursuant to special legislation enacted
in October 1995.
The State has no existing obligation with respect to any outstanding
obligations or securities of the County or any of the other participating
entities. However, in the event the County is unable to maintain county
administered State programs because of insufficient resources, it may be
necessary for the State to intervene, but the State cannot presently predict
what, if any, action may occur.
On January 17, 1994, an earthquake of the magnitude of an estimated 6.8
on the Richter Scale struck Los Angeles causing significant damage to public
and private structures and facilities. Although some individuals and
businesses suffered losses totaling in the billions of dollars, the overall
effect of the earthquake on the regional and State economy is not expected to
be serious.
State Finances. State moneys are segregated into the General Fund and
approximately 600 Special Funds. The General Fund consists of the revenues
received into the State Treasury and earnings from State investments, which
are not required by law to be credited to any other fund. The General Fund
is the principal operating fund for the majority of governmental activities
and is the depository of most major State revenue sources.
The SFEU is funded with General Fund revenues and was established to
protect the State from unforeseen reduced levels of revenues and/or
unanticipated expenditure increases. Amounts in the SFEU may be transferred
by the Controller as necessary to meet cash needs of the General Fund. The
Controller is required to return moneys so transferred without payment of
interest as soon as there are sufficient moneys in the General Fund. For
budgeting and accounting purposes, any appropriation made from the SFEU is
deemed an appropriation from the General Fund. For year-end reporting
purposes, the Controller is required to add the balance in the SFEU to the
balance in the General Fund so as to show the total monies then available for
General Fund purposes.
Inter-fund borrowing has been used for many years to meet temporary
imbalances of receipts and disbursements in the General Fund. As of June 30,
1994, the General Fund had outstanding loans in the aggregate principal
amount of $43 million to the General Fund from the SFEU and outstanding loans
in the aggregate principal amount of $5.2 billion, which consisted of $4.0
billion of internal loans to the General Fund from the SFEU and other Special
Funds and $1.2 billion of external loans represented by the 1994 revenue
anticipation warrants.
Articles XIIIA and XIIIB to the State Constitution and Other Revenue Law
Changes. Prior to 1977, revenues of the State government experienced
significant growth primarily as a result of inflation and continuous
expansion of the tax base of the State. In 1978, State voters approved an
amendment to the State Constitution known as Proposition 13, which added
Article XIIIA to the State Constitution, reducing ad valorem local property
taxes by more than 50%. In addition, Article XIIIA provides that additional
taxes may be levied by cities, counties and special districts only upon
approval of not less than a two-thirds vote of the "qualified electors" of
such district, and requires not less than a two-thirds vote of each of the
two houses of the State Legislature to enact any changes in State taxes for
the purpose of increasing revenues, whether by increased rate or changes in
methods of computation.
Primarily as a result of the reductions in local property tax revenues
received by local governments following the passage of Proposition 13, the
Legislature undertook to provide assistance to such governments by
substantially increasing expenditures from the General Fund for that purpose
beginning in the 1978-79 fiscal year. In recent years, in addition to such
increased expenditures, the indexing of personal income tax rates (to adjust
such rates for the effects of inflation), the elimination of certain
inheritance and gift taxes and the increase of exemption levels for certain
other such taxes had a moderating impact on the growth in State revenues. In
addition, the State has increased expenditures by providing a variety of tax
credits, including renters' and senior citizens' credits and energy credits.
The State is subject to an annual "appropriations limit" imposed by
Article XIIIB of the State Constitution adopted in 1979. Article XIIIB
prohibits the State from spending "appropriations subject to limitation" in
excess of the appropriations limit imposed. "Appropriations subject to
limitations" are authorizations to spend "proceeds of taxes," which consist
of tax revenues, and certain other funds, including proceeds from regulatory
licenses, user charges or other fees to the extent that such proceeds exceed
"the cost reasonably borne by such entity in providing the regulation,
product or service." One of the exclusions from these limitations is "debt
service" (defined as "appropriations required to pay the cost of interest and
redemption charges, including the funding of any reserve or sinking fund
required in connection therewith, on indebtedness existing or legally
authorized as of January 1, 1979 or on bonded indebtedness thereafter
approved" by the voters). In addition, appropriations required to comply
with mandates of courts or the Federal government and, pursuant to
Proposition 111 enacted in June 1990, appropriations for qualified capital
outlay projects and appropriations of revenues derived from any increase in
gasoline taxes and motor vehicle weight fees above January 1, 1990 levels are
not included as appropriations subject to limitation. In addition, a number
of recent initiatives were structured or proposed to create new tax revenues
dedicated to certain specific uses, with such new taxes expressly exempted
from the Article XIIIB limits (e.g., increased cigarette and tobacco taxes
enacted by Proposition 99 in 1988). The appropriations limit also may be
exceeded in cases of emergency. However, unless the emergency arises from
civil disturbance or natural disaster declared by the Governor, and the
appropriations are approved by two-thirds of the Legislature, the
appropriations limit for the next three years must be reduced by the amount
of the excess.
The State's appropriations limit in each year is based on the limit for
the prior year, adjusted annually for changes in California per capita
personal income and changes in population, and adjusted, when applicable, for
any transfer of financial responsibility of providing services to or from
another unit of government. The measurement of change in population is a
blended average of statewide overall population growth, and change in
attendance at local school and community college ("K-14") districts. As
amended by Proposition 111, the appropriations limit is tested over
consecutive two-year periods. Any excess of the aggregate "proceeds of
taxes" received over such two-year periods above the combined appropriations
limits for those two years is divided equally between transfers to
K-14 districts and refunds to taxpayers.
As originally enacted in 1979, the State's appropriations limit was
based on its 1978-79 fiscal year authorizations to expend proceeds of taxes
and was adjusted annually to reflect changes in cost of living and population
(using different definitions, which were modified by Proposition 111).
Commencing with the 1991-92 fiscal year, the State's appropriations limit is
adjusted annually based on the actual 1986-87 limit, and as if Proposition
111 had been in effect. The State Legislature has enacted legislation to
implement Article XIIIB which defines certain terms used in Article XIIIB and
sets forth the methods for determining the State's appropriations limit.
Government Code Section 7912 requires an estimate of the State's
appropriations limit to be included in the Governor's Budget, and thereafter
to be subject to the budget process and established in the Budget Act.
For the 1990-91 fiscal year, the State appropriations limit was $32.7
billion, and appropriations subject to limitation were $7.51 billion under
the limit. The limit for the 1991-92 fiscal year was $34.2 billion, and
appropriations subject to limitations were $3.8 billion under the limit. The
limit for the 1992-93 fiscal year was $35.01 billion, and the appropriations
subject to limitation were $7.53 billion under the limit. The limit for the
1993-94 fiscal year was $36.60 billion, and the appropriations subject to
limitation were $6.74 billion under the limit. The limit for the 1994-95
fiscal year was $37.53 billion, and the appropriations subject to limitations
were $5.93 billion under the limit. The estimated limit for the 1995-96
fiscal year is $39.31 billion, and the appropriations subject to limitations
are estimated to be $6.47 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 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
1994-95 contributed about 43% 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 9.3%. 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.
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 34% of General Fund
revenue in 1994-95. Bank and corporation tax revenues comprised about 13% of
General Fund revenue in 1994-95. In 1989, Proposition 99 added a 25 cents
per pack excise tax on cigarettes, and a new equivalent excise tax on other
tobacco products. Legislation enacted in 1993 added an additional 2 cents
per pack for the purpose of funding breast cancer research.
General Financial Condition of the State. In the years following
enactment of the Federal Tax Reform Act of 1986, and conforming changes to
the State's tax laws, taxpayer behavior became more difficult to predict, and
the State experienced a series of fiscal years in which revenue came in
significantly higher or lower than original estimates. The 1989-90 fiscal
year ended with revenues below estimates and the SFEU was fully depleted by
June 30, 1990. This date essentially coincided with the date of the most
recent recession, and the State subsequently accumulated a budget deficit in
the SFEU approaching $2.8 billion at its peak. The State's budget problems
in recent years also have been caused by a structural imbalance which has
been identified by the current and previous Administrations. The largest
General Fund programs -- K-14 education, health, welfare and corrections --
were increasing faster than the revenue base, driven by the State's rapid
population increases.
Starting in the 1990-91 fiscal year, each budget required multibillion
dollar actions to bring projected revenues and expenditures into balance and
to close large "budget gaps" which were identified. The Legislature and
Governor eventually agreed on significant cuts in program expenditures, some
transfers of program responsibilities and funding from the State to local
governments, revenue increases (particularly in the 1991-92 fiscal year
budget), and various one-time adjustments and accounting changes. However,
as the recession took hold and deepened after the summer of 1990, revenues
dropped sharply and expenditures for health and welfare programs increased as
job losses mounted, so that the State ended each of the 1990-91 and 1991-92
fiscal years with an unanticipated deficit in the budget reserve, the SFEU,
as compared to projected positive balances.
As a result of the revenue shortfalls accumulating for the previous two
fiscal years, the Controller in April 1992 indicated that cash resources
(including borrowing from Special Funds) would not be sufficient to meet all
General Fund obligations due on June 30 and July 1, 1992. On June 25, 1992,
the Controller issued $475 million of 1992 Revenue Anticipation Warrants (the
"1992 Warrants") in order to provide funds to cover all necessary payments
from the General Fund at the end of the 1991-92 fiscal year and on July 1,
1992. The 1992 Warrants were paid on July 24, 1992. In addition to the 1992
Warrants, the Controller reported that as of June 30, 1992, the General Fund
had borrowed $1.336 billion from the SFEU and $4.699 billion from other
Special Funds, using all but about $183 million of borrowable cash resources.
To balance the 1992-93 Governor's Budget, program reductions totalling
$4.365 billion and a revenue and transfer increase of $872 million were
proposed for the 1991-92 and 1992-93 fiscal years. Economic performance in
the State continued to be sluggish after the 1992-93 Governor's Budget was
prepared. By the time of the "May Revision," issued on May 20, 1992, the
Administration estimated that the 1992-93 Budget needed to address a gap of
about $7.9 billion, much of which was needed to repay the accumulated budget
deficits of the previous two years.
The severity of the budget actions needed led to a long delay in
adopting the budget. With the failure to enact a budget by July 1, 1992, the
State had no legal authority to pay many of its vendors until the budget was
passed. Starting on July 1, 1992, the Controller was required to issue
"registered warrants" in lieu of normal warrants backed by cash to pay many
State obligations. Available cash was used to pay constitutionally mandated
and priority obligations, such as debt service on bonds and revenue
anticipation warrants. Between July 1 and September 4, 1992, the Controller
issued an aggregate of approximately $3.8 billion of registered warrants
payable from the General Fund, all of which were called for redemption by
September 4, 1992 following enactment of the 1992-93 Budget Act and issuance
by the State of $3.3 billion of interim notes.
The Legislature enacted the 1992-93 Budget Bill on August 29, 1992, and
it was signed by the Governor on September 2, 1992. The 1992-93 Budget Act
provided for expenditures of $57.4 billion and consisted of General Fund
expenditures of $40.8 billion and Special Fund and Bond Fund expenditures of
$16.6 billion. The Department of Finance estimated a balance in the SFEU of
$28 million on June 30, 1993.
The $7.9 billion budget gap was closed primarily through cuts in the
program expenditures (principally for health and welfare programs, aid to
schools and support for higher education), together with some increases in
revenues from accelerated collections and changes in tax laws to confirm to
Federal law changes, and a variety of on-time inter-fund transfers and
deferrals. The other major component of the budget compromise was a law
requiring local governments to transfer a total of $1.3 billion to K-12
school and community college districts, thereby reducing by that amount
General Fund support for those districts under Proposition 98.
In May 1993, the Department of Finance projected that the General Fund
would end the fiscal year on June 30, 1993 with an accumulated budget deficit
of about $2.8 billion, and a negative fund balance of about $2.2 billion (the
difference being certain reserves for encumbrances and school funding costs).
As a result, the State issued $5 billion of revenue anticipation notes and
warrants.
The Governor's 1993-94 Budget, introduced on January 8, 1993, proposed
General Fund expenditures of $37.3 billion, with projected revenues of $39.9
billion. It also proposed Special Fund expenditures of $12.4 billion and
Special Fund revenues of $12.1 billion. The 1993-94 fiscal year represented
the third consecutive year the Governor and the Legislature were faced with a
very difficult budget environment, requiring revenue actions and expenditure
cuts totaling billions of dollars to produce a balanced budget. To balance
the budget in the face of declining revenues, the Governor proposed a series
of revenue shifts from local government, reliance on increased Federal aid
and reductions in state spending.
The "May Revision" of the Governor's Budget, released on May 20, 1993,
indicated that the revenue projections of the January Budget Proposal were
tracking well, with the full year 1992-93 about $80 million higher than the
January projection. Personal income tax revenue was higher than projected,
sales tax was close to target, and bank and corporation taxes were lagging
behind projections. The May Revision projected the State would have an
accumulated deficit of about $2.75 billion by June 30, 1993. The Governor
proposed to eliminate this deficit over an 18-month period. He also agreed
to retain the 0.5% sales tax scheduled to expire June 30 for a six-month
period, dedicated to local public safety purposes, with a November election
to determine a permanent extension. Unlike previous years, the Governor's
Budget and May Revision did not calculate a "gap" to be closed, but rather
set forth revenue and expenditure forecasts and proposals designed to produce
a balanced budget.
The 1993-94 Budget Act was signed by the Governor on June 30, 1993,
along with implementing legislation. The Governor vetoed about $71 million
in spending. With enactment of the Budget Act, the State carried out its
regular cash flow borrowing program for the fiscal year, which included the
issuance of approximately $2 billion of revenue anticipation notes that
matured on June 28, 1994.
The 1993-94 Budget Act was predicated on General Fund revenues and
transfers estimated at $40.6 billion, about $700 million higher than the
January Governor's Budget, but still about $400 million below 1992-93 (and
the second consecutive year of actual decline). The principal reasons for
declining revenues were the continued weak economy and the expiration (or
repeal) of three fiscal steps taken in 1991--a half cent temporary sales tax,
a deferral of operating loss carry forwards, and repeal by initiative of a
sales tax on candy and snack foods.
The 1993-94 Budget Act also assumed Special Fund revenues of $11.9
billion, an increase of 2.9% over 1992-93.
The 1993-94 Budget Act included General Fund expenditures of $38.5
billion (a 6.3% reduction from projected 1992-93 expenditures of $41.1
billion), in order to keep a balanced budget within the available revenues.
The Budget also included Special Fund expenditures of $12.1 billion, a 4.2%
increase.
The 1993-94 Budget Act contained no General Fund tax/revenue increases
other than a two year suspension of the renters' tax credit.
Administration reports during the course of the 1993-94 fiscal year
indicated that while economic recovery appeared to have started in the second
half of the fiscal year, recessionary conditions continued longer than had
been anticipated when the 1993-94 Budget Act was adopted. Overall, revenues
for the 1993-94 fiscal year were about $800 million lower than original
projections, and expenditures were about $780 million higher, primarily
because of higher health and welfare caseloads, lower property taxes which
require greater State support for K-14 education to make up to shortfall, and
lower than anticipated Federal government payments for immigration-related
costs. The reports in May and June 1994, indicated that revenues in the
second half of the 1993-94 fiscal year were very close to the projections
made in the Governor's Budget of January 10, 1994, which was consistent with
a slow turn around in the economy.
The Department of Finance's July 1994 Bulletin, which included final
June receipts, reported that June revenues were $114 million (2.5%) above
projection, with final end-of-year results at $377 million (about 1%) above
the May Revision projections. Part of this result was due to the end-of-year
adjustments and reconciliations. Personal income tax and sales tax continued
to track projections. The largest factor in the higher than anticipated
revenues was from bank and corporation taxes, which were $140 million (18.4%)
above projection in June.
During the 1993-94 fiscal year, the State implemented the Deficit
Retirement Plan, which was part of the 1993-94 Budget Act, by issuing $1.2
billion of revenue anticipation warrants in February 1994 that matured
December 21, 1994. This borrowing reduced the cash deficit at the end of the
1993-94 fiscal year. Nevertheless, because of the $1.5 billion variance from
the original 1993-94 Budget Act assumptions, the General Fund ended the
fiscal year at June 30, 1994 carrying forward an accumulated deficit of
approximately $1.8 billion.
Because of the revenue shortfall and the State's reduced internal
borrowable cash resources, in addition to the $1.2 billion of revenue
anticipation warrants issued as part of the Deficit Retirement Plan, the
State issued an additional $2.0 billion of revenue anticipation warrants that
matured July 26, 1994, which were needed to fund the State's obligations and
expenses through the end of the 1993-94 fiscal year.
The 1994-95 fiscal year represented the fourth consecutive year the
Governor and Legislature were faced with a very difficult budget environment
to produce a balanced budget. Many program cost and budgetary adjustments
had already been made in the last three years. The Governor's Budget
Proposal, as updated in May and June 1994, recognized that the accumulated
deficit could not be repaid in one year, and proposed a two-year solution.
The budget proposal set forth revenue and expenditure forecasts and revenue
and expenditure proposals which estimated operating surpluses for the budget
for both 1994-95 and 1995-96, and lead to the elimination of the accumulated
budget deficit, estimated at about $1.8 billion at June 30, 1994, by June 30,
1996.
The 1994-95 Budget Act, signed by the Governor on July 8, 1994,
projected revenues and transfers of $41.9 billion, $2.1 billion higher than
revenues in 1993-94. This reflected the Administration's forecast of an
improving economy. Also included in this figure was the projected receipt of
about $360 million from the Federal government to reimburse the State's cost
of incarcerating undocumented immigrants, most of which eventually was not
received.
The 1994-95 Budget Act projected Special Fund revenues of $12.1 billion,
a decrease of 2.4% from 1993-94 estimated revenues.
The 1994-95 Budget Act projected General Fund expenditures of $40.9
billion, an increase of $1.6 billion over the 1993-94 fiscal year. The 1994-
95 Budget Act also projected Special Fund expenditures of $13.7 billion, a
5.4% increase over 1993-94 fiscal year estimated expenditures.
The 1994-95 Budget Act contained no tax increases. Under legislation
enacted for the 1993-94 Budget Act, the renters' tax credit was suspended for
two years (1993 and 1994). A ballot proposition to permanently restore the
renters' tax credit after 1995 failed at the June 1994 election. The
Legislature enacted a further one-year suspension of the renters' tax credit,
for 1995, saving about $390 million in the 1995-96 fiscal year.
The 1994-95 Budget Act assumed that the State would use a cash flow
borrowing program in 1994-95 which combines one-year notes and two-year
warrants, which were issued. Issuance of the warrants allows the State to
defer repayment of approximately $1.0 billion of its accumulated budget
deficit into the 1995-96 fiscal year. The Budget Adjustment Law enacted
along with the 1994-95 Budget Act is designed to ensure that the warrants
will be repaid in the 1995-96 fiscal year.
The Department of Finance Bulletin for April 1995 reported that General
Fund revenues for March 1995 were $28 million, or 1.1%, below forecast, and
that year-to-date General Fund revenues were $110 million, or 0.4% below
forecast.
Initial Analysis of the Federal fiscal year 1995 budget by the
Department of Finance indicates that about $98 million was appropriated for
California to offset costs of incarceration of undocumented and refugee
immigrants, less than the $356 million which was assumed in the State's 1994-
95 Budget Act.
For the first time in four years, the State entered 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 estimated 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 reflected the Governor's
realignment proposal and the first year of his tax cut proposal. Without
these two proposals, General Fund revenues would have been projected at
approximately $43.8 billion, or an increase of 3.3% over 1994-95.
Expenditures were estimated at $41.7 billion (essentially unchanged from 1994-
95). Special Fund revenues were estimated at $13.5 billion (10.7% higher
than 1994-95) and Special Fund expenditures were estimated at $13.8 billion
(12.2% higher than 1994-95). The Proposed Budget projected that the General
Fund would 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.
The Department of Finance projected in June 1996 that the General Fund
would end the fiscal year at June 30, 1996 with a budget surplus in SFEU of
$28 million.
On January 10, 1996, the Governor released his proposed budget for the
Fiscal Year 1996-97 (the "Governor's Budget"). The Governor requested total
General Fund appropriations of about $45.2 billion, based on projected
revenues and transfers of about $45.6 billion, which would leave a budget
reserve in SFEU at June 30, 1997 of about $400 million. The Governor renewed
a proposal, which had been rejected by the Legislature in 1995, for a 15%
phased cut in individual and corporate tax rates over three years (the budget
proposal assumes this will be enacted, reducing revenues in 1996-97 by about
$600 million). There was also a proposal to restructure trial court funding
in a way which would result in a $300 million decrease in General Fund
revenues. The Governor requested legislation to make permanent a moratorium
on cost of living increases for welfare payments, and suspension of a renters
tax credit, which otherwise would go back into effect in the 1996-97 Fiscal
Year. He further proposed additional cuts in certain health and welfare
programs, and assumed that cuts previously approved by the Legislature will
receive Federal approval. The Governor's Budget proposes increases in
funding for K-12 schools under Proposition 98, for State higher education
systems (with a second year of no student fee increases), and for
corrections. The Governor's Budget projects external cash flow borrowing of
up to $3.2 billion, to mature by June 30, 1997.
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
10.1% in January to 7.7% in October and November 1994. The gap between the
national and California jobless rates narrowed from 3.4 percentage points at
the beginning of 1994 to an average of 2 percentage points in October and
November. The number of unemployed Californians fell by nearly 400,000
during the year, while civilian employment increased more than 300,000 in
1994.
Other indicators, including retail sales, homebuilding activity,
existing home sales and bank lending volume all confirm the State's recovery.
Personal income was severely affected by the Northridge Earthquake,
which reduced the first quarter 1994 figure by $22 billion at an annual rate,
reflecting the uninsured damage to residences and unincorporated businesses.
As a result, personal income growth for all of 1994 was about 4.2%. However,
excluding the Northridge effects, growth would have been in excess of 5%.
Personal income is expected to grow 6.6% for 1995.
APPENDIX 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.
<TABLE>
<CAPTION>
Dreyfus BASIC California Municipal Money Market Fund
Statement of Investments June 30, 1996
Principal
Tax Exempt Investments--100.0% Amount Value
- ---------------------------------------------------------------------------------- ---------- -----------
<S> <C> <C>
Alameda County, MFMR, Refunding, VRDN
(Quail) 3.10%, Series A (LOC; Federal National Mortgage Association) (a,b)...... $ 200,000 $ 200,000
Anaheim Housing Authority, MFHR, VRDN (Bel Age Project)
3.20%, Series A (LOC; Federal National Mortgage Association) (a,b).............. 900,000 900,000
Azusa Redevelopment Agency, Tax Allocation, Prerefunded
(West End Redevelopment Project)
8%, Series A, 8/1/96 (Escrowed in; U.S. Government Securities).................. 440,000 450,373
Bay Area Government Association, LR, VRDN (Pooled Project)
3.10% (LOC; National Westminster Bank) (a,b).................................... 100,000 100,000
Brea Redevelopment Agency, Sub Tax Allocation, Prerefunded
(Redevelopment Project Area AB)
8.50%, 9/15/96 (Escrowed in; U.S. Government Securities)........................ 475,000 491,482
California Department of Water, Resource Water Revenue, CP
3.50%, Series 1, 7/16/96 (LOC: Bayerische Landesbank, Credit Suisse,
Landesbank Hessen, Morgan Guaranty Trust Co. and
Westdeutsche Landesbank) (b).................................................... 1,000,000 1,000,000
California Educational Facilities Authority, Revenue, Refunding, VRDN
(Stanford University) 2.90%, Series L-2 (Guaranty; Stanford University) (a)..... 900,000 900,000
California Health Facilities Authority, Revenue, Prerefunding
(Mercy Health Systems)
7%, Series B, 11/3/96 (Insured; MBIA and Escrowed in;
U.S. Government Securities)..................................................... 185,000 190,686
California Health Facilities Finance Authority, Revenue, VRDN:
(Catholic Health Care)
3%, Series B (Insured; MBIA and SBPA; Morgan Guaranty Trust Co.) (a).......... 200,000 200,000
(Pooled Loan Program) 2.80%, Series B (Insured; FGIC) (a)....................... 200,000 200,000
Refunding:
(Memorial Health Services) 3% (Guaranty; Memorial Health Services) (a)........ 1,600,000 1,600,000
(Catholic West) 3%, Series B (Insured; MBIA and SBPA;
Rabobank Nederland) (a)..................................................... 1,000,000 1,000,000
California Housing Finance Agency, Multi-Family Revenue, Refunding, VRDN
3.10%, Series C (LOC; Federal National Mortgage Association) (a,b).............. 1,000,000 1,000,000
California Pollution Control Financing Authority:
IDR, VRDN (Southdown Inc.) 3.40% (LOC; Societe Generale) (a,b).................. 300,000 300,000
PCR:
Refunding:
CP (Pacific Gas and Electric):
3.15%, Series E, 7/25/96 (LOC; Morgan Guaranty Trust Co.) (b)............. 800,000 800,000
3.25%, Series C, 7/31/96 (LOC; Credit Suisse) (b)......................... 500,000 500,000
VRDN:
Refunding (Pacific Gas and Electric)
3.40%, Series B (LOC: Rabobank Nederland) (a,b)........................... 1,500,000 1,500,000
(Southdown Inc.):
3.40% (LOC; Societe Generale) (a,b)....................................... 400,000 400,000
3.40%, Series B (LOC; Societe Generale) (a,b)............................. 600,000 600,000
RRR, VRDN:
(Burney Forest Produce Project)
3.65%, Series A (LOC; National Westminster Bank) (a,b)...................... 600,000 600,000
<PAGE>
Dreyfus BASIC California Municipal Money Market Fund
Statement of Investments (continued) June 30, 1996
Principal
Tax Exempt Investments (continued) Amount Value
- ---------------------------------------------------------------------------------- ---------- -----------
California Pollution Control Financing Authority (continued):
RRR, VRDN (continued):
(Delano Project) 3.75% (LOC; ABN-Amro Bank) (a,b)............................. $ 500,000 $ 500,000
Refunding:
(Ultra Power Malaga) 3.80%, Series A (LOC; Bank of America) (a,b)........... 400,000 400,000
(Ultra Power Rocklin):
3.80%, Series A (LOC; Bank of America) (a,b).............................. 100,000 100,000
3.80%, Series B (LOC; Bank of America) (a,b).............................. 100,000 100,000
California Public Works Board, LR, Prerefunded
(Department of Corrections)
7.375%, Series A, 11/1/96 (Escrowed in; U.S. Government Securities)............. 100,000 103,244
California School Cash Reserve Program Authority
4.75%, Series A, 7/2/97 (Insured; MBIA)......................................... 1,300,000 1,311,232
California Statewide Communities Development Corporation, Revenue, VRDN:
(Karcher Property Project) 3.25%, Series C (LOC; Bayerische Vereinsbank) (a,b).. 500,000 500,000
(Johanson Project)
3.25%, Series E (LOC; California State Teacher Retirement System) (a,b)....... 300,000 300,000
(Marko Products) 3.40% (LOC; Bank of Tokyo-Mitsubishi) (a,b).................... 610,000 610,000
(Tri-Valley) 3.25%, Series F (LOC; ABN-Amro Bank) (a,b)......................... 300,000 300,000
Concord, MFMR, VRDN (Crossroads)
3.10%, Series B (LOC; Federal National Mortgage Association) (a,b).............. 100,000 100,000
Fontana Special Tax Community Facility District #2, Prerefunded
7.875%, Series A, 9/1/96 (Escrowed in; U.S. Government Securities).............. 100,000 103,244
Foothill Eastern Transportation Corridor Agency, Toll Road, VRDN
3.10%, Series C (LOC; Credit Suisse) (a,b)...................................... 700,000 700,000
Fresno, Water Systems Revenue, (Water Remediation Project)
5.25%, Series A, 6/1/97 (Insured; FGIC)......................................... 100,000 101,335
Huntington Park Redevelopment Agency, Revenue
(Huntington Park Persons Storage II)
3.90%, 8/1/96 (LOC; Sanwa Bank) (b)............................................. 440,000 440,000
Kern High School District, Refunding, GO Notes
5.675%, Series A, 8/1/96 (Insured; MBIA)........................................ 815,000 816,610
Long Beach, Harbor Revenue, CP
3.60%, Series A, 7/24/96
(Line of Credit; Canadian Imperial Bank of Commerce)............................ 1,000,000 1,000,000
Los Angeles, Multi-Family Revenue, VRDN (Masselin Manor)
3.05% (LOC; Bank of America) (a,b).............................................. 300,000 300,000
Los Angeles County:
Pension Obligation, Refunding, VRDN
4.10%, Series C (Insured; AMBAC and SBPA; Bank of Nova Scotia) (a)............ 600,000 600,000
TRAN 4.50%, 7/1/96 (LOC: Bank of America, Credit Suisse,
Morgan Guaranty Trust Co., Swiss Bank Corp., Union Bank of Switzerland
and Westdeutsche Landesbank) (b).............................................. 500,000 500,000
Los Angeles County Community Development Commission, COP, VRDN
(Willowbrook Project) 3.15% (LOC; Wells Fargo Bank) (a,b)....................... 300,000 300,000
Los Angeles County Transportation Commission,
Commission Sales Tax Revenue, Prerefunded
7.60%, Series A, 7/1/96 (Escrowed in; U.S. Government Securities)............... 700,000 714,000
<PAGE>
Dreyfus BASIC California Municipal Money Market Fund
Statement of Investments (continued) June 30, 1996
Principal
Tax Exempt Investments (continued) Amount Value
- ---------------------------------------------------------------------------------- ---------- -----------
Los Angeles Regional Airports Improvement Corporation, LR, VRDN
(American Airlines):
3.65%, Series E (LOC; Wachovia Bank of Georgia) (a,b)......................... $ 200,000 $ 200,000
3.65%, Series G (LOC; Wachovia Bank of Georgia) (a,b)......................... 100,000 100,000
Metropolitan Water District, CP
3.60%, Series B, 7/22/96 (Liquidity Facility; Westdeusche Landesbank)........... 800,000 800,000
Modesto, MFHR, Refunding, VRDN (Shadowbrook)
3.65%, Series A (LOC; Bank of America) (a,b).................................... 1,000,000 1,000,000
Moorpark, Multi-Family Revenue, VRDN (LeClub Apartments Project)
3.05%, Series A (LOC; Citibank) (a,b)........................................... 400,000 400,000
Newport Beach, Water Revenue, VRDN
(Water Services Capital Improvement Program)
5.375% (Insured; FGIC) (a)...................................................... 110,000 110,162
North City School Facilities Finance Authority,
Special Tax Community Facilities District # 1, Prerefunded
7.35%, Series A, 9/1/96 (Escrowed in; U.S. Government Securities)............... 100,000 100,635
Northern Power Agency, Public Power Revenue, Refunding, VRDN
(Geothermal Project # 3)
3.05%, Series A (Insured; AMBAC and SBPA; Bank of Nova Scotia) (a).............. 1,000,000 1,000,000
Ontario, Multi-Family Revenue, VRDN (Vineyard Village Project)
3.20% (LOC; Federal Home Loan Banks) (a,b)...................................... 1,000,000 1,000,000
Orange County, VRDN:
Apartment Development Revenue, Refunding (Pointe Niguel Project)
3.40%, Series C (LOC; Wells Fargo Bank) (a,b)................................. 1,000,000 1,000,000
COP (Florence Crittendoc Services)
3.30% (LOC; Swiss Bank Corp.) (a,b)........................................... 600,000 600,000
Otay Water District, COP, VRDN
(Capital Project) 3.20% (LOC; Landesbank Hessen) (a,b).......................... 800,000 800,000
Paramount Unified School District, TRAN 4.50%, 6/30/97............................ 1,000,000 1,004,790
Rainbow Municipal Water District, Refunding 5.10%, 6/1/97 (Insured; AMBAC)........ 225,000 227,802
Regional Airports Improvement Corporation,
Terminal Facilities Completion Revenue, VRDN (Los Angeles International Airport)
3.75% (LOC; Societe Generale) (a,b)............................................. 1,000,000 1,000,000
Sacramento County, COP, VRDN (Administration Center and Court House Project)
3.10% (LOC; Union Bank of Switzerland) (a,b).................................... 500,000 500,000
Sacramento Municipal Utilities District, CP
3.25%, Series H, 8/8/96
(LOC: Bank of America and Morgan Guaranty Trust Co.) (b)........................ 1,000,000 1,000,000
San Diego County:
MFHR, VRDN (Nationwide)
3.10%, Series C (LOC; Federal National Mortgage Association) (a,b)............ 100,000 100,000
TRAN 4.50%, 9/30/96
(LOC: Banque Nationale de Paris and National Westminster Bank) (b)............ 500,000 500,989
San Diego Housing Authority, MFHR, VRDN (Market Street Square Project)
3.10%, Series G (LOC; Barclays Bank) (a,b)...................................... 1,035,000 1,035,000
San Francisco City and County, (City Hall Improvement Project)
7%, Series A, 6/15/97 (Insured; FGIC)........................................... 700,000 722,069
San Francisco City and County Housing Authority, MFHR, VRDN (737 Post Project)
3.25%, Series D (LOC; Banque Nationale DeParis) (a,b)........................... 200,000 200,000
<PAGE>
Dreyfus BASIC California Municipal Money Market Fund
Statement of Investments (continued) June 30, 1996
Principal
Tax Exempt Investments (continued) Amount Value
- ---------------------------------------------------------------------------------- ---------- -----------
San Jose Redevelopment Agency, Tax Allocation, Prerefunding
(Merged Area Redevelopment Project)
7.50%, Series A, 8/1/96
(Insured; MBIA and Escrowed in; U.S. Government Securities)..................... $ 215,000 $ 220,080
San Jose, MFHR, VRDN (Foxchase)
3%, Series B (Insured; FGIC and Liquidity Facility; FGIC) (a)................... 100,000 100,000
Santa Ana, COP (Santa Ana Recycling Project)
3.90%, Series A, 5/1/97 (Insured; AMBAC)........................................ 500,000 500,000
Santa Clara County, COP, Prerefunding (Capital Project)
8%, 10/1/96 (Escrowed in; U.S. Government Securities)........................... 200,000 206,367
Simi Valley Unified School District, Prerefunded
6.875%, 8/1/96
(Insured; AMBAC and Escrowed in; U.S. Government Securities).................. 200,000 200,631
Southern California Public Power Authority, VRDN (Transmission Project)
3.10% (Insured; AMBAC and LOC; Swiss Bank Corp.) (a,b).......................... 200,000 200,000
Univeristy Housing Systems, Revenues, Prerefunded:
7.60%, Series X, 11/1/96
(Insured; MBIA and Escrowed in; U.S. Government Securities)................... 320,000 330,624
8%, Series X, 11/1/96
(Insured; MBIA and Escrowed in; U.S. Government Securities)................... 720,000 744,610
---------- -----------
TOTAL INVESTMENTS (cost $38,735,965).............................................. $38,735,965
-----------
-----------
<PAGE>
</TABLE>
Dreyfus BASIC California Municipal Money Market Fund
<TABLE>
Summary of Abbreviations
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
COP Certificate of Participation Insurance Corporation
CP Commercial Paper MFHR Multi-Family Housing Revenue
FGIC Financial Guaranty Insurance Company MFMR Multi-Family Mortgage Revenue
GO General Obligation PCR Pollution Control Revenue
IDR Industrial Development Revenue RRR Resources Recovery Revenue
LOC Letter of Credit SBPA Standby Bond Purchase Agreement
LR Lease Revenue TRAN Tax and Revenue Anticipation Notes
VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
Summary of Combined Ratings (Unaudited)
<S> <C> <C> <C> <C> <C>
Fitch (c) or Moody's or Standard & Poor's Percentage of Value
- --------- -------- ------------------- --------------------
F1+/F1 VMIG1/MIG1, P1 (d) SP1+/SP1, A1+/A1 (d) 84.2%
AAA/AA (e) Aaa/Aa (e) AAA/AA (e) 15.8%
-------
100.0%
-------
-------
</TABLE>
Notes to Statement of Investments:
(a) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest rates.
(b) Secured by letters of credit. At June 30, 1996, 61.8% of the Fund's net
assets are backed by letters of credit issued by domestic banks, foreign
banks, government agencies and corporations.
(c) Fitch currently provides creditworthiness information for a limited
number of investments.
(d) P1 and A1 are the highest ratings assigned tax-exempt commercial paper by
Moody's and Standard & Poor's, respectively.
(e) Notes which are not F, MIG or SP rated are represented by bond ratings of
the issuers.
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Dreyfus BASIC California Municipal Money Market Fund
Statement of Assets and Liabilities June 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $38,735,965)--see Statement of Investments................... $38,735,965
Cash................................................................. 49,026
Interest receivable.................................................. 277,517
-----------
39,062,508
LIABILITIES:
Due to The Dreyfus Corporation--Note 2(a)............................ $ 18,805
Payable for investment securities purchased.......................... 2,316,022 2,334,827
---------- -----------
NET ASSETS............................................................. $36,727,681
-----------
-----------
REPRESENTED BY:
Paid-in capital...................................................... $36,724,181
Accumulated undistributed net realized gain on investments........... 3,500
-----------
NET ASSETS at value applicable to 36,724,190 shares outstanding
(unlimited number of shares of Beneficial Interest authorized)....... $36,727,681
-----------
-----------
NET ASSET VALUE, offering and redemption price per share
($36,727,681 / 36,724,190 shares of Beneficial Interest outstanding). $1.00
-----
-----
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
<PAGE>
Dreyfus BASIC California Municipal Money Market Fund
Statement of Operations year ended June 30, 1996
<S> <C> <C>
INVESTMENT INCOME:
Interest Income......................................................... $ 932,767
Expenses:
Investment management fee--Note 2(a).................................... $ 106,265
Distribution fee--Note 2(b)............................................. 13,250
Trustees' fees and expenses--Note 2(c).................................. 2,817
---------
Total Expenses.................................................... 122,332
Less--reduction in management fee due to undertaking--Note 2(a)......... 17,286
---------
Net Expenses...................................................... 105,046
---------
INVESTMENT INCOME--NET...................................................... 827,721
NET REALIZED GAIN ON INVESTMENTS--Note 1(b)................................. 4,282
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $ 832,003
---------
---------
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
<PAGE>
Dreyfus BASIC California Municipal Money Market Fund
Statement of Changes in Net Assets
Year Ended June 30,
--------------------------------
1996 1995*
------------ ------------
<S> <C> <C>
OPERATIONS:
Investment income--net......... ..................................... $ 827,721 $ 842,212
Net realized gain on investments........,,............................. 4,282 6
------------ ------------
Net Increase In Net Assets Resulting From Operations............... 832,003 842,218
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net:
Investor shares...................................................... (703,677) (468,028)
Class R shares....................................................... (124,044) (374,184)
Net realized gain on investments:
Investor shares...................................................... (549) --
------------ ------------
Total Dividends.................................................... (828,270) (842,212)
------------ ------------
BENEFICIAL INTEREST TRANSACTIONS ($1.00 per share):
Net proceeds from shares sold:
Investor shares...................................................... 102,593,225 32,912,720
Class R shares....................................................... 14,319,110 32,480,825
Dividends reinvested:
Investor shares...................................................... 443,530 462,650
Class R shares....................................................... 65,137 265,428
Cost of shares redeemed:
Investor Shares...................................................... (81,850,739) (35,007,105)
Class R Shares....................................................... (21,813,892) (35,063,063)
------------ ------------
Increase (Decrease) In Net Assets From Beneficial Interest
Transactions..................................................... 13,756,371 (3,948,545)
------------ ------------
Total Increase (Decrease) In Net Assets.......................... 13,760,104 (3,948,539)
NET ASSETS:
Beginning of year...................................................... 22,967,577 26,916,116
------------ ------------
End of year............................................................ $ 36,727,681 $ 22,967,577
------------ ------------
------------ ------------
</TABLE>
___________________
*On October 17, 1994, the Trust shares were redesignated Class R shares.
See notes to financial statements.
<PAGE>
Dreyfus BASIC California Municipal Money Market Fund
Financial Highlights
Reference is made to page 5 of the Fund's Prospectus
dated November 1, 1996.
See notes to financial statements.
<PAGE>
Dreyfus BASIC California Municipal Money Market Fund
Financial Highlights (continued)
Reference is made to page 5 of the Fund's Prospectus
dated November 1, 1996.
See notes to financial statements.
<PAGE>
Dreyfus BASIC California Municipal Money Market Fund
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
The Dreyfus/Laurel Tax-Free Municipal Funds (the "Trust") is registered
under the Investment Company Act of 1940 ("Act") as a non-diversified
open-end management investment company and operates as a series company
currently offering seven series including the Dreyfus BASICCalifornia
Municipal Money Market Fund (the "Fund"). The Fund's investment objective is
to provide a high level of current income exempt from Federal and state of
California personal income taxes to the extent consistent with the preservatio
n of capital and the maintenance of liquidity by investing in high quality,
short-term municipal securities. The Dreyfus Corporation ("Manager") serves
as the Fund's investment adviser. The Manager is a direct subsidiary of
Mellon Bank, N.A. ("Mellon Bank").
On July 26, 1995, the Fund's Board of Trustees approved a new Investment
Management Agreement between the Fund and the Manager (the "New Agreement")
and certain other changes to restructure the Fund to enable it to join
Dreyfus' BASIC Family of Money Market Funds. Fund shareholders approved the
New Agreement at a special meeting of shareholders held on November 15, 1995
by a vote of 13,914,802 shares in favor of, and 4,050,090 shares against,
approval of the New Agreement, with 137,964 shares abstaining, and the New
Agreement and other changes became effective November 20, 1995.
On July 26, 1995, the Fund's Trustees approved a change to the Fund's
name, effective November 20, 1995, from "Dreyfus/Laurel California Tax-Free
Money Fund" to "Dreyfus BASICCalifornia Municipal Money Market Fund."
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. Prior to November 20, 1995, the Fund was
authorized to issue two classes of shares: Investor shares and Class R
shares. Investor shares were sold primarily to retail investors and were
subject to a distribution fee. Class R shares were sold primarily to bank
trust departments and other financial service providers (including Mellon
Bank and its affiliates) acting on behalf of customers having a qualified trus
t or investment account or relationship at such institution, and were not
subject to a distribution fee. Each class of shares had identical rights and
privileges, except with respect to the distribution fee and voting rights on
matters affecting a single class. Effective November 20, 1995, the Fund's
Investor and Class R descriptions were eliminated and the Fund became a
single class Fund without a separate class description. Fund shares currently
are offered to any investor.
Investment income, net of expenses (other than class specific expenses),
realized and unrealized gains and losses are allocated daily to each class of
shares based upon the relative proportion of net assets of each class.
The Fund's Financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
Actual results may differ from estimates.
(a) Portfolio valuation: Investments are valued at amortized cost in
accordance with Rule 2a-7 of the Investment Company Act of 1940, which has
been determined by the Fund's Board of Trustees to represent the fair value
of the Fund's investments.
It is the Fund's policy to maintain a continuous net asset value per
share of $1.00 for the Fund; the Fund has adopted certain investment,
portfolio valuation and dividend and distribution policies to enable
<PAGE>
Dreyfus BASIC California Municipal Money Market Fund
NOTES TO FINANCIAL STATEMENTS (continued)
it to do so. There is no assurance, however, that the Fund will be able
to maintain a stable net asset value of $1.00.
(b) Securities transactions and investment income: Securities
transactions are recorded on a trade date basis. Interest income, adjusted
for amortization of premiums and original issue discounts on investments, is
earned from settlement date and recognized on the accrual basis. Realized
gain and loss from securities transactions are recorded on the identified
cost basis.
(c) Concentration of risk: The Fund follows an investment policy of
investing primarily in municipal obligations of one state. Economic changes
affecting the state and certain of its public bodies and municipalities may
affect the ability of issuers within the state to pay interest on, or repay
principal of municipal obligations held by the Fund.
(d) Distributions to shareholders: It is the policy of the Fund to
declare dividends daily from investment income-net. Such dividends are paid
monthly. Dividends from net realized capital gain are normally declared and
paid annually, but the Fund may make distributions on a more frequent basis
to comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Fund not to distribute such gain.
(e) Federal income taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
At June 30, 1996, the cost of investments for federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see
the Statement of Investments).
NOTE 2 -- Investment Management Fee and Other Transactions With Affiliates:
(a) Investment management fee: Pursuant to the New Agreement with the
Manager, the Manager provides or arranges for one or more third parties to
provide investment advisory, administrative, custody, fund accounting and
transfer agency services to the Fund. The Manager also directs the
investments of the Fund in accordance with its investment objective, policies
and limitations. For these services, the Fund is contractually obligated to
pay the Manager a fee, calculated daily and paid monthly, at the annual rate
of .45% of the value of the Fund's average daily net assets. The Manager has
undertaken through November 19, 1996 to limit its unitary fee to .35 of 1% of
the Fund's average daily net assets excluding certain fees outlined below.
Out of its fee, the Manager pays all of the expenses of the Fund except
brokerage fees, taxes, interest, fees and expenses of non-interested Trustees
(including counsel fees) and extraordinary expenses. In addition, the Manager
is required to reduce its fee in an amount equal to the Fund's allocable
portion of fees and expenses of the non-interested Trustees (including
counsel). The reduction in management fee, pursuant to the undertaking,
amounted to $17,286 during the year ended June 30, 1996.
(b) Distribution plan: The Fund had adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act relating to its then
existing Investor shares. Under the Plan, the Fund paid annually up to .25%
of the value of the average daily net assets attributable to its Investor
shares to compensate
<PAGE>
Dreyfus BASIC California Municipal Money Market Fund
NOTES TO FINANCIAL STATEMENTS (continued)
the Distributor and Dreyfus Service Corporation, an affiliate of the
Manager, for shareholder servicing activities and the Distributor for
activities primarily intended to result in the sale of Investor shares. The
Class R shares did not bear a distribution fee. During the year ended June
30, 1996, the distribution fee for the Investor shares was $13,250. Effective
November 20, 1995, the Plan was terminated.
(c) Trustees' fees: Each trustee who is not an "interested person" as
defined in the Act receives $27,000 per year, $1,000 for each Board meeting
attended and $750 for each Audit Committee attended and is reimbursed for
travel and out-of-pocket expenses. These expenses are paid in total by the
following funds: The Dreyfus/Laurel Funds, Inc., The Dreyfus/Laurel Tax-Free
Municipal Funds, and The Dreyfus/Laurel Funds Trust. In addition the Chairman
of the Board receives an annual fee of $75,000 per year. These fees and expens
es are charged and allocated to each series based on net assets.
<PAGE>
Dreyfus BASIC California Municipal Money Market Fund
Independent Auditors' Report
The Board of Trustees and Shareholders
The Dreyfus/Laurel Tax-Free Municipal Funds:
We have audited the accompanying statement of assets and
liabilities, including the statement of investments of Dreyfus Basic
California Municipal Money Market Fund (formerly the Dreyfus/Laurel
California Tax-Free Money Fund) of The Dreyfus/Laurel Tax-Free Municipal
Funds as of June 30, 1996, and the related statement of operations for the
year then ended and statements of changes in net assets for each of the years
in the two-year period then ended and financial highlights for each of the
years or period in the three-year period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
highlights for each of the years or period for the three-year period ended
November 30, 1993 were audited by other auditors whose report thereon, dated
January 18, 1994, expressed an unqualified 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 financial highlights are free of material misstatement. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation
of securities owned as of June 30, 1996, by correspondence with the custodian.
An audit also includes assessing the accounting principles 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 Dreyfus Basic California Municipal Money Market Fund of The
Dreyfus/Laurel Tax-Free Municipal Funds as of June 30, 1996, the results of
its operations for the year then ended and the changes in its net assets for
each of the years in the two-year period then ended and financial highlights
for each of the years or period in the three-year period then ended in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, NY
July 29, 1996
__________________________________________________________________________
DREYFUS BASIC NEW YORK MUNICIPAL MONEY MARKET FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
NOVEMBER 1, 1996
__________________________________________________________________________
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus
of the Dreyfus BASIC New York Municipal Money Market Fund (formerly, the
Dreyfus/Laurel New York Tax-Free Money Fund) (the "Fund"), dated November
1, 1996, as it may be revised from time to time. The Fund is a separate,
non-diversified portfolio of The Dreyfus/Laurel Tax-Fee Municipal Funds
(the "Trust"), an open-end management investment company, known as a
mutual fund. To obtain a copy of the Fund's 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
Investment Policies. . . . . . . . . . . . . . . . . . B-11
Redemption of Fund Shares. . . . . . . . . . . . . . . B-24
Shareholder Services . . . . . . . . . . . . . . . . . B-26
Determination of Net Asset Value . . . . . . . . . . . B-28
Performance Information. . . . . . . . . . . . . . . . B-29
Dividends, other Distributions and Taxes . . . . . . . B-30
Information about the Fund . . . . . . . . . . . . . . B-31
Principal Shareholders . . . . . . . . . . . . . . . . B-32
Custodian and Transfer Agent . . . . . . . . . . . . . B-32
Counsel and Independent Auditors . . . . . . . . . . . B-33
Financial Statements . . . . . . . . . . . . . . . . . B-33
Appendix A Risk Factors - Investing in
New York Municipal Obligations . . . . . . . . . . . B-34
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
December 8, 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 eleven 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;
Director, Access Capital Strategic Community Investment Fund, Inc. -
Institutional Investment Portfolio. Age: 81 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, Access Capital Strategic Community
Investment Fund, Inc. - Bank Portfolio.; Director, Boston Mutual
Insurance Company; Director and Vice Chairman of the Board, Home
Owners Federal Savings and Loan (prior to May 1990). Age: 79 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. Director, Access
Capital Strategic Community Investment Fund, Inc. - Institutional
Investment Portfolio and Bank Portfolio. He is also Chairman of the
Board of Noel Group, Inc., a venture capital company; and a director
of the Muscular Dystrophy Association, HealthPlan Services
Corporation, Belding Heminway, Inc., Curtis Industries, Inc., Simmons
Outdoor Corporation and Staffing Resources, Inc. For more than five
years prior to January 1995, 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. 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.; Director, Access Capital
Strategic Community Investment Fund, Inc. - Bank Portfolio. Age: 61
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). Director, Access Capital Strategic
Community Investment Fund, Inc. - Bank Portfolio. Age: 68 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;
Director, Access Capital Strategic Community Investment Fund, Inc. -
Institutional Investment Portfolio. From 1988-1989 Director, Rexene
Corporation. Since May 1991, Mr. Goeschel has served as a Trustee of
Sewickley Valley Hospital. Age: 74 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.; Director, Access Capital Strategic Community
Investment Fund, Inc. - Bank Portfolio; 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. Director,
Access Capital Strategic Community Investment Fund, Inc. -
Institutional Investment Portfolio. Age: 78 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.; Director,
Access Capital Strategic Community Investment Fund, Inc. -
Institutional Investment Portfolio. Age: 48 years old. Address:
401 Edgewater Place, Wakefield, Massachusetts 01880.
o+JOHN J. SCIULLO. Trustee of the Trust; Dean Emeritus and Professor of
Law, Duquesne University Law School; Director, Urban Redevelopment
Authority of Pittsburgh; Director, Access Capital Strategic Community
Investment Fund, Inc. - Institutional Investment Portfolio. Age: 64
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/Pilgrim Community Health Plan, Inc.; Director, Access Capital
Strategic Community Investment Fund, Inc. - Bank Portfolio; 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: 46 years old.
Address: 25 Braddock Park, Boston, Massachusetts 02116-5816.
#ELIZABETH BACHMAN. Vice President and Assistant Secretary of the Trust,
The Trust 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: 27 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: 60 State Street, Boston, Massachusetts 02109.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Trust,
The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Funds, Inc.
(since July 1996); Supervisor of Treasury Services and Administration
of Funds Distributor, Inc. From April 1993 to January 1995, Mr.
Conroy was a Senior Fund Accountant for Investors Bank & Trust
Company. From December 1991 to March 1993, Mr. Conroy was employed
as a Fund Accountant at TBC. Prior to December 1991, Mr. Conroy
attended Merrimack College where he received a bachelors degree in
Business Administration. Age: 27 years old. Address: 60 State
Street, Boston, Massachusetts 02109.
#RICHARD W. INGRAM. Vice President and Assistant Treasurer of the Trust,
The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Funds, Inc.
(since July 1996); Senior Vice President and Director of Client
Services and Treasury Operations of Funds Distributor, Inc. From
March 1994 to November 1995, Mr. Ingram was Vice President and
Division Manager for First Data Investor Services Group. From 1989
to 1994, Mr. Ingram was Vice President, Assistant Treasurer and Tax
Director-Mutual Funds of TBC. Age: 40 years old. Address: 60 State
Street, Boston, Massachusetts 02109.
MARK A. KARPE, Vice President and Assistant Secretary of the Trust, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Funds, Inc. Senior
Paralegal of the Distributor and an officer of other investment
companies advised or administered by the Manager. From August 1993
to May 1996, he attended Hofstra University School of Law. Prior to
August 1993, he was employed as an Associate Examiner at the National
Association of Securities Dealers. Age: 27 years old. Address: 200
Park Avenue, New York, New York 10166.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Trust, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Funds, Inc. (since
July 1996); Vice President and Manager of Treasury Services and
Administration of Funds Distributor, Inc. From 1989 to July 1994,
Ms. Nelson was an Assistant Vice President and Client Manager for
TBC. Age: 32 years old. Address: 60 State Street, Boston,
Massachusetts 02109.
#JOHN E. PELLETIER. Vice President and Secretary of the Trust, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Funds, Inc. (since
September 1994); Senior Vice President, General Counsel and
Secretary, Funds Distributor, Inc. (since April 1994); Senior Vice
President, General Counsel and Secretary, Premier Mutual Fund
Services, Inc. (since August 1994); Counsel, The Boston Company
Advisors, Inc. (February 1992 to March 1994); Associate, Ropes & Gray
(August 1990 to February 1992). Age: 31 years old. Address: 60
State Street, Boston, Massachusetts 02109.
#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. From July 1988 to
August 1994, he was employed by TBC where he held various management
positions in the Corporate Finance and Treasury areas. Age: 33 years
old. Address: 60 State Street Boston, Massachusetts 02109.
_____________________________________
* "Interested person" of the Trust, as defined in the Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies
advised by Dreyfus.
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 $25,000 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 October 21,
1996.
For the fiscal year ended June 30, 1996, 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 Trust# Trust's Expenses Retirement Board Member+
- ----------------- ------------------- -------------------- ---------------- --------------------
<S> <C> <C> <C> <C>
Ruth Marie Adams $ 6,420 none none $ 34,500
Francis P. Brennan* 16,853 none none 97,000
Joseph S. DiMartino** none none none 448,618***
James M. Fitzgibbons 6,365 none none 32,500
J. Tomlinson Fort** none none none none
Arthur L. Goesche 6,420 none none 34,500
Kenneth A. Himme 5,448 none none 31,750
Arch S. Jeffery** none none none none
Stephen J. Lockwood 6,420 none none 34,500
John J. Sciullo 6,365 none none 33,500
Roslyn M. Watson 6,365 none none 33,500
</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 fact paid directly by
Dreyfus to the non-interested Trustees. Amount does not include
reimbursed expenses for attending Board meetings, which amounted to
$2,749 for the Trust.
* Compensation of Francis P. Brennan includes retainer paid by the
Dreyfus/Laurel Funds to be the Chairman of the Board. Effective May
1, 1996 the retainer was reduced from $75,000 to $25,000 annually..
** Joseph S. DiMartino, J. Tomlinson Fort and Arch S. 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, 1996, the aggregate amount of fees and expenses received by
Joseph S. DiMartino, J. Tomlinson Fort and Arch S. Jeffery from
Dreyfus for serving as a Board member of the Trust were $6,269,
$6,420 and $6,420, respectively, and for serving as a Board member of
all funds in the Dreyfus/Laurel Funds (including the Trust) were
$31,750, $34,500 and $34,500, respectively. In addition, Dreyfus
reimbursed Messrs. DiMartino, Fort and Jeffery a total of $1,043 for
expenses attributable to the Trust's Board meetings which is not
included in the $2,749 amount noted above.
*** Amount paid to Joseph S. DiMartino from the funds in the Fund Complex
for the year ended December 31, 1995.
+ The Dreyfus Family of Funds consists of 161 mutual funds.
Management Arrangements
Dreyfus serves as the investment manager for the Fund pursuant to an
Investment Management Agreement (the "Investment Management Agreement")
with the Trust dated December 8, 1995. Dreyfus is a wholly-owned
subsidiary of Mellon Bank. 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 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, 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 last 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 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 Investment Management Agreement, which
was last approved by the Trust's Board of Trustees on July 26, 1995 and
approved by Fund shareholders on December 6, 1995.
The Investment 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. Although, under the Investment Management Agreement, Dreyfus is
not required to pay the fees and expenses of of the non-interested
Trustees (including counsel fees), Dreyfus is required to reduce its
management fee by the amount of such fees and expenses. 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
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 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 Investment 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 Investment
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 Investment Management Agreement upon
60 days' written notice to the Fund. The Investment Management Agreement
will terminate immediately and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President,
Chief Executive Officer, 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; William
T. Sandalls, Jr., Senior Vice President and Chief Financial Officer; Elie
M. Genadry, Vice President-Institutional Sales; William F. Glavin, Jr.,
Vice President-Corporate Development; Mark N. Jacobs, Vice President,
General Counsel and Secretary; Patrice M. Kozlowski, Vice President-
Corporate Communications; Mary Beth Leibig, Vice President-Human
Resources; Jeffrey N. Nachman, Vice President-Mutual Fund Accounting;
Andrew S. Wasser, Vice President-Information Systems; Elvira Oslapas,
Assistant Secretary; and 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 during the Fund's
fiscal years ending June 30, 1994, 1995 and 1996.
<TABLE>
<CAPTION>
1996 1995 1994* (1) 1993**
---- ---- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fee Fee Fee Fees Fees Fees Fees Fees
Paid Waived Paid (2) Paid (3) Paid (4) Waive(5) Paid Waived (5)
---- ------ -------- -------- -------- -------- ---- ----------
Dreyfus BASIC $251,149 $59,061 $48,800 $12,400 $27,444 $46,447 (6) $73,485 $118,669 (7)
New York Municipal
Money Market Fund
</TABLE>
_______________________________
* For the period ended June 30. The Fund changed its fiscal year end
from November 30 to June 30.
** For the period 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 through June 30, 1994.
(4) Fees paid to TBC Advisors for investment advisory services for the
period from December 1, 1993 to April 3, 1994.
(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) Includes $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,
1996.
In addition, under a distribution plan adopted by the Fund pursuant
to Rule 12b-1 under the Act, (the "Plan"), 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 of 1% of average daily net
assets attributable to its Investor shares. For the period from July 1,
1995 to December 7, 1995, the Fund paid $26,897 in distribution fees
attributable to its then existing Investor Shares.
PURCHASE OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Fund Shares."
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. The Fund's shares are
offered on a continuous basis.
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 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' 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 net asset
value ("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 the activities contemplated
under these arrangements are consistent with 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 Board of Trustees would seek an alternative provider(s) of
such services.
INVESTMENT POLICIES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Investment
Objective and 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 Ratings Group ("S&P") and Moody's
Investors Service, Inc. ("Moody's") represent the opinions of these
agencies as to the quality of Municipal Obligations which they rate. It
should be emphasized, however, that such ratings are relative and
subjective and are not absolute standards of quality. These ratings will
be used by the 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 short-term and 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.
Special Factors Affecting the Fund
Some of the significant financial considerations relating to the
Fund's investment in New York Municipal Obligations are summarized in
Appendix A. 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 Fund's investment in
New York Municipal Obligations. 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 1990's 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 issued deficit notes during the fiscal
periods 1989 through 1992. The State's financial operations improved,
however, during the 1993 and 1994 fiscal years. After reflecting a 1993
year-end deposit to the State's refund reserve account of $671 million,
reported 1993 General Fund receipts were $45 million higher than
originally projected in April 1992. The State completed the 1994 fiscal
year with an operating surplus in the General Fund of $914 million. The
State reported a General Fund operating deficit of $1.426 billion for the
1995 fiscal year. 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 its ratings of certain appropriation-backed
debt of New York State and its agencies. The State's general obligation,
State-guaranteed and New York State Local Government Assistance
Corporation bonds continued to be rated A by Moody's. In January 1992,
S&P lowered from A to A- ratings of New York State general obligation
bonds and stated that it continued to assess the ratings outlook as
negative. S&P also lowered its ratings of various agency debts, State
moral obligations, contractual obligations, lease purchase obligations and
State guarantees. In February 1991, Moody's lowered its rating of New
York City's general obligation bonds from A to Baa1. The rating changes
reflected 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, 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.
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 objective and substantially the same
investment policies and restrictions as those applicable to the Fund.
Shareholders of the Fund will be given at lease 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 the 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.
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, 1996 and 1995, and for the
periods from December 1, 1993 to June 30, 1994 and from December 1, 1992
to June 30, 1993 the Fund paid no stated brokerage commissions.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to
Redeem 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
$1,000 or more ($500 for shareholders who has held Fund shares since
December 8, 1995). 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 (other than one
who has held Fund shares since December 8, 1995) 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 ($5,000 minimum)
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, or to a correspondent bank if the investor's
bank is not a member of the Federal Reserve System. 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 (other than one who has held Fund
shares since December 8, 1995) 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
"Redemption 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.
SHAREHOLDER SERVICES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Shareholder Services."
Fund Exchanges. Fund shares may be exchanged for shares of certain
other funds advised or administered by Dreyfus. 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 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 (including over The
Dreyfus Touch(R) automated telephone system, 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 (other than those who has held Fund shares since December 8,
1995) 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. Exchanges out of the Fund pursuant to Fund Exchanges are
limited to four per calendar year.
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.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest on the payment date their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of certain other funds in
the Dreyfus Family of Funds of which the investor is a shareholder.
Shares of the other funds purchased pursuant to this Privilege will be
purchased on the basis of relative NAV per share as follows:
A. Dividends and other distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that
are offered without a sales load.
B. Dividends and other distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds
sold with a sales load, and the applicable sales load will be
deducted.
C. Dividends and other distributions paid by a fund which charges a
sales load may be invested in shares of other funds sold with a
sales load (referred to herein as "Offered Shares"), provided
that, if the sales load applicable to the Offered Shares exceeds
the maximum sales load charged by the fund from which dividends
or other distributions are being swept, without giving effect to
any reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be invested
in shares of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be imposed
upon redemption of such shares.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Fund 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 Fund 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 INFORMATION
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Performance Information."
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.
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 June 30, 1996, the Fund's yield was 3.04%,
effective yield was 3.09% and equivalent taxable yield* was 5.69%. 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 June 30, 1996, would have been 2.94%,
2.98% and 5.51%, 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.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in
conjunction with the Section in the Fund's Prospectus entitled "Dividends,
Other Distributions and Taxes."
The Fund intends to satisfy the requirements for qualifying as a
"regulated investment company" under Subchapter M of the Code. Provided
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.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "General
Information."
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 October 21, 1996, no companies/individuals were found to have
owned beneficially 5% or more of the outstanding shares of the Fund.
CUSTODIAN AND TRANSFER AGENT
Mellon Bank, which is located at One 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, 345 Park Avenue, New York, New York 10154, was
appointed by the Board of Trustees to serve as the Fund's independent
auditors for the year ending June 30, 1997, 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, 1996
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 expanded modestly during 1995. 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 in 1995 was estimated to be about the same
as 1994. Both personal income and wages were estimated to have recorded
moderate gains in 1995. Employment growth is expected to slow
significantly in 1996 as the pace of national economic growth slackens,
entire industries experience consolidations, and governmental employment
continues to shrink. Personal income is estimated to increase by 4.0% in
1996.
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 was the first to be enacted in the administration
of the Governor, who assumed office on January 1. It was the first budget
in over half a century which proposed and, as enacted, projected an
absolute year-over-decline in General Fund disbursements. Spending for
State operations was projected to drop even more sharply, by 4.6%.
Nominal spending from all State funding sources (i.e., excluding Federal
aid) was 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 was 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 were expected to be recurring, but also through the use of one-time
solutions.
The General Fund was projected to be balanced on a cash basis for the
1995-96 fiscal year. Total receipts and transfers from other funds were
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 were projected to be $33.055 billion, a decrease
of $344 million from the total amount disbursed in the prior fiscal year.
The State Financial Plan was 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, with corresponding
material and adverse effects on the State's projections of receipts and
disbursements.
The State issued its second quarterly update to the cash-basis 1995-
96 State Financial Plan (the "Mid-Year Update") on October 26, 1995.
Revisions have been made to estimates of both receipts and disbursements
based on: (1) updated economic forecasts for both the nation and the
State, (2) an analysis of actual receipts and disbursements through the
first six months of the fiscal year, and (3) an assessment of changing
program requirements and cost savings initiatives. The Mid-Year Update
projects continued balance in the State's 1995-96 Financial Plan,with
estimated receipts reduced by a net $71 million and estimated
disbursements reduced by a net $30 million. The resulting General Fund
balance decreases to $172 million in the Mid-Year Update, reflecting the
expected use of $41 million from the Contingency Reserve Fund for payment
of litigation and disallowance expenses.
On October 2, 1995, the State Comptroller released a report entitled
"Comptroller's Report on the Financial Condition of New York State 1995"
in which he identified several risks to the State Financial Plan and
reaffirmed his estimate that the State faces a potential imbalance in
receipts and disbursements of at least $2.7 billion for the State's 1996-
97 fiscal year and at least $3.9 billion for the State's 1997-98 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 Plan--GAAP-Basis Results--1995-96 Update. The State
issued its first update to the GAAP-basis Financial Plan for the State's
1995-96 fiscal year on September 1, 1995. The September GAAP-basis update
projected a General Fund operating surplus of $401 million. The prior
projection of the 1995-96 GAAP-basis State Financial Plan, issued in March
1995 as part of the 1995-96 Executive Budget, projected an operating
surplus in the General Fund of $800 million. The change to the projection
primarily reflects the impact of legislative changes to the 1995-96
Executive Budge, as well as increases in projected accruals for certain
local assistance programs (primarily Medicaid).
Total revenues in the General Fund are projected at $31.871 billion,
consisting of $29.625 billion in tax revenues and $2.246 billion in
miscellaneous revenue. Total expenditures in the General Fund are
projected at $32.444 billion, including $22.678 billion for grants to
local governments, $8.037 billion for State operations, $1.711 billion for
general State charges, and $18 million for debt service. Compared to the
projections made in March, expenditures for grants to local governments
are substantially increased, primarily because of legislative changes to
the 1995-96 Executive Budget and increased projected accruals for
Medicaid.
For all governmental funds, the summary GAAP-basis Financial Plan
shows an excess of revenues and other financing sources over expenditures
and other financing uses of $359 million.
GAAP-Basis Results--1994-95 Fiscal Year. The State's Combined Balance
Sheet as of March 31, 1995 showed an accumulated deficit in its combined
governmental funds of $1.666 billion reflecting liabilities of $14.778
billion and assets of $13.112 billion. This accumulated governmental
funds deficit includes a $3.308 billion accumulated deficit in the General
Fund, as well as accumulated surpluses in the special Revenue and Debt
Service fund types of $877 million and $1.753 billion, respectively, and a
$988 million accumulated deficit in the Capital Projects fund type.
The State completed its 1994-95 fiscal year with a combined
Governmental Funds operating deficit of $1.791 billion, which included
operating deficits in the General Fund of $1.426 billion, in the Capital
Projects Funds of $366 million, and in the Debt Service Funds of $38
million. There is an operating surplus in the Special Revenue Funds of
$39 million.
GAAP-Basis Results--1993-94 Fiscal Year. The State reported a General
Fund operating surplus of $914 million for the 1993-94 fiscal year, as
compared to an operating surplus of $2.065 billion for the prior fiscal
year. The 1993-94 fiscal year surplus reflects several major factors,
including the cash basis surplus recorded in 1993-94, the use of $671
million of the 1992-93 surplus to fund operating expenses in 1993-94, net
proceeds of $575 million in bonds issued by the New York Local Government
Assistance Corporation ("LGAC") and the accumulation of a $265 million
balance in the Contingency Reserve Fund ("CRF"). Revenues increased $543
million (1.7%) over prior fiscal year revenues with the largest increase
occurring in personal income taxes. Expenditures increased $1.659 billion
(5.6%) over the prior fiscal year, with the largest increase occurring in
State aid for social services programs.
The Special Revenue fund and Debt Service fund ended 1993-94 with
operating surpluses of $149 million and $23 million, respectively. The
Capital Projects fund ended with an operating deficit of $35 million.
GAAP-Basis Results--1992-93 Fiscal Year. The State completed its 1992-93
fiscal year with a GAAP-basis operating surplus of $2.065 billion in the
General Fund and an accumulated deficit of $2.551 billion. The Combined
Statement of Revenues, Expenditures and Changes in Fund Balances reported
total revenues of $31.085 billion, total expenditures of $29.337 billion,
and net other financing sources and uses of $317 million. The surplus
primarily reflects the 1992-93 cash-basis surplus and the net proceeds of
$881 million in bonds issued by LGAC.
The Special Revenue, Debt Service and Capital Projects fund types
ended the 1992-93 fiscal year with GAAP-basis operating surpluses of $131
million, $381 million, and $57 million, respectively.
State Financial Plan--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.
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.
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 monies, to assist the State in financing
the 1994-95 fiscal year costs of extraordinary litigation 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.
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. 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.
Disbursements and transfer from the General Fund were $303 million
below the level projected in April 1993, an amount that would have been
$423 million had the State not accelerated the payment of Medicaid
billings, which in the April 1993 State Financial Plan were planned to be
deferred into the 1994-95 fiscal year. Compared to the estimates included
in the State Financial Plan formulated in April 1993, disbursements were
lower for Medicaid, capital projects, and debt service (due to
refundings). In addition, $114 million of school and payments were funded
from the proceeds of LGAC bonds. Disbursements were higher-than-expected
for general support for public schools. The State also made the first of
six required payments to the State of Delaware related to the settlement
of Delaware's litigation against the State regarding the disposition of
abandoned property receipts.
During the 1993-94 fiscal year, the State also established and funded
the CRF as a way to assist the State in financing the cost of litigation
affecting the State. The CRF was initially funded with a transfer of $100
million attributable to the positive margin recorded in the 1992-93 fiscal
year. In addition, the State augmented this initial deposit with $132
million on debt service savings attributable to the refinancing of State
and public authority bonds during 1993-94. A year-end transfer of $36
million was also made to the CRF, which, after a disbursement for
authorized fund purposes, brought the CRF balance at the end of 1993-94 to
$265 million. This amount was $165 million higher than the amount
originally targeted for this reserve fund.
The State ended the 1992-93 fiscal year with a balance on a cash
basis of $671 million in the General Fund that was deposited in the tax
refund reserve account and $67 million in the Tax Stabilization Fund.
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.
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.
Cash-Basis Results--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 1995-96 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 1995-96 State fiscal year,
total State assistance to the MTA is estimated at approximately $1.1
billion.
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.
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 1995-96 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,
1995 were balanced in accordance with GAAP, the thirteenth 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 1995 show a General Fund surplus reported
in accordance with GAAP. The City has eliminated the cumulative deficit
in its net General Fund position.
According to a recent OSDC economic report, the City's economy was
slow to recover from the recession and is expected to experience a weak
employment situation, and moderate wage and income growth, during the
1995-96 period. Also, Financial Plan reports of OSDC, the Control Board,
and the City Comptroller have variously indicated that many of the City's
balanced budgets have been accomplished, in part, through the use of non-
recurring resource, tax and fee increases, personnel reductions and
additional State assistance; that the City has not yet brought its long-
term expenditures in line with recurring revenues; that the City's
proposed gap-closing programs, if implemented, would narrow future budget
gaps; that these programs tend to rely heavily on actions outside the
direct control of the City; and that the City is therefore likely to
continue to face futures projected budget gaps requiring the City to
reduce expenditures and/or increase revenues. According to the most
recent staff reports of OSDC, the Control Board and the City Comptroller
during the four-year period covered by the current Financial Plan, the
City is relying on obtaining substantial resources from initiatives
needing approval and cooperation of its municipal labor unions, Covered
Organizations, and City Council, as well as the State and Federal
governments, among others, and there can be no assurance that such
approval can be obtained.
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 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.
<TABLE>
<CAPTION>
Dreyfus BASIC New York Municipal Money Market Fund
Statement of Investments June 30, 1996
Principal
Tax Exempt Investments--100% Amount Value
- --------------------------------------------------------------------------------------- ---------- ------------
<S> <C> <C>
New York--96.4%
Albany Industrial Development Agency, IDR, VRDN (Newkirk Products Inc., Project)
3.35%, Series A (LOC; Fleet Bank) (a,b).............................................. $1,620,000 $ 1,620,000
Babylon Industrial Development Agency, VRDN:
IDR (Napco Security System Inc., Facility) 3.10% (LOC; Chemical Bank) (a,b).......... 200,000 200,000
RRR (Equity Babylon Project) 3.65% (LOC; Union Bank of Switzerland) (a,b)............ 7,300,000 7,300,000
Broome County Industrial Development Agency, IDR, Refunding, VRDN
(Bing Realty Co. Project) 3.25% (LOC; Meridian Bank Corp.) (a,b)..................... 500,000 500,000
Buffalo Sewer Authority, Revenue, Prerefunded 7.625%, Series D, 7/1/96
(Insured; AMBAC and Escrowed in; U.S. Government Securities)......................... 1,000,000 1,030,000
Erie County, RAN 4.50%, 9/20/96 (LOC; Union Bank of Switzerland) (a)................... 700,000 700,969
Erie County Water Authority, Water Revenue, VRDN
3.10%, Series A (Insured; AMBAC and SBPA; National Bank of Australia) (b)............ 2,000,000 2,000,000
Franklin County Industrial Development Agency, IDR, VRDN
(Kes Chateaugay Limited Partnership Project)
3.40%, Series A (LOC; Bank of Tokyo) (a,b)........................................... 500,000 500,000
Huntington Unified Free School District, TAN 4.375%, 6/24/97........................... 4,000,000 4,021,680
Jefferson County Industrial Development Agency, IDR, VRDN
(Watertown-Carthage TV) 3.70% (LOC; First National Bank of Chicago) (a,b)............ 100,000 100,000
Liverpool Central School District, RAN 4.50%, 6/20/97.................................. 5,000,000 5,027,960
Metropolitan Transportation Authority:
Commuter Facilities Revenue, VRDN
3.15% (LOC: Bank of Tokyo-Mitsubishi, Industrial Bank of Japan,
Morgan Bank, National Westminster Bank and Sumitomo Bank) (a,b).................... 200,000 200,000
Transportation Facilities Revenue, Prerefunding
8.375%, Series F, 7/1/96 (Escrowed in; U.S. Government Securities)................. 1,100,000 1,122,000
Monroe County Industrial Development Agency, Revenue, Refunding, VRDN
(Office Building) 3.60% (LOC; Chemical Bank) (a,b)................................... 275,000 275,000
Montgomery Industrial Development Agency, IDR, VRDN
(Service Merchandise Co.) 3.60% (LOC; Industrial Bank of Japan) (a,b)................ 200,000 200,000
Nassau County General Improvement 5%, Series S, 3/1/97 (Insured; AMBAC)................ 2,415,000 2,442,457
New York City, GO:
Prerefunded:
7.375%, Series A, 8/15/96 (Escrowed in; U.S. Government Securities)................ 395,000 397,006
8.50%, Series D, 8/1/96 (Escrowed in; U.S. Government Securities).................. 4,045,000 4,142,661
VRDN:
3.10%, Series A-6 (LOC; Landesbank Hessen) (a,b)................................... 800,000 800,000
3.60%, Series B (LOC; Bank of Nova Scotia) (a,b)................................... 4,900,000 4,900,000
3.60%, Series B (Insured; MBIA and Liquidity Facility; Austria Aktiengesel) (b).... 1,500,000 1,500,000
New York City Housing Development Corporation, Mortgage Revenue, VRDN:
(Columbus Apartments)
3.10%, Series A (LOC; Federal National Mortgage Association) (a,b)................. 2,720,000 2,720,000
Multi-Family:
(Columbus) 3.10%, Series A (LOC; Citibank) (a,b)................................... 300,000 300,000
(Tribecca Towers)
3.20%, Series A (LOC; Federal National Mortgage Association) (a,b)............. 4,300,000 4,300,000
Refunding (James Tower Development) 3.20%, Series A (LOC; Citibank) (a,b)............ 500,000 500,000
<PAGE>
Dreyfus BASIC New York Municipal Money Market Fund
Statement of Investments (continued) June 30, 1996
Principal
Tax Exempt Investments (continued) Amount Value
- --------------------------------------------------------------------------------------- ---------- ------------
New York City Industrial Development Agency, IDR, VRDN
(Brooklyn Navy Yard Cogen) 3.40% (LOC; Bank of America) (a,b)........................ $ 400,000 $ 400,000
New York City Municipal Water Finance Authority:
CP:
3.70%, Series 3, 8/8/96 (LOC; Canadian Imperial Bank of Commerce) (a).............. 3,000,000 3,000,000
Water and Sewer Systems Revenue:
3.60%, Series 3, 7/3/96 (LOC: Bank of Nova Scotia and
Toronto Dominion) (a)........................................................ 3,000,000 3,000,000
3.20%, 8/8/96 (Insured; AMBAC and Liquidity Facility; Krediet Bank)............ 2,000,000 2,000,000
3.70%, 8/8/96 (LOC; Canadian Imperial Bank of Commerce) (a).................... 3,000,000 3,000,000
3.20%, Series A-3, 8/14/96 (Insured; FSA and LOC; Banque Paribas) (a).......... 4,200,000 4,200,000
VRDN, Water and Sewer Systems Revenue 3.55%, Series G (b)............................ 6,800,000 6,800,000
New York State Dormitory Authority, Revenues, VRDN:
(Cornell University) 3.45%, Series B (LOC; Morgan Guaranty Trust Co.) (a,b).......... 4,200,000 4,200,000
(Metropolitan Museum of Art)
3%, Series A (Guaranty; Metropolitan Museum of Art) (b)............................ 1,200,000 1,200,000
New York State Energy, Research and Development Authority:
PCR (New York State Electric and Gas):
3.30%, 3/15/97 (LOC; Morgan Bank) (a).............................................. 2,000,000 2,000,000
3.85%, Series B, 10/15/96 (LOC; Union Bank of Switzerland) (a)..................... 250,000 250,000
3.65%, Series D, 12/1/96 (LOC; Union Bank of Switzerland) (a)...................... 300,000 300,000
VRDN:
Electric Facilities Revenue (LILCO Project)
3.05%, Series A (LOC; Toronto-Dominion Bank) (a,b)............................... 500,000 500,000
PCR:
(Rochester Gas and Electric) 3.45% (LOC; The Bank of New York) (a,b)............. 700,000 700,000
Refunding (New York Electric and Gas)
3.55%, Series C (LOC; Morgan Guaranty Trust Co.) (a,b)......................... 3,300,000 3,300,000
New York State Environmental Facilities Corporation, SWDR, CP
(General Electric Co. Project)
3.60%, Series A, 7/23/96 (LOC; General Electric Co.) (a)............................. 1,900,000 1,900,000
New York State Housing Finance Agency, VRDN:
HR:
(East 84th Street) 3.30%, Series A (LOC: Fleet Bank) (a,b)......................... 1,600,000 1,600,000
(Liberty View Apartments) 3.35% (LOC; Chemical Bank) (a,b)......................... 2,200,000 2,200,000
Revenue:
(Mount Sinai School of Medicine) 3%, Series A (LOC; Sanwa Bank) (a,b).............. 1,800,000 1,800,000
(Normandie Court I Project) 3.05% (LOC; Societe Generale) (a,b).................... 100,000 100,000
New York State Job Development Authority, VRDN:
3.67%, Series D-1 to D-9 (LOC; Sumitomo Bank) (a,b).................................. 175,000 175,000
3.85%, Series A-1 to A-42 (Guaranty; New York State and SBPA; Fuji Bank) (b)......... 1,075,000 1,075,000
4%, Series A-1 to A-9 (LOC; Sumitomo Bank) (a,b)..................................... 515,000 515,000
4%, Series B-1 to B-6 (LOC; Sumitomo Bank) (a,b)..................................... 115,000 115,000
4%, Series C-1 to C-34 (LOC; Sumitomo Bank) (a,b).................................... 365,000 365,000
New York State Local Governmental Assistance Corporation, VRDN:
3%, Series B (LOC: Credit Suisse and Swiss Bank Corp.) (a,b)......................... 7,100,000 7,100,000
3.05%, Series F (LOC; Toronto-Dominion Bank) (a,b)................................... 4,100,000 4,100,000
3.10%, Series D (LOC; Societe Generale) (a,b)........................................ 5,900,000 5,900,000
3.10%, Series E (LOC; Canadian Imperial Bank of Commerce) (a,b)...................... 2,000,000 2,000,000
New York State Medical Care Facilities Finance Agency, Revenue, VRDN
(Pooled Equipment Loan Program II) 3.20% (LOC; Chemical Bank) (a,b).................. 4,200,000 4,200,000
<PAGE>
Dreyfus BASIC New York Municipal Money Market Fund
Statement of Investments (continued) June 30, 1996
Principal
Tax Exempt Investments (continued) Amount Value
- --------------------------------------------------------------------------------------- ---------- ------------
Niagara Falls Bridge Commission, Toll Revenue, VRDN
3.10%, Series A (Insured; FGIC and LOC; Industrial Bank of Japan) (a,b).............. $3,400,000 $ 3,400,000
North Tonawanda City School District, BAN 4.25%, 6/12/97............................... 3,386,000 3,401,449
Onondaga County Industrial Development Agency, IDR, VRDN
(Pass and Seymour Project) 3.40% (LOC; Banque Nationale DeParis) (a,b)............... 300,000 300,000
Town of Oyster Bay 7.10%, 3/1/97 (Insured; FGIC)...................................... 400,000 409,894
Village of Roslyn 4%, 12/18/96......................................................... 1,500,000 1,503,231
Roslyn Unified Free School District, BAN 3.55%, 7/18/96................................ 4,000,000 4,000,127
Saint Lawrence Industrial Development Agency, EIR, VRDN
(Reynolds Metals Co. Project) 3.35% (LOC; Royal Bank of Canada) (a,b)................ 1,100,000 1,100,000
Suffolk County, TAN 4%, Series I, 8/15/96 (LOC: Canadian Imperial Bank of
Commerce, National Westminster Bank and Westdeutsche Landesbank) (a)................. 1,000,000 1,000,846
Suffolk County Industrial Development Agency, VRDN:
Civil Facility Revenue (Suffolk Child Care Center Project)
3.25% (LOC; Barclays Bank) (a,b)................................................... 700,000 700,000
IDR:
(Algorex Corp Project) 3.30% (LOC; Marine Midland Bank) (a,b)...................... 1,850,000 1,850,000
Refunding (Target Rock Corporation) 3.15% (LOC; Bank of Nova Scotia) (a,b)......... 2,500,000 2,500,000
Suffolk County Southwest Sewer District, Refunding 4%, 2/1/97 (Insured; MBIA).......... 2,555,000 2,562,254
Suffolk County Water Authority, VRDN 3.25% (LOC; Bank of Nova Scotia) (a,b)............ 6,000,000 6,000,000
Syracuse Industrial Development Agency, Civil Facility Revenue, VRDN
(Syracuse University Project) 3.45% (LOC; Morgan Guaranty Trust Co.) (a,b)........... 3,500,000 3,500,000
Triborough Bridge and Tunnel Authority:
General Purpose Revenues, Prerefunding
8.10%, Series K, 1/1/97 (Escrowed in; U.S. Government Securities).................. 1,100,000 1,155,188
Special Obligation, VRDN 3.05% (Insured; FGIC and Liquidity Facility; FGIC) (b)...... 200,000 200,000
Westchester County 4.25%, Series B, 12/15/96........................................... 250,000 250,833
Western Nassau County Water Authority, Systems Revenue
3.70%, 5/1/97 (Insured; AMBAC)....................................................... 460,000 460,062
Yonkers Industrial Development Agency, Civil Facility Revenue, VRDN
(Consumers Union Facility)
3.20% (Insured; AMBAC and SBPA; Credit Locale De France) (b)......................... 3,500,000 3,500,000
U.S. Related--3.6%
Commonwealth of Puerto Rico Government Development Bank, Refunding, VRDN
3% (LOC; Credit Suisse) (a,b)........................................................ 1,500,000 1,500,000
Commonwealth of Puerto Rico Highway and Transportation Authority,
Highway Revenue, VRDN 3%, Series X (LOC: Landesbank Hessen,
Swiss Bank Corp. and Union Bank of Switzerland) (a,b)................................ 100,000 100,000
Puerto Rico Government Development Bank, CP 3.30%, 8/9/96.............................. 3,200,000 3,200,000
Puerto Rico Industrial Medical and Environmental Pollution Control Facility
Finance Authority, Revenue:
3.80%, 12/1/96 (LOC; Morgan Guaranty Trust Co.) (a)................................ 750,000 750,608
VRDN (AGMEF Project) 3.15% (LOC; Bank of Tokyo-Mitsubishi) (a,b)................... 200,000 200,000
------------
TOTAL INVESTMENTS
(cost $158,339,225).................................................................. $158,339,225
------------
------------
</TABLE>
<PAGE>
Dreyfus BASIC New York Municipal Money Market Fund
<TABLE>
Summary of Abbreviations
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
BAN Bond Anticipation Notes Insurance Corporation
CP Commercial Paper PCR Pollution Control Revenue
EIR Environment Improvement Revenue RAN Revenue Anticipation Notes
FGIC Financial Guaranty Insurance Company RRR Resources Recovery Revenue
FSA Financial Security Assurance SBPA Standby Bond Purchase Agreement
HR Hospital Revenue SWDR Solid Waste Disposal Revenue
IDR Industrial Development Revenue TAN Tax Anticipation Notes
LOC Letter of Credit VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
Summary of Combined Ratings (Unaudited)
<S> <C> <C> <C> <C> <C>
Fitch (c) or Moody's or Standard & Poor's Percentage of Value
- --------- --------- -------------------- -----------------------
F1+/F1 VMIG1/MIG1, P1 (d) SP1+/SP1, A1+/A1 (d) 80.5%
F2 VMIG2/MIG2, P2 SP2, A2 1.1
AAA/AA (e) Aaa/Aa (e) AAA/AA (e) 9.6
Not Rated (f) Not Rated (f) Not Rated (f) 8.8
------
100.0%
------
------
</TABLE>
Notes to Statement of Investments:
(a) Secured by letters of credit. At June 30, 1996, 67.1% of the Fund's net
assets are backed by letters of credit issued by domestic banks, foreign
banks, government agencies and corporations.
(b) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest rates.
(c) Fitch currently provides creditworthiness information for a limited
number of investments.
(d) P1 and A1 are the highest ratings assigned tax-exempt commercial paper by
Moody's and Standard & Poor's, respectively.
(e) Notes which are not F, MIG or SP rated are represented by bond ratings of
the issuers.
(f) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's, have been determined by the Fund's Board of Trustees to be of
comparable quality to those rated securities in which the Fund may invest.
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Dreyfus BASIC New York Municipal Money Market Fund
Statement of Assets and Liabilities June 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $158,339,225)--see Statement of Investments..................... $158,339,225
Cash.................................................................... 1,332,375
Interest receivable..................................................... 923,063
Other receivables....................................................... 605
------------
160,595,268
LIABILITIES:
Due to The Dreyfus Corporation--Note 2(a)............................... $ 82,287
Payable for investment securities purchased............................. 4,021,680 4,103,967
---------- ------------
NET ASSETS................................................................ $156,491,301
------------
------------
REPRESENTED BY:
Paid-in capital......................................................... $156,491,702
Accumulated net realized (loss) on investments.......................... (401)
------------
NET ASSETS at value applicable to 156,491,702 shares outstanding
(unlimited number of shares of Beneficial Interest authorized).......... $156,491,301
------------
------------
NET ASSET VALUE, offering and redemption price per share
($156,491,301 / 156,491,702 shares of Beneficial Interest outstanding).. $1.00
-----
-----
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Dreyfus BASIC New York Municipal Money Market Fund
Statement of Operations year ended June 30, 1996
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest Income....................................................... $2,533,428
Expenses:
Investment management fee--Note 2(a).................................. $310,240
Distribution fee--Note 2(b)........................................... 26,897
Trustees' fees and expenses--Note 2(c)................................ 4,778
--------
Total Expenses.................................................... 341,915
Less--reduction in management fee due to undertaking--Note 2(a)....... 59,061
--------
Net Expenses...................................................... 282,854
----------
INVESTMENT INCOME--NET.................................................... 2,250,574
NET REALIZED (LOSS) ON INVESTMENT--Note 1(b).............................. (391)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...................... $2,250,183
----------
----------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus BASIC New York Municipal Money Market Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------
1996 1995*
------------ ------------
<S> <C> <C>
OPERATIONS:
Investment income--net............................................... $ 2,250,574 $ 440,392
Net realized gain (loss) on investments.............................. (391) 349
------------ ------------
Net Increase In Net Assets Resulting From Operations............. 2,250,183 440,741
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net:
Investor shares.................................................... (2,138,509) (248,024)
Class R shares..................................................... (112,065) (192,368)
Net realized gain on investments;
Investor shares.................................................... (349) --
------------ ------------
Total Dividends.................................................. (2,250,923) (440,392)
------------ ------------
BENEFICIALINTEREST TRANSACTIONS ($1.00 per share):
Net proceeds from shares sold:
Investor shares.................................................... 224,508,939 23,865,192
Class R shares..................................................... 4,827,833 10,336,048
Dividends reinvested:
Investor shares.................................................... 1,957,795 240,333
Class R shares..................................................... 23,917 44,938
Cost of shares redeemed:
Investor shares.................................................... (91,714,099) (10,377,536)
Class R shares..................................................... (12,901,810) (7,789,885)
------------ ------------
Increase In Net Assets From Beneficial Interest Transactions..... 126,702,575 16,319,090
------------ ------------
Total Increase In Net Assets................................... 126,701,835 16,319,439
NET ASSETS:
Beginning of year.................................................... 29,789,466 13,470,027
------------ ------------
End of year.......................................................... $156,491,301 $ 29,789,466
------------ ------------
------------ ------------
<FN>
- ---------------------
* Effective December 8, 1995, the Fund converted to a single class Fund, with
existing Class R shares converted into Investor Class shares.
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus BASIC New York Municipal Money Market Fund
Financial Highlights
Reference is made to page 5 of the Fund's Prospectus
dated November 1, 1996.
See notes to financial statements.
<PAGE>
Dreyfus BASIC New York Municipal Money Market Fund
Financial Highlights (continued)
Reference is made to page 5 of the Fund's Prospectus
dated November 1, 1996.
See notes to financial statements.
<PAGE>
Dreyfus BASIC New York Municipal Money Market Fund
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
The Dreyfus/Laurel Tax-Free Municipal Funds (the "Trust") is registered
under the Investment Company Act of 1940 ("Act") as a non-diversified
open-end management investment company and operates as a series company
currently offering seven series including the Dreyfus BASIC New York
Municipal Money Market Fund (the "Fund"). The Fund's investment objective is
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 consi
stent with the preservation of capital and the maintenance of liquidity by
investing in high quality, short-term municipal securities. The Dreyfus
Corporation ("Manager") serves as the Fund's investment adviser. The Manager
is a direct subsidiary of Mellon Bank, N.A. ("Mellon Bank").
On July 26, 1995, the Fund's Board of Trustees approved a new Investment
Management Agreement between the Fund and the Manager (the "New Agreement")
and certain other changes to restructure the Fund to enable it to join
Dreyfus' BASIC Family of Money Market Funds. Fund shareholders approved the
New Agreement at a special meeting of shareholders held on December 6, 1995
by a vote of 13,769,202 shares in favor of, and 3,820,727 shares against,
approval of the New Agreement, with 409,310 shares abstaining, and the
NewAgreement and other changes became effective December 8, 1995.
On July 26, 1995, the Fund's Trustees approved a change to the Fund's
name, effective December 8, 1995, from "Dreyfus/Laurel New York Tax-Free
Money Fund" to "Dreyfus BASIC New York Municipal Money Market Fund."
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. Prior to December 8, 1995 the Fund was
authorized to issue two classes of shares: Investor shares and Class R
shares. Investor shares are sold primarily to retail investors and were
subject to a distribution fee. Class R shares were sold primarily to bank
trust departments and other financial service providers (including Mellon
Bank and its affiliates) acting on behalf of customers having a qualified trus
t or investment account or relationship at such institution, and were not
subject to a distribution fee. Each class of shares had identical rights and
privileges, except with respect to the distribution fee and voting rights on
matters affecting a single class. Effective December 8, 1995, the Fund's
Investor and Class R designations were eliminated and the Fund became a
single class Fund without a separate class designation. Fund shares currently
are offered to any investor.
Investment income, net of expenses (other than class specific expenses),
realized and unrealized gains and losses are allocated daily to each class of
shares based upon the relative proportion of net assets of each class.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
Actual results may differ from estimates.
(a) Portfolio valuation: Investments are valued at amortized cost in
accordance with Rule 2a-7 of the Investment Company Act of 1940, which has
been determined by the Fund's Board of Trustees to represent the fair value
of the Fund's investments.
<PAGE>
Dreyfus BASIC New York Municipal Money Market Fund
NOTES TO FINANCIAL STATEMENTS (continued)
It is the Fund's policy to maintain a continuous net asset value per
share of $1.00 for the Fund; the Fund has adopted certain investment,
portfolio valuation and dividend and distribution policies to enable it to do
so. There is no assurance, however, that the Fund will be able to maintain a
stable net asset value of $1.00.
(b) Securities transactions and investment income: Securities
transactions are recorded on a trade date basis. Interest income, adjusted
for amortization of premiums and original issue discounts on investments, is
earned from settlement date and recognized on the accrual basis. Realized
gain and loss from securities transactions are recorded on the identified
cost basis.
(c) Concentration of risk: The Fund follows an investment policy of
investing primarily in municipal obligations of one state. Economic changes
affecting the state and certain of its public bodies and municipalities may
affect the ability of issuers within the state to pay interest on, or repay
principal of, municipal obligations held by the Fund.
(d) Distributions to shareholders: It is the policy of the Fund to
declare dividends daily from investment income-net; such dividends are paid
monthly. Dividends from net realized capital gain are normally declared and
paid annually, but the Fund may make distributions on a more frequent basis
to comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Fund not to distribute such gain.
(e) Federal income taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
At June 30, 1996, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see
the Statement of Investments).
NOTE 2 - Investment Management Fee And Other Transactions With Affiliates:
(a) Investment management fee: Pursuant to the New Agreement with the
Manager, the Manager provides or arranges for one or more third parties
and/or affiliates to provide investment advisory, administrative, custody,
fund accounting and transfer agency services to the Fund. The Manager also
directs the investments of the Fund in accordance with its investment
objective, policies and limitations. For these services, the Fund is
contractually obligated to pay the Manager a fee, calculated daily and paid
monthly, at the annual rate of .45% of the value of the Fund's average daily
net assets. The Manager has undertaken through December 7, 1996 to limit its
unitary fee to .35 of 1% of the Fund's average daily net assets excluding
certain fees outlined below. Out of its fee, the Manager pays all of the
expenses of the Fund except brokerage fees, taxes, interest, fees and
expenses of non-interested Trustees (including counsel fees) and
extraordinary expenses. In addition, the Manager is required to reduce its
fee in an amount equal to the Fund's allocable portion of fees and expenses
of the non-interested Trustees (including counsel). The reduction in
management fee, pursuant to the undertaking, amounted to $59,061 during the
year ended June 30, 1996.
<PAGE>
Dreyfus BASIC New York Municipal Money Market Fund
NOTES TO FINANCIAL STATEMENTS (continued)
(b) Distribution plan: The Fund had adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act relating to its
then-existing Investor shares. Under the Plan, the Fund paid annually up to
.25% of the value of the average daily net assets attributable to its
Investor shares to compensate the Distributor and Dreyfus Service
Corporation, an affiliate of the Manager, for shareholder servicing
activities and the Distributor for activities primarily intended to result in
the sale of Investor shares. The Class R shares did not bear a distribution
fee. During the year ended June 30, 1996, the distribution fee for the
Investor shares was $26,897. Effective December 8, 1995, the Plan was
terminated.
(c) Trustees' fees: Each trustee who is not an interested person as
defined in the Act receives $27,000 per year, $1,000 for each Board meeting
attended and $750 for each Audit Committee attended and is reimbursed for
travel and out-of-pocket expenses, which is paid in total by the following
funds: The Dreyfus/Laurel Funds, Inc., The Dreyfus/Laurel Tax-Free Municipal
Funds, and The Dreyfus/Laurel Funds Trust. In addition the Chairman of the
Board receives an annual fee of $75,000 per year. These fees and expenses are
charged and allocated to each series based on net assets.
<PAGE>
Dreyfus BASIC New York Municipal Money Market Fund
Independent Auditors' Report
The Board of Trustees and Shareholders
The Dreyfus/Laurel Tax-Free Municipal Funds:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments of Dreyfus Basic New York Municipal
Money Market Fund (formerly the Dreyfus/Laurel New York Tax-Free Money Fund)
of The Dreyfus/Laurel Tax-Free Municipal Funds as of June 30, 1996, and the
related statement of operations for the year then ended and statements of
changes in net assets for each of the years in the two-year period then ended
and financial highlights for each of the years or period in the three-year
period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits. The financial highlights presented for each of the years in the
three-year period ended November 30, 1993 were audited by other auditors
whose report thereon, dated January 18, 1994, expressed an unqualified
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
financial highlights are free of material misstatement. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation
of securities owned as of June 30, 1996, by correspondence with the custodian.
An audit also includes assessing the accounting principles 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 Dreyfus Basic New York Municipal Money Market Fund of The
Dreyfus/Laurel Tax-Free Municipal Funds as of June 30, 1996, the results of
its operations for the year then ended and the changes in its net assets for
each of the years in the two-year period then ended and financial highlights
for each of the years or period in the three-year period then ended in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, NY
July 29, 1996
PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND
CLASS A, CLASS B, CLASS C AND CLASS R
PREMIER LIMITED TERM MUNICIPAL FUND
CLASS A, CLASS B, CLASS C AND CLASS R
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
NOVEMBER 1, 1996
This Statement of Additional Information ("SAI"), which is not a
prospectus, supplements and should be read in conjunction with the current
Prospectuses of the Premier Limited Term California Municipal Fund
("California Municipal Fund"), Premier Limited Term Massachusetts Municipal
Fund ("Massachusetts Municipal Fund"), and Premier Limited Term New York
Municipal Fund ("New York Municipal Fund"), (formerly the Laurel California
Tax-Free Bond Fund, Laurel Massachusetts Tax-Free Bond Fund, and Laurel New
York Tax-Free Bond Fund, respectively) and the Premier Limited Term
Municipal Fund ("Municipal Fund") (formerly the Laurel Tax-Free Bond Fund)
(collectively, the "Funds"), dated November 1, 1996, as they may be revised
from time to time. The Funds are separate portfolios of The Dreyfus/Laurel
Tax-Free Municipal Funds, a management investment company (the "Trust"),
known as a mutual fund. To obtain a copy of a Fund's Prospectus, please
write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York
11556-0144, or call the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. and Canada -- Call 516-794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Funds' investment
manager.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Funds' shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies . . . . . . . . . . . . . . . .B-3
Management of the Funds. . . . . . . . . . . . . . . . . . . . . . . . . . .B-17
Management Arrangements. . . . . . . . . . . . . . . . . . . . . . . . . . .B-23
Purchase of Fund Shares. . . . . . . . . . . . . . . . . . . . . . . . . . .B-26
Distribution and Service Plans . . . . . . . . . . . . . . . . . . . . . . .B-28
Redemption of Fund Shares. . . . . . . . . . . . . . . . . . . . . . . . . .B-31
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-32
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . . . .B-35
Dividends, Other Distributions and Taxes . . . . . . . . . . . . . . . . . .B-35
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . .B-40
Performance Information. . . . . . . . . . . . . . . . . . . . . . . . . . .B-42
Information About the Fund . . . . . . . . . . . . . . . . . . . . . . . . .B-46
Custodian, Transfer and Dividend Disbursing Agent,
Counsel and Independent Auditors . . . . . . . . . . . . . . . . . . . . B-48
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . B-48
Appendix A Risk Factors - Investing in Massachusetts Municipal Obligations. B-49
Appendix B Risk Factors - Investing in California Municipal Obligations . . B-52
Appendix C - Risk Factors - Investing in New York Municipal Obligations . . B-65
Appendix D - Information About Securities Ratings. . . . . . . . . . . . . B-78
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the section in the Funds' Prospectuses entitled
"Description of the Fund."
Portfolio Securities
The average distribution of investments (at value) in Municipal
Obligations by ratings for each Fund for the fiscal year ended June 30,
1996, computed on a monthly basis, was as follows:
Moody's Investors Standard & Poor's
Service, Inc. Rating Group Municipal
("Moody's") or ("S&P") Fund
Aaa AAA 56.5%
Aa AA 28.8
A A 9.6
MIG1, VMIG, P-1 SP-1+/SP-1,A-1 4.5
Not Rated Not Rated .6*
100.0
California
Moody's or S&P Municipal Fund
Aaa AAA 66.4%
Aa AA 21.7
A A 6.2
MIG1, VMIG1, P-1 SP-1 4.9
Not Rated Not Rated .8*
100.0
Massachusetts
Moody's or S&P Municipal Fund
Aaa AAA 71.5%
Aa AA 10.7
A A 15.1
MIG1, VMIG1, P-1 A-1 2.6
Not Rated Not Rated .1*
100.0
New York
Moody's or S&P Municipal Fund
Aaa AAA 70.1%
Aa AA 15.8
A A 5.1
Baa BBB 4.5
MIG1 SP-1+/SP-1, A-1 4.5
100%
_________________________
* Included in the Not Rated category are securities comprising .6%, .8%
and .1%, respectively of the value of the Fund's assets which, while not
rated, have been determined by Dreyfus to be of comparable quality to
securities in the following rated categories: AAA/Aaa (.2%), AA/Aa (.3%)
and F-1/MIG1, P-1/SP-1,A-1 (.1%) for Municipal Fund, AAA/Aaa (.8%) for
California Municipal Fund and Aaa/AAA (.1%) for Massachusetts Municipal
Fund, respectively.
Description of Municipal Obligations. For purposes of this Statement
of Additional Information, the term "Municipal Obligations" shall mean,
with respect to the Municipal Fund, debt obligations issued by states,
cities, counties, municipalities, municipal agencies and regional
districts, the interest from which is, in the opinion of counsel to the
respective issuers, exempt from Federal income taxes. The term "Municipal
Obligations" and "Massachusetts Municipal Obligations" shall mean, with
respect to the Massachusetts Municipal Fund, debt obligations issued by the
Commonwealth of Massachusetts, its political subdivisions, municipalities
and public authorities and municipal obligations issued by other
governmental entities if, in the opinion of counsel to the respective
issuers, the interest from such obligations is excluded from gross income
for Federal income tax purposes and is exempt from Federal and
Massachusetts personal income taxes. The term "Municipal Obligations" and
"California Municipal Obligations" shall mean, with respect to the
California Municipal Fund, debt obligations issued by the State of
California, its political subdivisions, municipalities and public
authorities and municipal obligations issued by other government entities
if, in the opinion of counsel to the respective issuers, the interest from
such obligations is exempt from Federal and California personal income
taxes. The term "Municipal Obligations" and "New York Municipal
Obligations" shall mean, with respect to the New York Municipal Fund, debt
obligations issued by the State of New York, its political subdivisions,
municipalities and public authorities and municipal obligations issued by
other governmental entities if, in the opinion of counsel to the respective
issuers, the interest from such obligations is excluded from gross income
for Federal income tax purposes and is exempt from Federal and New York
personal income taxes. "Municipal Obligations" (and "Massachusetts
Municipal Obligations," "California Municipal Obligations" and "New York
Municipal Obligations") include the following:
Municipal Bonds. Municipal Bonds, which generally have a maturity of
more than one year when issued, have two principal classifications: General
Obligation Bonds and Revenue Bonds. A Private Activity Bond is a
particular kind of Revenue Bond. The classification of General Obligation
Bonds, Revenue Bonds and Private Activity Bonds are discussed below.
1. General Obligation Bonds. The proceeds of these obligations are
used to finance a wide range of public projects, including construction or
improvement of schools, highways and roads, and water and sewer systems.
General Obligation Bonds are secured by the issuer's pledge of its faith,
credit and taxing power for the payment of principal and interest.
2. Revenue Bonds. Revenue Bonds are issued to finance a wide
variety of capital projects including: electric, gas, water and sewer
systems; highways, bridges and tunnels; port and airport facilities;
colleges and universities; and hospitals. The principal security for a
Revenue Bond is generally the net revenues derived from a particular
facility, group of facilities or, in some cases, the proceeds of a special
excise or other specific revenue source. Although the principal security
behind these bonds may vary, many provide additional security in the form
of a debt service reserve fund whose money may be used to make principal
and interest payments on the issuer's obligations. Some authorities provide
further security in the form of a state's ability (without obligation) to
make up deficiencies in the debt service reserve fund.
3. Private Activity Bonds. Private Activity Bonds, which are
considered Municipal Bonds if the interest paid thereon is exempt from
Federal income tax, are issued by or on behalf of public authorities to
raise money to finance various privately operated facilities for business
and manufacturing, housing, sports and pollution control. These bonds are
also used to finance public facilities such as airports, mass transit
systems, ports and parking. The payment of the principal and interest on
such bonds is dependent solely on the ability of the facility's user to
meet its financial obligations and the pledge, if any, of real and personal
property so financed as security for such payment. As noted in the
Prospectuses and discussed below under "Taxes," interest income on these
bonds may be an item of tax preference subject to the Federal alternative
minimum tax for individuals and corporations.
Municipal Notes. Municipal Notes generally are used to provide for
short-term capital needs and generally have maturities of thirteen months
or less. Municipal Notes include:
1. Tax Anticipation Notes. Tax Anticipation Notes are issued to
finance working capital needs of municipalities. Generally, they are issued
in anticipation of various seasonal tax revenue, such as income, sales, use
and business taxes, and are payable from these specific future taxes.
2. Revenue Anticipation Notes. Revenue Anticipation Notes are
issued in expectation of receipt of other kinds of revenue, such as Federal
revenues available under the Federal Revenue Sharing Programs.
3. Bond Anticipation Notes. Bond Anticipation Notes are issued to
provide interim financing until long-term financing can be arranged. In
most cases, the long-term bonds then provide the money for the repayment of
the Notes.
Municipal Commercial Paper. Issues of Municipal Commercial Paper
typically represent short-term, unsecured, negotiable promissory notes.
These obligations are issued by agencies of state and local governments to
finance seasonal working capital needs of municipalities or to provide
interim construction financing and are paid from general revenues of
municipalities or are refinanced with long-term debt. In most cases,
Municipal Commercial Paper is backed by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks or other institutions.
Municipal Lease Obligations. Municipal leases may take the form of a
lease or a certificate of participation in a purchase contract issued by
state and local government authorities to obtain funds to acquire a wide
variety of equipment and facilities such as fire and sanitation vehicles,
computer equipment and other capital assets. A lease obligation does not
constitute a general obligation of the municipality for which the
municipality's taxing power is pledged, although the lease obligation is
ordinarily backed by the municipality's covenant to budget for, appropriate
and make payments due under the lease obligation. Municipal leases have
special risks not normally associated with Municipal Bonds. These
obligations frequently contain "non-appropriation" clauses that provide
that the governmental issuer of the obligation has no obligation to make
future payments under the lease or contract unless money is appropriated
for such purposes by the legislative body on a yearly or other periodic
basis. In addition to the non-appropriation risk, municipal leases
represent a type of financing that has not yet developed the depth of
marketability associated with Municipal Bonds; moreover, although the
obligations will be secured by the leased equipment, the disposition of the
equipment in the event of foreclosure might prove difficult. For purposes
of the 15% limitation on the purchase of illiquid securities, a Fund will
not consider the municipal lease obligations or certificates of
participation in municipal lease obligations in which it invests as liquid,
unless Dreyfus shall determine, based upon such factors as the frequency of
trades and quotes for the obligation, the number of dealers willing to
purchase or sell the security and the number of other potential buyers, the
willingness of dealers to undertake to make a market in the security and
the nature of marketplace trades, that a security shall be treated as
liquid for purposes of such limitation.
Obligations of issuers of Municipal Obligations are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights
and remedies of creditors. In addition, the obligations of such issuers
may become subject to laws enacted in the future by Congress, state
legislators, or referenda extending the time for payment of principal
and/or interest, or imposing other constraints upon enforcement of such
obligations or upon municipalities to levy taxes. There is also the
possibility that, as a result of litigation or other conditions, the power
or ability of any issuer to pay, when due, the principal of and interest on
its Municipal Obligations may be materially affected.
Investments in Municipal Bond Index Futures Contracts and Options on
Interest Rate Futures Contracts. The Funds may invest in municipal bond
index futures contracts and interest rate futures contracts that are traded
on a domestic exchange or board of trade. Such investments may be made by
a Fund solely for the purpose of hedging against changes in the value of
its portfolio securities due to anticipated changes in interest rates and
market conditions, and not for purposes of speculation. Further, such
investments will be made only in unusual circumstances, such as when
Dreyfus anticipates an extreme change in interest rates or market
conditions.
Municipal Bond Index Futures Contracts. A municipal bond index
futures contract is an agreement pursuant to which two parties agree to
take or make delivery of an amount of cash equal to a specific dollar
amount times the difference between the value of the index at the close of
the last trading day of the contract and the price at which the index
contract was originally written. No physical delivery of the underlying
municipal bonds in the index is made. Municipal bond index futures
contracts based on an index of 40 tax-exempt, long-term municipal bonds
with an original issue size of at least $50 million and a rating of A- or
higher by S&P or A or higher by Moody's began trading mid-1985.
The purpose of the acquisition or sale of a municipal bond index
futures contract by a Fund, as the holder of long-term municipal
securities, is to protect the Fund from fluctuations in interest rates on
tax-exempt securities without actually buying or selling long-term
municipal securities.
Unlike the purchase or sale of a Municipal Bond, no consideration is
paid or received by a Fund upon the purchase or sale of a futures contract.
Initially, a Fund will be required to deposit with the broker an amount of
cash or cash equivalents equal to approximately 10% of the contract amount
(this amount is subject to change by the board of trade on which the
contract is traded and members of such board of trade may charge a higher
amount). This amount is known as initial margin and is in the nature of a
performance bond or good faith deposit on the contract which is returned to
the Fund upon termination of the futures contract, assuming that all
contractual obligations have been satisfied. Subsequent payments, known as
variation margin, to and from the broker, will be made on a daily basis as
the price of the index fluctuates, making the long and short positions in
the futures contract more or less valuable, a process known as marking-to-
market. At any time prior to the expiration of the contract, a Fund may
elect to close the position by taking an opposite position, which will
operate to terminate the Fund's existing position in the futures contract.
There are several risks in connection with the use of a municipal bond
index futures contract as a hedging device. Successful use of municipal
bond index futures contracts by the Funds is subject to Dreyfus' ability to
predict correctly movements in the direction of interest rates. Such
predictions involve skills and techniques which may be different from those
involved in the management of a long-term municipal bond portfolio. In
addition, there can be no assurance that there will be a correlation
between movements in the price of the municipal bond index and movements in
the price of the Municipal Bonds which are the subject of the hedge. The
degree of imperfection of correlation depends upon various circumstances,
such as variations in speculative market demand for futures contracts and
municipal securities, technical influences on futures trading, and
differences between the municipal securities being hedged and the municipal
securities underlying the municipal bond index futures contracts, in such
respects as interest rate levels, maturities and creditworthiness of
issuers. A decision of whether, when and how to hedge involves the exercise
of skill and judgment and even a well-conceived hedge may be unsuccessful
to some degree because of market behavior or unexpected trends in interest
rates.
Although the Funds intend to purchase or sell municipal bond index
futures contracts only if there is an active market for such contracts,
there is no assurance that a liquid market will exist for the contracts at
any particular time. Most domestic futures exchanges and boards of trade
limit the amount of fluctuation permitted in futures contract prices during
a single trading day. The daily limit establishes the maximum amount the
price of a futures contract may vary either up or down from the previous
day's settlement price at the end of a trading session. Once the daily
limit has been reached in a particular contract, no trades may be made that
day at a price beyond that limit. The daily limit governs only price
movement during a particular trading day and, therefore, does not limit
potential losses because the limit may prevent the liquidation of
unfavorable positions. It is possible that futures contract prices could
move to the daily limit for several consecutive trading days with little or
no trading, thereby preventing prompt liquidation of futures positions and
subjecting some futures traders to substantial losses. In such event, it
will not be possible to close a futures position and, in the event of
adverse price movements, the Funds would be required to make daily cash
payments of variation margin. In such circumstances, an increase in the
value of the portion of the portfolio being hedged, if any, may partially
or completely offset losses on the futures contract. As described above,
however, there is no guarantee that the price of Municipal Bonds will, in
fact, correlate with the price movements in the municipal bond index
futures contract and thus provide an offset to losses on a futures
contract.
If a Fund has hedged against the possibility of an increase in
interest rates adversely affecting the value of the Municipal Bonds held in
its portfolio and rates decrease instead, the Fund will lose part or all of
the benefit of the increased value of the Municipal Bonds it has hedged
because it will have offsetting losses in its futures positions. In
addition, in such situations, if a Fund has insufficient cash, it may have
to sell securities to meet daily variation margin requirements. Such sales
of securities may, but will not necessarily, be at increased prices which
reflect the decline in interest rates. A Fund may have to sell securities
at a time when it may be disadvantageous to do so.
When the Funds purchase municipal bond index futures contracts, an
amount of cash and U.S. government securities or other high grade debt
securities equal to the market value of the futures contracts will be
deposited in a segregated account with the Funds' custodian (and/or such
other persons as appropriate) to collateralize the positions and thereby
insure that the use of such futures contracts is not leveraged. In
addition, the ability of the Funds to trade in municipal bond index futures
contracts and options on interest rate futures contracts may be materially
limited by the requirements of the Internal Revenue Code of 1986, as
amended (the "Code"), applicable to a regulated investment company. See
"Taxes" below.
Options on Interest Rate Futures Contracts. A Fund may purchase put
and call options on interest rate futures contracts which are traded on a
domestic exchange or board of trade as a hedge against changes in interest
rates, and may enter into closing transactions with respect to such options
to terminate existing positions. A Fund will sell put and call options on
interest rate futures contracts only as part of closing sale transactions
to terminate its options positions. There is no guarantee that such closing
transactions can be effected.
Options on interest rate futures contracts, as contrasted with the
direct investment in such contracts, gives the purchaser the right, in
return for the premium paid, to assume a position in interest rate futures
contracts at a specified exercise price at any time prior to the expiration
date of the options. Upon exercise of an option, the delivery of the
futures position by the writer of the option to the holder of the option
will be accompanied by delivery of the accumulated balance in the writer's
futures contract margin account, which represents the amount by which the
market price of the futures contract exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of the option on the
futures contract. The potential loss related to the purchase of an option
on interest rate futures contracts is limited to the premium paid for the
option (plus transaction costs). Because the value of the option is fixed
at the point of sale, there are no daily cash payments to reflect changes
in the value of the underlying contract; however, the value of the option
does change daily and that change would be reflected in the net asset value
of a Fund.
There are several risks relating to options on interest rate futures
contracts. The ability to establish and close out positions on such
options will be subject to the existence of a liquid market. In addition,
a Fund's purchase of put or call options will be based upon predictions as
to anticipated interest rate trends by Dreyfus, which could prove to be
inaccurate. Even if Dreyfus' expectations are correct there may be an
imperfect correlation between the change in the value of the options and of
a Fund's portfolio securities.
Tender Option Bonds. Each Fund may invest up to 10% of the value of
its assets in tender option bonds. A tender option bond is a Municipal
Obligation (generally held pursuant to a custodial arrangement) having a
relatively long maturity and bearing interest at a fixed rate substantially
higher than prevailing short-term tax-exempt rates, that has been coupled
with the agreement of a third party, such as a bank, broker-dealer or other
financial institution, pursuant to which such institution grants the
security holders the option, at periodic intervals, to tender their
securities to the institution and receive the face value thereof. As
consideration for providing the option, the financial institution receives
periodic fees equal to the difference between the Municipal Obligation's
fixed coupon rate and the rate, as determined by a remarketing or similar
agent at or near the commencement of such period, that would cause the
securities, coupled with the tender option, to trade at par on the date of
such determination. Thus, after payment of this fee, the security holder
effectively holds a demand obligation that bears interest at the prevailing
short-term tax-exempt rate. Dreyfus, on behalf of each Fund, will consider
on an ongoing basis the creditworthiness of the issuer of the underlying
Municipal Obligation, of any custodian and the third-party provider of the
tender option. In certain instances and for certain tender option bonds,
the option may be terminable in the event of a default in payment of
principal or interest on the underlying Municipal Obligations and for other
reasons. No Fund will invest more than 15% of the value of its net assets
in illiquid securities, which would include tender option bonds for which
the required notice to exercise the tender feature is more than seven days
if there is no secondary market available for these obligations.
Use of Ratings as Investment Criteria. The ratings of nationally
recognized statistical rating organizations ("NRSROs") such as S&P and
Moody's represent the opinions of these agencies as to the quality of
Municipal Obligations which they rate. It should be emphasized, however,
that such ratings are relative and subjective and are not absolute
standards of quality. These ratings will be used by the Funds as initial
criteria for the selection of portfolio securities, but the Funds will also
rely upon the independent advice of Dreyfus to evaluate potential
investments. Among the factors which will be considered are the long-term
ability of the issuer to pay principal and interest and general economic
trends. Further information concerning the ratings of the NRSROs and their
significance is contained in the Appendix to this Statement of Additional
Information.
After being purchased by a Fund, the rating of a Municipal Obligation
may be reduced below the minimum rating required for purchase by the Fund
or the issuer of the Municipal Obligation may default on its obligations
with respect to the Municipal Obligation. In that event, the Fund will
dispose of the Municipal Obligation as soon as practicable, consistent with
achieving an orderly disposition of the Municipal Obligation, unless the
Trust's Board of Trustees determines that disposal of the Municipal
Obligation would not be in the best interest of the Fund. In addition, it
is possible that a Municipal Obligation may cease to be rated or an NRSRO
might not timely change its rating of a particular Municipal Obligation to
reflect subsequent events. Although neither event will require the sale of
such Municipal Obligation by a Fund, Dreyfus will consider such event in
determining whether the Fund should continue to hold the Municipal
Obligation. In addition, if an NRSRO changes its rating system, a Fund
will attempt to use comparable ratings as standards for its investments in
accordance with its investment objectives and policies.
Floating Rate and Variable Rate Obligations. A Fund may purchase
floating rate and variable rate obligations, including participation
interests therein. Floating rate or variable rate obligations provide that
the rate of interest is set as a specific percentage of a designated base
rate (such as the prime rate at a major commercial bank) and that the Fund
can demand payment of the obligation at par plus accrued interest.
Variable rate obligations provide for a specified periodic adjustment in
the interest rate, while floating rate obligations have an interest rate
which changes whenever there is a change in the external interest rate.
Frequently such obligations are secured by letters of credit or other
credit support arrangements provided by banks. The quality of the
underlying creditor or of the bank, as the case may be, must, as determined
by Dreyfus under the supervision of the Trustees, be equivalent to the
quality standard prescribed for the Funds.
A Fund may invest in participation interests purchased from banks in
floating rate or variable rate tax-exempt Municipal Obligations owned by
banks. A participation interest gives the purchaser an undivided interest
in the Municipal Obligation in the proportion that the Fund's participation
interest bears to the total principal amount of the Municipal Obligation,
and provides a demand feature. Each participation is backed by an
irrevocable letter of credit or guarantee of a bank (which may be the bank
issuing the participation interest, a bank issuing a confirming letter of
credit to that of the issuing bank, or a bank serving as agent of the
issuing bank with respect to the possible repurchase of the participation
interest) that Dreyfus, under the supervision of the Trustees, has
determined meets the prescribed quality standards for the Funds. A Fund
has the right to sell the instrument back to the issuing bank or draw on
the letter of credit on demand for all or any part of the Fund's
participation interest in the Municipal Obligation, plus accrued interest.
Banks will retain a service and letter of credit fee and a fee for issuing
repurchase commitments in an amount equal to the excess of the interest
paid on the Municipal Obligations over the negotiated yield at which the
instruments were purchased by a Fund.
When-Issued Securities. A Fund may purchase Municipal Obligations on
a when-issued basis, (i.e., for delivery beyond the normal settlement date
at the stated price and yield). The payment obligation and the interest
rate that will be received on the Municipal Obligations purchased on a
when-issued basis are each fixed at the time the buyer enters into the
commitment. Although a Fund will purchase Municipal Obligations on a when-
issued basis only with the intention of actually acquiring the securities,
the Fund may sell these securities before the settlement date if it is
deemed advisable as a matter of investment strategy.
Municipal Obligations purchased on a when-issued basis and the
securities held in the portfolio of each Fund are subject to changes in
market value based upon the public's perception of the creditworthiness of
the issuer and changes, real or anticipated, in the level of interest rates
(which will generally result in similar changes in value, i.e., both
experiencing appreciation when interest rates decline and depreciation when
interest rates rise). Therefore, to the extent a Fund remains
substantially fully invested at the same time that it has purchased
securities on a when-issued basis, there will be a greater possibility of
fluctuation in the Fund's net asset value. Purchasing Municipal
Obligations on a when-issued basis can involve a risk that the yields
available in the market when the delivery takes place may actually be
higher than those obtained in the transaction.
A separate account of each Fund consisting of cash or liquid debt
securities equal to the amount of the when-issued commitments will be
established with the Fund's custodian. When the time comes to pay for when-
issued securities, the Fund will meet its obligations from then-available
cash flow, sale of securities held in the separate account, sale of other
securities or, although it would not normally expect to do so, from the
sale of the when-issued securities themselves (which may have a value
greater or lesser than the Fund's payment obligations). Sale of securities
to meet such obligations carries with it a greater potential for the
realization of capital gains, which are not exempt from Federal income tax.
Taxable Investments. Each Fund anticipates being as fully invested as
practicable in Municipal Obligations. Because each Fund's purpose is to
provide income exempt from Federal and state personal income taxes, a Fund
will invest in taxable obligations only if and when the Trustees believe it
would be in the best interests of its shareholders to do so. Situations in
which a Fund may invest up to 20% of its total assets in taxable securities
include: (a) pending investment of proceeds of sales of shares of the Fund
or of portfolio securities, (b) pending settlement of purchases of
portfolio securities, and (c) when the Fund is attempting to maintain
liquidity for the purpose of meeting anticipated redemptions. A Fund may
temporarily invest more than 20% of its total assets in taxable securities
to maintain a "defensive" posture when, in the opinion of Dreyfus, it is
advisable to do so because of adverse market conditions affecting the
market for Municipal Obligations. A Fund may invest in only the following
kinds of taxable securities maturing in one year or less from the date of
purchase: (1) obligations of the United States Government, its agencies or
instrumentalities; (2) commercial paper rated Prime-1 by Moody's or A-1+ or
A-1 by S&P; (3) certificates of deposit of domestic banks with total assets
of $1 billion or more; and (4) repurchase agreements (instruments under
which the seller of a security agrees to repurchase the security at a
specific time and price) with respect to any securities that the Fund is
permitted to hold.
Repurchase Agreements. A Fund may enter into repurchase agreements
with member banks of the Federal Reserve System or certain non-bank
dealers. Under each repurchase agreement the selling institution will be
required to maintain the value of the securities subject to the agreement
at not less than their repurchase price. If a particular bank or non-bank
dealer defaults on its obligation to repurchase the underlying debt
instrument as required by the terms of a repurchase agreement, a Fund will
incur a loss to the extent that the proceeds it realizes on the sale of the
collateral are less than the repurchase price of the instrument. In
addition, should the defaulting bank or non-bank dealer file for
bankruptcy, a Fund could incur certain costs in establishing that it is
entitled to dispose of the collateral and its realization on the collateral
may be delayed or limited. Investments in repurchase agreements are
subject to the policy prohibiting investment of more than 10% of a Fund's
assets in restricted securities, securities without readily available
market quotations and repurchase agreements maturing in more than seven
days.
As noted in the Prospectuses, each of the Funds may, on occasion,
invest in securities issued by other investment companies. The Company may
in the future seek to achieve the Fund's investment objective by investing
all of the Fund's net investable assets in another investment company
having the same investment objective and substantially the same investment
policies and restrictions as those applicable to the Fund. Shareholders of
the Fund will be given at least 30 days' notice of any such investment.
Such securities will be acquired by a Fund within the limits prescribed by
the Investment Company Act of 1940 ("1940 Act"), which include, subject to
certain exceptions, a prohibition against a Fund's investing more than 10%
of the value of its total assets in such securities.
Special Factors Affecting the Massachusetts Municipal Fund.
The Commonwealth of Massachusetts and certain of its cities and towns
and public bodies have experienced financial difficulties that have
adversely affected their credit standing. The prolonged effects of such
financial difficulties could adversely affect the market value of the
Massachusetts Municipal Obligations held by the Massachusetts Municipal
Fund. The information summarized below describes some of the more
significant factors that could affect the Fund or the ability of the
obligors to pay debt service on certain of these securities. The sources of
such information are the official statements of issuers located in the
Commonwealth of Massachusetts, as well as other publicly available
documents, and statements of public officials. The Trust has not
independently verified any of the information contained in such statements
and documents, but the Trust is not aware of facts which would render such
information inaccurate.
Investing in Massachusetts Municipal Obligations. Investors should
consider carefully the special risks inherent in the Fund's investment in
Massachusetts Municipal Obligations. Since 1989, Massachusetts has
experienced growth rates significantly below the national average and an
economic recession in 1990 and 1991 caused negative growth rates in
Massachusetts. Massachusetts' economic difficulties and fiscal problems in
the late 1980s and 1990s caused several rating agencies to lower their
ratings of Massachusetts Municipal Obligations. A return of persistent
serious financial difficulties could adversely affect the market values and
marketability of, or result in default in payment on outstanding
Massachusetts Municipal Obligations. Investors should review Appendix A
which more fully sets forth these and other risk factors.
Special Factors Affecting the California Municipal Fund.
Some of the significant financial considerations relating to the
Funds' investments in California Municipal Obligations are summarized
below. This summary information is derived principally from official
statements and prospectuses relating to securities offerings of the State
of California and various local agencies in California, available as of the
date of this Statement of Additional Information and does not purport to be
a complete description of any of the considerations mentioned herein. The
accuracy and completeness of the information contained in such official
statements has not been verified independently.
Investing in California Municipal Obligations. Investors should
consider carefully the special risks inherent in the Fund's investment in
California Municipal Obligations. These risks result from certain
amendments to the California Constitution and other statues that limit the
taxing and spending authority of California governmental entities, as well
as from the general financial condition of the State of California. From
mid-1990 to late 1993, the State suffered a recession with the worst
economic, fiscal and budget conditions since the 1930s. As a result, the
State experienced recurring budget deficits for four of the five fiscal
years ended June 30, 1992. The State had an operating surplus of
approximately $109 million in 1992-93 and $836 million in fiscal 1993-94.
However, at June, 1994, according to California's Department of Finance,
the State's Special Fund for Economic Uncertainties had an accumulated
deficit, on a budget basis, of approximately $1.8 billion. A further
consequence of the large budget imbalances over the last three fiscal years
has been that the State depleted its available cash resources and has had
to use a series of external borrowings to meet its cash needs. To meet its
cash flow needs in the 1994-95 fiscal year, the State issued, in July and
August 1994, $4.0 billion of revenue anticipation warrants and $3.0 billion
of revenue anticipation notes. The 1994-95 Budget Act contained a plan to
retire a projected $1.025 billion deficit in the 1995-96 fiscal year. As a
result of the deterioration of the state's budget and cash situation
between October 1991 and July 1994, the rating on the State's general
obligation bonds was reduced by S&P from AAA to A, by Moody's from Aaa to
A1 and by Fitch AAA to A. These and other factors may have the effect of
impairing the ability of the issuers of California Municipal Obligations to
pay interest on, or repay principal of, such California Municipal
Obligations. Investors should review Appendix B which sets froth
additional information relating to investing in California Municipal
Obligations.
Special Factors Affecting the New York Municipal Fund.
Some of the significant financial considerations relating to the New
York Municipal 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 New York Municipal 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 the 1993 and 1994 fiscal years. After reflecting a 1993
year-end deposit to the refund reserve account of $671 million, reported
1993 General Fund receipts were $45 million higher than originally
projected in April 1992. The State completed the 1994 fiscal year with an
operating surplus of $914 million. The State reported a General Fund
operating deficit of $1.426 billion for the 1995 fiscal year. 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 its
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. The
rating changes reflect the rating agencies' concerns about the financial
condition of New York State and City, the heavy debt load of the State and
City, and economic uncertainties in the region. Investors should review
Appendix C which more fully sets forth these and other risk factors.
Investment Restrictions
The following are fundamental investment restrictions of each Fund. No
Fund may:
1. Purchase any securities which would cause more than 25% of the
value of a Fund's total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities and state or municipal governments and their
political subdivisions are not considered members of any industry. In
addition, this limitation does not apply to investments of domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S.
banks.)
2. Borrow money or issue senior securities as defined in the 1940
Act, except that (a) a Fund may borrow money in an amount not exceeding
one-third of the Fund's total assets at the time of such borrowing, and (b)
a Fund may issue multiple classes of shares. The purchase or sale of
futures contracts and related options shall not be considered to involve
the borrowing of money or issuance of senior securities.
3. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans.
For purposes of this restriction, debt instruments and repurchase
agreements shall not be treated as loans.
4. Underwrite securities issued by any other person, except to the
extent at the purchase of securities and the later disposition of such
securities in accordance with the Fund's investment program may be deemed
an underwriting.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent a
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage in
the real estate business or invest or deal in real estate or interests
therein).
6. Purchase or sell commodities, except that each Fund may enter
into futures contracts and related options, forward currency contracts and
other similar instruments.
Each Fund of the Trust may, notwithstanding any other fundamental
investment policy or restriction, invest all of its investable assets in
securities of a single open-end management investment company with
substantially the same fundamental investment objectives, policies, and
restrictions as the Fund.
The following are non-fundamental investment restrictions of each Fund
of the Trust:
1. The Trust will not purchase or retain the securities of any
issuer if the officers, directors or Trustees of the Trust, its advisers,
or managers owning beneficially more than one half of one percent of the
securities of each issuer together own beneficially more than 5% of such
securities.
2. No Fund will purchase securities of issuers (other than
securities issued or guaranteed by domestic or foreign governments or
political subdivisions thereof), including their predecessors, that have
been in operation for less than three years, if by reason thereof the value
of such Fund's investment in securities would exceed 5% of such Fund's
total assets. For purposes of this limitation, sponsors, general partners,
guarantors and originators of underlying assets may be treated as the
issuer of a security.
3. No Fund will purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities will exceed 5% of its total
assets, except that: (a) this restriction shall not apply to standby
commitments, and (b) this restriction shall not apply to a Fund's
transactions in futures contracts and related options.
4. No Fund will purchase warrants if at the time of such purchase:
(a) more than 5% of the value of such Fund's assets would be invested in
warrants, or (b) more than 2% of the value of such Fund's assets would be
invested in warrants that are not listed on the New York Stock Exchange
(NYSE) or American Stock Exchange (AMEX) (for purposes of this undertaking,
warrants acquired by a Fund in units or attached to securities will be
deemed to have no value).
5. No Fund will invest more than 15% of the value of its net assets
in illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, time deposits with maturities in excess
of seven days, and other securities which are not readily marketable. For
purposes of this restriction, illiquid securities shall not include
commercial paper issued pursuant to Section 4(2) of the Securities Act of
1933 and securities which may be resold under Rule 144A under the
Securities Act of 1933, provided that the Board of Trustees, or its
delegate, determines that such securities are liquid, based upon the
trading markets for the specific security.
6. No Fund may invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation or
acquisition of assets and except to the extent otherwise permitted by the
1940 Act.
7. No Fund will purchase oil, gas or mineral leases (a Fund may,
however, purchase and sell the securities of companies engaged in the
exploration, development, production, refining, transporting and marketing
of oil, gas or minerals).
8. No Fund shall sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amounts to the securities
sold short, and provided that transactions in futures contracts and options
are not deemed to constitute selling securities short.
9. No Fund shall purchase securities on margin, except that a Fund
may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection with futures
contracts and options on futures contracts shall not constitute purchasing
securities on margin.
10. No Fund shall purchase any security while borrowings representing
more than 5% of such Fund's total assets are outstanding.
If a percentage restriction is adhered to at the time of an
investment, a later increase or decrease in such percentage resulting from
a change in the values of assets will not constitute a violation of such
restriction.
Each of the foregoing restrictions applies to each Fund unless
otherwise indicated. Under the 1940 Act, a fundamental policy may not be
changed without the vote of a majority of the outstanding voting securities
of a Fund, as defined in the 1940 Act. "Majority" means the lesser of (1)
67% or more of the shares present at a Fund's meeting, if the holders of
more than 50% of the outstanding shares of a Fund are present or
represented by proxy, or (2) more than 50% of the outstanding shares of the
Fund. Non-fundamental investments restrictions may be changed by vote of a
majority of the Trust's Board of Trustees at any time.
In order to permit the sale of the Funds' shares in certain states,
the Trust may make commitments more restrictive than the investment
restrictions described above. Accordingly, the Fund's net assets would be
invested in warrants not listed on AMEX or NYSE. Further, the Funds have
given a representation that investments will not be made in real estate
limited partnerships. Should the Trust determine that any such commitment
is no longer in the best interests of the Trust and its shareholders, it
will revoke the commitment by terminating sales of its shares in the state
involved.
MANAGEMENT OF THE FUNDS
PRINCIPAL SHAREHOLDERS
As of October 3, 1996, the following companies/individuals owned
beneficially 5% or more of the outstanding Class A shares of the Premier
Limited Term California Municipal Fund: Virginia Ripner, 2641 State
Street, Santa Barbara, CA 93105-5513; 14% record; Donaldson Lufkin Jenrette
Securities Corp., P.O. Box 2052, Jersey City, N.J. 07303-9998; 35% record;
and Paul Mickelsen, 12 Corporate Plaza, Newport Beach, CA 92660; 5% record.
As of October 3, 1996, the following companies/individuals owned
beneficially 5% or more of the outstanding Class B shares of the Premier
Limited Term California Municipal Fund: Ruth Roelke, 32149 Beachfront
Lane, Westlake Village, CA 91361-3605; 39% record; Smith Barney, Inc.; 388
Greenwich Street, New York, NY 10013; 7% record; Frank Lem and Alice Lem,
2850 Aetna Way, San Jose, CA 95121-2301; 7% record; Clarice Ellis, 211
South Rockingham Avenue, Los Angeles, CA 90049-3635; 7% record; and
Donaldson Lufkin Jenrette Securities Corp., P.O. Box 2052, Jersey City,
N.J. 07303-9998; 35% record.
As of October 3, 1996, the following companies/individuals owned
beneficially 5% or more of the outstanding Class R shares of the Premier
Limited Term California Municipal Fund: Boston Safe Deposit and Trust
Company, P.O. Box 3198, Pittsburgh, PA 15230-3198; 22% record.
As of October 3, 1996, the following companies/individuals owned
beneficially 5% or more of the outstanding Class B shares of the Premier
Limited Term Massachusetts Municipal Fund: Beatrice and Ray Cowell, P.O.
Box 156, Otis, MA 01253-0156; 78% record; and Millicent E. Markham, R.R. 3
Box 86, Great Barrington, MA 01230-9809; 20% record.
As of October 3, 1996, the following companies/individuals owned
beneficially 5% or more of the outstanding Class R shares of the Premier
Limited Term Massachusetts Municipal Fund: Boston and Company, P.O. Box
3198, Pittsburgh, PA 15230-3198; 26% record.
As of October 3, 1996, the following companies/individuals owned
beneficially 5% or more of the outstanding Class A shares of the Premier
Limited Term New York Municipal Fund: Herman and Virginia Sadles, 94
Juniper Street, Islip, NY 11751-1224; 9% record; Paul Schwartz, 132 West
58th Street, New York, NY 10019-2135; 6% record; and James Gruber, 59
Fremont Street, Lindenhurst, NY 11757-3806; 6% record.
As of October 3, 1996, the following companies/individuals owned
beneficially 5% or more of the outstanding Class B shares of the Premier
Limited Term New York Municipal Fund: Joseph A. Vasti, 8 Dickens Street,
Stony Point, NY 10980-3653; 37% record; Theresa Romola, 315 South Bay
Avenue, Islip, NY 11751-4804; 32% record; Mark Specthrie, 201 Wisner Ave.,
Middleton, NY 10940-3209; 15% record; A. Gary Miller, 2877 Mt. Pleasant
Road, York, NY 14592; 8% record; and Kathleen A. Winde, 6706 Byron Holley
Road, Byron, NY 14422-9560; 7% record.
As of October 3, 1996, the following companies/individuals owned
beneficially 5% or more of the outstanding Class C shares of the Premier
Limited Term New York Municipal Fund: Madhukar Shanbag, 290 Wood Acres
Drive, East Amherst, NY 14031-1460; 51% record and James and Alice Mchale,
2 Meadow Gate, Saint James, NY 11780-1349; 49% record.
As of October 3, 1996, the following companies/individuals owned
beneficially 5% or more of the outstanding Class R shares of the Premier
Limited Term New York Municipal Fund: Boston Safe Deposit and Trust
Company, P.O. Box 3198, Pittsburgh, PA 15230-3198; 70% record.
As of October 3, 1996, the following companies/individuals owned
beneficially 5% or more of the outstanding Class B shares of the Premier
Limited Term Municipal Fund: David Zenelman, 5563 Northumberland Street,
Pittsburgh, PA; 15217-1163; 32% record; Helen Watson, 1117 Marquette Ave.,
Minneapolis, MN 55403-2449; 23% record; Merrill Lynch, Pierce Fenner &
Smith, Inc.; 4800 Deer Lake Drive, Jacksonville, FL 32246-6484; 20% record;
and Duncan and Joya Davis, 523 Hickory Circle, Ringgold, GA 30736-5244; 13%
record.
As of October 3, 1996, the following companies/individuals owned
beneficially 5% or more of the outstanding Class C shares of the Premier
Limited Term Municipal Fund: Roger Harrison, 920 South Gretna Green Way,
Los Angeles, CA 90049-5835; 20% record; Joseph Bellavance, P.O. Box 383,
Nashua, NH 03061-0383; 20% record; Wong Tsai Shih, 721 5th Street, Hull, IA
51239-7443; 6% record; and John Barzizza, 4615 Bee Coves Rd, Austin, TX
78746-5253; 11% record.
As of October 3, 1996, the following companies/individuals and
beneficially 5% or more of the outstanding Class R shares of the Premier
Limited Term Municipal Fund: Boston Safe Deposit and Trust Company, P.O.
Box 3198, Pittsburgh, PA 15230-3198; 16% record.
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 Funds, and in
providing services to the Funds as custodian, as well as Dreyfus'
investment advisory activities, may raise issues under these provisions.
Mellon Bank has been advised by counsel that the activities contemplated
under these arrangements are consistent with statutory and regulatory
obligations.
Changes in either federal or state statutes and regulations relating
to the permissible activities of banks and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of such future statutes and regulations, could prevent
Mellon Bank or Dreyfus from continuing to perform all or a part of the
above services for its customers and/or a Fund. If Mellon Bank or Dreyfus
were prohibited from serving a Fund in any of its present capacities, the
Board of Trustees would seek an alternative provider(s) of such services.
TRUSTEES AND OFFICERS
The Trust has a Board composed of eleven Trustees which supervises the
Trust's investment activities and reviews contractual arrangements with
companies that provide the Funds with services. The following lists the
Trustees and officers and their positions with the Trust and their present
and principal occupations during the past five years. Each Trustee who is
an "interested person" of the Trust (as defined in the Investment Company
Act of 1940, as amended (the "Act")) is indicated by an asterisk. Each of
the Trustees also serves as a Director of The Dreyfus/Laurel Funds, Inc.
and as a Trustee of The Dreyfus/Laurel 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; Director,
Access Capital Strategies Community Investment Fund, Inc. -
Institutional Investment Portfolio. Age: 81 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, Access Capital Strategic Community Investment Fund, Inc. -
Bank Portfolio; Director and Vice Chairman of the Board Home Owners
Federal Savings and Loan (prior to May 1990). Age: 79 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. Director, Access
Capital Strategic Community Investment Fund, Inc. - Bank Portfolio and
Institutional Investment Portfolio. He is also Chairman of the
Board of Noel Group, Inc., a venture capital company; and a director
of the Muscular Dystrophy Association, HealthPlan Services
Corporation, Belding Heminway, Inc., Curtis Industries, Inc., Simmons
Outdoor Corporation and Staffing Resources, Inc. For more than five
years prior to January 1995, 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.
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.; Director, Access Capital
Strategic Community Investment Fund, Inc. - Bank Portfolio. Age: 61
years old. Address: 40 Norfolk Road, Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Trustee of the Trust; Partner, Reed, Smith, Shaw &
McClay (law firm); Director, Access Capital Strategic Community
Investment Fund, Inc. - Bank Portfolio. Age: 68 years old. Address:
204 Woodcock Drive, Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Trustee of the Trust; 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; Director, Access
Capital Strategic Community Investment Fund, Inc. - Institutional
Investment Portfolio. Since May 1991, Mr. Goeschel has served as a
Trustee of Sewickley Valley Hospital. Age: 74 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. Director, Access Capital Strategic Community
Investment Fund, Inc. - Bank Portfolio; 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; Director,
Access Capital Strategic Community Investment Fund, Inc. -
Institutional Investment Portfolio. Age: 78 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., Director,
Access Capital Strategic Community Investment Fund, Inc. -
Institutional Investment Portfolio. Age: 48 years old. Address: 401
Edgewater Place, Wakefield, Massachusetts 01880.
o+JOHN J. SCIULLO. Trustee of the Trust; Dean Emeritus and Professor of
Law, Duquesne University Law School; Director, Urban Redevelopment
Authority of Pittsburgh; Director, Access Capital Strategic Community
Investment Fund, Inc. - Institutional Investment Portfolio. Age: 64
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/Pilgrim Community Health Care, Inc.; Director, Access Capital
Strategic Community Investment Fund, Inc. - Bank Portfolio; 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: 46 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 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: 60 State
Street, Boston, Massachusetts 02109.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Trust,
The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Funds, Inc.
(since July 1996); Supervisor of Treasury Services and Administration
of Funds Distributor, Inc. From April 1993 to January 1995, Mr.
Conroy was a Senior Fund Accountant for Investors Bank & Trust
Company. From December 1991 to March 1993, Mr. Conroy was employed as
a Fund Accountant at TBC. Prior to December 1991, Mr. Conroy attended
Merrimack College where he received a bachelors degree in Business
Administration. Age: 27 years old. Address: 60 State Street, Boston,
Massachusetts 02109.
#RICHARD W. INGRAM. Vice President and Assistant Treasurer of the Trust,
The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Funds, Inc.
(since July 1996); Senior Vice President and Director of Client
Services and Treasury Operations of Funds Distributor, Inc. From
March 1994 to November 1995, Mr. Ingram was Vice President and
Division Manager for First Data Investor Services Group. From 1989 to
1994, Mr. Ingram was Vice President, Assistant Treasurer and Tax
Director-Mutual Funds of TBC. Age: 40 years old. Address: 60 State
Street, Boston, Massachusetts 02109.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Trust, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Funds, Inc. (since
July 1996); Vice President and Manager of Treasury Services and
Administration of Funds Distributor, Inc. From 1989 to July 1994, Ms.
Nelson was an Assistant Vice President and Client Manager for TBC.
Age: 32 years old. Address: 60 State Street, Boston, Massachusetts
02109.
#JOHN E. PELLETIER. Vice President and Secretary of the Trust, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Funds, Inc. (since
September 1994); Senior Vice President, General Counsel and Secretary,
Funds Distributor, Inc. (since April 1994); Senior Vice President,
General Counsel and Secretary, Premier Mutual Fund Services, Inc.
(since August 1994); Counsel, The Boston Company Advisors, Inc.
(February 1992 to March 1994); Associate, Ropes & Gray (August 1990 to
February 1992). Age: 31 years old. Address: 60 State Street, Boston,
Massachusetts 02109.
#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. From July 1988 to
August 1994, he was employed by TBC, Inc. where he held various
management positions in the Corporate Finance and Treasury areas.
Age: 33 years old. Address: 60 State Street, Boston, Massachusetts
02109.
_____________________________________
* "Interested person" of the Trust, as defined in the Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies advised by
Dreyfus.
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 $25,000 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 October 3,
1996.
For the fiscal year ended June 30, 1996, 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>
Pension or Total Compensation
Aggregate Retirement Benefits Estimated Annual from the Trust and
Name of Board Compensation from Accrued as Part of Benefits Upon Fund & Complex Paid
Member the Trust# Trust's Expenses Retirement to Board Members
<S> <C> <C> <C>
Ruth Marie Adams $ 6,420 none none $ 34,500
Francis P. Brennan* 16,853 none none 97,000
Joseph S. DiMartino** none none none 448,618
James M. Fitzgibbons 6,365 none none 32,500
J. Tomlinson Fort** none none none none
Arthur L. Goeschel 6,420 none none 34,500
Kenneth A. Himmel 5,448 none none 31,750
Arch S. Jeffery** none none none none
Stephen J. Lockwood 6,420 none none 34,500
John J. Sciullo 6,365 none none 33,500
Roslyn M. Watson 6,365 none none 33,500
_____________________________
# 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
fact paid directly by Dreyfus to the non-interested Trustees. Amount does not include
reimbursed expenses for attending Board meetings, which amounted to $2,749 for the Trust.
* Compensation of Francis P. Brennan includes $25,000 paid by the Dreyfus/Laurel Funds
to be the Chairman of the Board; Effective May 1, 1996, the retainer was reduced from
$75,000 to $25,000 annually.
** Joseph S. DiMartino, J. Tomlinson Fort and Arch S. 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, 1996, the aggregate amount of fees and expenses
received by Joseph S. DiMartino, J. Tomlinson Fort and Arch S. Jeffery from Dreyfus for
serving as a Board member of the Trust were $6,269, $6,420 and $6,420, respectively, and
for serving as a Board member of all funds in the Dreyfus Family of Funds (including the
Trust) were $31,750, $34,500 and $34,500, respectively. In addition, Dreyfus reimbursed
Messrs. DiMartino, Fort and Jeffery a total of $1,043 for expenses attributable to the
Trust's Board meetings which is not included in the $2,749 amount noted above.
*** Amount paid to Joseph S. DiMartino from the funds in the Fund Complex for the year
ended December 31, 1996.
+ The Dreyfus Family of Funds consists of 161 mutual funds.
</TABLE>
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in
conjunction with the section in the Funds' Prospectuses entitled
"Management of the Fund."
Management Agreement. Dreyfus serves as the investment manager for
the Funds pursuant to an Investment Management Agreement with the Trust
dated April 4, 1994 ("Investment Management Agreement"), transferred to
Dreyfus as of October 17, 1994. Pursuant to the Management Agreement,
Dreyfus provides, or arranges for one or more third parties to provide,
investment advisory, administrative, custody, fund accounting and transfer
agency services to the Funds. As investment manager, Dreyfus manages the
Funds by making investment decisions based on each Fund's investment
objective, policies and restrictions. The Investment Management Agreement
is subject to review and approval at least annually by the Board of
Trustees.
Prior to May 21, 1993, The Boston Company Advisors, Inc. ("TBC
Advisors") served as investment adviser to each Fund pursuant to a written
agreement, which was last approved by the Trustees, including a majority of
the Trustees who are not "interested persons" of the Trust, on July 22,
1992. From May 21, 1993 through April 3, 1994, TBC Advisors served as
investment adviser to each Fund pursuant to a written agreement ("TBC
Advisors Agreement"), which was last approved by the Trustees, including a
majority of the Trustees who are not "interested persons" of the Trust, on
July 21, 1993 and approved by the shareholders of each Fund of the Trust on
December 31, 1992. The TBC Advisors Agreement became effective on May 21,
1993, upon the consummation of the sale of Boston Group Holdings, Inc., the
parent company of TBC, to Mellon Bank Corporation. Mellon Bank later served
as investment manager to each Fund pursuant to a written agreement ("Mellon
Agreement"), which was last approved by the Trustees, including a majority
of the Trustees who are not "interested persons" of the Trust or Mellon
Bank, on November 22, 1993, (subject to shareholder approval) and approved
by the shareholders of each Fund of the Trust on March 29, 1994. The
Mellon Agreement became effective on April 4, 1994. TBC Advisors is a
wholly-owned subsidiary of TBC, a financial services holding company. TBC
is in turn a wholly-owned subsidiary of Mellon Bank Corporation. As stated
above, Dreyfus, a wholly-owned subsidiary of Mellon Bank, is the current
Investment Manager pursuant to the Investment Management Agreement, which
was last approved by the Trustees on January 31, 1996.
The current Investment Management Agreement with Dreyfus provides for
a "unitary fee." Under the unitary fee structure, Dreyfus is required to
pay all expenses of the Funds except: (i) brokerage commissions, (ii)
taxes, interest, fees and expenses of the non-interested Trustees
(including counsel expenses), and extraordinary expenses (which are
expected to be minimal), and (iii) the Rule 12b-1 fees described in this
Statement of Additional Information. Although under the Investment
Management Agreement, Dreyfus is not obligated to pay the fees and expenses
of the non-interested Trustees, Dreyfus is required to reduce its
management fee by the amount of such fees and expenses. Under the unitary
fee, Dreyfus provides, or arranges for one or more third parties to
provide, investment advisory, administrative, custody, fund accounting and
transfer agency services to the Funds. For the provision of such services
directly, or through one or more third parties, Dreyfus receives a full
compensation for all services and facilities provided by it, a fee computed
daily and paid monthly at the annual rate set forth in each Fund's
Prospectus, applied to the average daily net assets of the Fund's
investment portfolio, less the accrued fees and expenses (including counsel
fees) of the non-interested Trustees of the Trust. Previously, the
payments to the investment manager covered merely the provision of
investment advisory services (and payment for sub-advisory services) and
certain specified administrative services. Under this previous
arrangement, the Fund also paid for additional non-investment advisory
expenses, such as custody and transfer agency services, that were not paid
by the investment adviser.
The Investment Management Agreement will continue from year to year as
to each Fund provided that a majority of the Trustees who are not
interested persons of the Fund and either a majority of all Trustees or a
majority of the shareholders of the Fund approve its continuance. Each
Fund may terminate the Investment 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
Investment Management Agreement upon written notice to the Fund. The
Investment Management Agreement will terminate immediately and
automatically upon its assignment.
The following persons are officers and/or directors of the Manager:
W. Keith Smith, Chairman of the Board; Christopher M. Condron, President,
Chief Executive Officer, 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; William T. Sandalls,
Jr., Senior Vice President and Chief Financial Officer; Elie M. Genadry,
Vice President-Institutional Sales; William F. Glavin, Jr., Vice President-
Corporate Development; Mark N. Jacobs, Vice President, General Counsel and
Secretary; Patrice M. Kozlowski, Vice President-Corporate Communications;
Mary Beth Leibig, Vice President-Human Resources; Jeffrey N. Nachman, Vice
President-Mutual Fund Accounting; Andrew S. Wasser, Vice President-
Information Systems; Elvira Oslapas, Assistant Secretary; and Mandell L.
Berman, Frank V. Cahouet, Alvin E. Friedman, Lawrence M. Greene and Julian
M. Smerling, directors.
As compensation for Dreyfus' services, each Fund pays a separate fee,
based on its total average daily net assets, that is computed daily and
paid monthly. The rates at which such fees are paid are described in each
Prospectus. Dreyfus may waive all or a portion of its fees payable by any
Fund from time to time.
The following table shows the fees paid by each Fund to TBC Advisors
or Mellon Bank (as the prior investment advisers) and to Dreyfus (the
current investment manager), including any fee waivers or expense
reimbursements by TBC Advisors, Dreyfus or Mellon, during the year or
period ended June 30 1994, 1995 and 1996 and with respect to the California
Municipal Fund and the New York Municipal Fund for the year ended November
30, 1993:
<TABLE>
<CAPTION>
1996 1995 1994(1)
Fees Fees Fees Fees Fees
Paid Paid Paid(2) Paid(3) Waived(4)
<S> <C> <C> <C> <C> <C>
Municipal Fund $183,024 $179,992 $42,914 $138,860 $120,026(5)
Massachusetts Municipal Fund 188,533 172,146 40,947 136,877 45,790(6)
California Municipal Fund 92,758 96,807 24,801* 37,628* 41,998(7)*
New York Municipal Fund 26,270 27,290 8,038* 11,467* 35,815(8)*
1993**
Fees Fees
Paid Waived(4)
California Municipal Fund 100,024 119,522(9)
New York Municipal Fund 28,242 102,024(10)
______________________________
* For the period ended June 30. The California Municipal Fund and the New York
Municipal Fund each changed their fiscal year end from November 30 to June 30.
** For the fiscal years ended November 30, 1993.
(1) Effective April 4, 1994, Mellon Bank served as each Fund's investment manager.
(2) Fees paid to Mellon Bank for investment management services for the period from
April 4, 1994 to the fiscal year ended June 30, 1994.
(3) Fees paid to TBC Advisors for investment advisory services for the period from
either July 1, 1993 (in the case of the Municipal Fund and the Massachusetts
Municipal Fund) or December 1, 1993 (in the case of the California Municipal Fund
and the New York Municipal Fund) to April 3, 1993.
(4) TBC Advisors waived all or a portion of its fees and/or reimbursed expenses of the
Funds from time to time in order to increase the Funds' net income available for
distribution to shareholders.
(5) Includes $54,702 reimbursement by TBC Advisors.
(6) Includes $846 reimbursement by TBC Advisors.
(7) Includes $4,370 reimbursement by TBC Advisors.
(8) Includes $24,348 reimbursement by TBC Advisors.
(9) Includes $19,498 reimbursement by TBC Advisors.
(10) Includes $73,782 reimbursement by TBC Advisors.
</TABLE>
Dreyfus has agreed that if in any fiscal year the aggregate expenses
of any Fund of the Trust (including fees pursuant to the Management
Agreement, but excluding interest, brokerage expenses, taxes and
extraordinary items) exceed the expense limitation of any state, it will
reduce its management fees by the amount of such excess expense. Such a
fee reduction, if any, will be reconciled on a monthly basis. To the
extent these state regulations permit the exclusion of distribution
expenses (see "Distribution and Service Plans" below), the Trust will
exclude such expenses in determining whether any reduction obligation
exists. The most restrictive state expense limitation applicable to any
Fund requires a reduction of fees in any year that such expenses exceed
2.5% of the first $30 million of average net assets, 2.0% of the next $70
million of average net assets and 1.5% of the remaining average net assets.
A number of factors, including the size of each Fund, will determine which
of these restrictions will be applicable to a Fund at any given time. No
reimbursement pursuant to state expense limitations was required for any of
the Funds for the fiscal year ended June 30, 1996.
PURCHASE OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Funds' Prospectuses entitled "How to
Buy Fund Shares."
The Distributor. The Distributor serves as the Funds' distributor
pursuant to an agreement which is renewable annually. The Distributor
also acts as distributor for the other funds in the Premier Family of
Funds, for funds in the Dreyfus Family of Funds and for certain other
investment companies.
For the fiscal year ended June 30, 1996, the Distributor retained no
commissions for Premier Limited Term Municipal Fund, Premier Limited Term
California Municipal Fund, Premier Limited Term Massachusetts Municipal
Fund and Premier Limited Term New York Municipal Fund, respectively, from
sales loads on the Funds' Class A shares. For the fiscal year ended June
30, 1996, the Distributor retained no fees from the contingent deferred
sales charge ("CDSC") on Class B shares for Premier Limited Term Municipal
Fund, Premier Limited Term California Municipal Fund, Premier Limited Term
Massachusetts Municipal Fund and Premier Limited Term New York Municipal
Fund, respectively. For the same period, the Distributor retained no fees
from the CDSC on Class C shares for Premier Limited Term Municipal Fund,
Premier Limited Term California Municipal Fund, Premier Limited Term
Massachusetts Municipal Fund and Premier Limited Term New York Municipal
Fund, respectively.
Sales Loads--Class A. The scale of sales loads applies to purchases
of Class A shares made by any "purchaser," which term includes an
individual and/or spouse purchasing securities for his, her or their own
account or for the account of any minor children, or a trustee or other
fiduciary purchasing securities for a single trust estate or a single
fiduciary account (including a pension, profit-sharing or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Code although more than one beneficiary is involved; or a group of accounts
established by or on behalf of the employees of an employer or affiliated
employers pursuant to an employee benefit plan or other program (including
accounts established pursuant to Sections 403(b), 408(k), and 457 of the
Code); or an organized group which has been in existence for more than six
months, provided that it is not organized for the purpose of buying
redeemable securities of a registered investment company and provided that
the purchases are made through a central administration or a single dealer,
or by other means which result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering
price of the Class A shares. The example assumes a purchase of Class A
shares aggregating less than $100,000 subject to the schedule of sales
charges set forth in the Prospectus at a price based upon the net asset
value of the Class A shares.
<TABLE>
<CAPTION>
Municipal California Massachusetts New York
Fund Municipal Fund Municipal Fund Municipal Fund
<S> <C> <C> <C> <C>
Net Asset Value per Share $11.89 $12.65 $11.97 $12.88
Per Share Sales Charge - 3.0%
of offering price (3.1% of
net asset value per share) $ 0.37 $ 0.39 $ 0.37 $ 0.40
Per Share Offering Price to
the Public $12.26 $13.04 $12.34 $13.28
</TABLE>
TeleTransfer Privilege. TeleTransfer purchase orders may be made
between the hours of 8:00 a.m. and 4:00 p.m., New York time, on any
business day that Dreyfus Transfer, Inc., the Fund's transfer and dividend
disbursing agent (the "Transfer Agent"), and the New York Stock Exchange
("NYSE") are open. Such purchases will be credited to the shareholder's
Fund account on the next bank business day. To qualify to use the
TeleTransfer Privilege, the initial payment for purchase of shares must be
drawn on, and redemption proceeds paid to, the same bank and account as are
designated on the Account Application or Shareholder Services Form on file.
If the proceeds of a particular redemption are to be wired to an account at
any other bank, the request must be in writing and signature-guaranteed.
See "Redemption of Fund Shares--TeleTransfer Privilege.
Reopening an Account. An investor may reopen an account with a
minimum investment of $100 without filing a new Account Application during
the calendar year the account is closed or during the following calendar
year, provided the information on the old Account Application is still
applicable.
DISTRIBUTION AND SERVICE PLANS
The following information supplements and should be read in
conjunction with the section in the Funds' Prospectuses entitled
"Distribution and Service Plans."
The Securities and Exchange Commission ("SEC") has adopted Rule 12b-1
under the 1940 Act ("Rule") regulating the circumstances under which
investment companies such as the Trust may, directly or indirectly, bear
the expenses of distributing their shares. The Rule defines distribution
expenses to include expenditures for "any activity which is primarily
intended to result in the sale of fund shares." The Rule, among other
things, provides that an investment company may bear such expenses only
pursuant to a plan adopted in accordance with the Rule.
Prior Plans
Prior to April 4, 1994, the Investor Shares (Class A) of each Fund
were known as either the "Retail Class" of shares or the "Institutional
Class" of shares. These two classes of shares of the Funds were
reclassified as a single class of shares (the Investor Shares) by the Board
of Trustees at a meeting held on November 22, 1993, subject to certain
approvals that were obtained from each Fund's shareholders at a meeting
held on March 29, 1994. At the November 22, 1993 Board Meeting, the
Trustees also approved a new distribution plan for the Investor Shares
(formerly a Fund's Retail and/or Institutional Class of shares) of each
Fund. Shareholders of each Fund's Retail Class of Shares and Institutional
Class of Shares approved the new distribution plans at a shareholders'
meeting held on March 14 and March 29, 1994. These new distribution plans
("Current A Plans") were effective on April 4, 1994. The Trust
redesignated the Funds' Investor Class shares Class A shares effective
October 17, 1994.
Prior to April 4, 1994, each Fund's Retail Shares and Institutional
Shares were subject to distribution plans (the "Prior Plans") that were
adopted by the Trust under the Rule. Under the Prior Plans, the Fund was
authorized to spend up to .25% of its average daily net assets attributable
to the Retail Class on activities primarily intended to result in the sale
of such Shares, and the Fund was authorized to spend up to .15% of its
average daily net assets attributable to the Institutional Class on
activities primarily intended to result in the sale of such Shares.
Under the distribution agreements with the prior distributor, Funds
Distributor, Inc. ("Funds Distributor") each Fund was authorized to pay, or
reimburse Funds Distributor, for distribution activities (which are the
same as those authorized by the Plans) on behalf of each Fund on a monthly
basis, provided that any payment by a Fund to Funds Distributor, together
with any other payments made by such Fund pursuant to the Prior Plan, did
not exceed .0208% of its average daily net assets attributable to the
Retail Class for the prior month (.25% on an annualized basis) and .0125%
of its average daily net assets attributable to the Institutional Class for
the prior month (.15% on an annualized basis).
Current Plans
Distribution Plan--Class A shares. Under the Current Plan ("Current A
Plan"), Class A shares of a Fund may spend annually up to 0.25 of 1% of the
average net asset value of the Class for costs and expenses incurred in
connection with the distribution of, and shareholder servicing with respect
to, Fund shares.
The Current A Plan provides that a report of the amounts expended
under the Current A Plan, and the purposes for which such expenditures were
incurred, must be made to the Trust's Trustees for their review at least
quarterly. In addition, the Current A Plan provides that it may not be
amended to increase materially the costs which a Fund may bear for
distribution pursuant to the Current A Plan without approval of a Fund's
shareholders, and that other material amendments of the Current A Plan must
be approved by the vote of a majority of the Trustees and of the Trustees
who are not "interested persons" of the Trust (as defined in the 1940 Act)
and who do not have any direct or indirect financial interest in the
operation of the Plan, cast in person at a meeting called for the purpose
of considering such amendments. The Current A Plan is subject to annual
approval by the entire Board of Trustees and by the Trustees who are
neither interested persons nor have any direct or indirect financial
interest in the operation of the Current A Plan, by vote cast in person at
a meeting called for the purpose of voting on the Current A Plan. The
Current A Plan is terminable, as to a Fund's Class A shares, at any time by
vote of a majority of the Trustees who are not interested persons and have
no direct or indirect financial interest in the operation of the Current A
Plan or by vote of the holders of a majority of the outstanding shares of
such class of the Fund.
Distribution and Service Plans -- Class B and C shares. In addition to
the above described Current A Plan for Class A shares, the Trust's Board of
Trustees has adopted a Service Plan (the "Service Plan") under the Rule
for Class B and Class C shares, pursuant to which the Fund pays the
Distributor and Dreyfus Service Corporation for the provision of certain
services to the holders of Class B and Class C shares. The Trust's Board
of Trustees has also adopted a Distribution Plan pursuant to the Rule with
respect to Class B and Class C shares (the "Distribution Plan"). The
Trust's Board of Trustees believes that there is a reasonable likelihood
that the Distribution and Service Plans (the "Plans") will benefit the
Funds and the holders of Class B and Class C shares.
For the year ended June 30, 1996, the distribution and service fees
were as follows:
Distribution Fees: Class A* Class B Class C
California Municipal Fund $21,318 $ 107 $109
Massachusetts Municipal Fund 41,030 209 90
New York Municipal Fund 5,769 190 250
Limited Term Municipal Fund 48,383 1728 557
________________
* Distribution and servicing combined.
Service Fees: Class B Class C
California Municipal Fund $ 53 $ 55
Massachusetts Municipal Fund 105 45
New York Municipal Fund 95 125
Limited Term Municipal Fund 864 279
Class R shares bear no service or distribution fee.
A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the
Trustees for their review. In addition, each Plan provides that it may not
be amended to increase materially the cost which holders of Class B or C
shares may bear pursuant to the Plan without the approval of the holders of
such Classes and that other material amendments of the Plan must be
approved by the Board of Trustees and by the Trustees who are not
interested persons of the Fund and have no direct or indirect financial
interest in the operation of the Plan or in any agreements entered into in
connection with the Plan, by vote cast in person at a meeting called for
the purpose of considering such amendments. The Plan is subject to annual
approval by such vote of the Trustees cast in person at a meeting called
for the purpose of voting on the Plan. Each Plan was so approved by the
Trustees at a meeting held on January 31, 1996. Each Plan may be
terminated at any time by vote of a majority of the Trustees who are not
interested persons and have no direct or indirect financial interest in the
operation of the Plan or in any agreements entered into in connection with
the Plan or by vote of the holders of a majority of Class B and C shares.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Funds' Prospectuses entitled "How to
Redeem Fund Shares."
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's Service Agent, and
reasonably believed by the Transfer Agent to be genuine. Ordinarily, a
Fund will initiate payment for shares redeemed pursuant to this Privilege
on the next business day after receipt if the Transfer Agent receives the
redemption request in proper form. Redemption proceeds will be transferred
by Federal Reserve wire only to the commercial bank account specified by
the investor on the Account Application or Shareholder Services Form.
Redemption proceeds, if wired, must be in the amount of $1,000 or more and
will be wired to the investor's account at the bank of record designated in
the investor's file at the Transfer Agent, if the investor's bank is a
member of the Federal Reserve System, or to a correspondent bank if the
investor's bank is not a member. Fees ordinarily are imposed by such bank
and usually are borne by the investor. Immediate notification by the
correspondent bank to the investor's bank is necessary to avoid a delay in
crediting the funds to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contracting a TRT Cables operator at 1-800-
654-7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations as well as from participants in the NYSE Medallion
Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may request
additional documentation from corporations, executors, administrators,
trustees or guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular verification. For
more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
TeleTransfer Privilege. Investors should be aware that if they have
selected the TeleTransfer Privilege, any request for a wire redemption will
be effected as a TeleTransfer transaction through the Automated Clearing
House ("ACH") system unless more prompt transmittal specifically is
requested. Redemption proceeds will be on deposit in the investor's
account at an ACH member bank ordinarily two business days after receipt of
the redemption request. See "Purchase of Fund Shares--TeleTransfer
Privilege."
Redemption Commitment. Each Fund has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, limited
in amount during any 90-day period to the lesser of $250,000 or 1% of the
value of the Fund's net assets at the beginning of such period. Such
commitment is irrevocable without the prior approval of the SEC. In the
case of requests for redemption in excess of such amount, the Board of
Trustees reserves the right to make payments in whole or in part in
securities or other assets in case of an emergency or any time a cash
distribution would impair the liquidity of the Fund to the detriment of the
existing shareholders. In this event, the securities would be valued in
the same manner as the Funds' portfolio is valued. If the recipient sold
such securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be suspended
or the date of payment postponed (a) during any period when the NYSE is
closed (other than customary weekend and holiday closings), (b) when
trading in the markets a Fund ordinarily utilizes is restricted, or when an
emergency exists as determined by the SEC so that disposal of a Fund's
investments or determination of its net asset value is not reasonably
practicable, or (c) for such other periods as the Securities and Exchange
Commission by order may permit to protect a Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in
conjunction with the section in the Funds' Prospectuses entitled
"Shareholder Services."
Exchange Privilege. Shares of any Class of a Fund may be exchanged
for shares of the respective Class of certain other funds advised or
administered by Dreyfus. Shares of the same Class of such funds purchased
by exchange will be purchased on the basis of relative net asset value per
share as follows:
A. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the applicable
sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a sales
load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein as
"Offered Shares"), provided that, if the sales load applicable to
the Offered Shares exceeds the maximum sales load that could have
been imposed in connection with the Purchased Shares (at the time
the Purchased Shares were acquired), without giving effect to any
reduced loads, the difference will be deducted.
E. Shares of funds subject to a contingent deferred sales charge
("CDSC") that are exchanged for shares of another fund will be
subject to the higher applicable CDSC of the two funds, and for
purposes of calculating CDSC rates and conversion periods, if any,
will be deemed to have been held since the date the shares being
exchanged were initially purchased.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their
account number.
To request an exchange, the investor's Service Agent acting on the
investor's behalf must give exchange instructions to the Transfer Agent in
writing, by wire or by telephone. The ability to issue exchange
instructions by telephone is given to all Fund shareholders automatically,
unless the investor checks the applicable "NO" box on the Account
Application, indicating that the investor specifically refunds this
Privilege. By using the Telephone Exchange, the investor authorizes the
Transfer Agent to act on telephonic, telegraphic or written exchange
instructions (including over The Dreyfus TouchRegistered Automated Telephone
System) from any person representing himself or herself to be the investor or a
representative of the investor's Service Agent, and reasonably believed by
the Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for
telephone exchange.
Auto-Exchange Privilege. The Auto-Exchange Privilege permits an
investor to purchase, in exchange for shares of a Fund, shares of the same
Class of another fund in the Premier Family of Funds or the Dreyfus Family
of Funds. This privilege is available only for existing accounts. Shares
will be exchanged on the basis of relative net asset value as described
above under "Fund Exchanges." Enrollment in or modification or
cancellation of this privilege is effective three business days following
notification by the investor. An investor will be notified if the
investor's account falls below the amount designated to be exchanged under
this privilege. In this case, an investor's account will fall to zero
unless additional investments are made in excess of the designated amount
prior to the next Auto-Exchange transaction.
Fund exchanges and Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between
accounts having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. Each Fund reserves the right to reject
any exchange request in whole or in part. Each Fund exchange service or
Auto-Exchange Privilege may be modified or terminated at any time upon
notice to shareholders.
Automatic Withdrawal. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends
and distributions, the investor's shares will be reduced and eventually may
be depleted. Automatic Withdrawal may be terminated at any time by the
investor, a Fund or the Transfer Agent. Shares for which certificates have
been issued may not be redeemed through the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest on the payment date their dividends or dividends and capital gain
distributions, if any, from a Fund in shares of the same Class of another
fund in the Premier Family of Funds or certain other funds in the Dreyfus
Family of Funds of which the investor is a shareholder. Shares of the same
Class of other funds purchased pursuant to this privilege will be purchased
on the basis of relative net asset value per share as follows:
A. Dividends and distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that are
offered without a sales load.
B. Dividends and distributions paid by a fund which does not charge
a sales load may be invested in shares of other funds sold with a
sales load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges a sales
load may be invested in shares of other funds sold with a sales load
(referred to herein as "Offered Shares"), provided that, if the
sales load applicable to the Offered Shares exceeds the maximum
sales load charged by the fund from which dividends or distributions
are being swept, without giving effect to any reduced loads, the
difference will be deducted.
D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a CDSC and the applicable CDSC, if
any, will be imposed upon redemption of such shares.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in
conjunction with the section in the Funds' Prospectuses entitled "How to
Buy Fund Shares."
New York Stock Exchange Closings. The holidays (as observed) on which
the NYSE is closed currently are: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
The Prospectuses describe the time at which the net asset value of
each Fund is determined for purposes of sales and redemptions. In
addition, portfolio securities held by the Funds may be actively traded in
securities markets which are open for trading on days when the Funds will
not be determining their net asset values. Accordingly, there may be
occasions when the Funds are not open for business but when the value of a
Fund's portfolio securities will be affected by such trading activity.
The Funds' investments are valued by Dreyfus, after consultation with
an independent pricing service (the "Service") approved by the Trustees.
When, in the judgment of the Service, quoted bid prices for investments are
readily available and are representative of the bid side of the market,
these investments are valued at the mean between the quoted bid prices (as
obtained by the Service from dealers in such securities) and asked prices
(as calculated by the service based upon it evaluation of the marker for
such securities). Investments for which, in the judgment of the Service,
there are no readily obtainable market quotations (which constitute a
majority of each Fund's portfolio securities) are carried at fair value as
determined by the Service, based on methods which include consideration of:
yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to value from dealers; and general market
conditions. The procedures of the Service are reviewed periodically by the
officers of the Trust under the general supervision and responsibility of
the Trustees, which may replace any such Service at any time if they
determine it to be in the best interests of the Trust to do so.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in
conjunction with the section in the Funds' Prospectuses entitled
"Dividends, Other Distributions and Taxes."
The term "regulated investment company" does not imply the supervision
of management or investment practices or policies by any government agency.
To qualify for treatment as a regulated investment company ("RIC")
under the Code, each Fund (1) must distribute to its shareholders each year
at least 90% of its investment company taxable income (generally consisting
of net investment income ("Distribution Requirements), net short-term
capital gains and net gains from certain foreign currency transactions),
(2) must derive at least 90% of its annual gross income from specified
sources ("Income Requirement"), (3) must derive less than 30% of its annual
gross income from the sale or disposition of any of the following that are
held for less than three months -- (i) securities, (ii) non-foreign-
currency options and futures and (iii) foreign currencies (or foreign
currency options, futures and forward contracts) that are not directly
related to a Fund's principal business of investing in securities (or
options and futures with respect thereto) ("Short-Short Limitation") -- and
(4) must meet certain asset diversification and other requirements.
Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the net asset value of
the shares below the cost of his investment. Such a dividend or other
distribution would be a return on investment in an economic sense, although
taxable as stated in the Funds' Prospectuses. In addition, if a
shareholder sells shares of the Fund held for six months or less and
receives a capital gain distribution with respect to those shares, any loss
incurred on the sale of those shares will be treated as a long-term capital
loss to the extent of the capital gain distribution received.
Dividends and other distributions declared by a Fund in October,
November or December of any year and payable to shareholders of record on a
date in that month any of those months are deemed to have been paid by a
Fund and received by the shareholders on December 31 of that year if the
distributions are paid by a Fund during the following January.
Accordingly, those distributions will be taxed to shareholders for the year
in which that December 31 falls.
Each Fund has satisfied, and intends to continue to satisfy, the
requirements for qualifying as a "regulated investment company" under
Subchapter M of the Code. Provided that each Fund distributes at least 90%
of its taxable net investment income, including market discount and net
realized short-term capital gains, and 90% of the tax-exempt interest
income (reduced by certain expenses), each Fund, if it qualifies as a
regulated investment company, will not be liable for Federal income taxes
to the extent its taxable net investment income and capital gain net income
are distributed to its shareholders.
Because each Fund will distribute exempt-interest dividends, interest
on indebtedness incurred by a shareholder to purchase or carry Fund shares
is not deductible for Federal income tax purposes. If a shareholder
receives an exempt-interest dividend with respect to shares of a Fund and
if such shares are held by the shareholder for six months or less, then any
loss on the redemption or exchange of such shares will, to the extent of
such exempt-interest dividends, be disallowed. In addition, the Code may
require a shareholder, if he or she receives exempt-interest dividends, to
treat as taxable income a portion of certain otherwise non-taxable social
security and railroad retirement benefit payments. Furthermore, that
portion of an exempt-interest dividend paid by a Fund which represents
income from private activity bonds may not retain its tax-exempt status in
the hands of a shareholder who is a "substantial user" of a facility
financed by such bonds, or a "related person" thereof. Moreover, as noted
in the Funds' Prospectuses, some or all of a Fund's dividends may be a
specific preference item, or a component of an adjustment item, for
purposes of the Federal individual and corporate alternative minimum taxes.
In addition, the receipt of Fund dividends and distributions may affect a
foreign corporate shareholder's Federal "branch profits" tax liability and
a Subchapter S corporation shareholder's Federal "excess net passive
income" tax liability. Shareholders should consult their own tax advisers
as to whether they are (1) substantial users with respect to a facility or
related to such users within the meaning of the Code or (2) subject to a
Federal alternative minimum tax, any applicable state alternative minimum
tax, the Federal branch profits tax, or the Federal excess net passive
income tax.
While the Funds do not expect to realize a significant amount of net
long-term capital gains, any such gains realized will be distributed
annually as described in the Funds' Prospectus. Such distributions
("capital gain dividends"), if any, will be taxable to the shareholders as
long-term capital gains, regardless of how long a shareholder has held a
Fund's shares, and will be designated as capital gain dividends in a
written notice mailed by the Funds to the shareholders after the close of
the Funds' prior taxable year. If a shareholder receives a capital gain
dividend with respect to any share and if such share is held by the
shareholder for six months or less, then any loss (to the extent not
disallowed pursuant to the other six month rule described above) on the
sale or exchange of such share, to the extent of the capital gain dividend,
shall be treated as a long-term capital loss.
Dividends derived by the Funds from tax-exempt interest are designated
as tax-exempt in the same percentage of the day's dividend as the actual
tax-exempt income earned that day. Thus, the percentage of the dividend
designated as tax-exempt may vary from day to day. Similarly, dividends
derived by the Funds from interest on relevant state Municipal Obligations
will be designated as exempt from that state's taxation in the same
percentage of the day's dividend as the actual interest on that state's
Municipal Obligations earned on that day.
Each Fund is required to withhold and remit to the U.S. Treasury 31%
of the taxable dividends paid by the Funds, the distributions paid by the
Funds and the proceeds of redemptions or exchanges of Fund shares (in
excess of $10 on an annualized basis) with respect to any non-corporate
shareholder who fails to furnish or certify his or her correct taxpayer
identification number, who has been notified that he or she is to subject
to back up withholding due to underreporting of dividend or interest income
or who fails to certify that he or she has provided a correct taxpayer
identification number, and that he or she is not subject to such
withholding. An individual's tax identification number is his or her
social security number. The backup withholding tax is not an additional
tax and may be credited against a shareholder's regular Federal income tax
liability.
The foregoing is only a summary of certain tax considerations
generally affecting the Funds and their shareholders, and is not intended
as a substitute for careful tax planning. Individuals may be exempt from
state and local personal income taxes on exempt-interest income derived
from obligations of issuers located in the state in which they reside, but
are usually subject to such taxes on such dividends that are derived from
obligations of issuers located in other jurisdictions. Investors are urged
to consult their tax advisers with specific reference to their own tax
situations.
A portion of the dividends paid by a Fund, whether received in cash or
reinvested in additional Fund shares, may be eligible for the dividends-
received deduction allowed to corporations. The eligible portion may not
exceed the aggregate dividends received by a Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
alternative minimum tax.
Dividends and interest received by a Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S.
possessions that would reduce the yield on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate
these foreign taxes, however, and many foreign countries do not impose
taxes on capital gains in respect of investments by foreign investors.
Gains from the sale or other disposition of foreign currencies (except
certain gains therefrom that may be excluded by future regulations), and
gains from options, futures and forward contracts derived by the Fund with
respect to its business of investing in securities or foreign currencies,
will qualify as permissible income under the Income Requirement. However,
income from the disposition of options and futures contracts (other than
those on foreign currencies) will be subject to the Short-Short Limitation
if they are held for less than three months. Income from the disposition
of foreign currencies, and options, futures and forward contracts thereon,
that are not directly related to a Fund's principal business of investing
in securities (or options and futures with respect to securities) also will
be subject to the Short-Short Limitation if they are held for less than
three months.
If a Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any
decrease in value (whether realized or not) of the offsetting hedging
position during the period of the hedge for purposes of determining whether
a Fund satisfies the Short-Short Limitation. Thus, only the net gain (if
any) from the designated hedge will be included in gross income for
purposes of that limitation. Each Fund will consider whether it should
seek to qualify for this treatment for its hedging transactions. To the
extent a Fund does not so qualify, it may be forced to defer the closing
out of certain options, futures and forward contracts beyond the time when
it otherwise would be advantageous to do so, in order for such Fund to
continue to qualify as a RIC.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain and loss. However, a portion of the gain or
loss from the disposition of foreign currencies and non-U.S. dollar
denominated securities (including debt instruments, certain financial
forward, futures and option contracts and certain preferred stock) may be
treated as ordinary income or loss under Section 988 of the Code. In
addition, all or a portion of any gain realized from the sale or other
disposition of certain market discount bonds will be treated as ordinary
income. Moreover, all or a portion of the gain realized from engaging in
"conversion transactions" may be treated as ordinary income under Section
1258. "Conversion transactions" are defined to include certain forward,
futures, option and straddle transactions, transactions marketed or sold to
produce capital gains, or transactions described in Treasury regulations to
be issued in the future.
Under Section 1256 of the Code, any gain or loss realized by a Fund
from certain futures and forward contracts and options transactions will be
treated as 60% long-term capital gain or loss and 40% short-term capital
gain or loss. Gain or loss will arise upon exercise or lapse of such
contracts and options as well as from closing transactions. In addition,
any such contracts or options remaining unexercised at the end of a Fund's
taxable year will be treated as sold for their then fair market value (a
process known as "marking to market"), resulting in additional gain or loss
to the Fund characterized in the manner described above.
Offsetting positions held by a Fund involving certain contracts or
options may constitute "straddles." "Straddles" are defined to include
"offsetting positions" in actively traded personal property. The tax
treatment of straddles is governed by Sections 1092 and 1258 of the Code,
which, in certain circumstances, override or modify Sections 1256 and 988.
As such, all or a portion of any short-term or long-term capital gain from
certain straddle transactions may be recharacterized ordinary income. If
the Fund were treated as entering into "straddles" by reason of its
engaging in certain forward contracts or options transactions, such
"straddles" would be characterized as "mixed straddles" if the forward
contracts or options transactions comprising a part of such straddles were
governed by Section 1256. Each Fund may make one or more elections with
respect to mixed straddles, depending on which election is made, if any,
the results to a Fund may differ. If no election is made, then to the
extent the "straddle" and conversion transactions rules apply to positions
established by a Fund, losses realized by a Fund will be deferred to the
extent of unrealized gain in the offsetting position. Moreover, as a
result of the "straddle" rules, short-term capital loss on "straddle"
positions may be recharacterized as long-term capital loss, and long-term
capital gains may be treated as short-term capital gains or ordinary
income.
Investment by a Fund in securities issued or acquired at a discount
(for example, zero coupon securities) could, under special tax rules,
affect the amount and timing of distributions to shareholders by causing
the Fund to recognize income prior to the receipt of cash payments. For
example, a Fund could be required to take into gross income annually a
portion of the discount (or deemed discount) at which the securities were
issued and to distribute such income to satisfy the Distribution
Requirement and avoid the 40% excise tax referred to in the Funds'
prospectuses under "Dividends, Other Distributions and Taxes". In such
case, the Fund may have to dispose of securities it might otherwise have
continued to hold in order to generate cash to satisfy these distribution
requirements.
State and Local Taxes. Depending upon the extent of a Fund's
activities in states and localities in which it is deemed to be conducting
business, the Fund may be subject to the tax laws of such states or
localities. Shareholders are advised to consult their tax advisers
concerning the application of state and local taxes to them.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a
non-resident alien individual, a foreign trust or estate, a foreign
corporation or a foreign partnership (a "foreign shareholder") depends on
whether the income from a Fund is "effectively connected" with a U.S. trade
or business carried on by the shareholder, as discussed generally below.
Special U.S. federal income tax rules that differ from those described
below may apply to certain foreign persons who invest in the Fund, such as
a foreign shareholder entitled to claim the benefits of an applicable tax
treaty. Foreign shareholders are advised to consult their own tax advisers
with respect to the particular tax consequences to them of an investment in
a Fund.
Foreign Shareholders - Income Not Effectively Connected. If the income
from a Fund is not effectively connected with a U.S. trade or business
carried on by the foreign shareholder, distributions of investment company
taxable income generally will be subject to a U.S. federal withholding tax
of 30% (or lower treaty rate).
Capital gains realized by foreign shareholders on the sale of Fund
shares and distributions to them of net capital gain (the excess of long-
term capital gain over short-term capital loss), generally will not be
subject to U.S. federal income tax unless the foreign shareholder is a
non-resident alien individual and is physically present in the United
States for more than 182 days during the taxable year. In the case of
certain foreign shareholders, the Fund may be required to withhold U.S.
Federal income tax at a rate of 31% of capital gain distributions and of
the gross proceeds from a redemption of Fund shares unless the shareholder
furnishes the Fund with a certificate regarding the shareholder's foreign
status.
Foreign Shareholders - Effectively Connected Income. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by a foreign shareholder, then all
distributions to that shareholder and any gains realized by that
shareholder on the disposition of the Fund shares will be subject to U.S.
federal income tax at the graduated rates applicable to U.S. citizens and
domestic corporations, as the case may be. Foreign shareholders also may be
subject to the branch profits tax.
PORTFOLIO TRANSACTIONS
All portfolio transactions of a Fund are placed on behalf of the Fund
by Dreyfus. Debt securities purchased and sold by a Fund are generally
traded on a net basis (i.e., without commission) through dealers acting for
their own account and not as brokers, or otherwise involve transactions
directly with the issuer of the instrument. This means that a dealer (the
securities firm or bank dealing with the Fund) makes a market for
securities by offering to buy at one price and sell at a slightly higher
price. The difference between the prices is known as a spread. Other
portfolio transactions may be executed through brokers acting as agent.
The Funds will pay a spread or commissions in connection with such
transactions. Dreyfus uses its best efforts to obtain execution of
portfolio transactions at prices which are advantageous to the Funds and at
spreads and commission rates, if any, which are reasonable in relation to
the benefits received. Dreyfus also places transactions for other accounts
that it provides with investment advice.
Brokers and dealers involved in the execution of portfolio
transactions on behalf of a Fund are selected on the basis of their
professional capability and the value and quality of their services. In
selecting brokers or dealers, Dreyfus will consider various relevant
factors, including, but not limited to, the size and type of the
transaction; the nature and character of the markets for the security to be
purchased or sold; the execution efficiency, settlement capability, and
financial condition of the broker-dealer; the broker-dealer's execution
services rendered on a continuing basis; and the reasonableness of any
spreads (or commissions, if any). Any spread, commission, fee or other
remuneration paid to an affiliated broker-dealer is paid pursuant to the
Trust's procedures adopted in accordance with Rule 17e-1 of the Act.
Brokers or dealers may be selected who provide brokerage and/or
research services to a Fund 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 services from broker-dealers may be useful to
Dreyfus in rendering investment management services to a Fund and/or its
other clients; and, conversely, such information provided by brokers or
dealers who have executed transaction orders on behalf of other clients of
Dreyfus may be useful to these organizations in carrying out their
obligation to the Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities;
however, it enables these organizations to avoid the additional expenses
which might otherwise be incurred if these organizations were to attempt to
develop comparable information through their own staffs.
The Trust's Board of Trustees periodically reviews Dreyfus'
performance of its responsibilities in connection with the placement of
portfolio transactions on behalf of the Fund and reviews the prices paid by
the Funds over representative periods of time to determine if they are
reasonable in relation to the benefits to the Funds.
The Funds will not purchase Municipal Obligations during the existence
of any underwriting or selling group relating thereto of which an affiliate
is a member, except to the extent permitted by the SEC. Under certain
circumstances, the Funds may be at a disadvantage because of this
limitation in comparison with other investment companies which have a
similar investment objective but are not subject to such limitations.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Funds are made independently from decisions
made for these other accounts. It sometimes happens that the same security
is held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase
or sale of the same investment instrument, the prices and amounts are
allocated in accordance with a formula considered by Dreyfus to be
equitable to each account. In some cases this system could have a
detrimental effect on the price or volume of the investment instrument as
far as the Funds are concerned. In other cases, however, the ability of the
Funds to participate in volume transactions will produce better executions
for the Funds. While the Trustees will continue to review simultaneous
transactions, it is their present opinion that the desirability of
retaining Dreyfus as investment manager to the Funds outweighs any
disadvantages that may be said to exist from exposure to simultaneous
transactions.
Portfolio Turnover. The Trust may attempt to increase yields on
investments made for the Funds by trading to take advantage of short-term
market variations. Securities may be sold in anticipation of a rise in
interest rates (market decline) or purchased in anticipation of a decline
in interest rates (market rise) and later sold. Furthermore, a security may
be sold and another of comparable quality purchased at approximately the
same time to take advantage of what the Trust believes to be a temporary
disparity in the normal yield relationship between the two securities.
These yield disparities may occur for reasons not directly related to the
investment quality of particular issues or the general movement of interest
rates, such as changes in the overall demand for, or supply of, various
types of tax-exempt securities. The Trust's portfolio transaction policy
should not result in high brokerage commissions to the Funds, as purchases
and sales of the Funds' portfolio securities are usually effected as
principal transactions. However, to the extent a high portfolio turnover
rate results in the realization by a Fund of net short-term capital gains,
such gains when distributed will be taxable to shareholders as ordinary
income. While a Fund's portfolio turnover rate will vary from year to
year, it is anticipated that the portfolio turnover rate for the Funds may
exceed 100%. The turnover rate will not be a limiting factor for these
Funds, however, when the Funds deem it desirable to sell or purchase
securities. The portfolio turnover rate is the lesser of purchases or
sales of portfolio securities for the year divided by the monthly average
value of a Fund's portfolio securities. Securities having maturities of
one year or less are excluded from the calculation.
The portfolio turnover rates for the fiscal years ended June 30, 1995
and 1996 for the Municipal Fund were 61% and 55.07%, respectively. The
portfolio turnover rates for the fiscal years ended June 30, 1995 and 1996
for the Massachusetts Municipal Fund were 25% and 39.16%, respectively.
The portfolio turnover rates for the fiscal year ended June 30, 1995 and
1996 for the California Municipal Fund were 49% and 39.09%, respectively.
The portfolio turnover rates for the fiscal year ended June 30, 1995 and
1996 for the New York Municipal Fund were 32% and 43.43%, respectively.
PERFORMANCE INFORMATION
The following information supplements and should be read in
conjunction with the section in each Fund's Prospectus entitled
"Performance Information."
The Premier Limited Term California Municipal Fund's current yield for
the 30-day period ended June 30, 1996 was 4.09%, 3.73%, 3.72% and 4.47% for
its Class A, Class B, Class C and Class R shares, respectively. The
Premier Limited Term Massachusetts Municipal Fund's current yield for the
30-day period ended June 30, 1996 was 4.14%, 3.88%, 3.77% and 4.52%, for
its Class A, Class B, Class C and Class R shares, respectively. The
Premier Limited Term New York Municipal Fund's current yield for the 30-day
period ended June 30, 1996 was 4.12%, 3.67%, 3.76% and 4.43%, for its Class
A, Class B, Class C and Class R shares, respectively. The Premier Limited
Term Municipal Fund's current yield* for the 30-day period ended June 30,
1996 was 4.21%, 3.85%, 3.85% and 4.6% for its Class A, Class B, Class C and
Class R shares, respectively. The Premier Limited Term California
Municipal Fund's equivalent taxable yield* for the 30-day period ended June
30, 1996 was 7.61%, 6.94%, 6.92% and 7.61% for its Class A, Class B, Class
C and Class R shares, respectively. The Premier Limited Term Massachusetts
Municipal Fund's equivalent taxable yield* for the 30-day period ended June
30, 1996 was 7.79%, 7.30%, 7.09% and 8.50% fore its Class A, Class B, Class
C and Class R shares, respectively. The Premier Limited Term New York
Municipal Fund's equivalent taxable yield* for the 30-day period ended June
30, 1996 was 7.72%, 6.87%, 7.04% and 8.30% for its Class A, Class B, Class
C and Class R shares respectively. The Premier Limited Term Municipal
Fund's equivalent taxable yield* for the 30-day period ended June 30, 1996
was 6.97%, 6.37%, 6.37% and 7.62% for its Class A, Class B, Class C and
Class R shares, respectively. Current yield is computed pursuant to a
formula which operates, with respect to each Class, as follows: the amount
of the Fund's expenses with respect to such Class accrued for the 30-day
period (net of reimbursements) is subtracted from the amount of the
dividends and interest earned (computed in accordance with regulatory
requirements) by the Fund with respect to such Class during the period.
That result is then divided by the product of: (a) the average daily
number of shares outstanding during the period that were entitled to
receive dividends, and (b) the maximum offering price per share in the case
of Class A or the net asset value per share in the case of Class B, Class C
and Class R on the last day of the period less any undistributed earned
income per share reasonably expected to be declared as a dividend shortly
thereafter. The quotient is then added to 1, and that sum is raised to the
6th power, after which 1 is subtracted. The current yield is then arrived
at by multiplying the result by 2.
_________________________
* Examples assume a Federal marginal tax rate of 39.6% for the
Massachusetts, California and New York Municipal Funds, a Massachusetts
marginal tax rate of 46.85%, a California marginal tax rate of 46.24% and
a New York State and New York City marginal tax rate of 46.6%,
respectively.
The Premier Limited Term California Municipal Fund's average annual
total returns for Class A shares for the 1 and 5 year periods ended June
30, 1996 and for the period March 7, 1988 (inception of Class A) through
June 30, 1996, were 2.24%, 6.23% and 6.65%, respectively. The average
annual total returns for Class B shares for the 1 year period through June
30, 1996 and for the period December 28, 1994 (inception of Class B)
through June 30, 1996 was 1.89% and 5.60%, respectively. The average
annual total returns for Class C shares for the 1 year period ended June
30, 1996 and for the period December 28, 1994 (inception of Class C)
through June 30, 1996 were 4.39%, and 7.63% respectively. The average
annual total returns for Class R shares for the 1 year period ended June
30, 1996 and for the period February 1, 1993 (inception of Class R) through
June 30, 1996, were 5.81% and 5.68%; respectively.
The Premier Limited Term Massachusetts Municipal Fund's average annual
total returns for Class A shares for the 1, 5 and 10 year periods ended
June 30, 1996 were 2.04%, 6.41% and 7.04% respectively. The average annual
total returns for Class B shares for the 1 year period ended June 30, 1996
and for the period December 28, 1994 (inception of Class B) through June
30, 1996 were 1.87% and 5.35%, respectively. The average annual total
returns for Class C shares for the 1 year period ended June 30, 1996 and
for the period December 28, 1994 (inception of Class C) through June 30,
1996 were 3.93% and 7.10%, respectively. The average annual total returns
for Class R shares for the 1 year period ended June 30, 1996 and for the
period February 1, 1993 (inception of Class R) through June 30, 1996 were
5.46% and 5.39%, respectively.
The Premier Limited Term New York Municipal Fund's average annual
total returns for Class A shares for the 1 and 5 year periods ended June
30, 1996 and for the period March 7, 1988 (inception of Class A) were
1.13%, 5.65% and 5.96%, respectively. The average annual total returns for
Class B for the 1 year period ended June 30, 1996 and for the period
December 28, 1994 (inception of Class B) through June 30, 1996 were .86%
and 4.77%, respectively. The average annual total returns for Class C for
the 1 year period ended June 30, 1996 and for the period December 28, 1994
(inception of Class C) through June 30, 1996 were 3.27% and 6.75%,
respectively. The average annual total returns for Class R for the 1 year
period ended June 30, 1996 and for the period February 1, 1993 (inception
of Class R) through June 30, 1996 were 4.49% and 3.07%, respectively.
The Premier Limited Term Municipal Fund's average annual total returns
for Class A shares for the 1, 5 and 10 year periods ended June 30, 1996
were 2.05%, 6.37% and 7.46%, respectively. The average annual total
returns for Class B for the 1 year period ended June 30, 1996 and for the
period December 28, 1994 (inception of Class B) through June 30, 1996 were
1.71% and 5.47%, respectively. The average annual total returns for Class
C for the 1 year period ended June 30, 1996 and for the period December 28,
1994 (inception of Class C) through June 30, 1996 were 4.06% and 7.41%,
respectively. The average annual total returns for Class R for the period
ended June 30, 1996 and for the period February 1, 1993 (inception of Class
R) through June 30, 1996 were 5.51% and 3.45%, respectively.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at net asset value (maximum
offering price in the case of Class A) per share with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and other distributions), dividing by the amount of the initial
investment, taking the "n"th root of the quotient (where "n" is the number
of years in the period) and subtracting 1 from the result. A Class'
average annual total return figures calculated in accordance with such
formula assume that in the case of Class A the maximum sales load has been
deducted from the hypothetical initial investment at the time of purchase
or in the case of Class B or C the maximum applicable CDSC has been paid
upon redemption at the end of the period.
The Premier Limited California Municipal Fund's total return for the
period March 7, 1986 (commencement of operations) to June 30, 1996 for
Class A was 70.81%. Without giving effect to the applicable front-end
sales load, the total return for Class A was 76.07% for this period. The
Premier Limited Term California Municipal Fund's total return for Class B
and Class C for the period from December 28, 1994 (inception date of Class
B and Class C) to June 30, 1996 was 8.81% and 12.08%, respectively.
Without giving effect to the applicable CDSC, the total return for Class B
and C was 11.81% and 12.08%, respectively. The Premier Limited California
Municipal Government Fund's total return for Class R for the period from
February 1, 1993 (inception date of Class R) through June 30, 1996 was
21.22%.
The Premier Limited Term Massachusetts Municipal Fund's total return
for the period September 24, 1985 (inception of Class A) to June 30, 1996
for Class A was 124.43%. Without giving effect to the applicable front-end
sales load, the total return for Class A was 131.38%. The Premier Limited
Term Massachusetts Municipal Fund's total return for Class B and C for the
period from December 28, 1994 (inception date of Class B and Class C) to
June 30, 1996 was 8.41% and 11.22%, respectively. Without giving effect to
the applicable CDSC, the total return for Class B and C was 11.41% and
11.22%, respectively. The Premier Limited Term Massachusetts Municipal
Fund's total return for Class R shares for the period February 1, 1993
(inception of Class R) to June 30, 1996 was 19.61%.
The Premier Limited Term New York Municipal Fund's total return for
Class A shares for the period March 7, 1988 (inception of Class A) to June
30, 1996 was 61.82%. Without giving effect to the applicable front-end
sales load, the total return for Class A was 66.80%. The Premier Limited
New York Municipal Fund's total return for Class B and C for the period
December 28, 1994 (inception date of Class B and Class C) to June 30, 1996
was 7.49% and 10.66%, respectively. Without giving effect to the
applicable CDSC, the total return for Class B and C was 10.49% and 10.66%,
respectively. The Premier Limited Term New York Municipal Fund's total
return for Class R shares for the period February 1, 1993 (inception of
Class R) to June 30, 1996 was 18.37%.
The Premier Limited Term Municipal Fund's total return for Class A
shares for the period October 1, 1985 (inception of Class A) to June 30,
1996 was 139.62%. Without giving effect to the applicable CDSC, the total
return for Class A was 147.05%. The Premier Limited Term Municipal Fund's
total return for Class B and C for the period December 28, 1994 (inception
date of Class B and Class C) to June 30, 1996 was 8.60% and 11.71%,
respectively. Without giving effect to the applicable front-end sales
load, the total return for Class B and C was 11.60% and 11.71%,
respectively. The Premier Limited Term Municipal Fund's total return for
Class R shares for the period February 1, 1993 (inception of Class R) to
June 30, 1996 was 19.83%.
Total return is calculated by subtracting the amount of a Fund's net
asset value (maximum offering price in the case of Class A) per share at
the beginning of a stated period from the net asset value (maximum offering
price in the case of Class A) per share at the end of the period (after
giving effect to the reinvestment of dividends and other distributions
during the period and any applicable CDSC), and dividing the result by the
net asset value (maximum offering price in the case of Class A) per share
at the beginning of the period. Total return also may be calculated based
on the net asset value per share at the beginning of the period instead of
the maximum offering price per share at the beginning of the period for
Class A shares or without giving effect to any applicable CDSC at the end
of the period for Class B or C shares. In such cases, the calculation
would not reflect the deduction of the sales load with respect to Class A
shares or any applicable CDSC with respect to Class B or C shares, which,
if reflected would reduce the performance quoted.
Each Fund may compare the performance of its shares to that of other
mutual funds, relevant indices or rankings prepared by independent services
or other financial or industry publications that monitor mutual fund
performance.
Performance rankings as reported in Changing Times, Business Week,
Institutional Investor, The Wall Street Journal, Mutual Fund Forecaster, No
Load Investor, Money Magazine, Morningstar Mutual Fund Values, U.S. News
and World Report, Forbes, Fortune, Barron's, Financial Planning, Financial
Planning on Wall Street, Certified Financial Planner Today, Investment
Advisor, Kiplinger's, Smart Money and similar publications may also be used
in comparing a Fund's performance. Furthermore, a Fund may quote its yields
in advertisements or in shareholder reports.
From time to time, advertising material for a Fund may including
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.
Yield information is useful in reviewing the Funds' performance, but
because yields fluctuate, such information cannot necessarily be used to
compare an investment in a Fund's shares with bank deposits, savings
accounts and similar investment alternatives which often provide an agreed
or guaranteed fixed yield for a stated period of time. Shareholders should
remember that yield is a function of the kind and quality of the
instruments in the Funds' portfolios, portfolio maturity, operating
expenses and market conditions. The Funds' yields and total returns will
also be affected if Dreyfus waives any portion of its investment management
fees.
The Funds' net investment income changes in response to fluctuations
in interest rates and the expenses of the Funds. Consequently, any given
performance quotation should not be considered as representative of the
Funds' performance for any specified period in the future.
For the purpose of determining the interest earned on debt obligations
that were purchased by a Fund at a discount or premium, the formula
generally calls for amortization of the discount or premium; the
amortization schedule will be adjusted monthly to reflect changes in the
market values of the debt obligations.
A Fund's equivalent taxable yield is computed by dividing that portion
of the Fund's yield which is tax-exempt by one minus a stated income tax
rate and adding the product to that portion, if any, of the Fund's yield
that is not tax-exempt.
Investors should recognize that in periods of declining interest rates
a Fund's yield will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates a Fund's yield will tend to
be somewhat lower. Also, when interest rates are falling, the inflow of
net new money to a Fund from the continuous sale of its shares will likely
be invested in portfolio instruments producing lower yields than the
balance of the Fund's portfolio, thereby reducing the current yield of the
Fund. In periods of rising interest rates, the opposite can be expected to
occur.
INFORMATION ABOUT THE FUNDS
The following information supplements and should be read in
conjunction with the section in each Fund's Prospectus entitled "General
Information."
The Trust is a non-diversified, open-end management investment company
organized as an unincorporated business trust under the laws of the
Commonwealth of Massachusetts by an Agreement and Declaration of Trust
dated March 28, 1983, amended and restated December 9, 1992, and
subsequently further amended. On March 31, 1994 the Trust changed its name
from "The Boston Company Tax-Free Municipal Funds" to "The Laurel Tax-Free
Municipal Funds." The Trust's name was then changed from "The Laurel Tax-
Free Municipal Funds" to "The Dreyfus/Laurel Tax-Free Municipal Funds"
effective October 17, 1994.
The Trustees have authority to create an unlimited number of shares of
beneficial interest of separate series, without par value, for each class
of shares. Each series will be treated as a separate entity. Currently,
seven series have been authorized. The Trustees have authority to create
additional series at any time in the future without shareholder approval.
Each share (regardless of Class) has one vote. On each matter
submitted to a vote of the shareholders, all shares of each Fund or Class
shall vote together as a single class, except as to any matter for which a
separate vote of any Fund or Class is required by the 1940 Act and except
as to any matter which affects the interest of a particular Fund or Class,
in which case only the holders of shares of the one or more affected Funds
or Classes shall be entitled to vote, each as a separate class.
The assets received by the Trust for the issue or sale of shares of
each Fund and all income, earnings, profits and proceeds thereof, subject
only to the rights of creditors, are specifically allocated to such Fund,
and constitute the underlying assets of such Fund. The underlying assets
of each Fund are required to be segregated on the books of account, and are
to be charged with the expenses in respect to such Fund and with a share of
the general expenses of the Trust. Any general expenses of the Trust not
readily identifiable as belonging to a particular Fund shall be allocated
by or under the direction of the Trustees in such manner as the Trustees
determine to be fair and equitable, taking into consideration, among other
things, the relative sizes of the Funds and the relative difficulty in
administering each Fund. Each share of each Fund represents an equal
proportionate interest in that Fund with each other share and is entitled
to such dividends and distributions out of the income belonging to such
Fund as are declared by the Trustees. Upon any liquidation of a Fund,
shareholders thereof are entitled to share pro rata in the net assets
belonging to that Fund available for distribution.
The Trust does not hold annual meetings of shareholders. There will
normally be no meetings of shareholders for the purpose of electing
Trustees unless and until such time as less than a majority of the Trustees
holding office have been elected by shareholders, at which time the
Trustees then in office will call a shareholders' meeting for the election
of Trustees. Under the 1940 Act, shareholders of record of no less than
two-thirds of the outstanding shares of the Trust may remove a Trustee
through a declaration in writing or by a vote cast in person or by proxy at
a meeting called for that purpose. The Trustees are required to call a
meeting of shareholders for the purposes of voting upon the question of
removal of any Trustee when requested in writing to do so by the
shareholders of record of not less than 10% of the Trust's outstanding
shares.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Agreement and Declaration of Trust disclaims shareholder
liability for acts or obligations of the Trust and requires that notice of
such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or a Trustee. The Agreement and
Declaration of Trust provides for indemnification from the Trust's property
for all losses and expenses of any shareholder held personally liable for
the obligations of the Trust. Thus, the risk of a shareholder's incurring
financial loss on account of shareholder liability is limited to
circumstances in which the Trust itself would be unable to meet its
obligations, a possibility which Dreyfus believes is remote. Upon payment
of any liability incurred by the Trust, the shareholder paying such
liability will be entitled to reimbursement from the general assets of the
Trust. The Trustees intend to conduct the operations of each Fund in such
a way so as to avoid, as far as possible, ultimate liability of the
shareholders for liabilities of such Fund.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS
Mellon Bank, One Mellon Bank Center, Pittsburgh, PA 15258, is the
Funds' custodian. Dreyfus Transfer, Inc., a wholly-owned subsidiary of
Dreyfus, P.O. Box 9692, Providence, RI 02940-9830, is each Fund's transfer
and dividend disbursing agent. Dreyfus Transfer, Inc. and Mellon Bank, as
custodian, have no part in determining the investment policies of a Fund or
which securities are to be purchased or sold by the Fund.
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 Funds' Prospectuses and this Statement of Additional
Information.
KPMG Peat Marwick LLP, 345 Park Avenue, New York, New York 10154,
was appointed by the Trustees to serve as the Funds' independent
auditors for the year ending June 30, 1997, providing audit services
including (1) examination of the annual financial statements (2)
assistance, review and consultation in connection with SEC (3) and review
of the annual Federal income tax return filed on behalf of each Fund.
FINANCIAL STATEMENTS
The Funds' Annual Reports for the fiscal year ended June 30, 1996
accompany this Statement of Additional Information, and the financial
statements contained therein, and related notes, are incorporated by
reference into this Statement of Additional Information.
APPENDIX A
RISK FACTORS - INVESTING
IN MASSACHUSETTS MUNICIPAL OBLIGATIONS
The following information constitutes only a brief summary, does not
purport to be a complete description, and is based on information drawn
from official statements relating to securities offerings of the
Commonwealth of Massachusetts available as of the date of this Statement of
Additional Information. While the Fund has not independently verified this
information, it has no reason to believe that such information is not
correct in all material aspects.
The economy of the Commonwealth of Massachusetts is experiencing a
recovery following a slowdown that began in mid-1988. Massachusetts had
benefitted from an annual job growth rate of approximately 2% since the
early 1980s, but by 1989 employment started to decline. Between 1988 and
1992, total employment in Massachusetts declined 10.7%. In 1993, 1994 and
1995, however, total employment increased by 1.6%, 2.2% and 2.4%,
respectively. Employment levels increased in all sectors except
manufacturing. Between 1990 and 1992, the Commonwealth's unemployment rate
was considerably higher than the national average, however, unemployment
rates in Massachusetts since 1993 have declined faster than the national
average (6.9% compared to 6.8% in 1993) and the employment rate in
Massachusetts in 1994 and 1995 was slightly below the national average
(6.0% compared to 6.1% for 1994 and 5.4% compared with 5.6% for 1995).
Massachusetts' economic and fiscal difficulties of recent years appear
to have abated. While the Commonwealth's expenditures for State programs
and services in each of the fiscal years 1987 through 1991 exceeded each
year's current revenues, Massachusetts ended each of the fiscal years 1991
to 1996 with a positive fiscal balance in its general operating funds.
While the Commonwealth's expenditures for State programs and services
in each of the fiscal years 1987 through 1991 exceeded each year's current
revenues, Massachusetts ended each of the fiscal years 1991 to 1996 with a
positive closing fund balance in its budgeted operating funds.
In recent years, health care related costs have risen dramatically in
Massachusetts and across the nation and the increase in the State's
Medicaid and group health insurance costs reflects this trend. In fiscal
1993, Medicaid was the largest item in Massachusetts' budget and has been
one of the fastest growing budget items, although the rate of increase has
abated in recent years. During fiscal years 1989, 1990, 1991 and 1992,
Medicaid expenditures were $1.83 billion, $2.12 billion, $2.77 billion and
$2.82 billion, respectively, representing an average increase of 15.4%.
Expenditures for fiscal 1993 were $3.15 billion, an 11.8% increase over
fiscal 1992. Medicaid expenses in fiscal 1994 were $3.31 billion and in
fiscal 1995 $3.398 billion. The average annual growth from fiscal 1991 to
fiscal 1995 was 5.4% compared with approximately 17% between fiscal 1987
and fiscal 1991.
Massachusetts' pension costs have risen dramatically as the State has
appropriated funds to address in part the unfunded liabilities that had
accumulated over several decades. Total pension costs increased at an
average annual rate of 8.1% from $703.9 million in fiscal 1991 to $968.8
million in fiscal 1995.
Payments for debt service on Massachusetts general obligation bonds
and notes have risen at an average annual rate of 11.6% from $649.8 million
in fiscal 1989 to $1.23 billion in fiscal 1995. Debt service payments
were $898.3 million in fiscal 1992, $1.14 billion in fiscal 1993 and $1.15
billion in fiscal 1994. In 1990, legislation was enacted which generally
imposes a 10% limit on the total appropriations in any fiscal year that may
be expended for payment of interest and principal on general obligation
debt. As of January 1, 1995, the State had approximately $9,595 billion of
long-term general obligation debt outstanding and short-term direct
obligations of the Commonwealth totalled $264 million.
Certain independent authorities and agencies within the State are
statutorily authorized to issue debt for which Massachusetts is directly,
in whole or in part, or indirectly liable. The State's liabilities are
either in the form of (i) a direct guaranty, (ii) state support through
contract assistance payments for debt service, or (iii) indirect
obligations. The State is indirectly liable for the debt of certain
authorities through a moral obligation to maintain the funding of reserve
funds which are pledged as security for the authorities' debt.
In November 1980, voters in the Commonwealth approved a State-wide tax
limitation initiative petition, commonly known as Proposition 2 1/2, to
constrain levels of property taxation and to limit the charges and fees
imposed on cities and towns of certain government entities, including
county governments. The law is not a constitutional provision and
accordingly is subject to amendment or repeal by the legislature.
Proposition 2 1/2 limits the property taxes which a Massachusetts city or town
may assess in any fiscal year to the lesser of (i) 2.5% of the full and
fair cash value of real estate and personal property therein and (ii) 2.5%
over the previous year's levy limit plus any growth in the tax base from
certain new construction and parcel subdivisions. In addition, Proposition
2 1/2 limits any increase in the charges and fees assessed by certain
governmental entities, including county governments, on cities and towns to
the sum of (i) 2.5% of the total charges and fees imposed in the preceding
fiscal year, and (ii) any increase in charges for services customarily
provided locally or services obtained by the city or town at its option.
The law contains certain override provisions which require voter approval
at a general or special election. Proposition 2 1/2 also limits any annual
increase in the total assessments on cities and towns by any county,
district, authority, the Commonwealth, or any other governmental entity
except regional school districts and regional water and sewer districts
whose budgets are approved by 2/3 of their member cities and towns. During
the 1980s, Massachusetts increased payments to the cities, towns and
regional school districts ("Local Aid") to mitigate the impact of
Proposition 2 1/2 on local programs and services. In fiscal 1996,
approximately 19.1% of Massachusetts' budget was allocated to Local Aid.
Direct Local Aid dropped from a high of $2.961 billion in fiscal 1989 to
$2.727 billion in fiscal 1994, but increased to $2.976 billion in fiscal
1995 and an estimated $3.240 billion in fiscal 1996. Recent increases are
largely a result of comprehensive education reform legislation enacted in
1993 that requires annual increases in state expenditures for education
funding, subject to annual legislative appropriations, above a fiscal 1993
base of approximately $1.288 billion. Increases of $175 million above the
base for fiscal 1994 to $867 million for fiscal 1997 have been fully
funded. Additional increases are called for in future years.
Many factors affect the financial condition of the Commonwealth and
its cities, towns and public bodies, such as social, environmental, and
economic conditions, many of which are not within the control of such
entities. As is the case with most urban States, the continuation of many
of Massachusetts' programs, particularly its human services programs, is in
significant part dependent upon continuing Federal reimbursements which
have been steadily declining. The loss of grants to Massachusetts and its
cities and towns could further slow economic development. To the extent
that such factors may exist, they could have an adverse effect on economic
conditions in Massachusetts, although what effect, if any, such factors
would have on Massachusetts' Municipal Obligations cannot be predicted.
APPENDIX B
RISK FACTORS - INVESTING IN CALIFORNIA MUNICIPAL OBLIGATIONS
Certain California (the "State") constitutional amendments,
legislative measures, executive orders, civil actions and voter
initiatives, as well as the general financial condition of the State, could
adversely affect the ability of issuers of California Municipal Obligations
to pay interest and principal on such obligations. The following
information constitutes only a brief summary, does not purport to be a
complete description, and is based on information drawn from official
statements relating to securities offerings of the State of California and
various local agencies, available as of the date of this Statement of
Additional Information. While the Fund has not independently verified such
information, it has no reason to believe that such information is not
correct in all material respects.
Recent Developments. From mid-1990 to late 1993, the State suffered a
recession with the worst economic, fiscal and budget conditions since the
1930s. Construction, manufacturing (especially aerospace), exports and
financial services, among others, were all severely affected. Job losses
have been the worst of any post-war recession. Unemployment reached 10.1%
in January 1994, but fell sharply to 7.7% in October and November 1994.
According to the State's Department of Finance, recovery from the recession
in California began in 1994.
The recession seriously affected State tax revenues, which basically
mirror economic conditions. It also has caused increased expenditures for
health and welfare programs. The State also has been facing a structural
imbalance in its budget with the largest programs supported by the General
Fund (K-12 schools and community colleges, health and welfare, and
corrections) growing at rates higher than the growth rates for the
principal revenue sources of the General Fund. As a result, the State
experienced recurring budget deficits in the late 1980s and early 1990s.
The State Controller reported that expenditures exceeded revenues for four
of the five fiscal years ending with 1991-92. The State had an operating
surplus of approximately $109 million in 1992-93 and $836 million in 1993-
94. However, at June 30, 1994, according to the Department of Finance, the
State's Special Fund for Economic Uncertainties ("SFEU") still had a
deficit, on a budget basis, of approximately $1.8 billion.
The accumulated budget deficits over the past several years, together
with expenditures for school funding which have not been reflected in the
budget, and reduction of available internal borrowable funds, have combined
to significantly deplete the State's cash resources to pay its ongoing
expenses. In order to meet its cash needs, the State has had to rely for
several years on a series of external borrowings, including borrowings past
the end of a fiscal year. Such borrowings are expected to continue in
future fiscal years. To meet its cash flow needs in the 1994-95 fiscal
year the State issued, in July and August 1994, $4.0 billion of revenue
anticipation warrants which mature on April 25, 1996, and $3.0 billion of
revenue anticipation notes which matured on June 28, 1995.
As a result of the deterioration in the State's budget and cash
situation, the rating agencies reduced the State's credit ratings. Between
October 1991 and July 1994, the rating on the State's general obligation
bonds was reduced by S&P from "AAA" to "A," by Moody's from "Aaa" to "A1"
and by Fitch from "AAA" to "A."
The 1994-95 Fiscal Year Budget (as updated in the January 10, 1995
Governor's Budget) projected $42.4 billion of General Fund revenues and
transfers and $41.7 billion of budgeted expenditures. In addition, the
1994-95 Budget Act anticipates deferring retirement of about $1 billion of
the accumulated budget deficit to the 1995-96 fiscal year when it is
intended to be fully retired by June 30, 1996.
The Governor's Budget for 1995-96 proposes General Fund revenues and
transfers of $42.5 billion and expenditures of $41.7 billion, which was
estimated to leave a balance of approximately $92 million in the budget
reserve, the SFEU, at June 30, 1996 after repayment of the accumulated
budget deficits. The Budget proposal is based on a number of assumptions,
including receipt of $830 million from the Federal government to offset
costs of undocumented and refugee immigrants.
On December 6, 1994, Orange County, California (the "County"),
together with its pooled investment funds (the "County Funds") filed for
protection under Chapter 9 of the Federal Bankruptcy Code, after reports
that the County Funds had suffered significant market losses in their
investments, causing a liquidity crisis for the County Funds and the
County. More than 1200 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 interim and/or extended entities which deposited monies in the Funds,
including the County, faced cash interim and/or extended flow difficulties
because of the bankruptcy filing and may be required to reduce programs or
capital projects. The County has embarked on a fiscal recovery plan based
on sharp reductions in services and personnel, and rescheduling of
outstanding short term debt using certain new revenues transferred to the
County from other local governments pursuant to special legislation enacted
in October 1995.
The State has no existing obligation with respect to any outstanding
obligations or securities of the County or any of the other participating
entities. However, in the event the County is unable to maintain county
administered State programs because of insufficient resources, it may be
necessary for the State to intervene, but the State cannot presently
predict what, if any, action may occur.
On January 17, 1994, an earthquake of the magnitude of an estimated
6.8 on the Richter Scale struck Los Angeles causing significant damage to
public and private structures and facilities. Although some individuals
and businesses suffered losses totaling in the billions of dollars, the
overall effect of the earthquake on the regional and State economy is not
expected to be serious.
State Finances. State moneys are segregated into the General Fund and
approximately 600 Special Funds. The General Fund consists of the revenues
received into the State Treasury and earnings from State investments, which
are not required by law to be credited to any other fund. The General Fund
is the principal operating fund for the majority of governmental activities
and is the depository of most major State revenue sources.
The SFEU is funded with General Fund revenues and was established to
protect the State from unforeseen reduced levels of revenues and/or
unanticipated expenditure increases. Amounts in the SFEU may be
transferred by the Controller as necessary to meet cash needs of the
General Fund. The Controller is required to return moneys so transferred
without payment of interest as soon as there are sufficient moneys in the
General Fund. For budgeting and accounting purposes, any appropriation
made from the SFEU is deemed an appropriation from the General Fund. For
year-end reporting purposes, the Controller is required to add the balance
in the SFEU to the balance in the General Fund so as to show the total
monies then available for General Fund purposes.
Inter-fund borrowing has been used for many years to meet temporary
imbalances of receipts and disbursements in the General Fund. As of June
30, 1994, the General Fund had outstanding loans in the aggregate principal
amount of $43 million to the General Fund from the SFEU and outstanding
loans in the aggregate principal amount of $5.2 billion, which consisted of
$4.0 billion of internal loans to the General Fund from the SFEU and other
Special Funds and $1.2 billion of external loans represented by the 1994
revenue anticipation warrants.
Articles XIIIA and XIIIB to the State Constitution and Other Revenue
Law Changes. Prior to 1977, revenues of the State government experienced
significant growth primarily as a result of inflation and continuous
expansion of the tax base of the State. In 1978, State voters approved an
amendment to the State Constitution known as Proposition 13, which added
Article XIIIA to the State Constitution, reducing ad valorem local property
taxes by more than 50%. In addition, Article XIIIA provides that
additional taxes may be levied by cities, counties and special districts
only upon approval of not less than a two-thirds vote of the "qualified
electors" of such district, and requires not less than a two-thirds vote of
each of the two houses of the State Legislature to enact any changes in
State taxes for the purpose of increasing revenues, whether by increased
rate or changes in methods of computation.
Primarily as a result of the reductions in local property tax revenues
received by local governments following the passage of Proposition 13, the
Legislature undertook to provide assistance to such governments by
substantially increasing expenditures from the General Fund for that
purpose beginning in the 1978-79 fiscal year. In recent years, in addition
to such increased expenditures, the indexing of personal income tax rates
(to adjust such rates for the effects of inflation), the elimination of
certain inheritance and gift taxes and the increase of exemption levels for
certain other such taxes had a moderating impact on the growth in State
revenues. In addition, the State has increased expenditures by providing a
variety of tax credits, including renters' and senior citizens' credits and
energy credits.
The State is subject to an annual "appropriations limit" imposed by
Article XIIIB of the State Constitution adopted in 1979. Article XIIIB
prohibits the State from spending "appropriations subject to limitation" in
excess of the appropriations limit imposed. "Appropriations subject to
limitations" are authorizations to spend "proceeds of taxes," which consist
of tax revenues, and certain other funds, including proceeds from
regulatory licenses, user charges or other fees to the extent that such
proceeds exceed "the cost reasonably borne by such entity in providing the
regulation, product or service." One of the exclusions from these
limitations is "debt service" (defined as "appropriations required to pay
the cost of interest and redemption charges, including the funding of any
reserve or sinking fund required in connection therewith, on indebtedness
existing or legally authorized as of January 1, 1979 or on bonded
indebtedness thereafter approved" by the voters). In addition,
appropriations required to comply with mandates of courts or the Federal
government and, pursuant to Proposition 111 enacted in June 1990,
appropriations for qualified capital outlay projects and appropriations of
revenues derived from any increase in gasoline taxes and motor vehicle
weight fees above January 1, 1990 levels are not included as appropriations
subject to limitation. In addition, a number of recent initiatives were
structured or proposed to create new tax revenues dedicated to certain
specific uses, with such new taxes expressly exempted from the Article
XIIIB limits (e.g., increased cigarette and tobacco taxes enacted by
Proposition 99 in 1988). The appropriations limit also may be exceeded in
cases of emergency. However, unless the emergency arises from civil
disturbance or natural disaster declared by the Governor, and the
appropriations are approved by two-thirds of the Legislature, the
appropriations limit for the next three years must be reduced by the amount
of the excess.
The State's appropriations limit in each year is based on the limit
for the prior year, adjusted annually for changes in California per capita
personal income and changes in population, and adjusted, when applicable,
for any transfer of financial responsibility of providing services to or
from another unit of government. The measurement of change in population
is a blended average of statewide overall population growth, and change in
attendance at local school and community college ("K-14") districts. As
amended by Proposition 111, the appropriations limit is tested over
consecutive two-year periods. Any excess of the aggregate "proceeds of
taxes" received over such two-year periods above the combined
appropriations limits for those two years is divided equally between
transfers to K-14 districts and refunds to taxpayers.
As originally enacted in 1979, the State's appropriations limit was
based on its 1978-79 fiscal year authorizations to expend proceeds of taxes
and was adjusted annually to reflect changes in cost of living and
population (using different definitions, which were modified by Proposition
111). Commencing with the 1991-92 fiscal year, the State's appropriations
limit is adjusted annually based on the actual 1986-87 limit, and as if
Proposition 111 had been in effect. The State Legislature has enacted
legislation to implement Article XIIIB which defines certain terms used in
Article XIIIB and sets forth the methods for determining the State's
appropriations limit. Government Code Section 7912 requires an estimate of
the State's appropriations limit to be included in the Governor's Budget,
and thereafter to be subject to the budget process and established in the
Budget Act.
For the 1990-91 fiscal year, the State appropriations limit was $32.7
billion, and appropriations subject to limitation were $7.51 billion under
the limit. The limit for the 1991-92 fiscal year was $34.2 billion, and
appropriations subject to limitations were $3.8 billion under the limit.
The limit for the 1992-93 fiscal year was $35.01 billion, and the
appropriations subject to limitation were $7.53 billion under the limit.
The limit for the 1993-94 fiscal year was $36.060 billion, and the
appropriations subject to limitation were $6.74 billion under the limit.
The limit for the 1994-95 fiscal year was $37.55 billion, and the
appropriations subject to limitations were $5.93 billion under the limit.
The estimated limit for the 1995-96 fiscal year is $39.31 billion, and the
appropriations subject to limitations are estimated to be $6.47 billion
under the limit.
In November 1988, State voters approved Proposition 98, which changed
State funding of public education below the university level and the
operation of the State's appropriations limit, primarily by guaranteeing K-
14 schools a minimum share of General Fund revenues. Under Proposition 98
(as modified by Proposition 111, which was enacted in June 1990), K-14
schools are guaranteed the greater of (a) 40.3% of General Fund revenues
("Test 1"), (b) the amount appropriated to K-14 schools in the prior year,
adjusted for changes in the cost of living (measured as in Article XIIIB by
reference to California per capita personal income) and enrollment ("Test
2"), or (c) a third test, which would replace the second test in any year
when the percentage growth in per capita General Fund revenues from the
prior year plus .5% is less than the percentage growth in California per
capita personal income ("Test 3"). Under "Test 3," schools would receive
the amount appropriated in the prior year adjusted for changes in
enrollment and per capita General Fund revenues, plus an additional small
adjustment factor. If "Test 3" is used in any year, the difference between
"Test 3" and "Test 2" would become a "credit" to schools which would be the
basis of payments in future years when per capita General Fund revenue
growth exceeds per capita personal income growth.
Proposition 98 permits the Legislature by two-thirds vote of both
houses, with the Governor's concurrence, to suspend the K-14 schools'
minimum funding formula for a one-year period. In the fall of 1989, the
Legislature and the Governor utilized this provision to avoid having 40.3%
of revenues generated by a special supplemental sales tax enacted for
earthquake relief go to K-14 schools. Proposition 98 also contains
provisions transferring certain State tax revenues in excess of the Article
XIIIB limit to K-14 schools.
The 1991-92 Budget Act, applying "Test 2" of Proposition 98,
appropriated approximately $18.5 billion for K-14 schools pursuant to
Proposition 98. During the course of the fiscal year, revenues proved to
be substantially below expectations. By the time the Governor's Budget was
introduced in January 1992, it became clear that per capita growth in
General Fund revenues for 1991-92 would be far smaller than the growth in
California per capita personal income and the Governor's Budget therefore
reflected a reduction in Proposition 98 funding in 1991-92 by applying
"Test 3" rather than "Test 2."
In response to the changing revenue situation and to fully fund the
Proposition 98 guarantee in both the 1991-92 and 1992-93 fiscal years
without exceeding it, the Legislature enacted several bills as part of the
1992-93 budget package which responded to the fiscal crisis in education
funding. Fiscal year 1991-92 Proposition 98 appropriations for K-14
schools were reduced by $1.083 billion. In order to not adversely impact
cash received by school districts, however, a short-term loan was
appropriated from the non-Proposition 98 State General Fund. The
Legislature then appropriated $16.6 billion to K-14 schools for 1992-93
(the minimum guaranteed by Proposition 98), but designated $1.083 billion
of this amount to "repay" the prior year loan, thereby reducing cash
outlays in 1992-93 by that amount. In addition to reducing the 1991-92
fiscal year appropriations for K-14 schools by $1.083 billion and
converting the amount to a loan (the "inter-year adjustment"), Chapter 703,
Statutes of 1992 also made an adjustment to "Test 1," based on the
additional $1.2 billion of local property taxes that were shifted to
schools and community colleges. The "Test 1" percentage changed from 40%
to 37%. Additionally, Chapter 703 contained a provision that if an
appellate court should determine that the "Test 1" recalculation or the
inter-year adjustment is unconstitutional, unenforceable or invalid,
Proposition 98 would be suspended for the 1992-93 fiscal year, with the
result that K-14 schools would receive the amount intended by the 1992-93
Budget Act compromise.
The State Controller stated in October 1992 that, because of a
drafting error in Chapter 703, he could not implement the $1.083 billion
reduction of the 1991-92 school funding appropriation, which was part of
the inter-year adjustment. The Legislature untimely enacted corrective
legislation as part of the 1993-94 Budget package to implement the $1.083
billion inter-year adjustment as originally intended.
In the 1992-93 Budget Act, a new loan of $732 million was made to K-12
schools in order to maintain per-average daily attendance ("ADA") funding
at the same level as 1991-92, at $4,187. An additional loan of $241
million was made to community college districts. These loans are to be
repaid from future Proposition 98 entitlements. (The teachers'
organization lawsuit 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
1994-95 contributed about 43% 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 9.3%. 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.
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 34% of General Fund
revenue in 1994-95. Bank and corporation tax revenues comprised about 13%
of General Fund revenue in 1994-95. In 1989, Proposition 99 added a 25
cents per pack excise tax on cigarettes, and a new equivalent excise tax on
other tobacco products. Legislation enacted in 1993 added an additional 2
cents per pack for the purpose of funding breast cancer research.
General Financial Condition of the State. In the years following
enactment of the Federal Tax Reform Act of 1986, and conforming changes to
the State's tax laws, taxpayer behavior became more difficult to predict,
and the State experienced a series of fiscal years in which revenue came in
significantly higher or lower than original estimates. The 1989-90 fiscal
year ended with revenues below estimates and the SFEU was fully depleted by
June 30, 1990. This date essentially coincided with the date of the most
recent recession, and the State subsequently accumulated a budget deficit
in the SFEU approaching $2.8 billion at its peak. The State's budget
problems in recent years also have been caused by a structural imbalance
which has been identified by the current and previous Administrations. The
largest General Fund programs -- K-14 education, health, welfare and
corrections -- were increasing faster than the revenue base, driven by the
State's rapid population increases.
Starting in the 1990-91 fiscal year, each budget required multibillion
dollar actions to bring projected revenues and expenditures into balance
and to close large "budget gaps" which were identified. The Legislature
and Governor eventually agreed on significant cuts in program expenditures,
some transfers of program responsibilities and funding from the State to
local governments, revenue increases (particularly in the 1991-92 fiscal
year budget), and various one-time adjustments and accounting changes.
However, as the recession took hold and deepened after the summer of 1990,
revenues dropped sharply and expenditures for health and welfare programs
increased as job losses mounted, so that the State ended each of the 1990-
91 and 1991-92 fiscal years with an unanticipated deficit in the budget
reserve, the SFEU, as compared to projected positive balances.
As a result of the revenue shortfalls accumulating for the previous
two fiscal years, the Controller in April 1992 indicated that cash
resources (including borrowing from Special Funds) would not be sufficient
to meet all General Fund obligations due on June 30 and July 1, 1992. On
June 25, 1992, the Controller issued $475 million of 1992 Revenue
Anticipation Warrants (the "1992 Warrants") in order to provide funds to
cover all necessary payments from the General Fund at the end of the 1991-
92 fiscal year and on July 1, 1992. The 1992 Warrants were paid on July 24,
1992. In addition to the 1992 Warrants, the Controller reported that as of
June 30, 1992, the General Fund had borrowed $1.336 billion from the SFEU
and $4.699 billion from other Special Funds, using all but about $183
million of borrowable cash resources.
To balance the 1992-93 Governor's Budget, program reductions totalling
$4.365 billion and a revenue and transfer increase of $872 million were
proposed for the 1991-92 and 1992-93 fiscal years. Economic performance in
the State continued to be sluggish after the 1992-93 Governor's Budget was
prepared. By the time of the "May Revision," issued on May 20, 1992, the
Administration estimated that the 1992-93 Budget needed to address a gap of
about $7.9 billion, much of which was needed to repay the accumulated
budget deficits of the previous two years.
The severity of the budget actions needed led to a long delay in
adopting the budget. With the failure to enact a budget by July 1, 1992,
the State had no legal authority to pay many of its vendors until the
budget was passed. Starting on July 1, 1992, the Controller was required
to issue "registered warrants" in lieu of normal warrants backed by cash to
pay many State obligations. Available cash was used to pay
constitutionally mandated and priority obligations, such as debt service on
bonds and revenue anticipation warrants. Between July 1 and September 4,
1992, the Controller issued an aggregate of approximately $3.8 billion of
registered warrants payable from the General Fund, all of which were called
for redemption by September 4, 1992 following enactment of the 1992-93
Budget Act and issuance by the State of $3.3 billion of interim notes.
The Legislature enacted the 1992-93 Budget Bill on August 29, 1992,
and it was signed by the Governor on September 2, 1992. The 1992-93 Budget
Act provided for expenditures of $57.4 billion and consisted of General
Fund expenditures of $40.8 billion and Special Fund and Bond Fund
expenditures of $16.6 billion. The Department of Finance estimated a
balance in the SFEU of $28 million on June 30, 1993.
The $7.9 billion budget gap was closed primarily through cuts in the
program expenditures (principally for health and welfare programs, aid to
schools and support for higher education), together with some increases in
revenues from accelerated collections and changes in tax laws to confirm to
Federal law changes, and a variety of on-time inter-fund transfers and
deferrals. The other major component of the budget compromise was a law
requiring local governments to transfer a total of $1.3 billion to K-12
school and community college districts, thereby reducing by that amount
General Fund support for those districts under Proposition 98.
In May 1993, the Department of Finance projected that the General Fund
would end the fiscal year on June 30, 1993 with an accumulated budget
deficit of about $2.8 billion, and a negative fund balance of about $2.2
billion (the difference being certain reserves for encumbrances and school
funding costs). As a result, the State issued $5 billion of revenue
anticipation notes and warrants.
The Governor's 1993-94 Budget, introduced on January 8, 1993, proposed
General Fund expenditures of $37.3 billion, with projected revenues of
$39.9 billion. It also proposed Special Fund expenditures of $12.4 billion
and Special Fund revenues of $12.1 billion. The 1993-94 fiscal year
represented the third consecutive year the Governor and the Legislature
were faced with a very difficult budget environment, requiring revenue
actions and expenditure cuts totaling billions of dollars to produce a
balanced budget. To balance the budget in the face of declining revenues,
the Governor proposed a series of revenue shifts from local government,
reliance on increased Federal aid and reductions in state spending.
The "May Revision" of the Governor's Budget, released on May 20, 1993,
indicated that the revenue projections of the January Budget Proposal were
tracking well, with the full year 1992-93 about $80 million higher than the
January projection. Personal income tax revenue was higher than projected,
sales tax was close to target, and bank and corporation taxes were lagging
behind projections. The May Revision projected the State would have an
accumulated deficit of about $2.75 billion by June 30, 1993. The Governor
proposed to eliminate this deficit over an 18-month period. He also agreed
to retain the 0.5% sales tax scheduled to expire June 30 for a six-month
period, dedicated to local public safety purposes, with a November election
to determine a permanent extension. Unlike previous years, the Governor's
Budget and May Revision did not calculate a "gap" to be closed, but rather
set forth revenue and expenditure forecasts and proposals designed to
produce a balanced budget.
The 1993-94 Budget Act was signed by the Governor on June 30, 1993,
along with implementing legislation. The Governor vetoed about $71 million
in spending. With enactment of the Budget Act, the State carried out its
regular cash flow borrowing program for the fiscal year, which included the
issuance of approximately $2 billion of revenue anticipation notes that
matured on June 28, 1994.
The 1993-94 Budget Act was predicated on General Fund revenues and
transfers estimated at $40.6 billion, about $700 million higher than the
January Governor's Budget, but still about $400 million below 1992-93 (and
the second consecutive year of actual decline). The principal reasons for
declining revenues were the continued weak economy and the expiration (or
repeal) of three fiscal steps taken in 1991--a half cent temporary sales
tax, a deferral of operating loss carry forwards, and repeal by initiative
of a sales tax on candy and snack foods.
The 1993-94 Budget Act also assumed Special Fund revenues of $11.9
billion, an increase of 2.9% over 1992-93.
The 1993-94 Budget Act included General Fund expenditures of $38.5
billion (a 6.3% reduction from projected 1992-93 expenditures of $41.1
billion), in order to keep a balanced budget within the available revenues.
The Budget also included Special Fund expenditures of $12.1 billion, a 4.2%
increase.
The 1993-94 Budget Act contained no General Fund tax/revenue increases
other than a two year suspension of the renters' tax credit.
Administration reports during the course of the 1993-94 fiscal year
indicated that while economic recovery appeared to have started in the
second half of the fiscal year, recessionary conditions continued longer
than had been anticipated when the 1993-94 Budget Act was adopted.
Overall, revenues for the 1993-94 fiscal year were about $800 million lower
than original projections, and expenditures were about $780 million higher,
primarily because of higher health and welfare caseloads, lower property
taxes which require greater State support for K-14 education to make up to
shortfall, and lower than anticipated Federal government payments for
immigration-related costs. The reports in May and June 1994, indicated that
revenues in the second half of the 1993-94 fiscal year were very close to
the projections made in the Governor's Budget of January 10, 1994, which
was consistent with a slow turn around in the economy.
The Department of Finance's July 1994 Bulletin, which included final
June receipts, reported that June revenues were $114 million (2.5%) above
projection, with final end-of-year results at $377 million (about 1%) above
the May Revision projections. Part of this result was due to the end-of-
year adjustments and reconciliations. Personal income tax and sales tax
continued to track projections. The largest factor in the higher than
anticipated revenues was from bank and corporation taxes, which were $140
million (18.4%) above projection in June.
During the 1993-94 fiscal year, the State implemented the Deficit
Retirement Plan, which was part of the 1993-94 Budget Act, by issuing $1.2
billion of revenue anticipation warrants in February 1994 that matured
December 21, 1994. This borrowing reduced the cash deficit at the end of
the 1993-94 fiscal year. Nevertheless, because of the $1.5 billion
variance from the original 1993-94 Budget Act assumptions, the General Fund
ended the fiscal year at June 30, 1994 carrying forward an accumulated
deficit of approximately $1.8 billion.
Because of the revenue shortfall and the State's reduced internal
borrowable cash resources, in addition to the $1.2 billion of revenue
anticipation warrants issued as part of the Deficit Retirement Plan, the
State issued an additional $2.0 billion of revenue anticipation warrants
that matured July 26, 1994, which were needed to fund the State's
obligations and expenses through the end of the 1993-94 fiscal year.
The 1994-95 fiscal year represented the fourth consecutive year the
Governor and Legislature were faced with a very difficult budget
environment to produce a balanced budget. Many program cost and budgetary
adjustments had already been made in the last three years. The Governor's
Budget Proposal, as updated in May and June 1994, recognized that the
accumulated deficit could not be repaid in one year, and proposed a two-
year solution. The budget proposal set forth revenue and expenditure
forecasts and revenue and expenditure proposals which estimated operating
surpluses for the budget for both 1994-95 and 1995-96, and lead to the
elimination of the accumulated budget deficit, estimated at about $1.8
billion at June 30, 1994, by June 30, 1996.
The 1994-95 Budget Act, signed by the Governor on July 8, 1994,
projected revenues and transfers of $41.9 billion, $2.1 billion higher than
revenues in 1993-94. This reflected the Administration's forecast of an
improving economy. Also included in this figure was the projected receipt
of about $360 million from the Federal government to reimburse the State's
cost of incarcerating undocumented immigrants, most of which eventually was
not received.
The 1994-95 Budget Act projected Special Fund revenues of $12.1
billion, a decrease of 2.4% from 1993-94 estimated revenues.
The 1994-95 Budget Act projected General Fund expenditures of $40.9
billion, an increase of $1.6 billion over the 1993-94 fiscal year. The
1994-95 Budget Act also projected Special Fund expenditures of $13.7
billion, a 5.4% increase over 1993-94 fiscal year estimated expenditures.
The 1994-95 Budget Act contained no tax increases. Under legislation
enacted for the 1993-94 Budget Act, the renters' tax credit was suspended
for two years (1993 and 1994). A ballot proposition to permanently restore
the renters' tax credit after 1995 failed at the June 1994 election. The
Legislature enacted a further one-year suspension of the renters' tax
credit, for 1995, saving about $390 million in the 1995-96 fiscal year.
The 1994-95 Budget Act assumed that the State would use a cash flow
borrowing program in 1994-95 which combines one-year notes and two-year
warrants, which were issued. Issuance of the warrants allows the State to
defer repayment of approximately $1.0 billion of its accumulated budget
deficit into the 1995-96 fiscal year. The Budget Adjustment Law enacted
along with the 1994-95 Budget Act is designed to ensure that the warrants
will be repaid in the 1995-96 fiscal year.
The Department of Finance Bulletin for April 1995 reported that
General Fund revenues for March 1995 were $28 million, or 1.1%, below
forecast, and that year-to-date General Fund revenues were $110 million, or
0.4%, below forecast.
Initial analysis of the Federal fiscal year 1995 budget by the
Department of Finance indicates that about $98 million was appropriated for
California to offset costs of incarceration of undocumented and refugee
immigrants, less than the $356 million which was assumed in the State's
1994-95 Budget Act.
For the first time in four years, the State entered 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 estimated 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 reflected the
Governor's realignment proposal and the first year of his tax cut proposal.
Without these two proposals, General Fund revenues would have been
projected at approximately $43.8 billion, or an increase of 3.3% over 1994-
95. Expenditures were estimated at $41.7 billion (essentially unchanged
from 1994-95). Special Fund revenues were 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 projected
that the General Fund would 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.
On January 10, 1996, the Governor released his proposed budget for the
Fiscal Year 1996-97 (the "Governor's Budget"). The Governor requested
total General Fund appropriations of about $45.6 billion, based on
projected revenues and transfers of about $45.6 billion, which would leave
a budget reserve in SFEU at June 30, 1997 of about $400 million. The
Governor renewed a proposal, which had been rejected by the Legislature in
1995, for a 15% phased cut in individual and corporate tax rates over three
years (the budget proposal assumes this will be enacted, reducing revenues
in 1996-97 by about $600 million). There was also a proposal to
restructure trial court funding in a way which would result in a $300
million decrease in General Fund revenues. The Governor requested
legislation to make permanent a moratorium on cost of living increases for
welfare payments, and suspension of a renters tax credit, which otherwise
would go back into effect in the 1996-97 Fiscal Year. He further proposed
additional costs in certain health and welfare programs, and assumed that
cost previously approved by the Legislature will receive Federal approval.
The Governor's Budget proposes increases in funding for K-12 schools under
Proposition 98, for State higher education systems (with a second year of
no student fee increases), and for corrections. The Governor's budget
projects external cash flow borrowing of up to $3.2 billion, to mature by
June 30, 1997.
Recent Economic Trends. Revised employment data indicate that
California's recession ended in 1993, and following a period of stability,
a solid recovery is now underway. The State's unemployment rate fell
sharply last year, from 10.1% in January to 7.7% in October and November
1994. The gap between the national and California jobless rates narrowed
from 3.4 percentage points at the beginning of 1994 to an average of 2
percentage points in October and November. The number of unemployed
Californians fell by nearly 400,000 during the year, while civilian
employment increased more than 300,000 in 1994.
Other indicators, including retail sales, homebuilding activity,
existing home sales and bank lending volume all confirm the State's
recovery.
Personal income was severely affected by the Northridge Earthquake,
which reduced the first quarter 1994 figure by $22 billion at an annual
rate, reflecting the uninsured damage to residences and unincorporated
businesses. As a result, personal income growth for all of 1994 was about
4.2%. However, excluding the Northridge effects, growth would have been in
excess of 5%. Personal income is expected to grow 6.6% for 1995.
APPENDIX C
RISK FACTORS--INVESTING IN NEW YORK MUNICIPAL OBLIGATIONS
The financial condition of New York State (the "State") and certain of
its public bodies (the "Agencies") and municipalities, particularly New
York City (the "City"), could affect the market values and marketability of
New York Municipal Obligations which may be held by the Fund. The
following information constitutes only a brief summary, does not purport to
be a complete description, and is based on information drawn from official
statements relating to securities offerings of the State, the City and the
Municipal Assistance Corporation for the City of New York ("MAC") available
as of the date of this Statement of Additional Information. While the Fund
has not independently verified such information, it has no reason to
believe that such information is not correct in all material respects.
A national recession commenced in mid-1990. The downturn continued
through the remainder of the 1990-91 fiscal year, and was followed by a
period of weak economic growth during the remainder of the 1991 calendar
year. For the calendar year 1992, the national economy continued to
recover, although at a rate below all post-war recoveries. The recession
was more severe in the State than in other parts of the nation, owing to a
significant retrenchment in the financial services industry, cutbacks in
defense spending, and an overbuilt real estate market. The State economy
remained in recession until 1993, when employment growth resumed. Since
early 1993, the State has gained approximately 100,000 jobs. The State's
economy is expected to continue to expand modestly during 1995, but there
will be a pronounced slow-down during the course of the year. Although
industries that export goods and services abroad are expected to benefit
from the lower dollar, growth will be slowed by government cutbacks at all
levels. On an average annual basis, employment growth will be about the
same as 1994. Both personal income and wages are expected to record
moderate gains in 1995.
The State's budget for the 1995-96 fiscal year was enacted by the
Legislature on June 7, 1995, more than two months after the start of the
fiscal year. Prior to adoption of the budget, the Legislature enacted
appropriations for disbursements considered to be necessary for State
operations and other purposes, including all necessary appropriations for
debt service. The State Financial Plan for 1995-96 fiscal year was
formulated on June 20, 1995 and is based on the State's budget as enacted
by the Legislature and signed into law by the Governor.
The 1995-96 budget is the first to be enacted in the administration of
the Governor, who assumed office on January 1. It is the first budget in
over half a century which proposed and, as enacted, projects an absolute
year-over-decline in General Fund disbursements. Spending for State
operations is projected to drop even more sharply, by 4.6%. Nominal
spending from all State funding sources (i.e., excluding Federal aid) is
proposed to increase by only 2.5% from the prior fiscal year, in contrast
to the prior decade when such spending growth averaged more than 6.0%
annually.
In his Executive Budget, the Governor indicated that in the 1995-96
fiscal year, the State Financial Plan, based on then-current law governing
spending and revenues, would be out of balance by almost $4.7 billion, as a
result of the projected structural deficit resulting from the ongoing
disparity between sluggish growth in receipts, the effect of prior-year tax
changes, and the rapid acceleration of spending growth; the impact of
unfunded 1994-95 initiatives, primarily for local aid programs; and the use
of one-time solutions, primarily surplus funds from the prior year, to fund
recurring spending in the 1994-95 budget. The Governor proposed additional
tax cuts, to spur economic growth and provide relief for low and middle-
income tax payers, which were larger than those ultimately adopted, and
which added $240 million to the then projected imbalance or budget gap,
bringing their total to approximately $5 billion.
This gap was 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 General Fund was projected to be balanced on a cash basis for the
1995-96 fiscal year. Total receipts and transfers from other funds were
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 were projected to be $33.055 billion, a decrease
of $344 million from the total amount disbursed in the prior fiscal year.
The State Financial Plan was 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 State issued its second quarterly update to the cash-basis 1995-96
State Financial Plan (the "Mid-Year Update") on October 26, 1995.
Revisions have been made to estimates of both receipts and disbursements
based on: (1) updated economic forecasts for both the nation and the
State, (2) an analysis of actual receipts and disbursements through the
first six months of the fiscal year, and (3) an assessment of changing
program requirements and cost savings initiatives. The Mid-Year Update
projects continued balance in the State's 1995-96 Financial Plan,with
estimated receipts reduced by a net $71 million and estimated disbursements
reduced by a net $30 million. The resulting General Fund balance decreases
to $172 million in the Mid-Year Update, reflecting the expected use of $41
million from the Contingency Reserve Fund for payment of litigation and
disallowance expenses.
On October 2, 1995, the State Comptroller released a report entitled
"Comptroller's Report on the Financial Condition of New York State 1995" in
which he identified several risks to the State Financial Plan and
reaffirmed his estimate that the State faces a potential imbalance in
receipts and disbursements of at least $2.7 billion for the State's 1996-97
fiscal year and at least $3.9 billion for the State's 1997-98 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 Plan--GAAP-Basis Results--1995-96 Update. The State
issued its first update to the GAAP-basis Financial Plan for the State's
1995-96 fiscal year on September 1, 1995. The September GAAP-basis update
projected a General Fund operating surplus of $401 million. The prior
projection of the 1995-96 GAAP-basis State Financial Plan, issued in March
1995 as part of the 1995-96 Executive Budget, projected an operating
surplus in the General Fund of $800 million. The change to the projection
primarily reflects the impact of legislative changes to the 1995-96
Executive Budge, as well as increases in projected accruals for certain
local assistance programs (primarily Medicaid).
State Financial Cash-Basis Results--General Fund. The General Fund is
the principal operating fund of the State and is used to account for all
financial transactions, except those required to be accounted for in
another fund. It is the State's largest fund and receives almost all State
taxes and other resources not dedicated to particular purposes. General
Fund moneys are also transferred to other funds, primarily to support
certain capital projects and debt service payments in other fund types.
New York State's financial operations have improved during recent
fiscal years. During the period 1989-90 through 1991-92, the State
incurred General Fund operating deficits that were closed with receipts
from the issuance of tax and revenue anticipation notes ("TRANs"). First,
the national recession, and then the lingering economic slowdown in the New
York and regional economy, resulted in repeated shortfalls in receipts and
three budget deficits. For its 1992-93, 1993-94 and 1994-95 fiscal years,
the State recorded balanced budgets on a cash basis, with substantial fund
balances in 1992-93 and 1993-94, and smaller fund balance in 1994-95, as
described below.
New York State ended its 1994-95 fiscal year with the General fund in
balance. The closing fund balance of $158 million reflects $157 million in
the Tax Stabilization Reserve Fund and $1 million in the Contingency
Reserve Fund ("CRF"). The CRF was established in State Fiscal year 1993-
94, funded partly with surplus moneys, to assist the State in financing the
1994-95 fiscal year costs of extraordinary ligation known or anticipated at
that time; the opening fund balance in State fiscal year 1994-95 was $265
million. The $241 million change in the fund balance reflects the use of
$264 million in the CRF as planned, as well as the required deposit of $23
million to the Tax Stabilization Reserve Fund. In addition, $278 million
was on deposit in the tax refund reserve account, $250 million of which was
deposited at the end of the State's 1994-95 fiscal year to continue the
process of restructuring the State's cash flow as part of the New York
Local Government Assistance Corporation ("LGAC") program.
Compared to the State Financial Plan for 1994-1995 as formulated on
June 16, 1994, reported receipts fell short of original projections by
$1.163 billion, primarily in the categories of personal income and business
taxes. Of this amount, the personal income tax accounts for $800 million,
reflecting weak estimated tax collections and lower withholding due to
reduced wage and salary growth, more severe reductions in brokerage
industry bonuses than projected earlier, and deferral of capital gains
realizations in anticipation of potential Federal tax changes. Business
taxes fell short by $373 million, primarily reflecting lower payments from
banks as substantial overpayments of 1993 liability depressed net
collections in the 1994-95 fiscal year. These shortfalls were offset by
better performance in the remaining taxes, particularly the user taxes and
fees, which exceeded projections by $210 million. Of this amount, $277
million was attributable to certain restatements for accounting treatment
purposes pertaining to the CRF and LGAC; these restatements had no impact
on balance in the General Fund.
Disbursements were also reduced from original projections by $848
million. After adjusting for the net impact of restatements relating to
the CRF and LGAC which raised disbursements by $38 million, the variance is
$886 million. Well over two-thirds of this variance is in the category of
grants to local governments, primarily reflecting the conservative nature
of the original estimates of projected costs for social services and other
programs. Lower education costs are attributable to the availability of
$110 million in additional lottery proceeds and the use of LGAC bond
proceeds.
The spending reductions also reflect $188 million in actions initiated
in January 1995 by the Governor to reduce spending to avert a potential gap
in the 1994-95 State Financial Plan. These actions included savings from a
hiring freeze, halting the development of certain services, and the
suspension of non-essential capital projects. These actions, together with
$71 million in other measures comprised the Governor's $259 million gap-
closing plan, submitted to the Legislature in connection with the 1995-96
Executive Budget.
The State ended its 1993-94 fiscal year with a balance of $1.140
billion in the tax refund reserve account, $265 million in the CRF and $134
million in its tax stabilization reserve fund. These fund balances were
primarily the result of an improving national economy, State employment
growth, tax collections that exceeded earlier projections and disbursements
that were below expectations. Deposits to the personal income tax refund
reserve have the effect of reducing reported personal income tax receipts
in the fiscal year when made and withdrawals from such reserve increase
receipts in the fiscal year when made. The balance in the tax reserve
account will be used to pay taxpayer refunds, rather than drawing from
1994-95 receipts.
Of the $1.140 billion deposited in the tax refund reserve account,
$1.026 billion was available for budgetary planning purposes in the 1994-95
fiscal year. The remaining $114 million will be redeposited in the tax
refund reserve account at the end of the State's 1994-95 fiscal year to
continue the process of restructuring the State's cash flow as part of the
LGAC program. The balance in the contingency reserve fund was reserved to
meet the cost of litigation facing the State in its 1994-95 fiscal year.
Before the deposit of $1.140 billion in the tax refund reserve
account, General Fund receipts in 1993-94 exceeded those originally
projected when the State Financial Plan for the year was formulated on
April 16, 1993 by $1.002 billion. Greater-than-expected receipts in the
personal income tax, the bank tax, the corporation franchise tax and the
estate tax accounted for most of this variance, and more than offset
weaker-than-projected collections from the sales and use tax and
miscellaneous receipts. Collections from individual taxes were affected
by various factors including changes in Federal business laws, sustained
profitability of banks, strong performance of securities firms, and higher-
than-expected consumption of tobacco products following price cuts.
The higher receipts resulted, in part, because the New York economy
performed better than forecasted. Employment growth started in the first
quarter of the State's 1993-94 year, and although this lagged the national
economic recovery, the growth in New York began earlier than forecasted.
The New York economy exhibited signs of strength in the service sector, in
construction, and in trade. Long Island, and the Mid-Hudson Valley
continued to lag the rest of the State in economic growth. Approximately
100,000 jobs are believed to have been added during the 1993-94 fiscal
year.
Disbursements and transfer from the General Fund were $303 million
below the level projected in April 1993, an amount that would have been
$423 million had the State not accelerated the payment of Medicaid
billings, which in the April 1993 State Financial Plan were planned to be
deferred into the 1994-95 fiscal year. Compared to the estimates included
in the State Financial Plan formulated in April 1993, disbursements were
lower for Medicaid, capital projects, and debt service (due to refundings).
In addition, $114 million of school and payments were funded from the
proceeds of LGAC bonds. Disbursements were higher-than-expected for
general support for public schools. The State also made the first of six
required payments to the State of Delaware related to the settlement of
Delaware's litigation against the State regarding the disposition of
abandoned property receipts.
During the 1993-94 fiscal year, the State also established and funded
the CRF as a way to assist the State in financing the cost of litigation
affecting the State. The CRF was initially funded with a transfer of $100
million attributable to the positive margin recorded in the 1992-93 fiscal
year. In addition, the State augmented this initial deposit with $132
million on debt service savings attributable to the refinancing of State
and public authority bonds during 1993-94. A year-end transfer of $36
million was also made to the CRF, which, after a disbursement for
authorized fund purposes, brought the CRF balance at the end of 1993-94 to
$265 million. This amount was $165 million higher than the amount
originally targeted for this reserve fund.
For its 1992-93 fiscal year the State had a balanced budget on a cash
basis with a positive margin of $671 million in the General Fund that was
deposited in the refund reserve account.
After reflecting a 1992-93 year-end deposit to the refund reserve
account of $671 million, reported 1992-93 General Fund receipts were $45
million higher than originally projected in April 1992. If not for that
year-end transaction, which had the effect of reducing 1992-93 receipts by
$671 million and making those receipts available in 1993-94, General Fund
receipts would have been $716 million higher than originally projected.
The favorable performance was primarily attributable to personal
income tax collections that were more than $700 million higher than
originally projected (before reflecting the refund reserve transaction).
The withholding and estimated payment components of the personal income tax
exceeded original estimates by more than $800 million combined, reflecting
both stronger economic activity, particularly at year's end, and the tax-
induced one-time acceleration of income into 1992. Modest shortfalls were
experienced in other components of the income tax.
There were large, but largely offsetting, variances in other
categories. Significantly higher-than-projected business tax collections
and the receipt of unbudgeted payments from the Medical Malpractice
Insurance Association and the New York Racing Association approximately
offset the loss of an anticipated $200 million Federal reimbursement, the
loss of certain budgeted hospital differential revenue as a result of
unfavorable court decisions, and shortfalls in certain miscellaneous
revenue sources.
Disbursements and transfers to other funds totaled $30.829 billion, an
increase of $45 million above projections in April 1992. After adjusting
for the impact of a $150 million payment from the Medical Malpractice
Insurance Association to health insurers made pursuant to legislation
passed in January 1993, actual disbursements were $105 million lower than
projected. This reduction primarily reflected higher-than-anticipated
costs for educational programs, as offset by lower costs in virtually all
other categories of spending, including Medicaid, local health programs,
agency operations, fringe benefits, capital projects and debt service.
During its 1989-90, 1990-91 and 1991-92 fiscal years, the State
incurred cash-basis operating deficits in the General Fund of $775 million,
$1.081 billion and $575 million, respectively, prior to the issuance of
short-term TRANs, owing to lower-than-projected receipts.
Other Governmental Funds. Activity in the three other governmental
funds has remained relatively stable over the last three fiscal years, with
Federally-funded programs comprising approximately two-thirds of these
funds. The most significant change in the structure of these funds has
been the redirection, beginning in the 1993-94 fiscal year, of a portion of
transportation-related revenues from the General Fund to two new dedicated
funds in the Special Revenue and Capital Projects Fund types. These
revenues totalling $676 million in the 1994-95 fiscal year were used to
support the capital programs of the Department of Transportation and the
Metropolitan Transportation Authority ("MTA").
The Special Revenue Funds account for State receipts from specific
sources that are legally restricted in use to specified purposes and
include all moneys received from the Federal government. Total receipts in
Special Revenue Funds are projected at $25.547 billion in the State's 1995-
96 fiscal year. Disbursements from Special Revenue Funds are projected to
be $26.002 billion for the State's 1995-96 fiscal year.
The Capital Projects Funds are used to finance the acquisition and
construction of major capital facilities and to aid local government units
and Agencies in financing capital constructions. Federal grants for
capital projects, largely highway-related, are projected to account for 24%
of the $4.170 billion in total projected receipts in Capital Projects Funds
in the State's 1995-96 fiscal year. Total disbursements for capital
projects are projected to be $4.160 billion during the State's 1995-96
fiscal year.
The Debt Service Funds serve to fulfill State debt service on long-
term general obligation State debt and other State lease/purchase and
contractual obligation financing commitments. Total receipts in Debt
Service Funds are projected to reach $2.409 billion in the State's 1995-96
fiscal year. Total disbursements from Debt Service Funds for debt service,
lease/purchase and contractual obligation financing commitments are
projected to be $2.506 billion for the 1994-95 fiscal year.
State Borrowing Plan. The State anticipates that its capital programs
will be financed, in part, through borrowings by the State and public
authorities in the 1995-96 fiscal year. The State expects to issue $248
million in general obligation bonds (including $70 million for purposes of
redeeming outstanding BANs) and $186 million in general obligation
commercial paper. The Legislature has also authorized the issuance of up
to $33 million in COPs during the State's 1995-96 fiscal year for equipment
purchases and $14 million for capital purposes. The projection of the
State regarding its borrowings for the 1995-96 fiscal year may change if
circumstances require.
In addition, the LGAC is authorized to provide net proceeds of up to
$529 million during the 1995-96 fiscal year to redeem notes sold in June
1995.
State Agencies. The fiscal stability of the State is related, at
least in part, to the fiscal stability of its localities and various of its
Agencies. Various Agencies have issued bonds secured, in part, by
non-binding statutory provisions for State appropriations to maintain
various debt service reserve funds established for such bonds (commonly
referred to as "moral obligation" provisions).
On September 30, 1994, there were 18 Agencies that had outstanding
debt of $100 million or more. The aggregate outstanding debt, including
refunding bonds, of these 18 Agencies was $70.3 billion as of September 30,
1994. As of March 31, 1995, aggregate Agency debt outstanding as State-
supported debt was $27.9 billion and as State-related was $36.1 billion.
Debt service on the outstanding Agency obligations normally is paid out of
revenues generated by the Agencies' projects or programs, but in recent
years the State has provided special financial assistance, in some cases on
a recurring basis, to certain Agencies for operating and other expenses and
for debt service pursuant to moral obligation indebtedness provisions or
otherwise. Additional assistance is expected to continue to be required in
future years.
Several Agencies have experienced financial difficulties in the past.
Certain Agencies continue to experience financial difficulties requiring
financial assistance from the State. Failure of the State to appropriate
necessary amounts or to take other action to permit certain Agencies to
meet their obligations could result in a default by one or more of such
Agencies. If a default were to occur, it would likely have a significant
effect on the marketability of obligations of the State and the Agencies.
These Agencies are discussed below.
The New York State Housing Finance Agency ("HFA") provides financing
for multifamily housing, State University construction, hospital and
nursing home development, and other programs. In general, HFA depends upon
mortgagors in the housing programs it finances to generate sufficient funds
from rental income, subsidies and other payments to meet their respective
mortgage repayment obligations to HFA, which provide the principal source
of funds for the payment of debt service on HFA bonds, as well as to meet
operating and maintenance costs of the projects financed. From January 1,
1976 through March 31, 1987, the State was called upon to appropriate a
total of $162.8 million to make up deficiencies in the debt service reserve
funds of HFA pursuant to moral obligation provisions. The State has not
been called upon to make such payments since the 1986-87 fiscal year and no
payments are anticipated during the 1995-96 fiscal year.
UDC has experienced, and expects to continue to experience, financial
difficulties with the housing programs it had undertaken prior to 1975,
because a substantial number of these housing program mortgagors are unable
to make full payments on their mortgage loans. Through a subsidiary, UDC
is currently attempting to increase its rate of collection by accelerating
its program of foreclosures and by entering into settlement agreements.
UDC has been, and will remain, dependent upon the State for appropriations
to meet its operating expenses. The State also has appropriated money to
assist in the curing of a default by UDC on notes which did not contain the
State's moral obligation provision.
The MTA oversees New York City's subway and bus lines by its
affiliates, the New York City Transit Authority and the Manhattan and Bronx
Surface Transit Operating Authority (collectively, the "TA"). Through
MTA's subsidiaries, the Long Island Rail Road Company, the Metro-North
Commuter Railroad Company and the Metropolitan Suburban Bus Authority, the
MTA operates certain commuter rail and bus lines in the New York
metropolitan area. In addition, the Staten Island Rapid Transit Authority,
an MTA subsidiary, operates a rapid transit line on Staten Island. Through
its affiliated agency, the Triborough Bridge and Tunnel Authority (the
"TBTA"), the MTA operates certain toll bridges and tunnels. Because fare
revenues are not sufficient to finance the mass transit portion of these
operations, the MTA has depended and will continue to depend for operating
support upon a system of State, local government and TBTA support and, to
the extent available, Federal operating assistance, including loans, grants
and subsidies. If current revenue projections are not realized and/or
operating expenses exceed current projections, the TA or commuter railroads
may be required to seek additional State assistance, raise fares or take
other actions.
Over the past several years the State has enacted several
taxes--including a surcharge on the profits of banks, insurance
corporations and general business corporations doing business in the
12-county region (the "Metropolitan Transportation Region") served by the
MTA and a special .25% regional sales and use tax--that provide additional
revenues for mass transit purposes, including assistance to the MTA. In
addition, since 1987, State law has required that the proceeds of .25%
mortgage recording tax paid on certain mortgages in the Metropolitan
Transportation Region be deposited in a special MTA fund for operating or
capital expenses. Further, in 1993, the State dedicated a portion of
certain additional State petroleum business tax receipts to fund operating
or capital assistance to the MTA. For the 1994-96 State fiscal year, total
State assistance to the MTA is estimated at approximately $1.1 billion.
A subway fire on December 28, 1990 and a subway derailment on August
28, 1991, each of which caused fatalities and many injuries, have given
rise to substantial claims for damages against both the TA and the City.
In 1981, the State Legislature authorized procedures for the adoption,
approval and amendment of a five-year plan for the capital program designed
to upgrade the performance of the MTA's transportation systems and to
supplement, replace and rehabilitate facilities and equipment, and also
granted certain additional bonding authorization therefor.
On April 5, 1993, the Legislature approved, and the Governor
subsequently signed into law, legislation authorizing a five-year $9.56
billion capital plan for the MTA for 1992-1996. The MTA has received
approval of the 1992-1996 Capital Program based on this legislation from
the MTA Capital Program Review Board (the "CPRB"), as State law requires.
This is the third five-year plan since the Legislature authorized
procedures for the adoption, approval and amendment of a five-year plan in
1981 for a capital program designed to upgrade the performance of the MTA's
transportation systems and to supplement, replace and rehabilitate
facilities and equipment. The MTA, the TBTA and the TA are collectively
authorized to issue an aggregate of $3.1 billion of bonds (net of certain
statutory exclusions) to finance a portion of the 1992-96 Capital Program.
The 1992-96 Capital Program was expected to be financed in significant part
through dedication of the State petroleum business tax receipts referred to
above. However, in December 1994 the proposed bond resolution based on
such tax receipts was not approved by the MTA Capital Program Review Board.
Further consideration of the resolution was deferred until 1995.
There can be no assurance that such governmental actions will be
taken, that sources currently identified will not be decreased or
eliminated, or that the 1992-1996 Capital Program will not be delayed or
reduced. If the MTA capital program is delayed or reduced because of
funding shortfalls or other factors, ridership and fare revenues may
decline, which could, among other things, impair the MTA's ability to meet
its operating expenses without additional State assistance.
The cities, towns, villages and school districts of the State are
political subdivisions of the State with the powers granted by the State
Constitution and statutes. As the sovereign, the State retains broad
powers and responsibilities with respect to the government, finances and
welfare of these political subdivisions, especially in education and social
services. In recent years the State has been called upon to provide added
financial assistance to certain localities.
Other Localities. Certain localities in addition to the City could
have financial problems leading to requests for additional State assistance
during the State's 1995-96 fiscal year and thereafter. The potential
impact on the State of such actions by localities is not included in the
projections of the State receipts and disbursements in the State's 1995-96
fiscal year.
Municipalities and school districts have engaged in substantial
short-term and long-term borrowings. In 1993, the total indebtedness of
all localities in the State, other than the City, was approximately $17.7
billion. A small portion (approximately $105 million) of this indebtedness
represented borrowing to finance budgetary deficits and was issued pursuant
to enabling State legislation. State law requires the Comptroller to
review and make recommendations concerning the budgets of those local
government units other than the City authorized by State law to issue debt
to finance deficits during the period that such deficit financing is
outstanding. Fifteen localities had outstanding indebtedness for deficit
financing at the close of their fiscal year ending in 1993.
Certain proposed Federal expenditure reductions would reduce, or in
some cases eliminate, Federal funding of some local programs and
accordingly might impose substantial increased expenditure requirements on
affected localities to increase local revenues to sustain those
expenditures. If the State, the City or any of the Agencies were to suffer
serious financial difficulties jeopardizing their respective access to the
public credit markets, the marketability of notes and bonds issued by
localities within the State could be adversely affected. Localities also
face anticipated and potential problems resulting from certain pending
litigation, judicial decisions and long-range economic trends. The
longer-range, potential problems of declining city population, increasing
expenditures and other economic trends could adversely affect localities
and require increasing State assistance in the future.
Because of significant fiscal difficulties experienced from time to
time by the City of Yonkers, a Financial Control Board was created by the
State in 1984 to oversee Yonkers' fiscal affairs. Future actions taken by
the Governor or the State Legislature to assist Yonkers in this crisis
could result in the allocation of State resources in amounts that cannot
yet be determined.
Certain litigation pending against the State or its officers or
employees could have a substantial or long-term adverse effect on State
finances. Among the more significant of these litigations are those that
involve: (i) the validity and fairness of agreements and treaties by which
various Indian tribes transferred title to the State of approximately six
million acres of land in central New York; (ii) certain aspects of the
State's Medicaid rates and regulations, including reimbursements to
providers of mandatory and optional Medicaid services; (iii) contamination
in the Love Canal area of Niagara Falls; (iv) a challenge to the State's
practice of reimbursing certain Office of Mental Health patient-care
expenses with clients' Social Security benefits; (v) a challenge to the
methods by which the State reimburses localities for the administrative
costs of food stamp programs; (vi) a challenge to the State's possession
of certain funds taken pursuant to the State's Abandoned Property law;
(vii) alleged responsibility of State officials to assist in remedying
racial segregation in the City of Yonkers; (viii) an action, in which the
State is a third party defendant, for injunctive or other appropriate
relief, concerning liability for the maintenance of stone groins
constructed along certain areas of Long Island's shoreline; (ix) actions
challenging the constitutionality of legislation enacted during the 1990
legislative session which changed the actuarial funding methods for
determining contributions to State employee retirement systems; (x) an
action against State and City officials alleging that the present level of
shelter allowance for public assistance recipients is inadequate under
statutory standards to maintain proper housing; (xi) an action challenging
legislation enacted in 1990 which had the effect of deferring certain
employer contributions to the State Teachers' Retirement System and
reducing State aid to school districts by a like amount; (xii) a challenge
to the constitutionality of financing programs of the Thruway Authority
authorized by Chapters 166 and 410 of the Laws of 1991 (described below in
this Part); (xiii) a challenge to the constitutionality of financing
programs of the Metropolitan Transportation Authority and the Thruway
Authority authorized by Chapter 56 of the Laws of 1993 (described below in
this Part); (xiv) challenges to the delay by the State Department of Social
Services in making two one-week Medicaid payments to the service providers;
(xv) challenges by commercial insurers, employee welfare benefit plans, and
health maintenance organizations to provisions of Section 2807-c of the
Public Health Law which impose 13%, 11% and 9% surcharges on inpatient
hospital bills and a bad debt and charity care allowance on all hospital
bills paid by such entities; (xvi) challenges to the promulgation of the
State's proposed procedure to determine the eligibility for and nature of
home care services for Medicaid recipients; (xvii) a challenge to State
implementation of a program which reduces Medicaid benefits to certain
home-relief recipients; and (xviii) challenges to the rationality and
retroactive application of State regulations recelebrating nursing home
Medicaid rates.
Adverse developments or decisions in such cases could affect the
ability of the State to maintain a balanced 1995-96 State 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 1995 show a General Fund surplus reported in
accordance with GAAP. The City has eliminated the cumulative deficit in
its net General Fund position.
According to a recent OSDC economic report, the City's economy was
slow to recover from the recession and is expected to experience a weak
employment situation, and moderate wage and income growth, during the 1995-
96 period. Also, Financial Plan reports of OSDC, the Control Board, and
the City Comptroller have variously indicated that many of the City's
balanced budgets have been accomplished, in part, through the use of non-
recurring resource, tax and fee increases, personnel reductions and
additional State assistance; that the City has not yet brought its long-
term expenditures in line with recurring revenues; that the City's proposed
gap-closing programs, if implemented, would narrow future budget gaps; that
these programs tend to rely heavily on actions outside the direct control
of the City; and that the City is therefore likely to continue to face
futures projected budget gaps requiring the City to reduce expenditures
and/or increase revenues. According to the most recent staff reports of
OSDC, the Control Board and the City Comptroller during the four-year
period covered by the current Financial Plan, the City is relying on
obtaining substantial resources from initiatives needing approval and
cooperation of its municipal labor unions, Covered Organizations, and City
Council, as well as the State and Federal governments, among others, and
there can be no assurance that such approval can be obtained.
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 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.
The City requires certain amounts of financing for seasonal and
capital spending purposes. The City has issued $1.75 billion of notes for
seasonal financing purposes during the 1994 fiscal year. The City's
capital financing program projects long-term financing requirements of
approximately $17 billion for the City's fiscal years 1995 through 1998 for
the construction and rehabilitation of the City's infrastructure and other
fixed assets. The major capital requirement include expenditures for the
City's water supply system, and waste disposal systems, roads, bridges,
mass transit, schools and housing. In addition, the City and the Municipal
Water Finance Authority have issued about $1.8 billion in refunding bonds
in the 1994 fiscal year.
State Economic Trends. The State historically has been one of the
wealthiest states in the nation. For decades, however, the State has grown
more slowly than the nation as a whole, gradually eroding its relative
economic position. Statewide, urban centers have experienced significant
changes involving migration of the more affluent to the suburbs and an
influx of generally less affluent residents. Regionally, the older
Northeast cities have suffered because of the relative success that the
South and the West have had in attracting people and business. The City
has also had to face greater competition as other major cities have
developed financial and business capabilities which make them less
dependent on the specialized services traditionally available almost
exclusively in the City.
During the 1982-83 recession, overall economic activity in the State
declined less than that of the nation as a whole. However, in the calendar
years 1984 through 1991, the State's rate of economic expansion was
somewhat slower than that of the nation. In the 1990-91 recession, the
economy of the State, and that of the rest of the Northeast, was more
heavily damaged than that of the nation as a whole and has been slower to
recover. The total employment growth rate in the State has been below the
national average since 1984. The unemployment rate in the State dipped
below the national rate in the second half of 1981 and remained lower until
1991; since then, it has been higher. According to data published by the
U.S. Bureau of Economic Analysis, during the past ten years, total personal
income in the State rose slightly faster than the national average only
from 1986 through 1988.
APPENDIX D
INFORMATION ABOUT SECURITIES RATINGS
The following are excerpts from Description of Moody's Investors'
Service, Inc. ("Moody's) municipal bond ratings. Aaa -- judged to be of
the "best quality" and are referred to as "gilt edge"; interest payments
are protected by a large or by an exceptionally stable margin and principal
is secure; Aa -- judged to be of "high quality by all standards," but as to
which margins of protection or other elements make long-term risks appear
somewhat larger than Aaa-rated Municipal Bonds; together with Aaa group
they comprise what are generally known as "high grade bonds"; A -- possess
many favorable investment attributes and are considered "upper medium grade
obligations." Factors giving security to principal and interest of A-rated
Municipal Bonds are considered adequate, but elements may be present which
suggest a susceptibility to impairment sometime in the future; Baa --
considered as medium grade obligations; i.e., they are neither highly
protected nor poorly secured; interest payments and principal security
appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of
time.
Moody's applies the numerical modifiers 1, 2 and 3 in each generic
rating classification from Aa through Baa to indicate ranking within a
general rating category; 1 being the highest and 3 the lowest.
Description of Moody's ratings of state and municipal notes. Moody's
ratings for state and municipal notes and other short-term obligations are
designated Moody's Investment Grade ("MIG") and for variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG").
This distinction recognizes the differences between short-term credit risk
and long-term risk. Symbols used will be as follows: MIG 1/VMIG 1 --best
quality, enjoying strong protection for established cash flows of funds for
their servicing or from established and broad-based access to the market
for refinancing, or both; MIG 2/VMIG 2 -- high quality, with margins of
protection ample although not so large as in the preceding group; MIG
3/VMIG 3 --favorable quality, with all security elements accounted for but
lacking the undeniable strength of the preceding grades.
Description of Moody's commercial paper ratings. PRIME-1 ("P-1") --
judged to be of the best quality. Their short-term debt obligations carry
the smallest degree of investment risk; PRIME-2 -- indicates a strong
capacity for repayment, but to a lesser degree than 1.
Description of Standard & Poors Ratings Group ("S&P") Municipal Bond
ratings. AAA -- has the highest rating assigned by S&P; extremely strong
capacity to pay principal and interest; AA -- has very strong capacity to
pay interest and repay principal and differs from the higher rated issues
only in a small degree; A -- has a strong capacity to pay principal and
interest, although somewhat more susceptible to adverse changes in
circumstances and economic conditions; BBB -- regarded as having an
adequate capacity to pay principal and interest; normally exhibit adequate
protection parameters but adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
principal and interest than for bonds in the A category. Ratings may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories, except in the AAA category.
Description of S&P's ratings of municipal note issues. SP-1+ -- very
strong capacity to pay principal and interest; SP-1 --strong capacity to
pay principal and interest; SP-2 --satisfactory capacity to pay principal
and interest.
Description of S&P's commercial paper ratings. A-1+ --indicates an
overwhelming degree of safety regarding timely payment; A-1 -- indicates a
very strong degree of safety regarding timely payment; A-2 -- indicates a
strong capacity for timely payment but with a relative degree of safety not
as overwhelming as for issues designated A-1.
Description of IBCA Limited/IBCA Inc. commercial paper ratings.
Short-term obligations, including commercial paper, rated A-1+ by IBCA
Limited or its affiliate IBCA Inc. are obligations supported by the highest
capacity for timely repayment. Obligations rated A-1 have a very strong
capacity for timely repayment. Obligations rated A-2 have a strong
capacity for timely repayment, although such capacity may be susceptible to
adverse changes in business, economic or financial conditions.
Description of Fitch Investors Services, Inc. commercial paper
ratings. Fitch Investors Services, Inc. employs the rating F-1+ to
indicate issues regarded as having the strongest degree of assurance for
timely payment. The rating F-1 reflects an assurance of timely payment
only slightly less in degree than issues rated F-1+, while the rating F-2
indicates a satisfactory degree of assurance for timely payment, although
the margin of safety is not as great as indicated by the F-1+ and F-1
categories.
Description of Duff & Phelps Inc. commercial paper ratings. Duff &
Phelps Inc. employs the designation of Duff 1 with respect to top grade
commercial paper and bank money instruments. Duff 1 + indicates the
highest certainty of timely payment: short-term liquidity is clearly
outstanding, and safety is just below risk-free U.S. Treasury short-term
obligations. Duff 1- indicates high certainty of timely payment. Duff 2
indicates good certainty of timely payment: liquidity factors and company
fundamentals are sound.
Various of the nationally recognized statistical rating organizations
("NRSROs") utilize rankings within rating categories indicated by a + or -.
The Funds, in accordance with industry practice, recognize such rankings
within categories as graduations, viewing for example S&P's rating of A-1+
and A-1 as being in S&P's highest rating category.
Description of Thomson BankWatch, Inc. ("BankWatch") commercial paper
ratings. BankWatch will assign both short-term debt ratings and issuer
ratings to the issuers it rates. BankWatch will assign a short-term rating
("TBW-1," "TBW-2," "TBW-3," or "TBW-4") to each class of debt (e.g.,
commercial paper or non-convertible debt), having a maturity of one-year or
less, issued by a holding company structure or an entity within the holding
company structure that is rated by BankWatch. Additionally, BankWatch will
assign an issuer rating ("A" "A/B," "B/C," "C," "C/D," "D/E," and "E") to
each issuer that it rates.
<TABLE>
<CAPTION>
Premier Limited Term California Municipal Fund
Statement of Investments June 30, 1996
Principal
Long-Term Municipal Investments_97.0% Amount Value
------------- -------------
<S> <C> <C>
California_81.2%
Anaheim, Electric Revenue, Refunding 6.80%, 10/1/1999....................... $ 150,000 $ 153,346
California Health Facilities Financing Authority, Revenue (Unihealth America)
7.10%, 10/1/1999 (Prerefunded 10/1/1998) (Insured; AMBAC) (a)........... 150,000 162,285
California Public Works Board, Lease Revenue:
(Corcoran State Prison) 7%, 9/1/1998.................................... 200,000 204,874
High Technology Facilities (Berkeley Campus) 7.20%, 3/1/2001............ 150,000 158,261
Elk Grove Unified School District, Special Tax Revenue, Refunding
(Community Facilities District No. 1) 6.50%, 12/1/2006 (Insured; AMBAC). 400,000 446,028
Franklin-McKinley School District, Refunding 5.20%, 7/1/2004 (Insured; MBIA) 375,000 382,005
Fresno, Sewer Revenue 6%, 9/1/2007 (Insured; MBIA).......................... 500,000 533,755
Kern High School District, Refunding
6.40%, 2/1/2012 (Insured; MBIA)......................................... 750,000 813,847
Long Beach Redevelopment Agency (Downtown Redevelopment Project)
7.125%, 11/1/1999 (Prerefunded 11/1/1998) (Insured; AMBAC) (a).......... 100,000 108,465
Los Angeles, Wastewater System Revenue:
6.60%, 6/1/1998......................................................... 400,000 417,032
7.10%, 11/1/1998........................................................ 150,000 157,877
Los Angeles County Health Facilities Authority, Lease Revenue, Refunding
(Olive View Medical Center) 6.80%, 3/1/1998............................. 150,000 156,460
Los Angeles County Housing Authority, MFHR (Monrovia Project)
7.625%, 12/1/1999 (Insured; CIC)........................................ 100,000 102,043
Los Angeles County Metropolitan Transportation Authority, Sales Tax Revenue
8%, 7/1/2000 (Insured; AMBAC)........................................... 500,000 563,235
Los Angeles County Transportation Commission, Sales Tax Revenue 6.80%, 7/1/1999 150,000 159,388
Los Angeles Department of Water and Power, Electric Plant Revenue 7%, 5/1/2000 125,000 133,494
Metropolitan Water District of Southern California, Waterworks Revenue
6.375%, 7/1/2002........................................................ 835,000 906,793
Northern California, Transmission Revenue, Refunding (Project No. 1)
6.25%, 8/15/2000 (Insured; MBIA)........................................ 360,000 378,342
Port Oakland, Port Revenue 6%, 11/1/2002 (Insured; MBIA).................... 500,000 529,075
Riverside County Transportation Commission, Sales Tax Revenue
6.50%, 6/1/2001 (Insured; AMBAC)........................................ 520,000 563,436
Sacramento Municipal Utilities District, Electrical Revenue:
5.85%, 7/1/2000 (Insured; FGIC)......................................... 100,000 104,957
6.30%, 9/1/2001 (Insured; MBIA)......................................... 500,000 537,875
San Bernardino Transportation Authority, Sales Tax Revenue
6%, 3/1/2002 (Insured; FGIC)............................................ 440,000 467,381
San Diego County Regional Transportation Commission, Sales Tax Revenue
Premier Limited Term California Municipal Fund
Statement of Investments (continued) June 30, 1996
Principal
Long-Term Municipal Investments (continued) Amount Value
------------ --------------
California (continued)
6%, 4/1/2004 (Insured; FGIC)............................................ $ 750,000 $ 800,903
San Diego County Water Authority, COP, Water Revenue 6%, 5/1/2001........... 300,000 314,310
San Diego Redevelopment Agency, Tax Allocation (Centre City Project)
5.50%, 9/1/2001 (Insured; AMBAC)........................................ 600,000 624,438
San Francisco Bay Area Rapid Transit District, Sales Tax Revenue, Refunding
6.70%, 7/1/2000......................................................... 500,000 539,645
San Francisco City and County Airports Commission, International Airport
Revenue
6.35%, 5/1/2000 (Insured; MBIA)......................................... 750,000 798,803
San Francisco City and County Public Utilities Commssion, Water Revenue,
Refunding:
6%, 11/1/2003........................................................... 750,000 804,360
6.375%, 11/1/2006....................................................... 500,000 540,690
San Mateo County Transit District, Sales Tax Revenue 6.20%, 6/1/1999 (Insured; MBIA) 100,000
105,657
Santa Rosa:
Wastewater Revenue:
6.60%, 9/1/2000 (Prerefunded 9/1/1999) (Insured; FGIC) (a)............ 480,000 519,970
(Subregional Wastewater Project)
6.20%, 9/1/2003 (Prerefunded 9/1/2002) (Insured; FGIC) (a)........ 350,000 382,063
Wastewater Services Facilities District, Refunding 7.40%, 7/2/1997...... 150,000 155,642
Simi Valley Unified School District, Refunding 6.25%, 8/1/2004 (Insured; FGIC) 700,000 757,848
Southern California Public Power Authority, Power Project Revenue, Refunding
(Hydroelectric-Hoover Uprating Project) 6.30%, 10/1/2002................ 420,000 455,204
State of California 6.60%, 2/1/2009......................................... 510,000 561,189
West and Central Basin Financing Authority, Revenue 6%, 8/1/2005 (Insured; AMBAC) 620,000 659,327
U.S. Related_15.8%
Commonwealth of Puerto Rico, Refunding 6.25%, 7/1/2011 (Insured; MBIA)...... 750,000 812,167
Puerto Rico Public Buildings Authority, Government Guaranteed Facilities
6.25%, 7/1/2010 (Insured; AMBAC)........................................ 750,000 812,467
Puerto Rico Electric Power Authority, Power Revenue 6.50%, 7/1/2006 (Insured; MBIA) 625,000
691,631
University of Puerto Rico, University Revenue Refunding
6.25%, 6/1/2008 (Insured; MBIA)......................................... 750,000 816,165
-------------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $18,608,103)...................................................... $19,292,733
=============
Los Angeles Regional Airports Improvement Corp., Lease Revenue:
Premier Limited Term California Municipal Fund
Statement of Investments (continued) June 30, 1996
Principal
Short-Term Municipal Investments_3.0% Amount Value
------------- -------------
VRDN 3.60% (LOC; Societe Generale) (b,c)................................ $ 300,000 $ 300,000
VRDN 3.65% (LOC; Societe Generale) (b,c)................................ 300,000 300,000
-------------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $600,000)......................................................... $ 600,000
=============
TOTAL INVESTMENTS_100.0%
(cost $19,208,103)...................................................... $19,892,733
=============
</TABLE>
<TABLE>
<CAPTION>
Summary of Abbreviations
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
CIC Continental Insurance Company Insurance Corporation
COP Certificate of Participation MFHR Multi-Family Housing Revenue
FGIC Financial Guaranty Insurance Company VRDN Variable Rate Demand Notes
LOC Letter of Credit
</TABLE>
<TABLE>
<CAPTION>
Summary of Combined Ratings (Unaudited)
<S> <C> <C> <C>
Fitch (d) or Moody's or Standard & Poor's Percentage of Value
- ---------- --------- --------------------- -----------------------
AAA Aaa AAA 68.0%
AA Aa AA 20.1
A A A 8.1
F1 MIGI SP1 3.0
Not Rated (e) Not Rated (e) Not Rated (e) .8
-------
100.0%
=======
</TABLE>
Notes to Statement of Investments:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Secured by letters of credit.
(c) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(d) Fitch currently provides creditworthiness information for a limited
number of investments.
(e) Securities which, while not rated by Fitch, Moody's and Standard &
Poor's, have been determined by the Manager to be of comparable quality
to those rated securities in which the Fund may invest.
(f) At June 30, 1996, the Fund had $5,505,864 (27.2%) and $6,118,530
(30.2%) of net assets invested in securities whose payment of principal
and interest were dependent upon revenues generated from transportation
and water & utilities projects, respectively.
(g) At June 30, 1996, 31.6% of the Fund's net assets are insured by
MBIA.
See notes to financial statements.
<TABLE>
<CAPTION>
Premier Limited Term California Municipal Fund
Statement of Assets and Liabilities June 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $19,208,103)_see Statement of Investments....................... $19,892,733
Interest receivable..................................................... 363,025
-----------
20,255,758
LIABILITIES:
Due to The Dreyfus Corporation_Note 2(a)................................ $17,109
Due to Distributor...................................................... 1,613
Cash overdrafts due to Custodian........................................ 5,855 24,577
------- -----------
NET ASSETS.................................................................. $20,231,181
===========
REPRESENTED BY:
Paid-in capital......................................................... $19,573,380
Accumulated distributions in excess of investment income_net............ (150)
Accumulated net realized (loss) on investments.......................... (26,679)
Accumulated net unrealized appreciation on investments_Note 3........... 684,630
-----------
NET ASSETS at value......................................................... $20,231,181
===========
NET ASSET VALUE, offering and redemption price per share:
Class A Shares
unlimited number of shares of Beneficial Interest authorized
($7,744,869 / 601,459 shares of Beneficial Interest outstanding)...... $12.88
======
Class B Shares
unlimited number of shares of Beneficial Interest authorized
($77,689 / 6,034 shares of Beneficial Interest outstanding)........... $12.88
======
Class C Shares
unlimited number of shares of Beneficial Interest authorized
($24,979 / 1,935 shares of Beneficial Interest outstanding)........... $12.91
======
Class R Shares
unlimited number of shares of Beneficial Interest authorized
($12,383,644 / 961,737 shares of Beneficial Interest outstanding)..... $12.88
======
See notes to financial statements.
Premier Limited Term California Municipal Fund
Statement of Operations year ended June 30, 1996
INVESTMENT INCOME:
Interest Income......................................................... $1,048,564
Expenses:
Investment management fee_Note 2(a)................................... $92,758
Distribution fee_Note 2(b)............................................ 21,534
Trustees' fees and expenses_Note 2(c)................................. 5,401
Service fee_Note 2(b)................................................. 108
-------
Total Expenses.................................................. 119,801
----------
INVESTMENT INCOME_NET........................................... 928,763
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS_Note 3:
Net realized gain on investments........................................ $ 2,558
Net realized gain on financial futures.................................. 17,834
-------
Net Realized Gain..................................................... 20,392
Net unrealized appreciation on investments.............................. 33,999
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 54,391
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $ 983,154
==========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Premier Limited Term California Municipal Fund
Statement of Changes in Net Assets
Year Ended June 30,
-------------------------------
1996 1995
-------------- ------------
<S> <C> <C>
OPERATIONS:
Investment income_net................................................... $ 928,763 $ 951,773
Net realized gain (loss) on investments................................. 20,392 (14,211)
Net unrealized appreciation on investments for the year................. 33,999 241,097
-------------- ------------
Net Increase In Net Assets Resulting From Operations.............. 983,154 1,178,659
-------------- ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income_net:
Class A Shares........................................................ (391,455) (474,831)
Class B Shares........................................................ (867) (107)
Class C Shares........................................................ (890) (132)
Class R Shares........................................................ (535,551) (476,652)
Net realized gain on investments:
Class A Shares........................................................ (14,350) (7,864)
Class B Shares........................................................ (39) ___
Class C Shares........................................................ (42) ___
Class R Shares........................................................ (18,429) (7,048)
-------------- ------------
Total Dividends................................................... (961,623) (966,634)
-------------- ------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A Shares........................................................ 645,645 2,197,261
Class B Shares........................................................ 67,799 8,761
Class C Shares........................................................ 25,025 25,015
Class R Shares........................................................ 8,085,552 2,806,491
Dividends reinvested:
Class A Shares........................................................ 291,515 330,931
Class B Shares........................................................ 679 102
Class C Shares........................................................ 815 138
Class R Shares........................................................ 309,750 238,156
Cost of shares redeemed:
Class A Shares........................................................ (1,744,945) (4,294,848)
Class B Shares........................................................ (16) ___
Class C Shares........................................................ (26,530) ___
Class R Shares........................................................ (4,798,508) (6,549,186)
-------------- ------------
Increase (Decrease) In Net Assets From
Beneficial Interest Transactions................................ 2,856,781 (5,237,179)
-------------- ------------
Total Increase (Decrease) In Net Assets......................... 2,878,312 (5,025,154)
NET ASSETS:
Beginning of year....................................................... 17,352,869 22,378,023
-------------- ------------
End of year [including distributions in excess of net investment
income_net:
($150) in 1995 and ($150) in 1996].................................... $20,231,181 $17,352,869
============== ============
</TABLE>
<TABLE>
<CAPTION>
Premier Limited Term California Municipal Fund
Statement of Changes in Net Assets (continued)
Shares
--------------------------------------------------------------------
Class A Class B
------------------------------ -------------------------------
Year Ended June 30, Year Ended June 30,
------------------------------- -------------------------------
1996 1995(1) 1996 1995(2)
------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............................ 49,480 174,483 5,287 688
Shares issued for dividends reinvested. 22,390 26,315 52 8
Shares redeemed........................ (134,672) (340,612) (1) ___
------------- ------------- ------------- -------------
Net Increase (Decrease) In
Shares Outstanding............... (62,802) (139,814) 5,338 696
------------- ------------- ------------- -------------
Shares
--------------------------------------------------------------------
Class C Class R
------------------------------- -------------------------------
Year Ended June 30, Year Ended June 30,
------------------------------- -------------------------------
1996 1995(2) 1996 1995(1)
------------ --------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS (continued):
Shares sold............................ 1,931 1,950 619,872 223,405
Shares issued for dividends reinvested. 62 11 23,809 18,939
Shares redeemed........................ (2,019) ___ (370,223) (523,959)
------------ --------------- ------------- -------------
Net Increase (Decrease) In
Shares Outstanding............... (26) 1,961 273,458 (281,615)
============ =============== ============= =============
(1) On October 17, 1994, Investor shares and Trust shares were redesignated
Class A shares and Class R shares, respectively. (2) The Fund commenced selling
Class B and C shares on December 28, 1994.
See notes to financial statements.
</TABLE>
Premier Limited Term California Municipal Fund
Financial Highlights
Reference is made to page 4 of the Fund's
Prospectus dated November 1, 1996.
See notes to financial statements.
Premier Limited Term California Municipal Fund
NOTES TO FINANCIAL STATEMENTS
NOTE 1_Significant Accounting Policies:
The Dreyfus/Laurel Tax-Free Municipal Fund (the "Trust") is registered
under the Investment Company Act of 1940 ("Act") as a non-diversified
open-end management investment company and operates as a series company
currently offering seven series including the Premier Limited Term California
Municipal Fund (the "Fund"). The Fund's investment objective is to maximize
current income exempt from Federal income taxes and state personal income
taxes for resident shareholders of California consistent with the prudent
risk of capital by investing in municipal securities which are of
investment-grade quality and intermediate maturities. The Dreyfus Corporation
("Manager") serves as the Fund's investment adviser. The Manager is a direct
subsidiary of Mellon Bank, N.A. ("Mellon Bank").
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Fund currently offers four classes of
shares: Class A, Class B, Class C and Class R shares. Class A, Class B and
Class C shares are sold primarily to retail investors through financial
intermediaries and bear a distribution fee and/or service fee. Class A shares
are sold with a front-end sales charge, while Class B and Class C shares are
subject to a contingent deferred sales charge ("CDSC") and a service fee.
Class R shares are sold primarily to bank trust departments and other
financial service providers (including Mellon Bank and its affiliates) acting
on behalf of customers having a qualified trust or investment account or
relationship at such institution, and bear no distribution or service fees.
Class R shares are offered without a front-end sales load or CDSC. Each class
of shares has identical rights and privileges, except with respect to
distribution and service fees and voting rights on matters affecting a single
class.
Investment income, net of expenses (other than class specific expenses),
realized and unrealized gains and losses are allocated daily to each class of
shares based upon the relative proportion of net assets of each class.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
Actual results may differ from estimates.
(a) Portfolio valuation: The Fund's investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the
Board of Trustees. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the
judgment of the Service are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for
such securities). Other investments (which constitute a majority of the
portfolio securities) are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of
municipal securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Options
and financial futures on municipal and U.S. treasury securities are valued at
the last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market
on each business day. Investments not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available.
Premier Limited Term California Municipal Fund
NOTES TO FINANCIAL STATEMENTS (continued)
(b) Securities transactions and investment income: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
(c) Financial futures: The Fund may invest in financial futures contracts
in order to gain exposure to or protect against changes in the market. The
Fund is exposed to market risk as a result of changes in the value of the
underlying financial instruments. Investments in financial futures require
the Fund to "mark to market" on a daily basis, which reflects the change in
the market value of the contract at the close of each day's trading.
Typically, variation margin payments are received or made to reflect daily
unrealized gains or losses. When the contracts are closed, the Fund
recognizes a realized gain or loss. These investments require initial margin
deposits with a custodian, which consist of cash or cash equivalents, up to
approximately 10% of the contract amount. The amount of these deposits is
determined by the exchange or Board of Trade on which the contract is traded
and is subject to change. At June 30, 1996, there were no financial futures
contracts outstanding.
(d) Concentration of risk: The Fund follows an investment policy of
investing primarily in municipal obligations of one state. Economic changes
affecting the state and certain of its public bodies and municipalities may
affect the ability of issuers within the state to pay interest on, or repay
principal of, municipal obligations held by the Fund.
(e) Distributions to shareholders: It is the policy of the Fund to
declare dividends daily from investment income-net. Such dividends are paid
monthly. Dividends from net realized capital gain are normally declared and
paid annually, but the Fund may make distributions on a more frequent basis
to comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Fund not to distribute such gain.
(f) Federal income taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2_Investment Management Fee And Other Transactions With Affiliates:
(a) Investment management fee: Pursuant to an Investment Management
agreement with the Manager, the Manager provides or arranges for one or more
third parties and/or affiliates to provide investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. The Manager also directs the investments of the Fund in accordance with
its investment objective, policies and limitations. For these services, the
Fund is contractually obligated to pay the Manager a fee, calculated daily
and paid monthly, at the annual rate of .50% of the value of the Fund's
average daily net assets. Out of its fee, the Manager pays all of the
expenses of the Fund except brokerage fees, taxes, interest, Rule 12b-1
Premier Limited Term California Municipal Fund
NOTES TO FINANCIAL STATEMENTS (continued)
distribution fees and expenses, fees and expenses of non-interested Trustees
(including counsel fees) and extraordinary expenses. In addition, the Manager
is required to reduce its fee in an amount equal to the Fund's allocable
portion of fees and expenses of the non-interested Trustees (including
counsel).
(b) Distribution and service plan: The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act relating to its
Class A, B and C shares. Under the Plan, the Fund may pay annually up to .25%
of the value of its average daily net assets attributable to its Class A
shares to compensate the Distributor and Dreyfus Service Corporation, an
affiliate of the Manager, for shareholder servicing activities and the
Distributor for activities and expenses primarily intended to result in the
sale of Class A shares. Under the Plan, the Fund may pay the Distributor for
distributing the Fund's Class B and Class C shares at an aggregate annual
rate of .50% of the value of the average daily net assets of Class B and
Class C shares. Class B and Class C shares are also subject to a service plan
adopted pursuant to Rule 12b-1, under which the Fund pays Dreyfus Service
Corporation or the Distributor for providing certain services to the holders
of Class B and Class C shares a fee at the annual rate of .25% of the value
of the average daily net assets of Class B and Class C shares. Class R shares
bear no service or distribution fee. For the year ended June 30, 1996, the
distribution fee for Class A, Class B and Class C shares was $21,318, $107
and $109, respectively. For the year ended June 30, 1996, the service fee for
Class B shares and Class C shares was $53 and $55, respectively.
Under its terms, the Plan shall remain in effect from year to year,
provided such continuance is approved annually by a vote of majority of those
Trustees who are not "interested persons" of the Investment Company and who
have no direct or indirect financial interest in the operation of the Plan or
in any agreement related to the Plan.
(c) Trustees' fees: Each trustee who is not an "interested person" as
defined in the Act receives $27,000 per year, $1,000 for each Board meeting
attended and $750 for each Audit Committee attended and is reimbursed for
travel and out-of-pocket expenses. These expenses are paid in total by the
following funds: The Dreyfus/Laurel Funds, Inc., The Dreyfus/Laurel Tax-Free
Municipal Funds, and The Dreyfus/Laurel Funds Trust. In addition the Chairman
of the Board receives an annual fee of $75,000 per year. These fees and
expenses are charged and allocated to each series based on net assets.
NOTE 3_Securities Transactions:
The aggregate amount of purchase and sales of investment securities,
excluding short-term securities, during the year ended June 30, 1996,
amounted to $9,235,484 and $7,319,886, respectively.
At June 30, 1996, accumulated net unrealized appreciation on investments
was $684,630, consisting of $714,238 gross unrealized appreciation and
$29,608 gross unrealized depreciation.
At June 30, 1996, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see
the Statement of Investments).
Premier Limited Term California Municipal Fund
Independent Auditors' Report
The Board of Trustees and Shareholders
The Dreyfus/Laurel Tax-Free Municipal Funds:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments of Premier Limited Term California
Municipal Fund of The Dreyfus/Laurel Tax-Free Municipal Funds as of June 30,
1996, and the related statement of operations for the year then ended and
statements of changes in net assets for each of the years in the two-year
period then ended and financial highlights for each of the years or period in
the three-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights for each
of the years or period for the three-year period ended November 30, 1993 were
audited by other auditors whose report thereon, dated and January 18, 1994,
expressed an unqualified 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
financial highlights are free of material misstatement. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation
of securities owned as of June 30, 1996, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles 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 Premier Limited Term California Municipal Fund of The
Dreyfus/Laurel Tax-Free Municipal Funds as of June 30, 1996, the results of
its operations for the year then ended and the changes in its net assets for
each of the years in the two-year period then ended and financial highlights
for each of the years or period in the three-year period then ended in conform
ity with generally accepted accounting principles.
(logo signature)
New York, NY
July 29, 1996
<TABLE>
<CAPTION>
Premier Limited Term Massachusetts Municipal Fund
Statement of Investments June 30, 1996
Principal
Long-Term Municipal Investments_98.2% Amount Value
------------- -----------
<S> <C> <C>
Massachusetts_81.4%
Amherst, GO 6%, 1/15/2003................................................... $ 200,000 $ 212,018
Belmont 5.50%, 1/15/2005.................................................... 585,000 604,100
Boston, Revenue (Boston City Hospital)
7.15%, 8/15/2001 (Insured; FHA, Prerefunded 8/1/2000) (a)............... 1,500,000 1,665,060
Boston Water and Sewer Commission, Revenue:
9.25%, 1/1/2011......................................................... 100,000 130,753
Crossover, Refunding 7.875%, 11/1/2013 ................................. 160,000 165,382
Crossover, Refunding 7.875%, 11/1/2013 (Prerefunded 11/1/1996) (a)...... 290,000 299,544
Cambridge:
GO 6.60%, 6/15/2000..................................................... 675,000 726,050
Municipal Purpose Loan 5.60%, 11/1/2001................................. 500,000 523,530
Cohasset, Municipal Purpose Loan:
6.70%, 11/1/1998 (Insured; MBIA)........................................ 160,000 168,437
6.90%, 11/1/2000 (Insured; MBIA)........................................ 150,000 162,855
Dedham-Westwood Water And Sewer Commission, Revenue
6.40%, 12/1/2005 (Prerefunded 12/1/1996) (a)............................ 500,000 515,290
Easton, Municipal Purpose Loan 6%, 9/15/2006................................ 105,000 110,727
Franklin, GO 6.25%, 11/15/2005 (Insured; MBIA).............................. 430,000 465,974
Massachusetts, Port Authority Revenue 7%, 7/1/2000 (Insured; FGIC).......... 1,000,000 1,080,860
Massachusetts, Refunding:
5.40%, 11/1/2006........................................................ 1,000,000 1,013,130
6.50%, 8/1/2008......................................................... 500,000 549,980
Massachusetts, Special Obligation Revenue 5.80%, 6/1/2000................... 880,000 915,411
Massachusetts, Water Pollution Abatement Revenue (Pooled Loan Program)
6.125%, 2/1/2007........................................................ 625,000 670,806
Massachusetts Bay Transportation Authority:
Massachusetts General Transportation 5.25%, 3/1/2011 (Insured; AMBAC)... 1,000,000 966,660
Refunding 5.90%, 3/1/2004............................................... 550,000 579,216
Massachusetts Consolidated Loan:
7%, 7/1/2006 (Insured; MBIA, Prerefunded 7/1/2000) (a).................. 500,000 551,125
7.625%, 6/1/2008 (Prerefunded 6/1/2001) (a)............................. 400,000 456,968
7.375%, 12/1/2008 (Prerefunded 12/1/1998) (a)........................... 250,000 272,720
Massachusetts Education Loan Authority, Education Loan Revenue
6.20%, 7/1/2013 (Insured; AMBAC)........................................ 1,000,000 1,003,160
Massachusetts Health and Educational Facilities Authority, Revenue:
(Beth Israel Hospital) 7.80%, 7/01/2014................................. 500,000 534,545
(Harvard University):
6.20%, 12/1/2001...................................................... 1,000,000 1,076,750
Massachusetts Health and Educational Facilities Authority, Revenue
(continued):
Premier Limited Term Massachusetts Municipal Fund
Statement of Investments (continued) June 30, 1996
Principal
Long-Term Municipal Investments (continued) Amount Value
------------- -------------
Massachusetts (continued)
(Harvard University) (continued):
Refunding 6.50%, 11/1/2004............................................ $ 700,000 $ 774,620
(Lahey Clinic) 7.625%, 7/1/2018 (Prerefunded 7/1/1998) (a).............. 1,000,000 1,085,420
(Malden Hospital Project) 9.50%, 8/1/2008............................... 35,000 35,074
(Northeastern University) 6.80%, 10/1/1999 (Insured; AMBAC)............. 1,000,000 1,069,680
Refunding (Dana-Farber Cancer Institute) 5.55%, 12/1/2003 (Insured; FGIC) 400,000 412,740
(Salem University) 8.15%, 7/1/2014 (Prerefunded 7/1/1999) (a)........... 750,000 840,810
(South Shore Hospital):
7.50%, 7/1/2010 (Insured; MBIA, Prerefunded 7/1/2000) (a)............. 350,000 391,849
7.50%, 7/1/2020 (Insured; MBIA, Prerefunded 7/1/2000) (a)............. 500,000 559,785
(Wenworth Institute of Technology):
7.15%, 4/1/2000 (Insured; AMBAC)...................................... 225,000 244,694
7.40%, 4/1/2010 (Insured; AMBAC, Prerefunded 4/1/2000) (a)............ 220,000 244,750
Massachusetts Industrial Finance Agency:
Museum Revenue, Refunding (Museum of Fine Arts of Boston)
5.375%, 1/1/2007 (Insured; MBIA)...................................... 1,000,000 1,011,200
Revenue:
(Brooks School):
5.70%, 7/1/2006................................................... 260,000 263,468
5.75%, 7/1/2007................................................... 275,000 277,500
5.80%, 7/1/2008................................................... 290,000 292,630
5.85%, 7/1/2009................................................... 305,000 306,693
(Nantucket Electric Co. Project) 6.75%, 7/1/2006 (Insured; AMBAC)..... 1,400,000 1,543,514
(Refunding_College of The Holy Cross) 5.50%, 3/1/2007 (Insured; MBIA). 1,145,000 1,163,858
(Springfield College Project) 7.80%, 10/1/2009
(LOC; Fleet Bank of Massachusetts, Prerefunded 10/1/1999) (a,b)... 1,100,000 1,238,204
Massachusetts Municipal Wholesale Electric Co.,
Power Supply System Revenue, Refunding 6.30%, 7/1/2000 (Insured; AMBAC). 500,000 525,565
Massachusetts Water Resource Authority, Refunding 5.875%, 11/1/2004......... 500,000 524,290
New England Education Loan Marketing Corp., Refunding (Student Loan)
5.70%, 7/1/2005......................................................... 1,750,000 1,768,410
Northampton, School Project Loan 6.40%, 5/15/2004 (Insured; MBIA)........... 750,000 816,885
Rockport, GO 6.90%, 12/15/2007.............................................. 1,000,000 1,075,190
Southeastern University Building Authority, Revenue, Refunding
5.90%, 5/1/2010 (Insured; AMBAC)........................................ 500,000 510,110
Springfield, School Project Loan 6.10%, 9/1/2002 (Insured; AMBAC)........... 600,000 640,386
Whitman, GO:
7.75%, 6/1/2007 (Prerefunded 6/1/1998) (a).............................. 180,000 196,294
7.75%, 6/1/2008 (Prerefunded 6/1/1998) (a).............................. 250,000 272,630
Premier Limited Term Massachusetts Municipal Fund
Statement of Investments (continued) June 30, 1996
Principal
Long-Term Municipal Investments (continued) Amount Value
------------- -------------
Massachusetts (continued)
Worchester, Municipal Purpose, Refunding 6.25%, 7/1/2010 (Insured; MBIA).... $ 755,000 $ 814,026
Yarmouth, GO 8.60%, 10/1/2000............................................... 100,000 114,736
U.S. Related_16.8%
Guam Government, Limited Obligation Highway, Refunding
6%, 5/1/2003 (Insured; CGIC)............................................ 750,000 795,848
Commonwealth of Puerto Rico:
GO, Refunding:
6.50%, 7/1/2003 (Insured; MBIA)....................................... 550,000 604,918
6.25%, 7/1/2011 (Insured; MBIA)....................................... 1,050,000 1,137,035
Public Improvement 6.70%, 7/1/1998 (Insured; FGIC)...................... 400,000 419,500
Commonwealth of Puerto Rico Highway and Transportation Authority, Revenue
6.25%, 7/1/2009 (Insured; MBIA)......................................... 1,000,000 1,084,060
Puerto Rico Electric Power Authority, Power Revenue
6.50%, 7/1/2006 (Insured; MBIA)......................................... 1,000,000 1,106,610
Puerto Rico Public Buildings Authority, Revenue 6.75%, 7/1/2005 (Insured; AMBAC) 1,000,000 1,127,610
University of Puerto Rico, University Revenue 6.25%, 6/1/2005............... 750,000 818,205
-----------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $40,620,652).................... $41,529,848
===========
Short-Term Municipal Investments_1.8%
Massachusetts:
Massachusetts, VRDN 3.60% (LOC; ABN Amro Bank) (b,c)........................ $ 200,000 $ 200,000
Massachusetts Health and Educational Authority, Revenue, VRDN
(Wellesley College) 3.10% (c)........................................... 600,000 600,000
------------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $800,000)...................... $ 800,000
===========
TOTAL MUNICIPAL INVESTMENTS_100.0%
(cost $41,420,652)...................................................... $42,329,848
===========
</TABLE>
<TABLE>
<CAPTION>
Premier Limited Term Massachusetts Municipal Fund
Summary of Abbreviations
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation LOC Letter of Credit
CGIC Capital Guaranty Insurance Company MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
FHA Federal Housing Administration VRDN Variable Rate Demand Notes
GO General Obligation
</TABLE>
<TABLE>
<CAPTION>
Summary of Combined Ratings (Unaudited)
<S> <C> <C> <C>
Fitch (d) or Moody's or Standard & Poor's Percentage of Value
- --------- --------- -------------------- -----------------------
AAA Aaa AAA 74.7%
AA Aa AA 6.9
A A A 16.5
F1, F-1+ MIG1, VMIG1 & P1 SP1, A1 1.9
--------
100.0%
=======
</TABLE>
Notes to Statement of Investments:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Secured by letters of credit.
(c) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(d) Fitch currently provides creditworthiness information for a limited
number of investments.
See notes to financial statements.
<TABLE>
<CAPTION>
Premier Limited Term Massachusetts Municipal Fund
Statement of Assets and Liabilities June 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $41,420,652)_see Statement of Investments....................... $42,329,848
Interest receivable..................................................... 792,146
Receivable for investment securities sold............................... 629,587
------------
43,751,581
LIABILITIES:
Due to The Dreyfus Corporation_Note 2(a)................................ $ 32,404
Due to Distributor_Note 2(b)............................................ 3,307
Cash overdraft due to custodian......................................... 49,880
Payable for investment securities purchased............................. 1,525,514
Trustees' fees payable_Note 2(c)........................................ 2,708 1,613,813
---------- ----------
NET ASSETS ................................................................ $42,137,768
===========
REPRESENTED BY:
Paid-in capital......................................................... $41,190,714
Accumulated undistributed net realized gain on investments.............. 37,858
Accumulated net unrealized appreciation on investments_Note 3........... 909,196
------------
NET ASSETS at value......................................................... $42,137,768
===========
NET ASSET VALUE, per share:
Class A Shares
unlimited number of shares of Beneficial Interest authorized
($15,688,404 / 1,310,848 shares of Beneficial Interest outstanding)... $11.97
======
Class B Shares
unlimited number of shares of Beneficial Interest authorized
($452,200 / 37,704 shares of Beneficial Interest outstanding)......... $11.99
======
Class C Shares
unlimited number of shares of Beneficial Interest authorized
($16,494 / 1,378 shares of Beneficial Interest outstanding)........... $11.97
======
Class R Shares
unlimited number of shares of Beneficial Interest authorized
($25,980,670 / 2,171,092 shares of Beneficial Interest outstanding)... $11.97
======
See notes to financial statements.
Premier Limited Term Massachusetts Municipal Fund
Statement of Operations year ended June 30, 1996
INVESTMENT INCOME:
Interest Income......................................................... $2,076,091
Expenses:
Investment management fee_Note 2(a)................................... $188,533
Distribution fee_Note 2(b)............................................ 41,329
Trustees' fees and expenses_Note 2(c)................................. 11,221
Service fee_Note 2(b)................................................. 150
---------
Total Expenses.................................................... 241,233
----------
INVESTMENT INCOME_NET............................................. 1,834,858
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS_Note 3:
Net realized gain on investments........................................ $ 22,557
Net realized gain on financial futures.................................. 44,495
---------
Net Realized Gain..................................................... 67,052
Net unrealized appreciation on investments.............................. 57,430
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 124,482
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $1,959,340
==========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Premier Limited Term Massachusetts Municipal Fund
Statement of Changes in Net Assets
Year Ended June 30,
-------------------------------
1996 1995
-------------- ------------
<S> <C> <C>
OPERATIONS:
Investment income_net................................................... $ 1,834,858 $ 1,668,665
Net realized gain on investments........................................ 67,052 28,732
Net unrealized appreciation on investments for the year................. 57,430 610,550
------------ ------------
Net Increase In Net Assets Resulting From Operations.............. 1,959,340 2,307,947
------------ ------------
DIVIDENDS TO SHAREHOLDERS:
From investment income_net:
Class A Shares........................................................ (730,953) (856,242)
Class B Shares........................................................ (1,544) ___
Class C Shares........................................................ (709) (149)
Class R Shares........................................................ (1,101,652) (812,274)
From net realized gain on investments:
Class A Shares........................................................ (23,631) (54,707)
Class B Shares........................................................ (14) ___
Class C Shares........................................................ (26) ___
Class R Shares........................................................ (32,290) (49,756)
------------ ------------
Total Dividends................................................... (1,890,819) (1,773,128)
------------ ------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A Shares........................................................ 1,601,368 3,717,270
Class B Shares........................................................ 450,001 15
Class C Shares........................................................ ___ 18,015
Class R Shares........................................................ 9,355,436 8,491,325
Dividends reinvested:
Class A Shares........................................................ 574,790 714,238
Class B Shares........................................................ 1,133 ___
Class C Shares........................................................ 651 151
Class R Shares........................................................ 498,611 324,993
Cost of shares redeemed:
Class A Shares........................................................ (3,075,439) (9,400,166)
Class B Shares........................................................ (16) ___
Class C Shares........................................................ (2,522) ___
Class R Shares........................................................ (3,553,482) (5,138,820)
------------ ------------
Increase (Decrease) In Net Assets From
Beneficial Interest Transactions................................ 5,850,531 (1,272,979)
------------ ------------
Total Increase (Decrease) In Net Assets......................... 5,919,052 (738,160)
NET ASSETS:
Beginning of year....................................................... 36,218,716 36,956,876
------------ ------------
End of year............................................................. $42,137,768 $36,218,716
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Premier Limited Term Massachusetts Municipal Fund
Statement of Changes in Net Assets (continued)
Shares
-------------------------------------------------------------------
Class A Class B
------------------------------ ------------------------------
Year Ended June 30, Year Ended June 30,
------------------------------ ------------------------------
1996 1995(1) 1996 1995(2)
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............................ 132,502 316,736 37,610 1
Shares issued for dividends reinvested. 47,482 61,078 94 ___
Shares redeemed........................ (254,257) (804,575) (1) ___
------------ ------------ ------------ -----------
Net Increase (Decrease) In
Shares Outstanding............... (74,273) (426,761) 37,703 1
========== ========= ======= ========
Shares
-------------------------------------------------------------------
Class C Class R
------------------------------ ------------------------------
Year Ended June 30, Year Ended June 30,
------------------------------ ------------------------------
1996 1995(2) 1996 1995(1)
------------ ------------ ------------ -----------
CAPITAL SHARE TRANSACTIONS (continued):
Shares sold............................ ___ 1,521 770,353 725,392
Shares issued for dividends reinvested. 54 12 41,214 27,778
Shares redeemed........................ (209) ___ (294,159) (434,867)
------------ ------------ ------------ -----------
Net Increase (Decrease) In
Shares Outstanding............... (155) 1,533 517,408 318,303
========== =========== =========== =========
(1) On October 17, 1994, the Investor and Trust shares were redesignated
Class A and Class R shares, respectively.
(2) The Fund commenced selling Class B and Class C shares on
December 28, 1994.
See notes to financial statements.
</TABLE>
Premier Limited Term Massachusetts Municipal Fund
Financial Highlights
Reference is made to page 9 of the Fund's
Prospectus dated November 1, 1996.
See notes to financial statements.
Premier Limited Term Massachusetts Municipal Fund
NOTES TO FINANCIAL STATEMENTS
NOTE 1_Significant Accounting Policies:
The Dreyfus/Laurel Tax-Free Municipal Funds (the "Trust") is registered
under the Investment Company Act of 1940 ("Act") as a non-diversified
open-end management investment company and operates as a series company
currently offering seven series including the Premier Limited Term
Massachusetts Municipal Fund (the "Fund"). The Fund's investment objective is
to maximize current income exempt from Federal income taxes and state
personal income taxes for resident shareholders of the named state consistent
with what is believed to be the prudent risk of capital by investing in
municipal obligations of the named state which are of investment-grade
quality and intermediate maturities. The Dreyfus Corporation ("Manager")
serves as the Fund's investment adviser. The Manager is a direct subsidiary
of Mellon Bank, N.A. ("Mellon Bank").
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Fund currently offers four classes of
shares: Class A, Class B, Class C and Class R shares. Class A, Class B and
Class C shares are sold primarily to retail investors through financial
intermediaries and bear a distribution fee and/or service fee. Class A shares
are sold with a front-end sales charge, while Class B and Class C shares are
subject to a contingent deferred sales charge ("CDSC") and a service fee.
Class R shares are sold primarily to bank trust departments and other
financial service providers (including Mellon Bank and its affiliates) acting
on behalf of customers having a qualified trust or investment account or
relationship at such institution, and bear no distribution fee or service
fees. Class R shares are offered without a front-end sales load or CDSC. Each
class of shares has identical rights and privileges, except with respect to
distribution and service fees and voting rights on matters affecting a single
class.
Investment income, net of expenses (other than class specific expenses),
realized and unrealized gains and losses are allocated daily to each class of
shares based upon the relative proportion of net assets of each class.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
Actual results may differ from estimates.
(a) Portfolio valuation: The Fund's investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the
Board of Trustees. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the
judgment of the Service are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for
such securities). Other investments (which constitute a majority of the
portfolio securities) are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of
municipal securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Options
and financial futures on municipal and U.S. treasury securities are valued at
the last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market
on each business day. Investments not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available.
Premier Limited Term Massachusetts Municipal Fund
NOTES TO FINANCIAL STATEMENTS (continued)
(b) Securities transactions and investment income: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
(c) Financial futures: The Fund may invest in trading financial futures
contracts in order to gain exposure to or protect against changes in the
market. The Fund is exposed to market risk as a result of changes in the
value of the underlying financial instruments. Investments in financial
futures require the Fund to "mark to market" on a daily basis, which reflects
the change in the market value of the contract at the close of each day's
trading. Accordingly, variation margin payments are received or made to
reflect daily unrealized gains or losses. When the contracts are closed, the
Fund recognizes a realized gain or loss. These investments require initial
margin deposits which consist of cash or cash equivalents, up to
approximately 10% of the contract amount. The amount of these deposits is
determined by the exchange or Board of Trade on which the contract is traded
and is subject to change. At June 30, 1996, there were no financial futures
contracts outstanding.
(d) Concentration of risk: The Fund follows an investment policy of
investing primarily in municipal obligations of one state. Economic changes
affecting the state and certain of its public bodies and municipalities may
affect the ability of issuers within the state to pay interest on, or repay
principal of, municipal obligations held by the Fund.
(e) Distributions to shareholders: It is the policy of the Fund to
declare dividends daily from investment income-net. Such dividends are paid
monthly. Dividends from net realized capital gain, if any, are normally
declared and paid annually, but the Fund may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code. To the extent that net realized capital gain can be offset by
capital loss carryovers, it is the policy of the Fund not to distribute such
gain.
(f) Federal income taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2_Investment Management Fee and Other Transactions With Affiliates:
(a) Investment management fee: Pursuant to an Investment Management
agreement with the Manager, the Manager provides or arranges for one or more
third parties to provide investment advisory, administrative, custody, fund
accounting and transfer agency services to the Fund. The Manager also directs
the investments of the Fund in accordance with its investment objective,
policies and limitations. For these services, the Fund is contractually
obligated to pay the Manager a fee, calculated daily and paid monthly, at the
annual rate of .50% of the value of the Fund's average daily net assets. Out
of its fee, the Manager pays all of the expenses of the Fund except brokerage
fees, taxes, interest, Rule 12b-1 distribution fees and expenses, fees and
expenses of non-interested Trustees (including counsel fees) and
extraordinary expenses. In addition, the Manager is required to reduce its
fee in an amount equal to the Fund's allocable portion of fees and expenses
of the non-interested Trustees (including counsel).
Premier Limited Term Massachusetts Municipal Fund
NOTES TO FINANCIAL STATEMENTS (continued)
(b) Distribution and service plan: The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act relating to its
Class A, B and C shares. Under the Plan, the Fund may pay annually up to .25%
of the value of its average daily net assets attributable to its Class A
shares to compensate the Distributor and Dreyfus Service Corporation, an
affiliate of the Manager, for shareholder servicing activities and the
Distributor for activities and expenses primarily intended to result in the
sale of Class A shares. Under the Plan, the Fund may pay the Distributor for
distributing the Fund's Class B and Class C shares at an aggregate annual
rate of .50% of the value of the average daily net assets of Class B and
Class C shares. Class B and Class C shares are also subject to a service plan
adopted pursuant to Rule 12b-1, under which the Fund pays Dreyfus Service
Corporation or the Distributor for providing certain services to the holders
of Class B and Class C shares a fee at the annual rate of .25% of the value
of the average daily net assets of Class B and Class C shares. Class R shares
bear no service or distribution fee. For the year ended June 30, 1996, the
distribution fee for Class A, Class B, and Class C shares was $41,030, $209
and $90, respectively. For the year ended June 30, 1996, the service fee for
Class B shares and Class C shares was $105 and $45, respectively.
Under its terms, the Plan shall remain in effect from year to year,
provided such continuance is approved annually by a vote of majority of those
Trustees who are not "interested persons" of the Company and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan.
(c) Trustees' fees: Each trustee who is not an "interested person" as
defined in the Act receives $27,000 per year, $1,000 for each Board meeting
attended and $750 for each Audit Committee attended and is reimbursed for
travel and out-of-pocket expenses. These expenses are paid in total by the
following funds: The Dreyfus/Laurel Funds, Inc., The Dreyfus/Laurel Tax-Free
Municipal Funds, and The Dreyfus/Laurel Funds Trust. In addition the Chairman
of the Board receives an annual fee of $75,000 per year. These fees and expens
es are charged and allocated to each series based on net assets.
NOTE 3_Securities Transactions:
The aggregate amount of purchase and sales of investment securities,
excluding short-term securities, during the year ended June 30, 1996,
amounted to $20,695,058 and $15,110,163, respectively.
At June 30, 1996, accumulated net unrealized appreciation on investments
was $909,196, consisting of $1,042,083 gross unrealized appreciation and
$132,887 gross unrealized depreciation.
At June 30, 1996, the cost of investments for federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see
the Statement of Investments).
Premier Limited Term Massachusetts Municipal Fund
Independent Auditors' Report
The Board of Trustees and Shareholders
The Dreyfus/Laurel Tax-Free Municipal Funds:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments of Premier Limited Term Massachusetts
Municipal Fund of The Dreyfus/Laurel Tax-Free Municipal Funds as of June 30,
1996, and the related statement of operations for the year then ended and
statements of changes in net assets for each of the years in the two-year
period then ended and financial highlights for each of the years or period in
the three-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights for each
of the years or period in the two-year period ended June 30, 1993 were
audited by other auditors whose report thereon, dated August 11, 1993,
expressed an unqualified 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
financial highlights are free of material misstatement. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation
of securities owned as of June 30, 1996, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles 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 Premier Limited Term Massachusetts Municipal Fund of The
Dreyfus/Laurel Tax-Free Municipal Funds as of June 30, 1996, the results of
its operations for the year then ended and the changes in its net assets for
each of the years in the two-year period then ended and financial highlights
for each of the years or period in the three-year period then ended in
conformity with generally accepted accounting principles.
(logo signature)
New York, NY
July 29, 1996
<TABLE>
<CAPTION>
Premier Limited Term New York Municipal Fund
Statement of Investments June 30, 1996
Principal
Long-Term Municipal Investments_95.2% Amount Value
------------ ------------
<S> <C> <C>
New York_85.5%
Albany County 7%, 10/1/2000 (Insured; FGIC, Prerefunded 10/1/1999) (a)...... $ 125,000 $ 137,907
Amherst, Public Improvement 6.20%, 4/1/2002 (Insured; FGIC)................. 150,000 161,262
Erie County Water Authority, Water Revenue, Refunding:
6.65%, 12/1/1999 (Insured; AMBAC)....................................... 250,000 267,487
7%, 12/1/2000 (Insured; AMBAC).......................................... 200,000 219,136
Greece Central School District 6%, 6/15/2010................................ 225,000 237,096
Town of Hempstead 6.30%, 1/1/2002 (Insured; AMBAC).......................... 150,000 160,216
Metropolitan Transportation Authority, Transporation Facilities Revenue:
6.30%, 7/1/2007 (Insured; MBIA)......................................... 250,000 272,500
(Service Contract) 7%, 7/1/1998 (Insured; AMBAC)........................ 100,000 105,132
Monroe County, Public Improvement 7%, 6/1/2003 (Insured; FGIC).............. 200,000 224,340
Municipal Assistance Corporation for New York City:
7.10%, 7/1/2000......................................................... 100,000 108,469
Refunding 5.25%, 7/1/2002 (Insured; AMBAC).............................. 125,000 127,873
Nassau County 7%, 7/1/2002 (Insured; AMBAC, Prerefunded 7/1/2000) (a)....... 100,000 109,585
New York State, Refunding 6.25%, 8/15/2004.................................. 200,000 215,896
New York State Dormitory Authority, Revenue:
(Colgate University) 6.50%, 7/1/2021 (Insured; MBIA, Prerefunded 7/1/2001) (a) 250,000 274,365
(FIT Student Housing) 5.75%, 7/1/2006 (Insured; AMBAC).................. 130,000 134,447
Refunding (Vassar College) 6%, 7/1/2005................................. 250,000 266,740
New York State Housing Finance Agency, Refunding
(State University Construction) 7.15%, 11/1/1997........................ 155,000 161,882
New York State Local Government Assistance Corporation 6.375%, 4/1/2000..... 200,000 211,118
New York State Medical Care Facilities Finance Agency, Revenue
(Mental Health Services Facilities) 6.60%, 8/15/1996.................... 100,000 100,353
New York State Mortgage Agency, Homeowner Mortgage Revenue
7.50%, 10/1/1998........................................................ 45,000 46,548
New York State Power Authority, General Purpose Revenue
7%, 1/1/2018 (Prerefunded 1/1/2010) (a)................................. 100,000 114,736
Orange County 5.10%, 11/15/2002............................................. 130,000 132,508
Oyster Bay 7.125%, 4/15/2000 (Insured; FGIC)................................ 180,000 196,078
Port Washington Union Free School District 6%, 8/1/2001..................... 125,000 131,958
Suffolk County, Public Improvement
7%, 4/1/2002 (Insured; MBIA, Prerefunded 4/1/2001) (a).................. 150,000 165,165
Triborough Bridge and Tunnel Authority, General Purpose Revenue:
7.40%, 1/1/2003 (Prerefunded 1/1/1999) (a).............................. 200,000 217,314
7%, 1/1/2011 (Prerefunded 1/1/1999) (a)................................. 150,000 161,574
Triborough Bridge and Tunnel Authority, General Purpose Revenue (continued):
Premier Limited Term New York Municipal Fund
Statement of Investments (continued) June 30, 1996
Principal
Long-Term Municipal Investments (continued) Amount Value
------------ ------------
New York (continued)
Refunding 5.90%, 1/1/2007............................................... $ 100,000 $ 105,058
Westchester County 6.625%, 11/1/2004........................................ 250,000 279,310
Western Nassau County Water Authority,
Water Systems Revenue 5.50%, 5/1/2004 (Insured; AMBAC).................. 250,000 258,583
U. S. Related_9.6%
Puerto Rico Commonwealth, Refunding 6.25%, 7/1/2011 (Insured; MBIA)......... 200,000 216,578
Puerto Rico Commonwealth Highway and Transporation Authority,
Highway Revenue 6.25%, 7/1/2009 (Insured; MBIA)......................... 150,000 162,609
University of Puerto Rico, University Revenues, Refunding
6.25%, 6/1/2006......................................................... 200,000 218,136
----------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $5,733,454)..................... $5,901,959
==========
Short-Term Municipal Investments_4.8%
New York City Municipal Water Finance Authority,
Water and Sewer Systems Revenue, VRDN 3.55% (Insured; FGIC) (b)......... $ 100,000 $ 100,000
New York State Energy Research and Development Authority, PCR, Refunding,
VRDN
3.55% (LOC; Morgan Guaranty Trust Co.) (b,c)............................ 200,000 200,000
----------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $300,000)...................... $ 300,000
==========
TOTAL INVESTMENTS_100.0%
(cost $6,033,454)....................................................... $6,201,959
==========
</TABLE>
<TABLE>
<CAPTION>
Premier Limited Term New York Municipal Fund
Summary of Abbreviations
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation PCR Pollution Control Revenue
FGIC Financial Guaranty Insurance Company VRDN Variable Rate Demand Notes
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance
Insurance Corporation
</TABLE>
<TABLE>
<CAPTION>
Summary of Combined Ratings (Unaudited)
<S> <C> <C> <C>
Fitch (d) or Moody's or Standard & Poor's Percentage of Value
- --------- --------- --------------------- -----------------------
AAA Aaa AAA 69.5%
AA Aa AA 12.8
A A A 6.9
BBB Baa BBB 6.0
F1+ & F1 MIG1, VMIG1 & P1 SP1 & A1 4.8
------
100.0%
======
</TABLE>
Notes to Statement of Investments:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(c) Secured by letters of credit.
(d) Fitch currently provides creditworthiness information for a limited
number of investments.
See notes to financial statements.
<TABLE>
<CAPTION>
Premier Limited Term New York Municipal Fund
Statement of Assets and Liabilities June 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $6,033,454)_see Statement of Investments........................ $6,201,959
Cash.................................................................... 12,091
Receivable for investment securities sold............................... 240,162
Interest receivable..................................................... 113,290
----------
6,567,502
LIABILITIES:
Due to The Dreyfus Corporation_Note 2(a)................................ $ 4,819
Due to Distributor_Note 2(b)............................................ 497
Payable for investment securities purchased............................. 223,931
Trustees' fee payable_Note 2(c)......................................... 452 229,699
---------- ---------
NET ASSETS.................................................................. $6,337,803
==========
REPRESENTED BY:
Paid-in capital......................................................... $6,138,455
Accumulated distributions in excess of investment income_net............ (22)
Accumulated undistributed net realized gain on investments.............. 30,865
Accumulated net unrealized appreciation on investments_Note 3........... 168,505
----------
NET ASSETS at value......................................................... $6,337,803
==========
NET ASSET VALUE, per share:
Class A Shares
unlimited number of shares of Beneficial Interest authorized
($2,106,373 / 166,546 shares of Beneficial Interest outstanding)...... $12.65
======
Class B Shares
unlimited number of shares of Beneficial Interest authorized
($120,118 / 9,487 shares of Beneficial Interest outstanding).......... $12.66
======
Class C Shares
unlimited number of shares of Beneficial Interest authorized
($51,692 / 4,077 shares of Beneficial Interest outstanding)........... $12.68
======
Class R Shares
unlimited number of shares of Beneficial Interest authorized
($4,059,620 / 321,017 shares of Beneficial Interest outstanding)...... $12.65
======
See notes to financial statements.
Premier Limited Term New York Municipal Fund
Statement of Operations year ended June 30, 1996
<S> <C> <C>
INVESTMENT INCOME:
Interest Income......................................................... $298,982
Expenses:
Investment management fee_Note 2(a)................................... $26,270
Distribution fee_Note 2(b)............................................ 6,209
Trustees' fees and expenses_Note 2(c)................................. 1,519
Service fee_Note 2(b)................................................. 220
-------
Total Expenses.................................................... 34,218
--------
INVESTMENT INCOME_NET............................................. 264,764
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS_Note 3:
Net realized gain on investments........................................ $41,273
Net realized (loss) on financial futures................................ (4,415)
-------
Net Realized Gain..................................................... 36,858
Net unrealized (depreciation) on investments............................ (63,766)
--------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS................. (26,908)
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $237,856
========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Premier Limited Term New York Municipal Fund
Statement of Changes in Net Assets
Year Ended June 30,
------------------------------
1996 1995
------------ -----------
<S> <C> <C>
OPERATIONS:
Investment income_net................................................... $ 264,764 $ 274,395
Net realized gain on investments........................................ 36,858 5,110
Net unrealized appreciation (depreciation) on investments for the year.. (63,766) 74,362
------------ -----------
Net Increase In Net Assets Resulting From Operations.............. 237,856 353,867
------------ -----------
DIVIDENDS TO SHAREHOLDERS:
From investment income_net:
Class A Shares........................................................ (106,844) (128,592)
Class B Shares........................................................ (1,519) --
Class C Shares........................................................ (2,084) (571)
Class R Shares........................................................ (154,347) (145,224)
From net realized gain on investments:
Class A Shares........................................................ ___ (7,144)
Class R Shares........................................................ ___ (6,625)
In excess of net realized gain on investments:
Class A Shares........................................................ ___ (3,114)
Class R Shares........................................................ ___ (2,887)
------------ -----------
Total Dividends................................................... (264,794) (294,157)
------------ -----------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A Shares........................................................ 304,803 2,659,825
Class B Shares........................................................ 119,997 15
Class C Shares........................................................ 127,309 66,765
Class R Shares........................................................ 1,483,810 2,784,534
Dividends reinvested:
Class A Shares........................................................ 76,624 95,205
Class B Shares........................................................ 1,520 ___
Class C Shares........................................................ 1,925 528
Class R Shares........................................................ 12,580 9,422
Cost of shares redeemed:
Class A Shares........................................................ (606,642) (3,357,585)
Class B Shares........................................................ (16) ___
Class C Shares........................................................ (147,090) ___
Class R Shares........................................................ (262,285) (2,376,553)
------------ -----------
Increase (Decrease) In Net Assets From
Beneficial Interest Transactions................................ 1,112,535 (117,844)
------------ -----------
Total Increase (Decrease) In Net Assets......................... 1,085,597 (58,134)
NET ASSETS:
Beginning of year....................................................... 5,252,206 5,310,340
------------ -----------
End of year [including distributions in excess of investment income_net;
($22) in 1996]........................................................ $6,337,803 $5,252,206
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Premier Limited Term New York Municipal Fund
Statement of Changes in Net Assets (continued)
Shares
-------------------------------------------------------------------
Class A Class B
------------------------------ ------------------------------
Year Ended June 30, Year Ended June 30,
------------------------------ ------------------------------
1996 1995(1) 1996 1995(2)
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............................ 23,900 216,459 9,368 1
Shares issued for dividends reinvested. 5,966 7,633 119 ___
Shares redeemed........................ (47,503) (272,051) (1) ___
------------ ------------ ------------ -----------
Net Increase (Decrease) In
Shares Outstanding............... (17,637) (47,959) 9,486 1
========= ========= ========== =========
</TABLE>
<TABLE>
<CAPTION>
Shares
-------------------------------------------------------------------
Class C Class R
------------------------------ ------------------------------
Year Ended June 30, Year Ended June 30,
------------------------------ ------------------------------
1996 1995(2) 1996 1995(1)
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS (continued):
Shares sold............................ 9,989 5,292 116,482 224,379
Shares issued for dividends reinvested. 150 42 980 756
Shares redeemed........................ (11,396) ___ (20,278) (191,061)
------------ ------------ ---------- -----------
Net Increase (Decrease) In
Shares Outstanding............... (1,257) 5,334 97,184 34,074
========== ========= ========= =========
---------- ---------- ---------- ----------
(1) On October 17, 1994, Investor shares and Trust shares were redesignated
Class A shares and Class R shares, respectively. (
2)The Fund commenced selling Class B and C shares on December 28, 1994.
See notes to financial statements.
</TABLE>
Premier Limited Term New York Municipal Fund
Financial Highlights
Reference is made to page 13 of the Fund's
Prospectus dated November 1, 1996.
See notes to financial statements.
Premier Limited Term New York Municipal Fund
NOTES TO FINANCIAL STATEMENTS
NOTE 1_Significant Accounting Policies:
The Dreyfus/Laurel Tax-Free Municipal Funds (the "Trust") is registered
under the Investment Company Act of 1940 ("Act") as a non-diversified
open-end management investment company and operates as a series company
currently offering seven series including the Premier Limited Term New York
Municipal Fund (the "Fund"). The Fund's investment objective is to maximize
current income exempt from Federal, New York State and New York City income
taxes to the extent consistent with the preservation of capital. The Dreyfus
Corporation ("Manager") serves as the Fund's investment adviser. The Manager
is a direct subsidiary of Mellon Bank, N.A. ("Mellon Bank").
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Fund currently offers four classes of
shares: Class A, Class B, Class C and Class R shares. Class A, Class B and
Class C shares are sold primarily to retail investors through financial
intermediaries and bear a distribution fee and/or service fee. Class A shares
are sold with a front-end sales charge, while Class B and Class C shares are
subject to a contingent deferred sales charge ("CDSC") and a service fee.
Class R shares are sold primarily to bank trust departments and other
financial service providers (including Mellon Bank and its affiliates) acting
on behalf of customers having a qualified trust or investment account or
relationship at such institution, and bear no distribution fee or service
fee. Class R shares are offered without a front-end sales load or CDSC. Each
class of shares has identical rights and privileges, except with respect to
distribution fees and voting rights on matters affecting a single class.
Investment income, net of expenses (other than class specific expenses),
realized and unrealized gains and losses are allocated daily to each class of
shares based upon the relative proportion of net assets of each class.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
Actual results may differ from estimates.
(a) Portfolio valuation: The Fund's investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the
Board of Trustees. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the
judgment of the Service are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for
such securities). Other investments (which constitute majority of the
portfolio securities) are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of
municipal securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Options
and financial futures on municipal and U.S. treasury securities are valued at
the last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market
on each business day. Investments not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available.
(b) Securities transactions and investment income: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
(c) Financial futures: The Fund may invest in financial futures contracts
in order to gain exposure to or protect against changes in the market. The
Fund is exposed to market risk as a result of changes in the value of the
underlying financial instruments. Investments in financial futures require
the Fund to "mark to market" on a daily basis, which reflects the change in
the market value of the contract at the close of each day's trading.
Typically, variation margin payments are received or made to reflect daily
unrealized gains or losses. When the contracts are closed, the Fund
recognizes a realized gain or loss. These investments require initial margin
deposits with a custodian, which consist of cash or cash equivalents, up to
approximately 10% of the contract amount. The amount of these deposits is
determined by the exchange or Board of Trade on which the contract is traded
and is subject to change. At June 30, 1996, there were no financial futures
contracts outstanding.
(d) Concentration of risk: The Fund follows an investment policy of
investing primarily in municipal obligations of one state. Economic changes
affecting the state and certain of its public bodies and municipalities may
affect the ability of issuers within the state to pay interest on, or repay
principal of, municipal obligations held by the Fund.
(e) Distributions to shareholders: It is the policy of the Fund to
declare dividends daily from investment income-net. Such dividends are paid
monthly. Dividends from net realized capital gain are normally declared and
paid annually, but the Fund may make distributions on a more frequent basis
to comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Fund not to distribute such gain.
(f) Federal income taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2_Investment Management Fee and Other Transactions With Affiliates:
(a) Investment management fee: Pursuant to an Investment Management
agreement with the Manager, the Manager provides or arranges for one or more
third parties to provide investment advisory, administrative, custody, fund
accounting and transfer agency services to the Fund. The Manager also directs
the investments of the Fund in accordance with its investment objective,
policies and limitations. For these services, the Fund is contractually
obligated to pay the Manager a fee, calculated daily and paid monthly, at the
annual rate of .50% of the value of the Fund's average daily net assets. Out
of its fee, the Manager pays all of the expenses of the Fund except brokerage
fees, taxes, interest, Rule 12b-1 distribution fees and expenses, fees and
expenses of non-interested Trustees (including counsel fees) and
extraordinary expenses. In addition, the Manager is required to reduce its
fee in an amount equal to the Fund's allocable portion of fees and expenses
of the non-interested Trustees (including counsel).
(b) Distribution and service plan: The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act relating to its
Class A, B and C shares. Under the Plan, the Fund may pay annually up to .25%
of the value of its average daily net assets attributable to its Class A
shares to compensate the Distributor and Dreyfus Service Corporation, an
affiliate of the Manager, for shareholder servicing activities and the
Distributor for activities and expenses primarily intended to result in the
sale of Class A shares. Under the Plan, the Fund may pay the Distributor for
distributing the Fund's Class B and Class C shares at an aggregate annual
rate of .50% of the value of the average daily net assets of Class B and
Class C shares. Class B and Class C shares are also subject to a service plan
adopted pursuant to Rule 12b-1, under which the Fund pays Dreyfus Service
Corporation or the Distributor for providing certain services to the holders
of Class B and Class C shares a fee at the annual rate of .25% of the value
of the average daily net assets of Class B and Class C shares. Class R shares
bear no service or distribution fee. For the year ended June 30, 1996, the
distribution fee for Class A, Class B and Class C shares was $5,769, $190 and
$250, respectively. For the year ended June 30, 1996, the service fee for
Class B and Class C shares was $95 and $125, respectively.
Under its terms, the Plan shall remain in effect from year to year,
provided such continuance is approved annually by a vote of majority of those
Trustees who are not "interested persons" of the Company and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan.
(c) Trustees' fees: Each trustee who is not an "interested person" as
defined in the Act receives $27,000 per year, $1,000 for each Board meeting
attended and $750 for each Audit Committee attended and is reimbursed for
travel and out-of-pocket expenses. These expenses are paid in total by the
following funds: The Dreyfus/Laurel Funds, Inc., The Dreyfus/Laurel Tax-Free
Municipal Funds, and The Dreyfus/Laurel Funds Trust. In addition the
Chairman of the Board receives an annual fee of $75,000 per year. These fees
and expenses are charged and allocated to each series based on net assets.
NOTE 3_Securities Transactions:
The aggregate amount of purchase and sales of investment securities,
excluding short-term securities, during the year ended June 30, 1996,
amounted to $3,203,806 and $2,296,230, respectively.
At June 30, 1996, accumulated net unrealized appreciation on investments
was $168,505, consisting of $185,032 gross unrealized appreciation and
$16,527 gross unrealized depreciation.
At June 30, 1996, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see
the Statement of Investments).
Premier Limited Term New York Municipal Fund
Independent Auditors' Report
The Board of Trustees and Shareholders
The Dreyfus/Laurel Premier Limited Term Tax-Free Municipal Funds:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments of Premier Limited Term New York
Municipal Fund of The Dreyfus/Laurel Tax-Free Municipal Funds as of June 30,
1996, and the related statement of operations for the year then ended and
statements of changes in net assets for each of the years in the two-year
period then ended and financial highlights for each of the years or period in
the three-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights for each
of the years or period for the three-year period ended November 30, 1993 were
audited by other auditors whose report thereon, dated January 18, 1994,
expressed an unqualified 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
financial highlights are free of material misstatement. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation
of securities owned as of June 30, 1996, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles 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 Premier Limited Term New York Municipal Fund of The
Dreyfus/Laurel Tax-Free Municipal Funds as of June 30, 1996, the results of
its operations for the year then ended and the changes in its net assets for
each of the years in the two-year period then ended and financial highlights
for each of the years or period in the three-year period then ended in conform
ity with generally accepted accounting principles.
New York, NY
July 29, 1996
<TABLE>
<CAPTION>
Premier Limited Term Municipal Fund
Statement of Investments June 30, 1996
Principal
Long-Term Municipal Investments_93.2% Amount Value
----------- -----------
<S> <C> <C>
Alaska_3.1%
Anchorage, Port and Term Facilities Revenue, Refunding
6%, 2/1/2003 (Insured; MBIA)............................................ $ 1,110,000 $ 1,175,779
Arizona_5.1%
Maricopa County Unified School District Number 69 (Paradise Valley)
6.35%, 7/1/2010 (Insured; MBIA)......................................... 550,000 599,467
Phoenix, Refunding 6.25%, 7/1/2016.......................................... 1,250,000 1,352,550
Arkansas_1.4%
North Little Rock, Electric Revenue, Refunding 6%, 7/1/2001 (Insured; MBIA). 500,000 529,050
California_2.8%
Los Angeles County Metropolitan Transportation Authority, Sales Tax Revenue
8%, 7/1/1997 (Insured; AMBAC)........................................... 1,000,000 1,042,140
Connecticut_4.2%
Connecticut 5.95%, 11/15/2000............................................... 1,000,000 1,052,340
Stamford 6.60%, 1/15/2007................................................... 500,000 558,635
Florida_4.7%
Dade County:
Public Improvement 7.125%, 10/1/2016.................................... 100,000 102,666
Water and Sewer System Revenue 6.25%, 10/1/2008 (Insured; FGIC)......... 535,000 581,599
Miami Health Facilities Authority, Health Facilities Revenue (Mercy Hospital
Project)
6.75%, 8/1/2020 (Insured; AMBAC) (Prerefunded 8/1/2001) (a)............. 1,000,000 1,108,330
Georgia_1.5%
Fulton De Kalb Hospital Authority, HR
7.25%, 1/1/2020 (Insured; AMBAC) (Prerefunded 1/1/2000) (a)............. 500,000 550,230
Illinois_8.3%
Chicago, Refunding 7.25%, 1/1/2010 (Insured; MBIA) (Prerefunded 7/1/1996) (a) 100,000 102,029
Chicago Metropolitan Water Reclamation District (Chicago Capital Improvement)
7.25%, 12/1/2012........................................................ 1,000,000 1,182,560
Illinois, Sales Tax Revenue, Refunding 6.75%, 6/15/2006 (Prerefunded 6/15/1997) (a) 1,000,000 1,047,960
Regional Transportation Authority 7.75%, 6/1/2012 (Insured; FGIC)........... 390,000 477,243
Sangamon County School District Number 186 (Springfield)
7.70%, 6/1/2001 (Insured; MBIA)......................................... 300,000 337,812
Indiana_.1%
Indiana Transportation Finance Authority, Highway Revenue
7.875%, 12/1/2011 (Prerefunded 12/1/1998) (a)........................... 50,000 54,993
Premier Limited Term Municipal Fund
Statement of Investments (continued) June 30, 1996
Principal
Long-Term Municipal Investments (continued) Amount Value
-------------- ------------
Iowa_2.7%
Iowa Student Loan Liquidity Corp., Student Loan Revenue, Refunding
5.65%, 12/1/2005........................................................ $ 1,000,000 $ 1,008,280
Kentucky_2.9%
Kentucky Turnpike Authority, Economic Development Road Revenue, Refunding
(Revitalization Projects) 6.50%, 7/1/2007 (Insured; AMBAC).............. 1,000,000 1,110,140
Massachusetts_5.0%
Massachusetts, Special Obligation Revenue 7%, 6/1/2002...................... 1,000,000 1,106,000
Worcester, Refunding (Municipal Purpose)
6.25%, 7/1/2009 (Insured; MBIA)......................................... 720,000 777,010
Michigan_4.8%
Berkley City School District (Qualified School Board Loan Fund)
7%, 1/1/2009 (Insured; FGIC)............................................ 1,030,000 1,175,941
Comstock Park Public Schools 6%, 5/01/2016 (Prerefunded 5/1/1999) (a)....... 50,000 52,796
Saint John's Public Schools (Qualified School Board Loan Fund)
6.50%, 5/1/2006 (Insured; FGIC)......................................... 525,000 579,779
Mississippi_1.8%
Mississippi Higher Education Assisstance Corporation, Student Loan Revenue
6.05%, 9/1/2007......................................................... 650,000 663,150
New Jersey_1.4%
Cumberland County Improvement Authority, SWDR
6%, 1/1/2001 (Insured; FGIC)............................................ 500,000 525,020
New York_5.1%
New York State, Refunding 6.25%, 8/15/2004.................................. 1,000,000 1,079,480
New York State Dormitory Authority, Revenues (State University Educational)
7.125%, 5/15/2009 (Insured; FGIC)....................................... 200,000 215,480
New York State Environmental Facilities Corporation, PCR
(State Water Revolving Fund) 7.50%, 6/15/2012........................... 500,000 550,600
Triborough Bridge and Tunnel Authority, General Purpose Revenue
7%, 11/1/2011 (Prerefunded 1/1/1999) (a)................................ 100,000 107,716
North Carolina_3.9%
Charlotte, Refunding 5.50%, 7/1/2004........................................ 1,405,000 1,468,239
North Carolina Eastern Municipal Power Agency,
Power System Revenue, Refunding 8%, 1/1/2021 (Prerefunded 1/1/1998) (a) 5,000 5,386
Premier Limited Term Municipal Fund
Statement of Investments (continued) June 30, 1996
Principal
Long-Term Municipal Investments (continued) Amount Value
------------- -------------
Ohio_2.4%
Cuyahoga County, HR, Refunding (Mount Sinai Medical Center)
8.125%, 11/15/2014 (Prerefunded 11/15/1997) (a)......................... $ 250,000 $ 269,025
Gahanna - Jefferson City School District, Refunding
5.10%, 12/1/2001 (Insured; AMBAC)....................................... 625,000 635,481
Oregon_2.1%
Oregon Department of General Services, COP 6.60%, 9/1/1998 (Insured; AMBAC). 500,000 523,650
Tri County Metropolitan Transportation District (Light Rail Extension)
5.60%, 7/1/2003......................................................... 250,000 261,405
Pennsylvania_5.8%
Pennsylvania Intergovernmental Coop Authority, Special Tax Revenue
(City of Philadelphia Funding Program) 6.80%, 6/15/2022
(Prerefunded 6/15/2002) (a)........................................... 1,000,000 1,102,370
Somerset County General Authority, Commonwealth LR
6.70%, 10/15/2003 (Insured; FGIC) (Prerefunded 10/15/2001) (a).......... 1,000,000 1,091,510
South Carolina_1.4%
Anderson County, Hospital Facilities Revenue (Anderson Memorial Hospital)
7.50%, 2/1/2018 (Insured; MBIA) (Prerefunded 2/1/1998) (a).............. 500,000 535,460
Texas_9.1%
Austin, Utility System Revenue
8%, 11/15/2016 (Prerefunded 5/15/2001) (a).............................. 200,000 227,956
Fort Bend Independant School District, Refunding (Permanent School Fund
Guaranteed)
6.60%, 2/15/2004........................................................ 875,000 963,138
Lewisville Independant School District (Building Bonds)
(Permanent School Fund Guaranteed):
7.50%, 8/15/2006...................................................... 650,000 765,681
7.50%, 8/15/2007...................................................... 600,000 710,142
Red River Authority, PCR (Hoechst Celanese Corp. Project)
6.875%, 4/1/2017........................................................ 750,000 795,863
Vermont_3.5%
Vermont Educational and Health Buildings Financing Agency, Revenue
(Middlebury College Project) 6%, 11/1/2003.............................. 1,260,000 1,340,917
Premier Limited Term Municipal Fund
Statement of Investments (continued) June 30, 1996
Principal
Long-Term Municipal Investments (continued) Amount Value
-------------- ------------
Virginia_2.8%
Virginia Transportation Board, Transportation Contract Revenue, Refunding
(Route 28 Project) 6%, 4/1/2005......................................... $ 1,000,000 $ 1,058,619
Washington_6.0%
Grant County Public Utility District Number 002, Electric Revenue
7.20%, 1/1/2007 (Prerefunded 7/1/1996) (a).............................. 100,000 100,029
Spokane Regional Solid Waste Management System, Revenue
7.625%, 1/1/2011 (Insured; AMBAC) (Prerefunded 1/1/1999) (a)............ 1,000,000 1,093,600
Washington Public Power Supply System, Revenue, Refunding
(Nuclear Project Number 1) 7%, 7/1/2008................................. 1,000,000 1,098,209
Wisconsin_1.3%
Wisconsin, Health and Educational Facilities Revenue
(Aurora Medical Group Inc.) 5.75%, 11/15/2007 (Insured; FSA)............ 500,000 509,164
-----------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $34,541,925)...................................................... $35,362,619
============
Short-Term Municipal Investments_6.8%
Alabama_.3%
Northern Alabama Environmental Improvement Authority, PCR, Refunding,
VRDN (Reynold Metals) 3.65% (LOC; Bank of Nova Scotia Trust Company
of New York) (b,c)...................................................... $ 100,000 $ 100,000
California_2.3%
California Health Facilities Financing Authority, Revenue, Refunding, VRDN
(Memorial Health Services) 3% (b)....................................... 200,000 200,000
Foothill, Eastern Transportation Corridor Agency, Toll Road Revenue, VRDN
3.10% (LOC; Credit Suisse) (b,c)........................................ 100,000 100,000
Los Angeles Regional Airports Improvement Corp., LR, VRDN
(American Airlines-Los Angeles International) 3.65%
(LOC; Wachovia Bank) (b,c).............................................. 600,000 600,000
Massachusetts_1.3%
Massachusetts:
3.60% (LOC; National Westminster Bank) (b,c)............................ 200,000 200,000
3.60% (LOC; ABN Amro Bank of N.V.) (b,c)................................ 200,000 200,000
Massachusetts Industrial Finance Agency, RRR, Refunding, VRDN (Ogden
Haverhill
Premier Limited Term Municipal Fund
Statement of Investments (continued) June 30, 1996
Principal
Short Term Municipal Investments (continued) Amount Value
------------- ----------
Massachusetts (continued)
Project) 3.35% (LOC; Union Bank of Switzerland) (b,c)................... $ 100,000 $ 100,000
Texas_1.3%
Grapevine Industrial Development Corporation, Revenue, VRDN
(Multiple Mode-American Airlines):
3.65% (b)............................................................. 200,000 200,000
3.65% (LOC; The Sanwa Bank) (b,c)..................................... 100,000 100,000
3.65% (LOC; The Sanwa Bank) (b,c)..................................... 100,000 100,000
Lonestar Airport Improvement Authority Inc., Revenue, VRDN
(Multiple Mode-Dem-B-2)
3.65% (LOC; The Royal Bank of Canada) (b,c)............................. 100,000 100,000
Wyoming_1.6%
Green River, PCR, Refunding, VRDN (Rhone-Poulenc Inc. Project):
3.70% (LOC; ABN - Amro Bank) (b,c)...................................... 200,000 200,000
3.70% (LOC; ABN - Amro Bank) (b,c)...................................... 400,000 400,000
------------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $2,600,000)....................................................... $ 2,600,000
============
TOTAL INVESTMENTS_100.0%
(cost $ 37,141,925)..................................................... $37,962,619
============
</TABLE>
<TABLE>
<CAPTION>
Premier Limited Term Municipal Fund
Summary of Abbreviations
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
COP Certificate of Participation Insurance Corporation
FGIC Financial Guaranty Insurance Company PCR Pollution Control Revenue
FSA Financial Security Assurance RRR Resources Recovery Revenue
HR Hospital Revenue SWDR Solid Waste Disposal Revenue
LR Lease Revenue VRDN Variable Rate Demand Notes
LOC Letter of Credit
</TABLE>
<TABLE>
<CAPTION>
Summary of Combined Ratings (Unaudited)
<S> <C> <C> <C>
Fitch (d) or Moody's or Standard & Poor's Percentage of Value
- --------- --------- -------------------- -----------------------
AAA Aaa AAA 61.2%
AA Aa AA 25.3
A A A 8.1
F1 MIG1/P1 SP1/A1 5.3
Not Rated(e) Not Rated(e) Not Rated(e) .1
------
100.0%
======
</TABLE>
Notes to Statement of Investments:
(a) Bonds which are prerefunded are collateralized by U.S. government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(c) Secured by letters of credit.
(d) Fitch currently provides creditworthiness information for a limited
number of investments.
(e) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Fund may invest.
See notes to financial statements.
<TABLE>
<CAPTION>
Premier Limited Term Municipal Fund
Statement of Assets and Liabilities June 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $37,141,925)_see Statement of Investments....................... $37,962,619
Cash.................................................................... 206,521
Interest receivable..................................................... 672,385
------------
38,841,525
LIABILITIES:
Due to The Dreyfus Corporation_Note 2(a)................................ $ 30,535
Due to Distributor_Note 2(b)............................................ 4,147
Payable for investment securities purchased............................. 1,451,246
Payable for shares of Beneficial Interest redeemed...................... 84,693 1,570,621
----------- -----------
NET ASSETS ................................................................ $37,270,904
===========
REPRESENTED BY:
Paid-in capital......................................................... $36,390,992
Accumulated distributions in excess of investment income_net............ (23,994)
Accumulated undistributed net realized gain on investments.............. 83,212
Accumulated net unrealized appreciation on investments_Note 3........... 820,694
------------
NET ASSETS at value......................................................... $37,270,904
===========
NET ASSET VALUE, per share:
Class A Shares
unlimited number of shares of Beneficial Interest authorized
($18,750,551 / 1,576,564 shares of Beneficial Interest outstanding)... $11.89
======
Class B Shares
unlimited number of shares of Beneficial Interest authorized
($499,627 / 42,012 shares of Beneficial Interest outstanding)......... $11.89
======
Class C Shares
unlimited number of shares of Beneficial Interest authorized
($150,540 / 12,654 shares of Beneficial Interest outstanding)......... $11.90
======
Class R Shares
unlimited number of shares of Beneficial Interest authorized
($17,870,186 / 1,502,593 shares of Beneficial Interest outstanding)... $11.89
======
See notes to financial statements.
Premier Limited Term Municipal Fund
Statement of Operations year ended June 30, 1996
INVESTMENT INCOME:
Interest Income......................................................... $2,037,678
Expenses:
Investment management fee_Note 2(a)................................... $183,084
Distribution fee_Note 2(b)............................................ 50,668
Trustees' fees and expenses_Note 2(c)................................. 9,479
Service fee_Note 2(b)................................................. 1,143
---------
Total Expenses.................................................... 244,374
----------
INVESTMENT INCOME_NET............................................. 1,793,304
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS_Note 3:
Net realized gain on investments........................................ $192,693
Net realized gain on financial futures.................................. 56,530
---------
Net Realized Gain..................................................... 249,223
Net unrealized (depreciation) on investments............................ (638)
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 248,585
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $2,041,889
==========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Premier Limited Term Municipal Fund
Statement of Changes in Net Assets
Year Ended June 30,
-------------------------------
1996 1995
--------------- -----------
<S> <C> <C>
OPERATIONS:
Investment income_net................................................... $ 1,793,304 $ 1,717,471
Net realized gain (loss) on investments................................. 249,223 (166,012)
Net unrealized appreciation (depreciation)
on investments for the year........................................... (638) 737,035
------------ ------------
Net Increase In Net Assets Resulting From Operations.............. 2,041,889 2,288,494
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income_net:
Class A Shares........................................................ (879,802) (1,028,941)
Class B Shares........................................................ (13,817) (1,466)
Class C Shares........................................................ (4,466) (402)
Class R Shares........................................................ (895,219) (686,662)
Net realized gain on investments:
Class A Shares........................................................ ___ (50,842)
Class R Shares........................................................ ___ (31,702)
------------ ------------
Total Dividends................................................... (1,793,304) (1,800,015)
------------ ------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A Shares........................................................ 1,917,807 5,989,210
Class B Shares........................................................ 488,218 81,474
Class C Shares........................................................ 65,040 84,008
Class R Shares........................................................ 6,442,697 7,987,960
Dividends reinvested:
Class A Shares........................................................ 712,884 929,728
Class B Shares........................................................ 10,430 161
Class C Shares........................................................ 1,403 64
Class R Shares........................................................ 185,865 161,104
Cost of shares redeemed:
Class A Shares........................................................ (5,397,222) (9,531,849)
Class B Shares........................................................ (81,163) (10)
Class C Shares........................................................ (239) ___
Class R Shares........................................................ (5,593,570) (4,215,852)
------------ ------------
Increase (Decrease) In Net Assets From Beneficial
Interest Transactions........................................... (1,247,850) 1,485,998
------------ ------------
Total Increase (Decrease) In Net Assets......................... (999,265) 1,974,477
NET ASSETS:
Beginning of year....................................................... 38,270,169 36,295,692
------------ ------------
End of year [including accumulated distributions in excess of
investment income_net: ($23,994) in 1996 and ($23,994) in 1995]....... $37,270,904 $38,270,169
========== ===========
</TABLE>
<TABLE>
<CAPTION>
Premier Limited Term Municipal Fund
Statement of Changes in Net Assets (continued)
Shares
------------------------------------------------------------------
Class A Class B
----------------------------- ----------------------------
Year Ended June 30, Year Ended Period Ended
-----------------------------
June 30, June 30,
1996 1995(1) 1996 1995(2)
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............................ 159,936 517,296 40,828 7,145
Shares issued for dividends reinvested. 59,279 80,218 867 13
Shares redeemed........................ (451,257) (823,489) (6,840) (1)
---------- ---------- ----------- -----------
Net Increase (Decrease) In
Shares Outstanding............... (232,042) (225,975) 34,855 7,157
=========== ========= ========= =========
Shares
-----------------------------------------------------------------
Class C Class R
------------------------------- ----------------------------
Year Ended Period Ended Year Ended June 30,
----------------------------
June 30, June 30,
1996 1995(2) 1996 1995(1)
---------- ---------- ----------- -----------
CAPITAL SHARE TRANSACTIONS (continued):
Shares sold............................ 5,436 7,116 537,652 689,685
Shares issued for dividends reinvested. 117 5 15,459 13,891
Shares redeemed........................ (20) __ (465,937) (367,505)
---------- ---------- ----------- -----------
Net Increase In Shares Outstanding... 5,533 7,121 87,174 336,071
=========== ========= ========= =========
(1) On October 17, 1994, the Investor and Trust shares were redesignated
Class A and Class R shares, respectively.
(2) The Fund commenced selling Class B and Class C shares on
December 28, 1994.
See notes to financial statements.
</TABLE>
Premier Limited Term Municipal Fund
Financial Highlights
Reference is made to page 4 of the Fund's Prospectus
dated November 1, 1996.
See notes to financial statements.
Premier Limited Term Municipal Fund
Financial Highlights (continued)
Reference is made to page 6 of the Fund's Prospectus
dated November 1, 1996.
See notes to financial statements.
Premier Limited Term Municipal Fund
Financial Highlights (continued)
Reference is made to page 7 of the Fund's Prospectus
dated November 1, 1996.
See notes to financial statements.
Premier Limited Term Municipal Fund
NOTES TO FINANCIAL STATEMENTS
NOTE 1_Significant Accounting Policies:
The Dreyfus/Laurel Tax-Free Municipal Funds (the "Trust") is registered
under the Investment Company Act of 1940 ("Act") as a non-diversified
open-end management investment company and operates as a series company
currently offering seven series including the Premier Limited Term Municipal
Fund (the "Fund"). The Fund's investment objective is to maximize current
income exempt from Federal income taxes consistent with the prudent risk of
capital by investing in municipal securities which are of investment-grade
quality and intermediate maturities. The Dreyfus Corporation ("Manager")
serves as the Fund's investment adviser. The Manager is a direct subsidiary
of Mellon Bank, N.A. ("Mellon Bank").
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Fund currently offers four classes of
shares: Class A, Class B, Class C and Class R shares. Class A, Class B and
Class C shares are sold primarily to retail investors through financial
intermediaries and bear a distribution fee and/or service fee. Class A shares
are sold with a front-end sales charge, while Class B and Class C shares are
subject to a contingent deferred sales charge ("CDSC") and a service fee.
Class R shares are sold primarily to bank trust departments and other
financial service providers (including Mellon Bank and its affiliates) acting
on behalf of customers having a qualified trust or investment account or
relationship at such institution, and bear no distribution or service fees.
Class R shares are offered without a front-end sales load or CDSC. Each class
of shares has identical rights and privileges, except with respect to
distribution and service fees and voting rights on matters affecting a single
class.
Investment income, net of expenses (other than class specific expenses),
realized and unrealized gains and losses are allocated daily to each class of
shares based upon the relative proportion of net assets of each class.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
Actual results may differ from estimates.
(a) Portfolio valuation: The Fund's investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the
Board of Trustees. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the
judgment of the Service are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for
such securities). Other investments (which constitute a majority of the
portfolio securities) are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of
municipal securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Options
and financial futures on municipal and U.S. treasury securities are valued at
the last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market
on each business day. Investments not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available.
Premier Limited Term Municipal Fund
NOTES TO FINANCIAL STATEMENTS (continued)
(b) Securities transactions and investment income: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
(c) Financial futures: The Fund may invest in financial futures contracts
in order to gain exposures to or protect against changes in the market. The
Fund is exposed to market risk as a result of changes in the value of the
underlying financial instruments. Investments in financial futures require
the Fund to "mark to market" on a daily basis, which reflects the change in
the market value of the contract at the close of each day's trading.
Typically, variation margin payments are received or made to reflect daily
unrealized gains or losses. When the contracts are closed, the Fund
recognizes a realized gain or loss. These investments require initial margin
deposits with a custodian, which consist of cash or cash equivalents, up to
approximately 10% of the contract amount. The amount of these deposits is
determined by the exchange or Board of Trade on which the contract is traded
and is subject to change. At June 30, 1996, there were no financial futures
contracts outstanding.
(d) Distributions to shareholders: It is the policy of the Fund to
declare dividends daily from investment income-net. Such dividends are paid
monthly. Dividends from net realized capital gain are normally declared and
paid annually, but the Fund may make distributions on a more frequent basis
to comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Fund not to distribute such gain.
(e) Federal income taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2_-Investment Management Fee and Other Transactions With Affiliates:
(a) Investment management fee: Pursuant to an Investment Management
agreement with the Manager, the Manager provides or arranges for one or more
third parties and/or affiliates to provide investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. The Manager also directs the investments of the Fund in accordance with
its investment objective, policies and limitations. For these services, the
Fund is contractually obligated to pay the Manager a fee, calculated daily
and paid monthly, at the annual rate of .50% of the value of the Fund's
average daily net assets. Out of its fee, the Manager pays all of the
expenses of the Fund except brokerage fees, taxes, interest, Rule 12b-1
distribution fees and expenses, fees and expenses of non-interested Trustees
(including counsel fees) and extraordinary expenses. In addition, the Manager
is required to reduce its fee in an amount equal to the Fund's allocable
portion of fees and expenses of the non-interested Trustees (including
counsel).
(b) Distribution and service plan: The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act relating to its
Class A, B and C shares. Under the Plan, the Fund may pay annually up to .25%
of the value of its average daily net assets attributable to its Class A
shares to compensate the Distributor and Dreyfus Service Corporation, an
affiliate of the Manager, for shareholder
Premier Limited Term Municipal Fund
NOTES TO FINANCIAL STATEMENTS (continued)
servicing activities and the
Distributor for activities and expenses primarily intended to result in the
sale of Class A shares. Under the Plan, the Fund may pay the Distributor for
distributing the Fund's Class B and Class C shares at an aggregate annual
rate of .50% of the value of the average daily net assets of Class B and
Class C shares. Class B and Class C shares are also subject to a service plan
adopted pursuant to Rule 12b-1, under which the Fund pays Dreyfus Service
Corporation or the Distributor for providing certain services to the holders
of Class B and Class C shares a fee at the annual rate of .25% of the value
of the average daily net assets of Class B and Class C shares. Class R shares
bear no service or distribution fee. For the year ended June 30, 1996, the
distribution fee for Class A, Class B and Class C shares was $48,383, $1,728
and $557, respectively. For the year ended June 30, 1996, the service fee for
Class B and Class C shares was $864 and $279, respectively.
Under its terms, the Plan shall remain in effect from year to year,
provided such continuance is approved annually by a vote of majority of those
Trustees who are not "interested persons" of the Company and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan.
(c) Trustees' fees: Each trustee who is not an "interested person" as
defined in the Act receives $27,000 per year, $1,000 for each Board meeting
attended and $750 for each Audit Committee meeting attended and is reimbursed
for travel and out-of-pocket expenses. These expenses are paid in total by
the following funds: The Dreyfus/Laurel Funds, Inc., The Dreyfus/Laurel
Tax-Free Municipal Funds, and The Dreyfus/Laurel Funds Trust. In addition the
Chairman of the Board receives an annual fee of $75,000 per year. These fees
and expenses are charged and allocated to each series based on net assets.
NOTE 3_Securities Transactions:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended June 30, 1996,
amounted to $20,122,006 and $22,128,418, respectively.
At June 30, 1996, accumulated net unrealized appreciation on investments
was $820,694, consisting of $918,851 gross unrealized appreciation and
$98,157 gross unrealized depreciation.
At June 30, 1996, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see
the Statement of Investments).
Premier Limited Term Municipal Fund
Independent Auditors' Report
The Board of Trustees and Shareholders
The Dreyfus/Laurel Tax-Free Municipal Funds:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments of Premier Limited Term Municipal Fund
of The Dreyfus/Laurel Tax-Free Municipal Funds as of June 30, 1996, and the
related statement of operations for the year then ended, statements of
changes in net assets for each of the years in the two-year period then ended
and financial highlights for each of the years or period in the three-year
period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits. The financial highlights for each of the years or period in the
three-year period ended June 30, 1993 were audited by other auditors whose
report thereon, dated August 11, 1993, expressed an unqualified 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
financial highlights are free of material misstatement. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation
of securities owned as of June 30, 1996, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles 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 Premier Limited Term Municipal Fund of The Dreyfus/Laurel
Tax-Free Municipal Funds as of June 30, 1996, the results of its operations
for the year then ended, the changes in its net assets for each of the years
in the two-year period then ended and the financial highlights for each of
the years or period in the three-year period then ended in conformity with
generally accepted accounting principles.
(logo signature)
New York, New York
July 29, 1996
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 August 29) and the
Registrant's Semi Annual Report for the fiscal year ending June
30, 1996:
- 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 Registrant's Rule 18f-3 Plans, as revised.
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 September
25, 1996:
Number of Record Holders
------------------------
Title of Class
- ----------------
Dreyfus BASIC New York Municipal Money Market Fund 1,109
Dreyfus BASIC California Municipal Money Market Fund 299
Set forth below are the number of recordholders of
securities of each series of the Registrant as of October 3,
1996:
Number of Record Holders
------------------------
Class A Class B Class C Class R
Title of Class Shares Shares Shares Shares
- -------------- ------- ------- ------- -------
Premier Limited Term Municipal 1,069 10 4 149
Fund
Premier Limited Term California 145 6 1 63
Municipal Fund
Premier Limited Term Massachusetts 328 3 1 116
Municipal Fund
Premier Limited Term New York 133 6 3 20
Municipal Fund
Item 27. Indemnification
---------------
Under a provision of the Registrant's Second Amended and Restated
Agreement and Declaration of Trust (the "Declaration of Trust"), 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 against any
liability to the Registrant or its shareholders to which such Trustee or
officer would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of his/her duties. Moreover,
this provision does not authorize indemnification where such Trustee or
officer is finally adjudicated not to have acted in good faith in the
reasonable belief that his/her actions were in or not opposed to the best
interests of the Registrant. 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 Declaration of Trust.
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:
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 None
Director
JULIAN M. SMERLING None
Director
W. KEITH SMITH Chairman and Chief Executive Officer:
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****;
Executive Officer, The Boston Company*****;
Chief Operating Deputy Director:
Officer and a Mellon Trust****;
Director 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
and a Director Officer:
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:
Dreyfus America Fund
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 and Trust
Company*****;
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*;
Chairman and Director:
Dreyfus Transfer, Inc.
One American Express Plaza
Providence, Rhode Island 02903
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*;
Dreyfus America Fund
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.
ELIE M. GENADRY President:
Vice President- Institutional Services Division of
Institutional Sales Dreyfus Service Corporation*;
Broker-Dealer Division of Dreyfus
Service Corporation*;
Group Retirement Plans Division of
Dreyfus Service Corporation;
Executive Vice President:
Dreyfus Service Corporation*;
Dreyfus Service Organization, Inc.***;
Vice President:
The Dreyfus Trust Company++
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.*;
General Counsel Secretary:
and Secretary The Dreyfus Consumer Credit
Corporation*;
Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization, Inc.***;
Major Trading Corporation*;
The Truepenny Corporation*
PATRICE M. KOZLOWSKI None
Vice President-
Corporate Communications
MARY BETH LEIBIG None
Vice President-
Human Resources
JEFFREY N. NACHMAN President and Director:
Vice President-Mutual Fund Dreyfus Transfer, Inc.
Accounting One American Express Plaza
Providence, Rhode Island 02903
ANDREW S. WASSER Vice President:
Vice President-Information Mellon Bank Corporation****
Services
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.
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 Funds, 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 Cash Management
14) Dreyfus Cash Management Plus, Inc.
15) Dreyfus Connecticut Intermediate Municipal Bond Fund
16) Dreyfus Connecticut Municipal Money Market Fund, Inc.
17) Dreyfus Florida Intermediate Municipal Bond Fund
18) Dreyfus Florida Municipal Money Market Fund
19) The Dreyfus Fund Incorporated
20) Dreyfus Global Bond Fund, Inc.
21) Dreyfus Global Growth Fund
22) Dreyfus GNMA Fund, Inc.
23) Dreyfus Government Cash Management
24) Dreyfus Growth and Income Fund, Inc.
25) Dreyfus Growth and Value Funds, Inc.
26) Dreyfus Growth Opportunity Fund, Inc.
27) Dreyfus Income Funds
28) Dreyfus Institutional Money Market Fund
29) Dreyfus Institutional Short Term Treasury Fund
30) Dreyfus Insured Municipal Bond Fund, Inc.
31) Dreyfus Intermediate Municipal Bond Fund, Inc.
32) Dreyfus International Funds, Inc.
33) The Dreyfus/Laurel Funds, Inc.
34) The Dreyfus/Laurel Funds Trust
35) Dreyfus Stock Index Fund, Inc.
36) Dreyfus LifeTime Portfolios, Inc.
37) Dreyfus Liquid Assets, Inc.
38) Dreyfus Massachusetts Intermediate Municipal Bond Fund
39) Dreyfus Massachusetts Municipal Money Market Fund
40) Dreyfus Massachusetts Tax Exempt Bond Fund
41) Dreyfus MidCap Index Fund
42) Dreyfus Money Market Instruments, Inc.
43) Dreyfus Municipal Bond Fund, Inc.
44) Dreyfus Municipal Cash Management Plus
45) Dreyfus Municipal Money Market Fund, Inc.
46) Dreyfus New Jersey Intermediate Municipal Bond Fund
47) Dreyfus New Jersey Municipal Bond Fund, Inc.
48) Dreyfus New Jersey Municipal Money Market Fund, Inc.
49) Dreyfus New Leaders Fund, Inc.
50) Dreyfus New York Insured Tax Exempt Bond Fund
51) Dreyfus New York Municipal Cash Management
52) Dreyfus New York Tax Exempt Bond Fund, Inc.
53) Dreyfus New York Tax Exempt Intermediate Bond Fund
54) Dreyfus New York Tax Exempt Money Market Fund
55) Dreyfus 100% U.S. Treasury Intermediate Term Fund
56) Dreyfus 100% U.S. Treasury Long Term Fund
57) Dreyfus 100% U.S. Treasury Money Market Fund
58) Dreyfus 100% U.S. Treasury Short Term Fund
59) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
60) Dreyfus Pennsylvania Municipal Money Market Fund
61) Dreyfus S&P 500 Index Fund
62) Dreyfus Short-Intermediate Government Fund
63) Dreyfus Short-Intermediate Municipal Bond Fund
64) Dreyfus Investment Grade Bond Funds, Inc.
65) The Dreyfus Socially Responsible Growth Fund, Inc.
66) Dreyfus Tax Exempt Cash Management
67) The Dreyfus Third Century Fund, Inc.
68) Dreyfus Treasury Cash Management
69) Dreyfus Treasury Prime Cash Management
70) Dreyfus Variable Investment Fund
71) Dreyfus Worldwide Dollar Money Market Fund, Inc.
72) General California Municipal Bond Fund, Inc.
73) General California Municipal Money Market Fund
74) General Government Securities Money Market Fund, Inc.
75) General Money Market Fund, Inc.
76) General Municipal Bond Fund, Inc.
77) General Municipal Money Market Fund, Inc.
78) General New York Municipal Bond Fund, Inc.
79) General New York Municipal Money Market Fund
80) Premier Insured Municipal Bond Fund
81) Premier California Municipal Bond Fund
82) Premier Equity Funds, Inc.
83) Premier Global Investing, Inc.
84) Premier GNMA Fund
85) Premier Growth Fund, Inc.
86) Premier Municipal Bond Fund
87) Premier New York Municipal Bond Fund
88) Premier State Municipal Bond Fund
89) Premier Strategic Growth Fund
90) Premier Value 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 Vice President
and Chief Financial Officer and Assistant
Treasurer
John E. Pelletier+ Senior Vice President, General Vice President
Counsel, Secretary and Clerk and Secretary
Roy M. Moura+ First Vice President None
Dale F. Lampe+ Vice President None
Mary A. Nelson+ Vice President Vice President
and Assistant
Treasurer
Paul Prescott+ Vice President None
Elizabeth A. Bachman++ Assistant Vice President Vice President
and Assistant
Secretary
Jean M. O'Leary+ Assistant Secretary and None
Assistant Clerk
John W. Gomez+ Director None
William J. Nutt+ Director None
________________________________
+ Principal business address is One Exchange Place, Boston, Massachusetts
02109.
++ Principal business address is 200 Park Avenue, New York, New York 10166.
Item 30. Location of Accounts and Records
________________________________
1. First Data Investor Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671
2. The Bank of New York
90 Washington Street
New York, New York 10286
3. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02940-9671
4. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 31. Management Services
_______ ___________________
Not Applicable
Item 32. Undertakings
________ ____________
(1) To call a meeting of shareholders for the purpose of voting upon
the question of removal of a trustee or trustees 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, the Registrant certifies that it meets all
of the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amendment to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
New York, and State of New York on the 29th day of October, 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 10/29/96
- ---------------------------
Marie E. Connolly
/s/Francis P. Brennan* Trustee, 10/29/96
- --------------------------- Chairman of the Board
Francis P. Brennan
/s/Ruth Marie Adams* Trustee 10/29/96
- ---------------------------
Ruth Marie Adams
/s/Joseph S. DiMartino* Trustee 10/29/96
- ---------------------------
Joseph S. DiMartino
/s/James M. Fitzgibbons* Trustee 10/29/96
- ---------------------------
James M. Fitzgibbons
/s/Kenneth A. Himmel* Trustee 10/29/96
- ---------------------------
Kenneth A. Himmel
/s/Stephen J. Lockwood* Trustee 10/29/96
- ---------------------------
Stephen J. Lockwood
/s/Roslyn M. Watson* Trustee 10/29/96
- ---------------------------
Roslyn M. Watson
/s/J. Tomlinson Fort* Trustee 10/29/96
- ---------------------------
J. Tomlinson Fort
/s/Arthur L. Goeschel* Trustee 10/29/96
- ---------------------------
Arthur L. Goeschel
/s/Arch S. Jeffery* Trustee 10/29/96
- ---------------------------
Arch S. Jeffery
/s/John Sciullo* Trustee 10/29/96
- ---------------------------
John Sciullo
*By: /s/Elizabeth Bachman
---------------------------
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 for Dreyfus BASIC California Municipal
Money Market Fund, Dreyfus BASIC New York Municipal Money Market Fund,
Premier Limited Term Municipal Fund, Premier Limited Term New York
Municipal Fund, Premier Limited Term California Municipal Fund, Premier
Limited Term Massachusetts Municipal Fund (six of the series constituting
The Dreyfus/Laurel Tax-Free Municipal Funds) dated July 29, 1996,
incorporated by reference herein and to the references to our firm under
the headings "Financial Highlights" in the Prospectuses and "Counsel and
Independent Auditors" for Dreyfus BASIC California Municipal Money Market
Fund and Dreyfus BASIC New York Municipal Money Market Fund and "Custodian,
Transfer and Dividend Disbursing Agent, Counsel and Independent Auditors"
for Premier Limited Term Municipal Fund, Premier Limited Term New York
Municipal Fund, Premier Limited Term California Municipal Fund and Premier
Limited Term Massachusetts Municipal Fund in each respective Statement of
Additional Information.
[KPMG Peat Marwick LLP]
New York, New York
October 28, 1996
THE DREYFUS FAMILY OF FUNDS
(Premier Family of Funds -
Fixed-Income Funds Included in Exhibit I)
Rule 18f-3 Plan
Rule 18f-3 under the Investment Company Act of 1940, as amended (the
"1940 Act"), requires that the Board of an investment company desiring to
offer multiple classes of shares pursuant to said Rule adopt a plan
setting forth the differences among the classes with respect to
shareholder services, distribution arrangements, expense allocations and
any related conversion features or exchange privileges.
The Board, including a majority of the non-interested Board members,
of each of the investment companies, or series thereof, listed on Exhibit
I attached hereto (each, a "Fund") which desires to offer multiple classes
has determined that the following plan is in the best interests of each
class individually and the Fund as a whole:
1. Class Designation: Fund shares shall be divided into Class A,
Class B, Class C and Class R.
2. Differences in Availability: Class A shares, Class B shares and
Class C shares shall be available only to clients of banks, brokers,
dealers and other financial institutions, except that full-time or part-
time employees or directors of The Dreyfus Corporation ("Dreyfus") or any
of its affiliates or subsidiaries, Board members or a fund advised by
Dreyfus, including members of the Fund's Board, or the spouse or minor
child of any of the foregoing may purchase Class A shares directly through
the Fund's Distributor.
Class R shares shall be sold primarily to bank trust departments and
other financial service providers acting on behalf of customers having a
qualified trust or investment account or relationship at such institution,
or to customers who have received and hold shares of the Fund distributed
to them by virtue of such an account or relationship.
3. Differences in Services: Other than shareholder services
provided under the Distribution Plan for Class A shares and the Service
Plans for Class B and Class C shares, the services offered to shareholders
of each Class shall be substantially the same, except that Right of
Accumulation, Letter of Intent and Reinvestment Privilege shall be
applicable only to holders of Class A shares.
4. Differences in Distribution Arrangements: Class A shares shall
be offered with a front-end sales charge, as such term is defined in
Article III, Section 26(b), of the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and a deferred sales charge (a
"CDSC"), as such term is defined in said Section 26(b), may be assessed on
certain redemptions of Class A shares purchased without an initial sales
charge as part of an investment of $1 million or more. The amount of the
sales charge and the amount of and provisions relating to the CDSC
pertaining to the Class A shares are set forth on Schedule A hereto.
Class A shares shall be subject to a Distribution Plan adopted pursuant to
Rule 12b-1 under the 1940 Act. The Distribution Plan for Class A shares
allows the Fund to spend annually up to 0.25% of its average daily net
assets attributable to Class A shares to compensate Dreyfus Service
Corporation, an affiliate of Dreyfus, for shareholder servicing
activities, and the Fund's Distributor for shareholder servicing
activities and for activities or expenses primarily intended to result in
the sale of Class A shares.
Class B shares shall not be subject to a front-end sales charge, but
shall be subject to a CDSC. The amount of and provisions relating to the
CDSC are set forth on Schedule B hereto. Class B shares shall be subject
to a Distribution Plan and Service Plan each adopted pursuant to Rule 12b-
1 under the 1940 Act. Under the Distribution Plan for Class B shares, the
Fund pays the Distributor for distributing the Fund's Class B shares at an
aggregate annual rate of .50 of 1% of the value of the average daily net
assets of Class B. Under the Service Plan for Class B shares, the Fund
pays Dreyfus Service Corporation or the Distributor for the provision of
certain services to the holders of Class B shares a fee at the annual rate
of .25 of 1% of the value of the average daily net assets of Class B.
Class C shares shall not be subject to a front-end sales charge, but
shall be subject to a CDSC. The amount of and provisions relating to the
CDSC are set forth on Schedule C hereto. Class C shares shall be subject
to a Distribution Plan and Service Plan each adopted pursuant to Rule 12b-
1 under the 1940 Act. Under the Distribution Plan for Class C shares, the
Fund pays the Distributor for distributing the Fund's Class C shares at an
aggregate annual rate of .50 of 1% of the value of the average daily net
assets of Class C. Under the Service Plan for Class C shares, the Fund
pays Dreyfus Service Corporation or the Distributor for the provision of
certain services to the holders of Class C shares a fee at the annual rate
of .25 of 1% of the value of the average daily net assets of Class C.
Class R shares shall not be subject to a front-end sales charge,
CDSC, distribution plan or service plan.
5. Expense Allocation. The following expenses shall be allocated,
to the extent practicable, on a Class-by-Class basis: (a) fees under the
Distribution Plans and Service Plans; (b) printing and postage expenses
payable by the Fund related to preparing and distributing materials, such
as proxies, to current shareholders of a specific Class; and (c)
litigation or other legal expenses relating solely to a specific Class.
6. Conversion Features. Class B shares shall automatically convert
to Class A shares after a specified period of time after the date of
purchase, based on the relative net asset value of each such Class without
the imposition of any sales charge, fee or other charge, as set forth on
Schedule D hereto. No other Class shall be subject to any automatic
conversion feature.
7. Exchange Privileges. Class A shares shall be exchangeable only
for (a) Class A shares (however the same may be named) of other funds
managed or administered by Dreyfus which are generally subject to an
initial sales charge, but which, on purchases of $1 million or more, are
not subject to an initial front-end sales charge but are subject to a CDSC
if shares are redeemed within one year of purchase; (b) Investor shares
(however the same may be named) of other funds managed or administered by
Dreyfus; (c) Institutional shares (however the same may be named) of other
funds managed or administered by Dreyfus (except Dreyfus Core Value Fund);
(d) shares of funds managed or administered by Dreyfus which do not have
separate share classes; and (e) shares of certain other funds, as
specified from time to time.
Class B shares shall be exchangeable only for (a) Class B shares
(however the same may be named) of other funds managed or administered by
Dreyfus with the same CDSC structure as the Fund; and (b) shares of
certain other funds, as specified from time to time.
Class C shares shall be exchangeable only for (a) Class C shares
(however the same may be named) of other funds managed or administered by
Dreyfus with the same CDSC structure as the Fund; and (b) shares of
certain other funds, as specified from time to time.
Class R shares shall be exchangeable only for (a) Class R shares
(however the same may be named) of other funds managed or administered by
Dreyfus; (b) Retail shares (however the same may be named) of other funds
managed or administered by Dreyfus; (c) shares of funds managed or
administered by Dreyfus which do not have separate share classes; and (d)
shares of certain other funds, as specified from time to time.
Dated: April 26, 1995
Revised as of: November 1, 1996
EXHIBIT I
The Dreyfus/Laurel Funds, Inc. -
Premier Limited Term Income Fund
The Dreyfus/Laurel Funds Trust -
Premier Limited Term Government Securities Fund
The Dreyfus/Laurel Tax-Free Municipal Funds -
Premier Limited Term Municipal Fund
Premier Limited Term California Municipal Fund
Premier Limited Term Massachusetts Municipal Fund
Premier Limited Term New York Municipal Fund
SCHEDULE A
Front-End Sales Charge--Class A Shares--The public offering price for
Class A shares shall be the net asset value per share of that Class plus a
sales load as shown below:
Total Sales Load
---------------------
As a % of As a % of
offering net asset
price per value per
Amount of Transaction share share
---------- ---------
Less than $100,000 . . . . . . . . . . 3.00 3.10
$100,000 to less than $250,000 . . . . 2.75 2.80
$250,000 to less than $500,000 . . . . 2.25 2.30
$500,000 to less than $1,000,000 . . . 2.00 2.00
$1,000,000 or more . . . . . . . . . . -0- -0-
Contingent Deferred Sales Charge--Class A Shares--A CDSC of 1% shall be
assessed at the time of redemption of Class A shares purchased without an
initial sales charge as part of an investment of at least $1,000,000 and
redeemed within one year after purchase. The terms contained in Schedule
C pertaining to the CDSC assessed on redemptions of Class B shares (other
than the amount of the CDSC and its time periods), including the
provisions for waiving the CDSC, shall be applicable to the Class A shares
subject to a CDSC. Letter of Intent and Right of Accumulation shall apply
to such purchases of Class A shares.
SCHEDULE B
Contingent Deferred Sales Charge--Class B Shares--A CDSC payable to the
Fund's Distributor shall be imposed on any redemption of Class B shares
which reduces the current net asset value of such Class B shares to an
amount which is lower than the dollar amount of all payments by the
redeeming shareholder for the purchase of Class B shares of the Fund held
by such shareholder at the time of redemption. No CDSC shall be imposed
to the extent that the net asset value of the Class B shares redeemed does
not exceed (i) the current net asset value of Class B shares acquired
through reinvestment of dividends or capital gain distributions, plus (ii)
increases in the net asset value of the shareholder's Class B shares above
the dollar amount of all payments for the purchase of Class B shares of
the Fund held by such shareholder at the time of redemption.
If the aggregate value of the Class B shares redeemed has declined
below their original cost as a result of the Fund's performance, a CDSC
may be applied to the then-current net asset value rather than the
purchase price.
In circumstances where the CDSC is imposed, the amount of the charge
shall depend on the number of years from the time the shareholder
purchased the Class B shares until the time of redemption of such shares.
Solely for purposes of determining the number of years from the time of
any payment for the purchase of Class B shares, all payments during a
month shall be aggregated and deemed to have been made on the first day of
the month. The following table sets forth the rates of the CDSC:
CDSC as a % of
Year Since Amount Invested
Purchase Payment or Redemption
Was Made Proceeds
- ----------------- ----------------
First . . . . . . . . . . . . . . . . 3.00
Second. . . . . . . . . . . . . . . . 3.00
Third . . . . . . . . . . . . . . . . 2.00
Fourth. . . . . . . . . . . . . . . . 2.00
Fifth . . . . . . . . . . . . . . . . 1.00
Sixth . . . . . . . . . . . . . . . . 0.00
In determining whether a CDSC is applicable to a redemption, the
calculation shall be made in a manner that results in the lowest possible
rate. Therefore, it shall be assumed that the redemption is made first of
amounts representing shares acquired pursuant to the reinvestment of
dividends and distributions; then of amounts representing the increase in
net asset value of Class B shares above the total amount of payments for
the purchase of Class B shares made during the preceding five years; then
of amounts representing the cost of shares purchased five years prior to
the redemption; and finally, of amounts representing the cost of shares
held for the longest period of time within the applicable five-year
period.
Waiver of CDSC--The CDSC shall be waived in connection with (a)
redemptions made within one year after the death or disability, as defined
in Section 72(m)(7) of the Internal Revenue Code of 1986, as amended (the
"Code"), of the shareholder, (b) redemptions by employees participating in
qualified or non-qualified employee benefit plans or other programs where
(i) the employers or affiliated employers maintaining such plans or
programs have a minimum of 250 employees eligible for participation in
such plans or programs, or (ii) such plan's or program's aggregate
investment in the Dreyfus Family of Funds or certain other products made
available by the Fund's Distributor exceeds one million dollars, (c)
redemptions as a result of a combination of any investment company with
the Fund by merger, acquisition of assets or otherwise, and (d) a
distribution following retirement under a tax-deferred retirement plan or
upon attaining age 70-1/2 in the case of an IRA or Keogh plan or custodial
account pursuant to Section 403(b) of the Code. Any Fund shares subject
to a CDSC which were purchased prior to the termination of such waiver
shall have the CDSC waived as provided in the Fund's prospectus at the
time of the purchase of such shares.
SCHEDULE C
Contingent Deferred Sales Charge--Class C Shares--A CDSC of .75% payable
to the Fund's Distributor shall be imposed on any redemption of Class C
shares within one year of the date of purchase. The basis for calculating
the payment of any such CDSC shall be the method used in calculating the
CDSC for Class B shares. In addition, the provisions for waiving the CDSC
shall be those set forth for Class B shares.
SCHEDULE D
Conversion of Class B Shares--Class B shares shall automatically convert
to Class A shares on the first Fund business day of the month in which the
sixth anniversary of the date of purchase occurs (unless otherwise
specified by the Board), based on the relative net asset values for shares
of each such Class, and shall be subject to the Distribution Plan for
Class A shares but shall no longer be subject to the Distribution Plan and
Service Plan applicable to Class B shares. (Such conversion is subject to
suspension by the Board members if adverse tax consequences might result.)
At that time, Class B shares that have been acquired through the
reinvestment of dividends and distributions ("Dividend Shares") shall be
converted in the proportion that a shareholder's Class B shares (other
than Dividend Shares) converting to Class A shares bears to the total
Class B shares then held by the shareholder which were not acquired
through the reinvestment of dividends and distributions.
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</TABLE>
