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. 48 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 47 [ 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, 1997 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, 1997 was filed on or about August 28, 1997.
Dreyfus BASIC California Municipal Money Market Fund
Dreyfus BASIC New York Municipal Money Market Fund
Dreyfus BASIC Massachusetts Municipal Money Market Fund
Dreyfus Premier Limited Term Municipal Fund
Dreyfus Premier Limited Term California Municipal Fund
Dreyfus Premier Limited Term Massachusetts Municipal Fund
Dreyfus Premier Limited Term New York Municipal 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
Dreyfus BASIC California Municipal Money Market Fund
Dreyfus BASIC New York Municipal Money Market Fund
Dreyfus BASIC Massachusetts Municipal Money Market Fund
Dreyfus Premier Limited Term Municipal Fund
Dreyfus Premier Limited Term California Municipal Fund
Dreyfus Premier Limited Term Massachusetts Municipal Fund
Dreyfus Premier Limited Term New York Municipal Fund
Cross-Reference Sheet Pursuant to Rule 495(a)
________________________________________________________
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 Plans;
Securities Being Offered Redemption of Shares;
Valuation of Shares
20 Tax Status Taxes
21 Underwriters Purchase of Shares;
Distribution and Service Plans;
Amounts Expended
Dreyfus BASIC California Municipal Money Market Fund
Dreyfus BASIC New York Municipal Money Market Fund
Dreyfus BASIC Massachusetts Municipal Money Market Fund
Dreyfus Premier Limited Term Municipal Fund
Dreyfus Premier Limited Term California Municipal Fund
Dreyfus Premier Limited Term Massachusetts Municipal Fund
Dreyfus Premier Limited Term New York Municipal Fund
Cross-Reference Sheet Pursuant to Rule 495(a)
________________________________________________________
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, 1997
DREYFUS BASIC CALIFORNIA MUNICIPAL MONEY MARKET FUND
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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, 1997 (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 GLENNCURTISS BOULEVARD,
UNIONDALE, NEW YORK 11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK
FOR OPERATOR 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
ALL 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.
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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.
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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
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[This Page Intentionally Left Blank]
[Page 3]
<TABLE>
EXPENSE SUMMARY
<S> <C> <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%
EXAMPLE:
You would pay the following expenses
on a $1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each
time period:
1 YEAR $ 10
3 YEARS $ 19
5 YEARS $ 30
10 YEARS $ 62
* 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.")
</TABLE>
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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%.
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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. 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.
However, these charges will be waived if the closing balance in the
shareholder's account on the business day immediately preceding the effective
date of such transaction is $50,000 or more. These charges, when paid, are
paid to the Fund's transfer agent. See "Management of the Fund," "How to Buy
Fund Shares," "Shareholder Services" 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, related notes and report of independent auditors that
appear in the Fund's Annual Report dated June 30, 1997, and that are
incorporated by reference in the SAI. The financial statements, 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, 1996 and 1997, have been
audited by KPMG Peat Marwick LLP, independent auditors of the Fund. 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.
DREYFUS BASIC CALIFORNIA MUNICIPAL MONEY MARKET FUND
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.(1)
<TABLE>
Period YEAR YEAR YEAR
Ended Ended Ended Ended
YEAR OR PERIOD ENDED NOVEMBER 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
_______________________-______________________________
PER SHARE DATA: 1988 1989 1990 1991 1992(4) 1993(4) 1994(2) 1995(3) 1996 1997
______ _____ _____ ______ _____ ______ ______ ______ ______ ______
<S> <C> <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 $ 1.00
______ _____ _____ ______ _____ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Net investment income(7).. 0.033 0.060 0.056 0.046 0.031 0.023 0.012 0.031 0.031 0.031
DISTRIBUTIONS:
Dividends from net
investment income....... (0.033) (0.060) (0.056) (0.046) (0.031) (0.023) (0.012) (0.031) (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 $ 1.00
===== ======= ======= ======= ======= ======= ======= ======= ======= ======
TOTAL RETURN........... 3.39% 6.18% 5.75% 4.65% 3.10% 2.41% 1.25% 3.10% 3.19%. 3.11%
===== ======= ======= ======= ======= ======= ======= ======= ======= ======
RATIOS/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 $80,580
Ratio of expenses to
average net assets 0.67%(5) 0.32% 0.32% 0.32% 0.32% 0.32% 0.47%(5) 0.60% 0.44%(6) 0.42%
Ratio of net investment
income to
average net assets..... 4.55%(5) 6.02% 5.58% 4.57% 3.03% 2.40% 2.11%(5) 3.07% 3.36% 3.09%
Decrease reflected
in above
expense ratios
due to undertakings
by Dreyfus 0.74%(5) 0.69% 0.61% 0.46% 0.51% 0.76% 0.38%(5) -- 0.07% 0.03%
(1) 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 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 year ended June 30, 1997 are based upon a Fund share
outstanding. 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."
(2) The Fund changed its fiscal year end to June 30. Prior to this, the
Fund's fiscal year end was November 30. Prior to April 4, 1994, The Boston
Company Advisors, Inc. served as the Fund's investment adviser. From April 4,
1994 through October 16, 1994, Mellon Bank, served as the Fund's investment
manager.
(3) Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager.
(4) The per share amounts have been calculated using the monthly average
shares method, which more appropriately presents per share data for the
period since use of the undistributed net investment income method did not
accord with results of operations.
(5) Annualized.
(6) 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.
(7) 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.
</TABLE>
<TABLE>
[Page 5]
DEBT OUTSTANDING
PER SHARE DATA: YEAR ENDED JUNE 30, 1997(1)
___________________________
<S> <C> <C>
Amount of debt outstanding at end of year (in thousands) --
Average amount of debt outstanding throughout year (in thousands)(2) $ 21
Average number of shares outstanding throughout year (in thousands)(3) 59,529
Average amount of debt per share throughout year........ --
(1) From March 2, 1988 through June 30, 1996, the Fund had no outstanding debt.
(2) Based upon daily outstanding borrowings.
(3) Based upon month-end balances.
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 may
include: (1) municipal bonds; (2) municipal notes; (3) municipal commercial
paper; and (4) municipal lease obligations. 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 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
[Page 6]
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 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. The Fund does not intend to borrow except for temporary or
emergency purposes.
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
[Page 7]
value thereof. As consideration for providing the option, the financial
institution receives periodic fees equal to the difference between the
municipal obligation's fixed coupon rate and the rate, as determined by a
remarketing or similar agent at or near the commencement of such period, that
would cause the securities, coupled with the tender option, to trade at par
on the date of such determination. Thus, after payment of this fee, the
security holder effectively holds a demand obligation that bears interest at
the prevailing short-term tax-exempt rate. Dreyfus, on behalf of the Fund,
will consider on an ongoing basis the creditworthiness of the issuer of the
underlying municipal obligation, of any custodian and the third-party
provider of the tender option. In certain instances and for certain tender
option bonds, the option may be terminable in the event of a default in
payment of principal or interest on the underlying municipal obligation and
for other reasons. The Fund will not invest more than 10% of the value of the
Fund's net assets in illiquid securities, which would include tender option
bonds for which the required notice to exercise the tender feature is more
than seven days if there is no secondary market available for these
obligations.
WHEN-ISSUED SECURITIES. The Fund may purchase California Municipal
Obligations on a "when-issued" basis (i.e., delivery of and payment for the
California Municipal Obligations normally take place within 45 days after the
date of the purchase commitment). The payment obligation and the interest
rate on such securities are fixed at the time of the purchase commitment.
Although the Fund generally will purchase California Municipal Obligations on
a when-issued basis with the intention of acquiring the securities, the Fund
may sell such securities before the settlement date. California Municipal
Obligations purchased on a when-issued basis, like other investments made by
the Fund, may decline or appreciate in value prior to their actual delivery
to the Fund.
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 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. A
severe recession from 1990 through fiscal 1994 reduced revenues and increased
expenditures for social welfare programs, resulting in a period of budget
imbalance. During this period, expenditures exceeded revenues in four out of
six years, and the State accumulated and sustained a budget deficit in its
budget reserve, the Special Fund for Economic Uncertainties, approaching $2.8
billion at its peak at June 30, 1993. By the 1993-94 fiscal year, the
accumulated budget deficit was so large that it was impractical to budget to
retire it in one year, so a two-year program was implemented, using the
issuance of revenue anticipation warrants to carry a portion of the deficit
over the end of the fiscal year. When the economy failed to recover
sufficiently, a second two-year plan was implemented in 1994-95, again using
cross-fiscal year revenue anticipation warrants to partly finance the deficit
into the 1995-96 fiscal year. As a consequence of the accumulated budget
deficits, the State's cash resources available to pay its ongoing obligations
were significantly reduced causing the State to rely increasingly on external
debt markets to meet its cash needs. Future budget problems or a deterioration
in California's general financial condition may have the effect of impairing
the ability of the issuers of California Municipal Obligations to pay
interest on, or repay the principal of, such California Municipal
Obligations. As a result of the deterioration in the State's budget and cash
situation between October 1991 and July 1994, the rating on the State's
general obligation bonds was reduced by S&P from AAA to A, by Moody's from
Aaa to A1 and by Fitch from AAA to A. These and other factors may have the
effect of impairing the ability of the issuers of California Municipal
Obligations to pay interest on, or repay principal of, such Municipal
Obligations. You should obtain and review a copy of the SAI which more fully
sets forth these and other risk factors.
[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,
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. 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, 1997, Dreyfus managed or administered
approximately $93 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. 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
[Page 9]
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 $286 billion in assets as of
June 30, 1997, including $94 billion in mutual fund assets. As of June 30,
1997, Mellon, through various subsidiaries, provided non-investment services,
such as custodial or administration services, for more than $1.306
trillion in assets, including approximately $63 billion in mutual fund
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. 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 voluntarily waive a
portion of the investment management fees, and/or assume certain expenses
payable by the Fund, 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, 1997, the Fund paid Dreyfus at the
effective annual rate of .42% of its average daily net assets in investment
management fees, less fees and expenses of the non-interested Trustees
(including counsel fees), which reflects an undertaking by Dreyfus in effect
through November 19, 1996.
For the fiscal year ended June 30, 1997, total operating expenses
(excluding Rule 12b-1 fees) of the Fund were 0.42% of the Fund's average
daily net assets, which reflects an undertaking by Dreyfus in effect through
November 19, 1996.
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, 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.
[Page 10]
DISTRIBUTOR. The Fund's distributor is Premier Mutual Fund Services,
Inc. ("Distributor"), located at 60 State Street,
Boston, Massachusetts 02109. The Distributor's ultimate parent 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., a
wholly-owned subsidiary of Dreyfus, P.O. Box 9671, Providence, Rhode Island,
02940-9671, 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 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 subseq
uent investments should be made by third party check. Purchase orders may be
delivered in person only to a Dreyfus Financial Center. THESE ORDERS WILL BE
FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For
the location of the nearest Dreyfus Financial Center, please call the
telephone number listed under "General Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to Boston Safe Deposit and Trust Company,
[Page 11]
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 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 calling
1-800-645-6561 or, if calling from overseas, 516-794-5452.
[Page 12]
SHAREHOLDER SERVICES
Fund Exchanges. You may purchase, in exchange for shares of the Fund,
shares of certain other eligible 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 NOVEMBER 20, 1995). This fee
will be deducted from your account and paid to the Transfer Agent. However,
this Fund will waive this fee if the closing balance in the shareholder's
account on the business day immediately preceding the effective date of such
transaction is $50,000 or more.
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 instr
uctions (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 into a new account, 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 "Shareholder Services" 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.
[Page 13]
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 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 may apply. However, the Fund will
waive this fee if the closing balance in the shareholder's account on the
business day immediately preceding the effective date of such transaction is
$50,000 or more. Agents may charge a fee for effecting redemptions of Fund
shares. Any certificates representing Fund shares being redeemed must be
submitted with the redemption request. The value of the shares redeemed may
be more or less than their original cost, depending upon the Fund's then
current NAV.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the SEC. HOWEVER, IF YOU HAVE
PURCHASED FUND SHARES BY CHECK OR BY THE DREYFUS TELETRANSFER PRIVILEGE AND
SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER AGENT, THE
REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE
OF YOUR PURCHASE CHECK OR DREYFUS TELETRANSFER PURCHASE ORDER, WHICH MAY TAKE
UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL NOT HONOR
REDEMPTION CHECKS UNDER THE CHECK REDEMPTION PRIVILEGE, AND WILL REJECT
REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR PURSUANT TO THE DREYFUS
TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY
THE TRANSFER AGENT OF THE PURCHASE CHECK OR THE DREYFUS TELETRANSFER PURCHASE
ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT
APPLY IF YOUR SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE
A SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE REDEMPTION
REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH
SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE ALL
OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares will not be redeemed until
the Transfer Agent has received your Account Application.
[Page 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 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 shares by using the regular redemption
procedure through the Transfer Agent, or through the Telephone Redemption
Privilege or the Check Redemption Privilege, which are granted automatically
unless you specifically refuse them by checking the applicable "No" box on
the Account Application. The Telephone Redemption Privilege and the Check
Redemption Privilege may be established for an existing account by a separate
signed Shareholder Services Form or, with respect to the Telephone Redemption
Privilege, by oral request from any of the authorized signatories on the
account by calling 1-800-645-6561. You also may redeem shares through the
Wire Redemption Privilege, or the Dreyfus TeleTransfer Privilege, if you have
checked the appropriate box and supplied the necessary information on the
Account Application or have filed a Shareholder Services Form with the
Transfer Agent. 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. The Fund reserves the right to refuse any request made
by wire or 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 any redemption Privilege at any time or
charge a service fee upon notice to shareholders. No such fee currently is
contemplated. Shares for which certificates have been issued are not eligible
for the Check Redemption, Wire Redemption, Telephone Redemption or Dreyfus TEL
ETRANSFER Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes 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."
[Page 15]
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 write Redemption Checks drawn on
your Fund 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).
However, the Fund will waive this fee if the closing balance in the
shareholder's account on the business day immediately preceding the effective
date of such transaction is $50,000 or more. 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. Such fees are not subject to waiver
based on account balance or other factors. 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. This Privilege may be modified or terminated at any time by
the Fund or the Transfer Agent upon notice to shareholders. The Check
Redemption Privilege is granted automatically unless you refuse it.
WIRE REDEMPTION PRIVILEGE. You may request by wire, telephone or
letter 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. However, the Fund will waive this fee if the closing
balance in the shareholder's account on the business day immediately
preceding the effective date of such transaction is $50,000 or more. 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's SAI sets forth instructions for transmitting
redemption requests by wire.
TELEPHONE REDEMPTION PRIVILEGE. You may request by telephone that
redemption proceeds (maximum $150,000 per day) 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 Telephone
Redemption Privilege is granted automatically unless you specifically refuse
it.
DREYFUS TELETRANSFER PRIVILEGE. You may request by telephone that
redemption proceeds (minimum $1,000 per day) be transferred between your Fund
account and your bank account. Only a bank 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. 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. 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). However, the Fund will waive this fee if the closing
balance in the shareholder's account on the business day immediately
preceding the effective date of such transaction is $50,000 or more.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of Fund shares by calling
1-800-645-6561 or, if calling from overseas, 516-794-5452.
[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 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 ordinarily declares dividends from its net investment income
on each day the New York Stock Exchange is open for business. The Fund's
earnings for Saturdays, Sundays and holidays are declared as dividends on the
preceding business day. Dividends usually are paid on the last calendar day
of each month, and are automatically reinvested in additional Fund shares at
NAV or, at your option, paid in cash. If you redeem all shares in your
account at any time during the month, all dividends to which you are entitled
will be paid to you along with the proceeds of the redemption. If you are an
omnibus accountholder and indicate in a partial redemption request that a
portion of any accrued dividends to which such account is entitled belongs to
an underlying accountholder who has redeemed all shares in his or her
account, such portion of the accrued dividends will be paid to you along with
the proceeds of the redemption. Distributions from net realized securities
gains, if any, generally are declared and paid once a year, but the Fund 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 securities gains unless capital loss carryovers, if any, have been
utilized or have expired. You may choose whether to receive distributions in
cash or to reinvest in additional shares at NAV. All expenses are accrued
daily and deducted before declaration of dividends to investors.
Except as provided below, shares purchased on a day on which the Fund
calculates its NAV will not begin to accrue dividends until the following
business day and 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
[Page 17]
the dividend declared on the day of purchase. You will not receive the
dividends declared on the day of redemption if a wire redemption order is
placed prior to 12:00 noon, Eastern time.
It is expected that the Fund will qualify for treatment as a
regulated investment company under the Code so that it will be relieved of
Federal income tax on that part of its investment company taxable income
(consisting generally of taxable net investment income and net short-term
capital gain) and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) that is distributed to its shareholders. In
addition, the Fund intends to continue to qualify to pay "exempt-interest"
dividends, which requires, among other things, that at the close of each
quarter of its taxable year at least 50% of the value of its total assets
must consist of municipal securities.
Dividends from the Fund's investment company taxable income are
taxable to you as ordinary income, to the extent of the Fund's earnings and
profits. Distributions by the Fund that are designated by it as
"exempt-interest dividends" generally may be excluded by you from your gross
income. Distributions by the Fund of net capital gain, when designated as
such, are taxable to you as long-term capital gains, regardless of the length
of time you have owned your shares.
Interest on indebtedness incurred or continued to purchase or carry
shares of the Fund will not be deductible for Federal income tax purposes to
the extent that the Fund's distributions (other than capital gains
distributions) consist of exempt-interest dividends. The Fund may invest in
"private activity bonds," the interest on which is treated as a tax
preference item for shareholders in determining their liability for the
alternative minimum tax. Proposals may be introduced before Congress for the
purpose of restricting or eliminating the Federal income tax exemption for
interest on municipal securities. If such a proposal were enacted, the
availability of such securities for investment by the Fund and the value of
its portfolio would be affected. In such event, the Fund would reevaluate its
investment objective and policies.
Dividends and other distributions, to the extent taxable, are taxable
to you regardless of whether they are received in cash or reinvested in
additional Fund shares, even if the value of your shares is below your cost.
If you purchase shares shortly before a taxable distribution (i.e., any
distribution other than an exempt-interest dividend paid by the Fund), you
must pay income taxes on the distribution, even though the value of your
investment (plus cash received, if any) remains the same. In addition, the
share price at the time you purchase shares may include unrealized gains in
the securities held in the Fund. If these portfolio securities are
subsequently sold and the gains are realized, they will, to the extent not
offset by capital losses, be paid to you as a capital gain distribution and
will be taxable to you.
In January of each year, the Fund will send you a Form 1099-DIV
notifying you of the status for Federal income tax purposes of your
distributions for the preceding year. The Fund also will advise shareholders
of the percentage, if any, of the dividends paid by the Fund that are exempt
from Federal income tax and the portion, if any, of those dividends that is a
tax preference item for purposes of the Federal alternative minimum tax.
The Fund must withhold and remit to the U.S. Treasury ("backup
withholding") 31% of dividends, capital gain distributions and redemption
proceeds, regardless of the extent to which gain or loss may be realized,
paid to an individual or certain other non-corporate shareholders if such
shareholder fails to certify that the TIN furnished to the Fund is correct.
Backup withholding at that rate also is required from dividends and capital
gain distributions payable to such a shareholder if (1) that shareholder
fails to certify that he or she has not received notice from the IRS of being
subject to backup withholding as a result of a failure properly to report
taxable dividend or interest income on a Federal income tax return or (2) the
IRS notifies the Fund to institute backup withholding because the IRS
determines that the shareholder's TIN is incorrect or that the shareholder
has failed properly to report such income.
A TIN is either the Social Security number, IRS individual taxpayer
identification number, or employer identification number of the record owner
of the account. Any tax withheld as a result of backup withholding
[Page 18]
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.
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"), without shareholder approval.
Effective November 20, 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 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 1997 Dreyfus Service Corporation
307p1197
[Page 20]
- -----------------------------------------------------------------------------
PROSPECTUS NOVEMBER 1, 1997
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, 1997 (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 GLENNCURTISS BOULEVARD,
UNIONDALE, NEW YORK 11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK
FOR OPERATOR 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
ALL 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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
[Page 2]
</TABLE>
<TABLE>
TABLE OF CONTENTS
<S> <C> <C>
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............................. 19
</TABLE>
[This Page Intentionally Left Blank]
[Page 3]
<TABLE>
EXPENSE SUMMARY
<S> <C> <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%
EXAMPLE:
You would pay the following expenses
on a $1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each
time period:
1 YEAR $ 10
3 YEARS $ 19
5 YEARS $ 30
10 YEARS $ 62
* 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.")
</TABLE>
- ---------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL
RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL
RETURN GREATER OR LESS THAN 5%.
- ---------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in understanding
the various costs and expenses that investors will bear, directly or
indirectly, the payment of which will reduce investors' return on an annual
basis. The information in the foregoing table does not reflect any fee waiver
or expense reimbursement arrangements that may be in effect. 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.
However, these charges will be waived if the closing balance in the
shareholder's account on the business day immediately preceding the effective
date of such transaction is $50,000 or more. These charges, when paid, are
paid to the Fund's transfer agent. See "Management of the Fund," "How to Buy
Fund Shares," "Shareholder Services" 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, related notes and report of independent auditors that
appear in the Fund's Annual Report dated June 30, 1997, and that are
incorporated by reference in the SAI. The financial statements, as well as
the information in the table below insofar as it relates to the fiscal years
or period ended June 30, 1994, 1995, 1996 and 1997, have been audited by KPMG
Peat Marwick LLP, independent auditors of the Fund. 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.
DREYFUS BASIC NEW YORK MUNICIPAL MONEY MARKET FUND
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.(1)
<TABLE> Period YEAR YEAR YEAR
Ended Ended Ended Ended
YEAR OR PERIOD ENDED NOVEMBER 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
______________________________________________________
PER SHARE DATA: 1988 1989 1990 1991 1992 1993 1994(2) 1995(3) 1996 1997
______ _____ _____ ______ _____ ______ ______ ______ ______ ______
<S> <C> <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 $1.00
______ _____ _____ ______ _____ ______ ______ ______ ______ ______
Investment operations:
Net investment income(6) 0.032 0.058 0.054 0.046 0.031 0.021 0.012 0.029 0.031 0.031
DISTRIBUTIONS:
Dividends from net
investment income (0.032) (0.058) (0.054) (0.046) (0.031) (0.021) (0.012) (0.029) (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 $1.00
===== ======= ======= ======= ======= ======= ======= ======= ======= ======
Total Return.......... 3.19% 5.90% 5.53% 4.65% 3.11% 2.15% 1.23% 2.95% 3.14% 3.11%
===== ======= ======= ======= ======= ======= ======= ======= ======= ======
RATIOS/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 $272,544
Ratio of expenses to
average net assets 0.65%(4) 0.32% 0.32% 0.32% 0.32% 0.31% 0.44%(4) 0.60% 0.43%(5)... 0.41%
Ratio of net
investment income
to average net assets 4.33%(4) 5.73% 5.38% 4.58% 3.08% 2.13% 2.12%(4) 2.97% 3.43% 3.08%
Decrease reflected
in above expense ratios
due to undertakings
by Dreyfus 0.77%(4) 0.78% 0.71% 0.61% 0.71% 0.98% 0.53%(4 _ 0.09% 0.04%
</TABLE>
(1) 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 design
ation and its Distribution Plan was terminated. The Financial Highlights for
the year ended June 30, 1997 are based upon a Fund share outstanding. 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."
(2) The Fund changed its fiscal year end to June 30. Prior to this, the
Fund's fiscal year end was November 30. Prior to April
4, 1994, The Boston Company Advisors, Inc. served as the Fund's investment
adviser. From April 4, 1994 through October 16, 1994, Mellon Bank served as
the Fund's investment manager.
(3) Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager.
(4) Annualized.
(5) 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.
(6) 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.
[Page 5]
<TABLE>
DEBT OUTSTANDING
PER SHARE DATA: YEAR ENDED JUNE 30, 1997(1)
_____________________________
<S> <C> <C>
Amount of debt outstanding at end of year (in thousands)................. --
Average amount of debt outstanding throughout year (in thousands)(2)..... $ 31
Average number of shares outstanding throughout year (in thousands)(3)... 236,389
Average amount of debt per share throughout year......................... --
(1) From March 2, 1988 through June 30, 1996, the Fund had no outstanding debt.
(2) Based upon daily outstanding borrowings.
(3) Based upon month-end balances.
</TABLE>
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 may include
(1) municipal bonds; (2) municipal notes; (3) municipal commercial paper; and
(4) municipal lease obligations. 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 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.
[Page 6]
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 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. The Fund does not intend to borrow except for temporary or
emergency purposes.
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.
[Page 7]
As consideration for providing the option, the financial institution
receives periodic fees equal to the difference between the municipal
obligation's fixed coupon rate and the rate, as determined by a remarketing
or similar agent at or near the commencement of such period, that would cause
the securities, coupled with the tender option, to trade at par on the date
of such determination. Thus, after payment of this fee, the security holder
effectively holds a demand obligation that bears interest at the prevailing
short-term tax-exempt rate. Dreyfus, on behalf of the Fund, will consider on
an ongoing basis the creditworthiness of the issuer of the underlying
municipal obligation, of any custodian and the third-party provider of the
tender option. In certain instances and for certain tender option bonds, the
option may be terminable in the event of a default in payment of principal or
interest on the underlying municipal obligation and for other reasons. The
Fund will not invest more than 10% of the value of the Fund's net assets in
illiquid securities, which would include tender option bonds for which the
required notice to exercise the tender feature is more than seven days if
there is no secondary market available for these obligations.
WHEN-ISSUED SECURITIES. The Fund may purchase New York Municipal
Obligations on a "when-issued" basis (i.e., delivery of and payment for the
New York Municipal Obligations normally take place within 45 days after the
date of the purchase commitment). The payment obligation and the interest
rate on such securities are fixed at the time of the purchase commitment.
Although the Fund generally will purchase New York Municipal Obligations on a
when-issued basis with the intention of acquiring the securities, the Fund
may sell such securities before the settlement date. New York Municipal
Obligations purchased on a when-issued basis, like other investments made by
the Fund, may decline or appreciate in value prior to their actual delivery
to the Fund.
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 have improved, however, during
recent fiscal years. For its fiscal years 1993 through 1997, the State
recorded balanced budgets on a cash basis, with positive fund balances in the
General Fund. New York State ended its 1996-97 fiscal year on March 31, 1997
in balance on a cash basis, with a cash surplus in the General Fund of
approximately $1.4 billion. There can be no assurance that New York will not
face substantial potential budget gaps in future years. You should obtain and
review a copy of the SAI which more fully sets forth these and other risk
factors.
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.
[Page 8]
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,
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. 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, 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 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, 1997, Dreyfus managed or administered
approximately $93 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. 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.
[Page 9]
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 $286 billion in assets as of June 30, 1997, including $94
billion in mutual fund assets. As of June 30, 1997, Mellon, through various
subsidiaries, provided non-investment services, such as custodial or
administration services, for more than $1.306 trillion in assets, including
approximately $63 billion in mutual fund 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. 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 voluntarily waive a
portion of the investment management fees, and/or assume certain expenses
payable by the Fund, 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, 1997, the Fund paid Dreyfus at the
effective annual rate of .41% of its average daily net assets in investment
management fees, less fees and expenses of the non-interested Trustees
(including counsel fees), which reflects an undertaking by Dreyfus in effect
through December 7, 1996.
For the fiscal year ended June 30, 1997, total operating expenses
(excluding Rule 12b-1 fees) of the Fund were 0.41% of the Fund's average
daily net assets which reflects an undertaking by Dreyfus in effect through
December 7, 1996.
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, 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"), located at 60 State Street, Boston, Massachusetts
02109. The Distributor's ultimate parent 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., a wholly-owned subsidiary of Dreyfus, P.O. Box 9671, Providence, Rhode
Island 02940-9671, 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 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 new accounts which are mailed
should be sent to The Dreyfus Family of Funds, P.O. Box 9387, Providence,
Rhode Island 02940-9387, together with your Account Application. For
subsequent investments, your Fund account number should appear on the check
and an investment slip should be enclosed and sent to The Dreyfus Family of
Funds, P.O. Box 105, Newark, New Jersey 07101-0105. Neither initial nor subseq
uent investments should be made by third party check. Purchase orders may be
delivered in person only to a Dreyfus Financial Center. THESE ORDERS WILL BE
FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For
the location of the nearest Dreyfus Financial Center, please call the
telephone number listed under "General Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to Boston Safe Deposit and Trust Company, DDA # 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
[Page 11]
Number ("TIN") should be included instead), account registration and dealer
number, if applicable. If your initial purchase of Fund shares is by wire,
you should call 1-800-645-6561 after completing your wire payment in order
to obtain your Fund account number. Please include your Fund account number
on the Fund's Account Application and promptly mail the Account Application
to the Fund, as no redemptions will be permitted until the Account
Application is received. You may obtain further information about remitting
funds in this manner from your bank. All payments should be made in U.S.
dollars and, to avoid fees and delays, should be drawn only on U.S. banks. A
charge will be imposed if any check used for investment in your account does
not clear. The Fund makes available to certain large institutions the ability
to issue purchase instructions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House ("ACH") member. You must
direct the institution to transmit immediately available funds through the
ACH System to Boston Safe Deposit and Trust Company with instructions to
credit your Fund account. The instructions must specify your Fund account
registration and Fund account number PRECEDED BY THE DIGITS "4780".
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Other Distributions and
Taxes" and the Fund's Account Application for further information concerning
this requirement. Failure to furnish a certified TIN to the Fund could
subject you to a $50 penalty imposed by the Internal Revenue Service (the
"IRS").
NET ASSET VALUE PER SHARE ("NAV"). An investment portfolio's NAV
refers to the worth of one share. The NAV for Fund shares, which are offered
on a continuous basis, is calculated on the basis of amortized cost, which
involves initially valuing a portfolio instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. The Fund intends to maintain a constant NAV of $1.00,
although there is no assurance that this can be done on a continuing basis.
The offering price of Fund shares is their NAV. Investments and
requests to exchange or redeem shares received by the Fund before 4 p.m.,
Eastern time, on each day that the New York Stock Exchange is open (a
"business day") are effective on, and will receive the price next determined,
that business day. The NAV of the Fund is calculated two times each business
day, at 12 noon and 4 p.m., Eastern time. Investment, exchange or redemption
requests received after 4 p.m., Eastern time are effective on, and receive
the first share price determined, the next business day.
DREYFUS TELETRANSFER PRIVILEGE. You may purchase Fund shares (minimum
$1,000 and maximum $150,000 per day) without charge by telephone if you have
checked the appropriate box and supplied the necessary information on the
Fund's Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The proceeds will be transferred between the bank account
designated in one of these documents and your Fund account. Only a bank
account maintained in a domestic financial institution which is an ACH member
may be so designated. The Fund may modify or terminate this Privilege at any
time or charge a service fee upon notice to shareholders. No fee is
contemplated for purchases of Fund shares pursuant to this Privilege.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of Fund shares by calling 1-8
00-645-6561 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 eligible 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
[Page 12]
fee will be deducted from your account and paid to the Transfer Agent.
However, the Fund will waive this fee if the closing balance in the
shareholder's account on the business day immediately preceding the effective
date of such transaction is $50,000 or more.
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 instr
uctions (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 into a new account, 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 "Shareholder Services" 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 Privilege, or to request a Dividend Options Form,
please call toll free 1-800-645-6561. You may cancel
[Page 13]
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 may apply. However, the Fund will
waive this fee if the closing balance in the shareholder's account on the
business day immediately preceding the effective date of such transaction is
$50,000 or more. Agents may charge a fee for effecting redemptions of Fund
shares. Any certificates representing Fund shares being redeemed must be
submitted with the redemption request. The value of the shares redeemed may
be more or less than their original cost, depending upon the Fund's then
current NAV.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the SEC. HOWEVER, IF YOU HAVE
PURCHASED FUND SHARES BY CHECK OR BY THE DREYFUS TELETRANSFER PRIVILEGE AND
SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION REQUEST TO THE DREYFUS TRANSFER
AGENT, THE REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK
CLEARANCE OF YOUR PURCHASE CHECK OR DREYFUS TELETRANSFER PURCHASE ORDER,
WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL
NOT HONOR REDEMPTION CHECKS UNDER THE CHECK REDEMPTION PRIVILEGE, AND WILL
REJECT REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR PURSUANT TO THE
DREYFUS TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER
RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK OR THE DREYFUS
TELETRANSFER PURCHASE ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE
PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY WIRE PAYMENT, OR
IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO COVER
THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE,
DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED
TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares will not be
redeemed until the Transfer Agent has received your Account Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if the net asset value of your account
is $10,000 or less ($500 or less in the case of Fund shareholders as of
December 8, 1995) and remains at or below such amount during the notice
period. The $5.00 account closeout fee would be charged in such case.
PROCEDURES. You may redeem shares by using the regular redemption
procedure through the Transfer Agent, or through the Telephone Redemption
Privilege or the Check Redemption Privilege, which are granted automatically
unless you specifically refuse them by checking the applicable "No" box on
the Account Application. The Telephone Redemption Privilege and the Check
Redemption Privilege may be established for an existing account by a separate
signed Shareholder Services Form or, with respect to the Telephone Redemption
Privilege, by oral request from any of the authorized signatories
[Page 14]
on the account by calling 1-800-645-6561. You also may redeem shares through
the Wire Redemption Privilege, or the Dreyfus TELETRANSFER Privilege, if you
have checked the appropriate box and supplied the necessary information on
the Account Application or have filed a Shareholder Services Form with the
Transfer Agent. 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. TheFund reserves the right to refuse any request made by
wire or 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 any redemption Privilege at any time or charge a
service fee upon notice to shareholders. No such fee is currently
contemplated. Shares for which certificates have been issued are not eligible
for the Check Redemption, Wire Redemption, Telephone Redemption or Dreyfus
TELETRANSFER Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes 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 write Redemption Checks drawn on
your Fund 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).
However, the Fund will waive this fee if the closing balance in the
shareholder's account on the business day immediately preceding the effective
date of such transaction is $50,000 or more. 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.
[Page 15]
Such fees are not subject to waiver based on account balance or other
factors. 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. The Check
Redemption Privilege is granted automatically unless you refuse it.
WIRE REDEMPTION PRIVILEGE. You may request by wire, telephone or
letter 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. However, the Fund will waive this fee if the closing
balance in the shareholder's account on the business day immediately
preceding the effective date of such transaction is $50,000 or more. 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's SAI sets forth instructions for transmitting
redemption requests by wire.
TELEPHONE REDEMPTION PRIVILEGE. You may request by telephone that
redemption proceeds (maximum $150,000 per day) 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 Telephone Redem
ption Privilege is granted automatically unless you specifically refuse it.
DREYFUS TELETRANSFER PRIVILEGE. You may request by telephone that
redemption proceeds (minimum $1,000 per day) be transferred between your Fund
account and your bank account. Only a bank 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. 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. 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). However, the Fund will waive this fee if the closing
balance in the shareholder's account on the business day immediately
preceding the effective date of such transaction is $50,000 or more.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of Fund shares by calling
1-800-645-6561 or, if calling from overseas, 516-794-5452.
PERFORMANCE INFORMATION
From time to time, the Fund may advertise its yield and
tax-equivalent yield. YIELD AND TAX-EQUIVALENT YIELD FIGURES ARE BASED ON
HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. It
can be expected that these yield figures will fluctuate substantially.
The Fund's "yield" refers to the income generated by an investment in
the Fund over a seven-day period identified in the advertisement. This income
is then "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a
52-week period and is shown as a percentage of the investment. The "effective
yield" is calculated similarly, but, when annualized, the income earned by an
investment in the Fund is assumed to be reinvested. The "effective yield"
will be slightly higher than the "yield" because of the compounding effect of
this assumed reinvestment. The Fund's "yield" and "effective yield" may
reflect absorbed expenses pursuant to any undertaking that may be in effect.
See "Management of the Fund." Since yields fluctuate, yield data cannot
necessarily be used to compare an investment in the Fund with bank deposits,
savings accounts, and similar
[Page 16]
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 ordinarily declares dividends from its net investment income
on each day the New York Stock Exchange is open for business. The Fund's
earnings for Saturdays, Sundays and holidays are declared as dividends on the
preceding business day. Dividends usually are paid on the last calendar day
of each month, and are automatically reinvested in additional Fund shares at
NAV or, at your option, paid in cash. If you redeem all shares in your
account at any time during the month, all dividends to which you are entitled
will be paid to you along with the proceeds of the redemption. If you are an
omnibus accountholder and indicate in a partial redemption request that a
portion of any accrued dividends to which such account is entitled belongs to
an underlying accountholder who has redeemed all shares in his or her
account, such portion of the accrued dividends will be paid to you along with
the proceeds of the redemption. Distributions from net realized securities
gains, if any, generally are declared and paid once a year, but the Fund 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 securities gains unless capital loss carryovers, if any, have been
utilized or have expired. You may choose whether to receive distributions in
cash or to reinvest in additional Fund shares at NAV. All expenses are
accrued daily and deducted before declaration of dividends to investors.
Except as provided below, shares purchased on a day on which the Fund
calculates its NAV will not begin to accrue dividends until the following
business day and 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 a wire 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.
[Page 17]
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 Federal alternative minimum tax.
The Fund must withhold and remit to the U.S. Treasury ("backup
withholding") 31% of dividends, capital gain distributions and redemption
proceeds, regardless of the extent to which gain or loss may be realized,
paid to an individual or certain other non-corporate shareholders if such
shareholder fails to certify that the TIN furnished to the Fund is correct.
Backup withholding at that rate also is required from dividends and capital
gain distributions payable to such a shareholder if (1) that shareholder
fails to certify that he or she has not received notice from the IRS of being
subject to backup withholding as a result of a failure properly to report
taxable dividend or interest income on a Federal income tax return or (2) the
IRS notifies the Fund to institute backup withholding because the IRS
determines that the shareholder's TIN is incorrect or that the shareholder
has failed properly to report such income.
A TIN is either the Social Security number, IRS individual taxpayer
identification 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.
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.
[Page 18]
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"), without shareholder approval.
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 BASICNew
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 1997 Dreyfus Service Corporation
Registration Mark
316p1197
[Page 20]
- ---------------------------------------------------------------------------
PROSPECTUS NOVEMBER 1, 1997
DREYFUS BASIC MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
- ---------------------------------------------------------------------------
THE DREYFUS BASIC MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
(FORMERLY, THE DREYFUS/LAUREL MASSACHUSETTS 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 MASSACHUSETTS 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 TELET
RANSFER 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, 1997 (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 GLENNCURTISS BOULEVARD,
UNIONDALE, NEW YORK 11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK
FOR OPERATOR 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
ALL 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.
- ---------------------------------------------------------------------------
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.......................... 10
SHAREHOLDER SERVICES............................ 12
HOW TO REDEEM FUND SHARES....................... 13
PERFORMANCE INFORMATION......................... 16
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES........ 16
GENERAL INFORMATION............................. 18
[Page 2]
[This Page Intentionally Left Blank]
[Page 3]
<TABLE>
<CAPTION>
<S> <C>
EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES:
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%
EXAMPLE:
You would pay the following expenses on a $1,000 investment,
assuming (1) a 5% annual return and (2) redemption at the end
of each time period:
1 Year $ 10
3 Years $ 19
5 Years $ 30
10 Years $ 62
*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.")
</TABLE>
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL
RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL
RETURN GREATER OR LESS THAN 5%.
The purpose of the foregoing table is to assist you in understanding
the various costs and expenses that investors will bear, directly or
indirectly, the payment of which will reduce investors' return on an annual
basis. The information in the foregoing table does not reflect any fee waiver
or expense reimbursement arrangements that may be in effect. 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.
However, these charges will be waived if the closing balance in the
shareholder's account on the business day immediately preceding the effective
date of such transaction is $50,000 or more. These charges, when paid, are
paid to the Fund's transfer agent. See "Management of the Fund," "How to Buy
Fund Shares," "Shareholder Services" and "How to Redeem Fund Shares."
[Page 4]
FINANCIAL HIGHLIGHTS
The following table is based upon a single share outstanding
throughout each fiscal year or period and should be read in conjunction with
the financial statements, related notes and report of independent auditors
that appear in the Fund's Annual Report dated June 30, 1997, and that are
incorporated by reference in the SAI. The financial statements, as well as
the information in the table below insofar as it relates to the fiscal years
ended June 30, 1994, 1995, 1996 and 1997, have been audited by KPMG Peat
Marwick LLP, independent auditors of the Fund. The information in the table
below for the five month period ended June 30, 1993, has been audited by
other independent auditors.
<TABLE>
<CAPTION>
DREYFUS BASIC MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
Period Year Year Year Year
Ended Ended Ended Ended Ended
Per Share Data: 6/30/93(3) 6/30/94(3)(4) 6/30/95(2)(3) 6/30/96(1)(3) 6/30/97
------------ ------------ ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
______ ______ ______ _______ _______
INVESTMENT OPERATIONS:
Net investment income........................ 0.007(5) 0.019(5) 0.032 0.033 0.031
DISTRIBUTIONS:
Dividends from net investment income......... (0.007) (0.019) (0.032) (0.033) (0.031)
______ ______ ______ _______ _______
Net Asset Value, end of period............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ======= =======
TOTAL RETURN................................. 0.73% 1.97% 3.25% 3.31% 3.12%
====== ====== ====== ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in 000's)...... $19,645 $19,830 $25,485 $52,317 $90,264
Ratios of expenses to average net assets..... 0.57%(6)(7) 0.56%(7) 0.35% 0.35% 0.37%
Ratios of net investment income to average net assets 1.78%(6) 1.94% 3.19% 3.24% 3.09%
Decrease reflected in above expense ratios
due to undertakings by Dreyfus........... -- -- -- 0.02% 0.09%
</TABLE>
(1) Effective May 8, 1996, the Fund's Investor class became shares of
Dreyfus Massachusetts Municipal Money Market Fund, the Fund's Class
R designation was eliminated, and the Fund became a single class Fund.
(2) Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager.
(3) The Fund commenced selling Investment Class shares on February 1,
1993. Effective April 4, 1994, the Investment Class was reclassified
as the Trust shares. Effective October 17, 1994, Trust shares were
redesignated as Class R shares. The above is based upon an Investment
Class share outstanding from February 1, 1993 to April 3, 1994, a
Trust share outstanding from April 4, 1994 to October 16, 1994, a
Class R share outstanding from October 17, 1994 to May 7, 1996, and a
Fund share outstanding after May 7, 1996.
(4) Prior to April 4, 1994, The Boston Company Advisors, Inc. served as
the Fund's investment adviser. From April 4, 1994 through October 16,
1994, Mellon Bank served as the Fund's investment manager.
(5) Net investment income per share before waiver of fees and/or
reimbursement of expenses by the investment adviser and/or
custodian and/or transfer agent for the year ended June 30, 1994 and
period ended June 30, 1993 were $.019 and $.007, respectively.
(6) Annualized.
(7) Annualized expense ratios before voluntary waiver of fees and/or
reimbursement of expenses by the investment adviser and/or custodian
and/or transfer agent for the year ended June 30, 1994 and period
ended June 30, 1993 were .64% and .62%, respectively.
<TABLE>
<CAPTION>
DEBT OUTSTANDING
PER SHARE DATA: YEAR ENDED JUNE 30, 1997(1)
______________________________
<S> <C>
Amount of debt outstanding at end of year (in thousands)................. --
Average amount of debt outstanding throughout year (in thousands)(2)..... $ 46
Average number of shares outstanding throughout year (in thousands)(3)... 82.405
Average amount of debt per share throughout year......................... --
(1) From February 1, 1993 through June 30, 1996, the Fund had no outstanding debt.
(2) Based upon daily outstanding borrowings.
(3) Based upon month-end balances.
</TABLE>
[Page 5]
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks to provide a high level of current income exempt from
Federal income taxes and Massachusetts 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 Commonwealth of Massachusetts, 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 Massachusetts personal income tax purposes ("Massachusetts
Municipal Obligations").
Under normal market conditions, the Fund attempts to invest 100%, and
will invest a minimum of 80%, of its total assets in Massachusetts Municipal
Obligations. When, in the opinion of Dreyfus, adverse market conditions exist
for Massachusetts 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 Massachusetts
Municipal Obligations, but which produce income exempt from Federal but not
Massachusetts personal income taxes for resident shareholders of
Massachusetts, 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 Massachusetts 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
and Massachusetts personal income taxes. The Fund's policy of investing a
minimum of 80% of its total assets in Massachusetts 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 Massachusetts Municipal Obligations.
The Massachusetts Municipal Obligations purchased by the Fund may
include: (1) municipal bonds; (2) municipal notes; (3) municipal commercial
paper; and (4) municipal lease obligations. 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 comparable outstanding short-term debt obligations are so
rated, or (iii) if not rated, are of comparable quality, as determined by
Dreyfus in accordance with procedures established by the Board of Trustees.
The Fund will limit its investments to securities that present minimal credit
risk, as determined by Dreyfus under procedures established by the Board of
Trustees.
Because many issuers of Massachusetts 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, and to
the extent the Fund invests in unrated obligations, the Fund will be more
reliant on Dreyfus' judgement, analysis and experience than would be the case
if the Fund invested in only 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 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.
[Page 6]
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
Massachusetts 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 Massachusetts Municipal Obligations owned by
banks. Participation interests carry a demand feature permitting the Fund to
tender them back to the bank. Each participation is backed by an irrevocable
letter of credit or guarantee of a bank which Dreyfus under the supervision
of the Trustees has determined meets the prescribed quality standards for the
Fund.
Other types of tax-exempt instruments that may become available in
the future may be purchased by the Fund as long as Dreyfus believes the
quality of these instruments meets the Fund's quality standards.
OTHER INVESTMENT COMPANIES. The Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with its investment objective and policies and permissible under
the 1940 Act. As a shareholder of another investment company, the Fund would
bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would
be in addition to the advisory and other expenses that the Fund bears
directly in connection with its own operations.
TENDER OPTION BONDS. The Fund may invest up to 10% of the value of
its assets in tender option bonds. A tender option bond is a municipal
obligation (generally held pursuant to a custodial arrangement) having a
relatively long maturity and bearing interest at a fixed-rate substantially
higher than prevailing short-term tax-exempt rates, that has been coupled
with the agreement of a third party, such as a bank, broker-dealer or other
financial institution, pursuant to which such institution grants the security
holders the option, at periodic intervals, to tender their securities to the
institution and receive the face value thereof. As consideration for
providing the option, the financial institution receives periodic fees equal
to the difference between the municipal obligation's fixed coupon rate and
the rate, as determined by a remarketing or similar agent at or near the
commencement of such period, that would cause the securities, coupled with
the tender option, to trade at par on the date of such determination. Thus,
after payment of this fee, the security holder effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt rate.
Dreyfus, on behalf of the Fund, will consider on an ongoing basis the
creditworthiness of the issuer of the underlying municipal obligation, of any
custodian and the third-party provider of the tender option. In certain
instances and for certain tender option bonds, the option may be terminable
in the event of a default in payment of principal or interest on the
underlying municipal obligation and for other reasons. The Fund will not
invest more than 10% of the value of the Fund's net assets in illiquid
securities, which would include tender option bonds for which the required
notice to exercise the tender feature is more than seven days if there is no
secondary market available for these obligations.
[Page 7]
WHEN-ISSUED SECURITIES. The Fund may purchase Massachusetts Municipal
Obligations on a "when-issued" basis (i.e.,
delivery of and payment for the Massachusetts 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
Massachusetts Municipal Obligations on a when-issued basis with the intention
of acquiring the securities, the Fund may sell such securities before the
settlement date. Massachusetts 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 THE COMMONWEALTH
OF MASSACHUSETTS MUNICIPAL OBLIGATIONS. Since the Fund is concentrated in
securities issued by Massachusetts or entities within Massachusetts, 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 Massachusetts Municipal
Obligations. 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 through 1996 with a positive fiscal balance in its general operating
funds. 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.
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,
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. 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 those securities are
in the highest short-term rating category or are determined to be of comparabl
e 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
[Page 8]
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 Massachusetts Municipal
Obligations which are repayable out of revenue streams generated from
economically related projects or facilities or whose issuers are located in
Massachusetts. 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.
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, 1997, Dreyfus managed or administered
approximately $93 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 May 8, 1996 (the
"Investment Management Agreement"). Prior thereto, Dreyfus provided
investment advisory services to the Fund pursuant to a prior Investment
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 Board of Trustees of the Trust 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 $286 billion in assets as of
June 30, 1997, including $94 billion in mutual fund assets. As of June 30,
1997, Mellon, through various subsidiaries, provided non-investment services,
such as custodial or administration services, for more than $1.306 trillion
in assets, including approximately $63 billion in mutual fund 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. 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 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 expenses. From time to time, Dreyfus may voluntarily waive a portion of
the investment management fees, and/or assume
[Page 9]
certain expenses payable by the Fund, 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, 1997, the Fund paid Dreyfus at the
effective annual rate of .37% of its average daily net assets in investment
management fees, less fees and expenses of the non-interested Trustees
(including counsel fees), which reflects an undertaking by Dreyfus in effect
through May 7, 1997.
For the fiscal year ended June 30, 1997, total operating expenses
(excluding Rule 12b-1 fees) of the Fund were .37% of the Fund's average daily
net assets, which reflects an undertaking by Dreyfus in effect through May 7,
1997.
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, 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. ("Distributor"), located at 60 State Street, Boston, Massachusetts
02109. The Distributor's ultimate parent 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., a
wholly-owned subsidiary of Dreyfus, P.O. Box 9671, Providence, Rhode Island
62940-9671, 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 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
[Page 10]
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 May 8, 1996). 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 Massachusetts 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 "4750."
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 net
asset value ("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
[Page 11]
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 calling
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 eligible 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 May 8, 1996). This fee will be deducted from your
account and paid to the Transfer Agent. However, the Fund will waive this fee
if the closing balance in the shareholder's account on the business day
immediately preceding the effective date of such transaction is $50,000 or
more.
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 signatures 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 automatic
telephone system) by calling 1-800-645-6561. If calling from overseas,
516-794-5452. See "How to Redeem Fund Shares_Procedures." Upon an exchange
into a new account, 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
[Page 12]
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 "Shareholder Services" 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 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 MAY 8, 1996). 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 may apply. However, the Fund will waive this fee if
the closing balance in the shareholder's account on the business day
immediately preceding the effective date of such transaction is $50,000 or
more. Agents may charge a 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.
[Page 13]
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 TEL
EPHONE 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 May
8, 1996) 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 shares by using the regular redemption
procedure through the Transfer Agent, or through the Telephone Redemption
Privilege or the Check Redemption Privilege, which are granted automatically
unless you specifically refuse them by checking the applicable "No" box on
the Account Application. The Telephone Redemption Privilege and the Check
Redemption Privilege may be established for an existing account by a separate
signed Shareholder Services Form or, with respect to the Telephone Redemption
Privilege, by oral request from any of the authorized signatories on the
account by calling 1-800-645-6561. You also may redeem shares through, the
Wire Redemption Privilege, or the Dreyfus TeleTransfer Privilege, if you have
checked the appropriate box and supplied the necessary information on the
Account Application or have filed a Shareholder Services Form with the
Transfer Agent. 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. The Fund reserves the right to refuse any request made
by wire or 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 any redemption Privilege at any time or
charge a service fee upon notice to shareholders. No such fee currently is
contemplated. Shares for which certificates have been issued are not eligible
for the Check Redemption, Wire Redemption, Telephone Redemption or Dreyfus TEL
ETRANSFER Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes 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
[Page 14]
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 write Redemption Checks drawn on
your Fund 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 May 8, 1996).
However, the Fund will waive this fee if the closing balance in the
shareholder's account on the business day immediately preceding the effective
date of such transaction is $50,000 or more. 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. Such fees are not subject to
waiver based on account balance or other factors. 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. The Check Redemption Privilege
is granted automatically unless you refuse it.
WIRE REDEMPTION PRIVILEGE. You may request by wire, telephone or
letter 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 MAY 8, 1996), WHICH WILL BE DEDUCTED FROM YOUR ACCOUNT AND PAID TO THE
TRANSFER AGENT. However, the Fund will waive this fee if the closing balance
in the shareholder's account on the business day immediately preceding the
effective date of such transaction is $50,000 or more. 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's SAI sets forth instructions for transmitting
redemption requests by wire.
TELEPHONE REDEMPTION PRIVILEGE. You may request by telephone that
redemption proceeds (maximum $150,000 per day) 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 Telephone
Redemption Privilege is granted automatically unless you specifically
refuse it.
[Page 15]
DREYFUS TELETRANSFER PRIVILEGE. You may request by telephone that
redemption proceeds (minimum $1,000 per day) be transferred between your Fund
account and your bank account. Only a bank 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. 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.
YOUR ACCOUNT WILL BE CHARGED $5.00 FOR EACH REDEMPTION EFFECTED PURSUANT TO
THIS PRIVILEGE (UNLESS YOU HAVE HELD FUND SHARES SINCE MAY 8, 1996). However,
the Fund will waive this fee if the closing balance in the shareholder's
account on the business day immediately preceding the effective date of such
transaction is $50,000 or more.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of Fund shares by calling 1-800-645-
6561 or, if calling from overseas, 516-794-5452.
PERFORMANCE INFORMATION
From time to time, the Fund may advertise its yield and
tax-equivalent yield. YIELD AND TAX-EQUIVALENT YIELD FIGURES ARE BASED ON
HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. It
can be expected that these yield figures will fluctuate substantially.
The Fund's "yield" refers to the income generated by an investment in
the Fund over a seven-day period identified in the advertisement. This income
is then "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a
52-week period and is shown as a percentage of the investment. The "effective
yield" is calculated similarly, but, when annualized, the income earned by an
investment in the Fund is assumed to be reinvested. The "effective yield"
will be slightly higher than the "yield" because of the compounding effect of
this assumed reinvestment. The Fund's "yield" and "effective yield" may
reflect absorbed expenses pursuant to any undertaking that may be in effect.
See "Management of the Fund." Since yields fluctuate, yield data cannot
necessarily be used to compare an investment in the Fund with bank deposits,
savings accounts, and similar investment alternatives which often provide an
agreed-upon or guaranteed fixed yield for a stated period of time, or other
investment companies which may use a different method of computing yield. The
Fund's tax-equivalent yield shows the level of taxable yield needed to
produce an after-tax equivalent to the Fund's tax-free yield. This is done by
increasing the Fund's yield by the amount necessary to reflect the payment of
Federal income tax (and state income tax, if applicable) at a stated tax
rate.
Any fees charged by an Agent directly to its customers' account in
connection with investments in the Fund will not be included in calculations
of yield.
The Fund may compare its performance with various industry standards
of performance including Lipper Analytical Services, Inc. ratings.
Performance rankings as reported in CHANGING TIMES, BUSINESS WEEK,
INSTITUTIONAL INVESTOR, THE WALL STREET JOURNAL, IBC/DONOGHUE'S MONEY FUND
REPORT, MUTUAL FUND FORECASTER, NO LOAD INVESTOR, MONEY MAGAZINE, MORNINGSTAR
MUTUAL FUND VALUES, U.S. NEWS AND WORLD REPORT, FORBES, FORTUNE, BARRON'S and
similar publications may also be used in comparing the Fund's performance.
Furthermore, the Fund may quote its yields in advertisements or in
shareholder reports.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund ordinarily declares dividends from its net investment income
on each day the New York Stock exchange is open for business. The Fund's
earnings for Saturdays, Sundays and holidays are declared as dividends on the
preceding business day. Dividends usually are paid on the last calendar day
of each month, and are automatically reinvested in additional Fund shares at
NAV or, at your option, paid in cash. If you redeem all shares in your
account at any time during the month, all dividends to which you are entitled
will be paid to you along with the proceeds of the redemption. If you are an
[Page 16]
omnibus accountholder and indicate in a partial redemption request that a
portion of any accrued dividends to which such account is entitled belongs to
an underlying accountholder who has redeemed all shares in his or her
account, such portion of the accrued dividends will be paid to you along with
the proceeds of the redemption. Distributions from net realized securities
gains, if any, generally are declared and paid once a year, but the Fund 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 securities gains unless capital loss carryovers, if any, have been
utilized or have expired. You may choose whether to receive distributions in
cash or to reinvest in additional shares at NAV. All expenses are accrued
daily and deducted before declaration of dividends to investors.
Except as provided below, shares purchased on a day on which the Fund
calculates its NAV will not begin to accrue dividends until the following
business day and 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 after 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 a wire redemption order is placed prior to 12:00 noon, Eastern time.
It is expected that the Fund will qualify for treatment as a
regulated investment company under the Code so that it will be relieved of
Federal income tax on that part of its investment company taxable income
(consisting generally of taxable net investment income and net short-term
capital gain) and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) that is distributed to its shareholders. In
addition, the Fund intends to continue to qualify to pay "exempt-interest"
dividends, which requires, among other things, that at the close of each
quarter of its taxable year at least 50% of the value of its total assets
must consist of municipal securities.
Dividends from the Fund's investment company taxable income are
taxable to you as ordinary income, to the extent of the Fund's earnings and
profits. Distributions by the Fund that are designated by it as
"exempt-interest dividends" generally may be excluded by you from your gross
income. Distributions by the Fund of net capital gain, when designated as
such, are taxable to you as long-term capital gains, regardless of the length
of time you have owned your shares.
Interest on indebtedness incurred or continued to purchase or carry
shares of the Fund will not be deductible for Federal income tax purposes to
the extent that the Fund's distributions (other than capital gains
distributions) consist of exempt-interest dividends. The Fund may invest in
"private activity bonds," the interest on which is treated as a tax
preference item for shareholders in determining their liability for the
alternative minimum tax. Proposals may be introduced before Congress for the
purpose of restricting or eliminating the Federal income tax exemption for
interest on municipal securities. If such a proposal were enacted, the
availability of such securities for investment by the Fund and the value of
its portfolio would be affected. In such event, the Fund would reevaluate its
investment objective and policies.
Dividends and other distributions, to the extent taxable, are taxable
to you regardless of whether they are received in cash or reinvested in
additional Fund shares, even if the value of your shares is below your cost.
If you purchase shares shortly before a taxable distribution (i.e., any
distribution other than an exempt-interest dividend paid by the Fund), you
must pay income taxes on the distribution, even though the value of your
investment (plus cash received, if any) remains the same. In addition, the
share price at the time you purchase shares may include unrealized gains in
the securities held in the Fund. If these portfolio securities are
subsequently sold and the gains are realized, they will, to the extent not
offset by capital losses, be paid to you as a capital gain distribution and
will be taxable to you.
In January of each year, the Fund will send you a Form 1099-DIV
notifying you of the status for Federal income tax purposes of your
distributions for the preceding year. The Fund also will advise shareholders
of the percentage, if any, of the dividends paid by the Fund that are exempt
from Federal
[Page 17]
income tax and the portion, if any, of those dividends that is a tax
preference item for purposes of the Federal alternative minimum tax.
The Fund must withhold and remit to the U.S. Treasury ("backup
withholding") 31% of dividends, capital gain distributions and redemption
proceeds, regardless of the extent to which gain or loss may be realized,
paid to an individual or certain other non-corporate shareholders if such
shareholder fails to certify that the TIN furnished to the Fund is correct.
Backup withholding at that rate also is required from dividends and capital
gain distributions payable to such a shareholder if (1) that shareholder
fails to certify that he or she has not received notice from the IRS of being
subject to backup withholding as a result of a failure properly to report
taxable dividend or interest income on a Federal income tax return or (2) the
IRS notifies the Fund to institute backup withholding because the IRS
determines that the shareholder's TIN is incorrect or that the shareholder
has failed properly to report such income.
A TIN is either the Social Security number, IRS individual taxpayer
identification 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.
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 of
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") without shareholder approval.
Effective May 8, 1996, the Fund's name changed to "Dreyfus BASIC
Massachusetts 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 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 Fund 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
[Page 18]
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
Massachusetts
Municipal
Money Market
Fund
Prospectus
Registration Mark
Copy Rights 1997 Dreyfus Service Corporation
715p1197
[Page 20]
- -----------------------------------------------------------------------------
DREYFUS PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
DREYFUS PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
DREYFUS PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND
PROSPECTUS NOVEMBER 1, 1997
- -----------------------------------------------------------------------------
Dreyfus Premier Limited Term California Municipal Fund,
Dreyfus Premier Limited Term Massachusetts Municipal Fund
and Dreyfus Premier Limited Term New York Municipal Fund (formerly, the
Premier Limited Term California Municipal Fund, Premier Limited Term
Massachusetts Municipal Fund and Premier Limited Term New York Municipal
Fund, respectively) (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,
1997 (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. EACH 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 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.
[Page 1]
(Continued from page 1)
Class A shares are subject to a sales charge imposed at the
time of purchase. (Class A shares of each Fund were formerly called
Investor Shares.) Class B shares are subject to a contingent deferred
sales charge imposed on redemptions made within five years of purchase.
Class C shares are subject to a .75% contingent deferred sales charge
imposed on redemptions made within the first year of purchase. Class R
shares are sold primarily to bank trust departments and other financial
service providers (including Mellon Bank and its affiliates) ("Banks")
acting on behalf of customers having a qualified trust or investment
account or relationship at such institution. (Class R shares of each Fund
were formerly called Trust Shares.) Other differences among the Classes
include the services offered to and the expenses borne by each Class and
certain voting rights, as described herein. These alternatives are
offered so that an investor may choose the method of purchasing shares
that is most beneficial given the amount of purchase, the length of time
the investor expects to hold the shares and other relevant circumstances.
TABLE OF CONTENTS
Expense Summary.................................... 3
Financial Highlights............................... 4
Alternative Purchase Methods....................... 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.......................... 36
Distribution Plans
(Class A Plan and Class B and Class C Plans) 39
Dividends, Other Distributions and Taxes........... 40
Performance Information............................ 42
General Information................................ 43
<TABLE>
[Page 2]
EXPENSE SUMMARY
CLASS A CLASS B CLASS C CLASS R
---------- --------- -------- ---------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 3.00% none none none
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge) none* 3.00% .75% none
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
Management Fee.......................... .50% .50% .50% .50%
12b-1 Fee(1)............................ .25% .75% .75% none
Other Expenses(2) ...................... .00% .00% .00% .00%
---------- --------- -------- ---------
Total Fund Operating Expenses........... .75% 1.25% 1.25% .50%
Example
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) except where noted, redemption
at the end of each time period:
1 YEAR $ 37 $43/$13 3 $20/$133 $ 5
3 YEARS $ 53 $60/$40 3 $40 $16
5 YEARS $ 70 $79/$69 3 $69 $28
10 YEARS $120 $125** $151 $63
* A contingent deferred sales charge of 1% 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. 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 Plans 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 less
than 0.01% of each Fund's net assets. (See "Management of the Funds.")
3 Assuming no redemption of shares.
</TABLE>
The amounts listed in the example should not be considered as
representative of future expenses and actual expenses may
be greater or less than those indicated. Moreover, while the example assumes
a 5% annual return, the 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 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 "Alternative Purchase
Methods," "Management of the Funds," "How to Buy Fund Shares," "How to Redeem
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 "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 an Agent under its Selling Agreement ("Agreement") with
the Distributor. The Agreement requires each Agent to disclose to its clients
any compensation payable to such 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,
related notes and report of independent auditors that appear in each
Fund's Annual Report dated June 30, 1997 and that are incorporated by
reference in the SAI. The financial statements, 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. 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. 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.
DREYFUS PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
For a Class A share outstanding throughout each year or period.*
<TABLE>
Period
Ended
Year Ended June 30, June 30, Year Ended November 30,
_____________________ ________ __________________________________________________________
PER SHARE DATA: 1997 1996 1995## 1994@## 1993 1992 1991 1990 1989 1988*
_______ _______ _______ _______ _______ _______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period $12.88 $12.80 $12.61 $13.07 $12.81 $12.53 $12.29 $12.16 $11.84 $12.00
_______ _______ _______ _______ _______ _______ ______ ______ ______ ______
Investment operations:
Net investment income** 0.59 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...... 0.26 0.10 0.21 (0.46) 0.66 0.44 0.24 0.20 0.32 (0.16)
_______ _______ _______ _______ _______ _______ ______ ______ ______ ______
Total from investment
operations.. 0.85 0.70 0.80 (0.12) 1.33 1.14 0.97 0.93 1.08 0.31
_______ _______ _______ _______ _______ _______ ______ ______ ______ ______
Distributions:
Dividends from net
investment income (0.59) (0.60) (0.60) (0.34) (0.67) (0.70) (0.73) (0.73) (0.76) (0.47)
Dividends from net
realized
capital gains (0.03) (0.02) (0.01) (0.00)**** (0.40) (0.16) -- (0.07) -- --
_______ _______ _______ _______ _______ _______ ______ ______ ______ ______
Total distributions...... (0.62) (0.62) (0.61) (0.34) (1.07) (0.86) (0.73) (0.80) (0.76) (0.47)
_______ _______ _______ _______ _______ _______ ______ ______ ______ ______
Net Asset Value,
end of period.... $13.11 $12.88 $12.80 $12.61 $13.07 $12.81 $12.53 $12.29 $12.16 $11.84
====== ====== ====== ======= ======= ======= ======= ======= ====== =======
Total return............. 6.79% 5.43% 6.48% (0.95)% 10.58% 9.27% 8.07% 7.96% 9.38% 2.61%
====== ====== ====== ======= ======= ======= ======= ======= ====== =======
Ratios/Supplemental data:
Net assets,
end of period (000's) $8,012 $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% 0.75% 0.58%** 0.45% 0.45% 0.45% 0.45% 0.45% 0.68%**
Ratio of net investment
income to
average net assets..... 4.54% 4.59% 4.71% 4.51%** 5.09% 5.38% 5.84% 6.07% 6.28% 5.43%**
Portfolio turnover rate.. 25.92% 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.
Exclusive of sales load.
@ 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]
FINANCIAL HIGHLIGHTS
<TABLE>
DREYFUS PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
For a Class B share outstanding throughout each year or period.*
YEAR YEAR PERIOD
ENDED ENDED ENDED
6/30/97 6/30/96 6/30/95
__________ __________ __________
<S> <C> <C> <C>
Per Share Data:
Net Asset Value, beginning of period $12.88 $12.80 $12.28
__________ __________ __________
Investment operations:
Net investment income 0.52 0.53 0.27
Net realized and unrealized gain on investments 0.26 0.10 0.53
__________ __________ __________
Total from investment operations 0.78 0.63 0.80
__________ __________ __________
Distributions:
Dividends from net investment income (0.52) (0.53) (0.28)
Dividends from net realized gain on investments (0.03) (0.02) --
__________ __________ __________
Total Distributions (0.55) (0.55) (0.28)
__________ __________ __________
Net Asset Value, end of period $13.11 $12.88 $12.80
========== ========= =========
Total return 6.25% 4.89% 6.51%**
========== ========= =========
Ratios/Supplemental data:
Net assets, end of period (000's) $ 256 $ 78 $ 9
Ratio of expenses to average net assets 1.25% 1.25% 1.25%**
Ratio of net investment income to average net assets 4.00% 4.08% 4.20%**
Portfolio turnover rate 25.92% 39.09% 49.00%
* The Fund commenced selling Class B shares on December 28, 1994.
** Annualized.
Exclusive of sales load.
</TABLE>
[Page 6]
<TABLE>
FINANCIAL HIGHLIGHTS
DREYFUS PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
For a Class C share outstanding throughout each year or period.*
YEAR YEAR PERIOD
ENDED ENDED ENDED
6/30/97 6/30/96 6/30/95
__________ __________ __________
<S> <C> <C> <C>
Per Share Data:
Net Asset Value, beginning of period $12.91 $12.80 $12.28
__________ __________ __________
Investment operations:
Net investment income 0.53 0.53 0.28
Net realized and unrealized gain on investments 0.26 0.13 0.52
__________ __________ __________
Total from investment operations 0.79 0.66 0.80
__________ __________ __________
Distributions:
Dividends from net investment income (0.53) (0.53) (0.28)
Dividends from net realized gain on investments (0.03) (0.02) --
__________ __________ __________
Total Distributions (0.56) (0.55) (0.28)
__________ __________ __________
Net Asset Value, end of period $13.14 $12.91 $12.80
========== ========= =========
Total return 6.25% 5.14% 6.51%**
========== ========= =========
Ratios/Supplemental data:
Net assets, end of period (000's) $ 25 $ 25 $ 25
Ratio of expenses to average net assets 1.25% 1.25% 1.25%**
Ratio of net investment income to average net assets 4.04% 4.06% 4.22%**
Portfolio turnover rate 25.92% 39.09% 49.00%
* 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>
FINANCIAL HIGHLIGHTS
DREYFUS PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
For a Class R share outstanding throughout each year or period.*
Year Year Year Period Period
Ended Ended Ended Ended Ended
6/30/97 6/30/96 6/30/95## 6/30/94@## 11/30/93*
___________ __________ ___________ ____________ ____________
<S> <C> <C> <C> <C> <C>
Per Share Data:
Net Asset Value, beginning of period $12.88 $12.80 $12.61 $13.07 $12.96
___________ __________ ___________ ____________ ____________
Investment operations:
Net investment income 0.62 0.63 0.63 0.35*** 0.55***
Net realized and unrealized gain (loss)
on investments 0.26 0.10 0.20 (0.46) 0.52
___________ __________ ___________ ____________ ____________
Total from investment operations 0.88 0.73 0.83 (0.11) 1.07
___________ __________ ___________ ____________ ____________
Distributions:
Dividends from net investment income (0.62) (0.63) (0.63) (0.35) (0.56)
Dividends from net realized capital gains (0.03) (0.02) (0.01) (0.00)**** (0.40)
___________ __________ ___________ ____________ ____________
Total distributions (0.65) (0.65) (0.64) (0.35) (0.96)
___________ __________ ___________ ____________ ____________
Net Asset Value, end of period $13.11 $12.88 $12.80 $12.61 $13.07
========= ======== ======== ========= =========
Total return 7.04% 5.68% 6.75% (0.87)%(1) 8.32%(1)
========= ======== ======== ========= =========
Ratios/Supplemental data:
Net assets, end of period (000's) $16,278 $12,384 $8,813 $12,235 $8,291
Ratio of expenses to average net assets 0.50% 0.50% 0.50% 0.42%** 0.40%**
Ratio of net investment income to average
net assets 4.79% 4.84% 4.96% 4.68%** 5.04%**
Portfolio turnover rate 25.92% 39.09% 49.00% 5.00%(1) 38.00%
* 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 operating expense ratio excludes interest expense. The operating
expense ratio including interest expense was 0.41% for the period ended
November 30, 1993.
Exclusive of sales load.
@ 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.
(1) Not annualized.
</TABLE>
[Page 8]
<TABLE>
FINANCIAL HIGHLIGHTS
DREYFUS PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
For a Class A share outstanding throughout each year.*
Year Ended June 30,
____________________________________________________________________________________________
1997 1996 1995## 1994## 1993 1992 1991 1990 1989 1988
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:
Net Asset Value,
beginning of year $11.97 $11.91 $11.74 $12.38 $11.83 $11.23 $11.09 $11.25 $10.89 $10.74
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Investment operations:
Net investment income............ 0.54 0.54 0.55 0.54** 0.64** 0.73** 0.73 0.72 0.74 0.72
Net realized and unrealized
gain (loss) on investments 0.20 0.08 0.20 (0.36) 0.55 0.60 0.14 (0.16). 0.36 0.15
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Total from investment operations... 0.74 0.62 0.75 0.18 1.19 1.33 0.87 0.56 1.10 0.87
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Distributions:
Dividends from net
investment income... (0.54) (0.54) (0.54) (0.54) (0.64) (0.73) (0.73) (0.72) (0.74) (0.72)
Dividends from net realized
capital gains (0.02) (0.02) (0.04) (0.28) -- -- -- -- -- --
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Total distributions............. (0.56) (0.56) (0.58 )(0.82) (0.64) (0.73) (0.73) (0.72) (0.74) (0.72)
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Net Asset Value, end of year.... $12.15 $11.97 $11.91 $11.74 $12.38 $11.83 $11.23 $11.09 $11.25 $10.89
====== ======= ====== ====== ====== ======= ======= ======= ======= ========
Total return.................. 6.36% 5.22% 6.60% 1.38% 10.27% 12.21% 8.13% 5.13% 10.44% 8.37%.
====== ======= ====== ====== ====== ======= ======= ======= ======= ========
Ratios/Supplemental data:
Net assets, end of year (000's) $16,093 $15,689 $16,501 $21,276 $20,106 $20,513 $16,337 $16,093 $14,957 $14,702
Ratio of expenses to
average net assets 0.75% 0.75% 0.75 %0.76%(1) 0.75%(1) 0.76% 0.88% 0.92% 0.96% 0.96%
Ratio of net income to
average net assets 4.47% 4.44% 4.65% 4.40% 5.30% 6.34% 6.59% 6.45% 6.70% 6.69%
Portfolio turnover rate..... 22.57% 39.16% 25.00% 19.00% 60.00% 23.00% 41.00% 99.00% 93.00% 104.00%
* 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 and 1992 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 and 1993 were
0.89% and 0.92%, 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.
(1) Annualized expense ratios before voluntary waiver of fees and
reimbursement of expenses by the investment adviser and/or custodian
and/or transfer agent for the year ended June 30, 1994 and 1993 were
0.89% and 0.92%, respectively.
</TABLE>
[Page 9]
<TABLE>
FINANCIAL HIGHLIGHTS
DREYFUS PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND*
For a Class B share outstanding throughout the year.
Year Year
Ended Ended
6/30/97 6/30/96
------------- -------------
<S> <C> <C>
Per Share Data:
Net Asset Value, beginning of year $11.99 $11.91
------------- -------------
Investment operations:
Net investment income 0.48 0.48
Net realized and unrealized gain on investments 0.21 0.10
------------- -------------
Total from investment operations 0.69 0.58
------------- -------------
Distributions:
Dividends from net investment income (0.48) (0.48)
Dividends from net realized gain on investments (0.02) (0.02)
------------- -------------
Total Distributions (0.50) (0.50)
------------- -------------
Net Asset Value, end of year $12.18 $11.99
============= ===========
Total return 5.90% 4.87%
============= ===========
Ratios/Supplemental data:
Net assets, end of year (000's) $ 464 $ 452
Ratio of expenses to average net assets 1.25% 1.25%
Ratio of net investment income to average net assets 3.96% 3.67%
Portfolio turnover rate 22.57% 39.16%
* The Fund commenced selling Class B shares on December 28, 1994.
Exclusive of sales load.
</TABLE>
[Page 10]
<TABLE>
FINANCIAL HIGHLIGHTS
DREYFUS PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
For a Class C share outstanding throughout each year or period.*
YEAR YEAR PERIOD
ENDED ENDED ENDED
6/30/97 6/30/96 6/30/95
__________ __________ __________
<S> <C> <C> <C>
Per Share Data:
Net Asset Value, beginning of period $11.97 $11.91 $11.45
__________ __________ __________
Investment operations:
Net investment income 0.49 0.48 0.26
Net realized and unrealized gain on investments 0.20 0.08 0.45
__________ __________ __________
Total from investment operations 0.69 0.56 0.71
__________ __________ __________
Distributions:
Dividends from net investment income (0.49) (0.48) (0.25)
Dividends from net realized gain on investments (0.02) (0.02) --
__________ __________ __________
Total Distributions (0.51) (0.50) (0.25)
__________ __________ __________
Net Asset Value, end of period $12.15 $11.97 $11.91
========= ========= =========
Total return 5.87% 4.68% 6.24%
========= ========= =========
Ratios/Supplemental data:
Net assets, end of period (000's) $ 7 $ 16 $ 18
Ratio of expenses to average net assets 1.25% 1.25% 1.25%**
Ratio of net investment income to average net assets 4.05% 3.93% 4.15%**
Portfolio turnover rate 22.57% 39.16% 25.00%
* The Fund commenced selling Class C shares on December 28, 1994.
**Annualized.
Exclusive of sales load.
</TABLE>
[Page 11]
<TABLE>
FINANCIAL HIGHLIGHTS
DREYFUS PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
For a Class R share outstanding throughout each year or period.*
Ended Ended Ended Ended Ended
6/30/97 6/30/96 6/30/95## 6/30/94@## 11/30/93*
___________ __________ ___________ ____________ ____________
<S> <C> <C> <C> <C> <C>
Per Share Data:
Net Asset Value, beginning of period $11.97 $11.91 $11.74 $12.38 $12.08
___________ __________ ___________ ____________ ____________
Investment operations:
Net investment income 0.57 0.57 0.57 0.55 0.25
Net realized and unrealized gain (loss)
on investments 0.21 0.08 0.21 (0.35) 0.29
___________ __________ ___________ ____________ ____________
Total from investment operations 0.78 0.65 0.78 0.20 0.54
___________ __________ ___________ ____________ ____________
Distributions:
Dividends from net investment income (0.57) (0.57) (0.57) (0.56) (0.24)
Dividends from net realized capital gains (0.02) (0.02) (0.04) (0.28) --
___________ __________ ___________ ____________ ____________
Total distributions (0.59) (0.59) (0.61) (0.84) (0.24)
___________ __________ ___________ ____________ ____________
Net Asset Value, end of period $12.16 $11.97 $11.91 $11.74 $12.38
========= ======== ========= ========= ===========
Total return 6.70% 5.46% 6.87% 1.53% 4.53%
========= ======== ========= ========= ===========
Ratios/Supplemental data:
Net assets, end of period (000's) $33,188 $25,981 $19,700 $15,681 $9,411
Ratio of expenses to average net assets 0.50% 0.50% 0.50% 0.62% 0.65%**
Ratio of net investment income to average
net assets 4.73% 4.68% 4.90% 4.54% 4.84%**
Portfolio turnover rate 22.57% 39.16% 25.00% 19.00% 60.00%
* 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.
Exclusive of sales load.
## 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>
FINANCIAL HIGHLIGHTS
DREYFUS 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: 1997 1996 1995## 1994@## 1993 1992 1991 1990 1989 1988
______ _____ ______ _________ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period........ $12.65 $12.71 $12.59 $13.04 $12.70 $12.34 $12.02 $11.90 $11.75 $12.00
______ _____ ______ ________ ______ ______ ______ ______ ______ ______
Net investment income....... 0.59 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 0.18 (0.06) 0.17 (0.45) 0.46 0.36 0.32 0.11 0.15 (0.24)
______ _____ ______ ________ ______ ______ ______ ______ ______ ______
Total from investment operations.. 0.77 0.53 0.77 (0.10) 1.12 1.04 1.02 0.84 0.87 0.23
______ _____ ______ ________ ______ ______ ______ ______ ______ ______
Distributions:
Dividends from net
investment income............. (0.59) (0.59) (0.60) (0.35) (0.66) (0.68) (0.70) (0.72) (0.72). (0.48)
Dividends from net
realized capital gains.... (0.06) -- (0.04) -- (0.12) -- -- -- -- --
Dividends in excess of net
realized capital gains.... -- -- (0.01) -- -- -- -- -- -- --
______ _____ ______ ________ ______ ______ ______ ______ ______ ______
Total distributions........ (0.65) (0.59) (0.65) (0.35) (0.78) (0.68) (0.70) (0.72) (0.72). (0.48)
______ _____ ______ ________ ______ ______ ______ ______ ______ ______
Net Asset Value, end of period..... $12.77 $12.65 $12.71 $12.59 $13.04 $12.70 $12.34 $12.02 $11.90 $11.75
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return.................. 6.17% 4.23% 6.39% (0.80%)(1) 9.00% 8.65% 8.71% 7.35% 7.60% 1.95%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Ratios/Supplemental data:
Net assets,
end of period (000's)........ $2,043 $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% 0.75% 0.57%** 0.46% 0.45% 0.45% 0.45% 0.44% 0.70%**
Ratio of net investment income to
average net assets. 4.60% 4.62% 4.83% 4.66%** 5.11% 5.43% 5.74% 6.14% 6.30% 5.54%**
Portfolio turnover rate........... 15.00% 43.43% 32.00% 13.00%(1) 32.00% 0% 0% 45.00% 7.00%... 74.00%
* 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.
(1) Not annualized.
</TABLE> [Page 13]
<TABLE>
FINANCIAL HIGHLIGHTS
DREYFUS PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND*
For a Class B share outstanding throughout the year.
YEAR YEAR
ENDED ENDED
6/30/97 6/30/96
-------------- -----------
<S> <C> <C>
Per Share Data:
Net Asset Value, beginning of year $12.66 $12.71
-------------- -----------
Investment operations:
Net investment income 0.52 0.54
Net realized and unrealized gain (loss) on investments 0.18 (0.05)
-------------- -----------
Total from investment operations 0.70 0.49
Distributions:
Dividends from net investment income (0.52) (0.54)
Dividends from net realized gain on investments (0.06) --
Total Distributions (0.58) (0.54)
-------------- -----------
Net Asset Value, end of year $12.78 $12.66
============= ==========
Total return 5.64% 3.85%
============= ==========
Ratios/Supplemental data:
Net assets, end of year (000's) $ 118 $ 120
Ratio of expenses to average net assets 1.25% 1.25%
Ratio of net investment income to average net assets 4.09% 3.97%
Portfolio turnover rate 15.00 43.43%
* The Fund commenced selling Class B Shares on December 28, 1994.
Exclusive of sales load.
</TABLE>
[Page 14]
<TABLE>
FINANCIAL HIGHLIGHTS
DREYFUS PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND
For a Class C share outstanding throughout each year or period.*
Year Year Period
Ended Ended Ended
6/30/97 6/30/96 6/30/95
----------- ---------- ----------
<S> <C> <C> <C>
Per Share Data:
Net Asset Value, beginning of period $12.68 $12.71 $12.21
----------- ---------- ----------
Investment operations:
Net investment income 0.52 0.54 0.28
Net realized and unrealized gain (loss) on investments 0.18 (0.03) 0.49
----------- ---------- ----------
Total from investment operations 0.70 0.51 0.77
----------- ---------- ----------
Distributions:
Distributions from net investment income (0.52) (0.54) (0.27)
Dividends from net realized gain on investments 0.06 -- --
Total Distributions (0.58) (0.54) (0.27)
Net Asset Value, end of period $12.80 $12.68 $12.71
========== ========== ==========
Total return 5.63% 4.02% 6.39%
========== ========== ==========
Ratios/Supplemental data:
Net assets, end of period (000's) $ 84 $ 52 $ 68
Ratio of expenses to average net assets 1.25% 1.25% 1.25%**
Ratio of net investment income to average net assets 4.08% 4.15% 4.34%**
Portfolio turnover rate 15.00% 43.43% 32.00%
* The Fund commenced selling Class C Shares on December 28, 1994.
**Annualized.
Not Annualized.
Exclusive of sales load.
</TABLE>
[Page 15]
<TABLE>
FINANCIAL HIGHLIGHTS
DREYFUS PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND
For a Class R Share outstanding throughout each year or period.*
Ended Ended Ended Ended Ended
6/30/97 6/30/96 6/30/95## 6/30/94@## 11/30/93*
___________ __________ ___________ ____________ ____________
<S> <C> <C> <C> <C> <C>
Per Share Data:
Net Asset Value, beginning of period $12.65 $12.71 $12.59 $13.04 $12.85
___________ __________ ___________ ____________ ____________
Investment operations:
Net investment income 0.62 0.63 0.64 0.37*** 0.57***
Net realized and unrealized gain (loss)
on investments 0.17 (0.06) 0.17 (0.45) 0.31
___________ __________ ___________ ____________ ____________
Total from investment operations 0.79 0.57 0.81 (0.08) 0.88
___________ __________ ___________ ____________ ____________
Distributions:
Dividends from net investment income (0.62) (0.63) (0.64) (0.37) (0.57)
Dividends from net realized capital gains (0.06) -- (0.04) -- (0.12)
Dividends in excess of net realized
capital gains -- -- (0.01) -- --
___________ __________ ___________ ____________ ____________
Total distributions (0.68) (0.63) (0.69) (0.37) (0.69)
___________ __________ ___________ ____________ ____________
Net Asset Value, end of period $12.76 $12.65 $12.71 $12.59 $13.04
======== ======= ======== ======== ===========
Total return 6.34% 4.49% 6.65% (0.67%)(1) 6.95%(1)
======== ======= ======== ======== ===========
Ratios/Supplemental data:
Net assets, end of year (000's) $5,372 $4,060 $2,844 $2,388 $2,542
Ratio of expenses to average net assets 0.50% 0.50% 0.50% 0.29%** 0.25%**
Ratio of net investment income to average
net assets 4.85% 4.87% 5.08% 4.94%** 5.20%**
Portfolio turnover rate 15.00% 43.43% 32.00% 13.00%(1) 32.00%
* 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.
Exclusive of sales load.
@ 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.
(1) annualized.
</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%, and 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%, and 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 account or relationship. Class
A, Class B and Class C shares are sold primarily to clients of Agents
that have entered into Agreements with the Distributor.
[Page 17]
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 Dreyfus 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 debt obligations of such Fund's named state, its political
subdivisions, municipalities, public authorities and municipal
obligations issued by other governmental entities, the interest from
which is believed to be excluded from gross income for Federal income tax
purposes and is exempt from state personal income taxes for residents of
the named state ("Municipal Obligations"), and 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. Municipal Obligations may include
(1) municipal bonds; (2) municipal notes; (3) municipal commercial paper;
(4) municipal leases, and (5) related investments. 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
[Page 18]
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.
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 than higher rated bonds. 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, that 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.
[Page 19]
MUNICIPAL BOND INDEX AND INTEREST RATE FUTURES CONTRACTS AND
OPTIONS ON MUNICIPAL BOND INDEX AND INTEREST RATE FUTURES CONTRACTS. The
Funds may enter into municipal bond index futures contracts and interest
rate futures contracts and purchase and sell options on these futures
contracts that are traded on a United States exchange or board of trade.
Such investments, if any, by a Fund will be made solely for the purpose
of hedging against changes in the value of its portfolio securities and
in the value of securities it intends to purchase due to anticipated
changes in interest rates and market conditions and when the transactions
are economically appropriate to the reduction of risks inherent in the
management of the Funds.
A municipal bond index futures contract, which is based on an
index of long-term, tax-exempt municipal bonds, is an agreement in which
two parties agree to take or make delivery of an amount of cash equal to
a specified dollar amount times the difference between the value of the
index at the close of the last trading day of the contract and the price
at which the index contract was originally written. An interest rate
futures contract provides for the future purchase or sale of specified
interest rate sensitive debt securities such as United States Treasury
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
[Page 20]
the event of adverse price movements. Any income earned by
the Funds from transactions in futures contracts and options on futures
contracts will be taxable. Accordingly, it is anticipated that such
investments will be made only in unusual circumstances, such as when
Dreyfus anticipates an extreme change in interest rates or market
conditions. Successful use of futures contracts by the Funds is subject
to the ability of Dreyfus to correctly predict movements in the direction
of interest rates.
The Funds may not enter into futures contracts or purchase
options on futures contracts if, immediately thereafter, the sum of the
amount of margin deposits on the Funds' existing futures contracts and
premiums paid for options would exceed 5% of the value of a Fund's total
assets, after taking into account unrealized profits and losses on any
existing contracts. When a Fund enters into futures contracts, purchases
an index or debt security or purchases call options, an amount of cash,
U.S. Government Securities or other high grade debt securities equal to
the market value of the contract will be deposited and maintained in a
segregated account with the Fund's custodian to collateralize the
positions, thereby insuring that the use of the contract is unleveraged.
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
[Page 21]
insurance or a letter of credit. Lease obligations are a
relatively new type of financing that has not yet developed the depth of
marketability associated with more conventional municipal obligations.
For these reasons, before investing in a lease obligation Dreyfus will
consider, among other things, whether (1) the leased property is
essential to a governmental function of the municipality, (2) the
municipality is prohibited from substituting or purchasing similar
equipment if lease payments are not appropriated, and (3) the
municipality has maintained good market acceptability for its lease
obligations in the past. The Board of Trustees has established guidelines
for determining whether a Municipal Lease Obligation is a liquid
security. Such determination will be made based upon all relevant factors
including, the frequency of trades and quotes for the obligation, the
number of dealers willing to purchase or sell the security and the number
of potential buyers, the willingness of dealers to undertake to make a
market in the securities, and the nature of the marketplace trades.
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.
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.
CERTAIN RISK CONSIDERATIONS REGARDING THE STATE OF
CALIFORNIA. Because the Dreyfus 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 Dreyfus
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
[Page 22]
spending authority of California governmental entities, as
well as from the general financial condition of the State of California.
A severe recession from 1990 through fiscal 1994 reduced revenues and
increased expenditures for social welfare programs, resulting in a period
of budget imbalance. During this period, expenditures exceeded revenues
in four out of six years, and the State accumulated and sustained a
budget deficit in its budget reserve, the Special Fund for Economic
Uncertainties, approaching $2.8 billion at its peak at June 30, 1993. By
the 1993-94 fiscal year, the accumulated budget deficit was so large that
it was impractical to budget to retire it in one year, so a two-year
program was implemented, using the issuance of revenue anticipation
warrants to carry a portion of the deficit over the end of the fiscal
year. When the economy failed to recover sufficiently, a second two-year
plan was implemented in 1994-95, again using cross-fiscal year revenue
anticipation warrants to partly finance the deficit into the 1995-96
fiscal year. As a consequence of the accumulated budget deficits, the
State's cash resources available to pay its ongoing obligations were
significantly reduced causing the State to rely increasingly on external
debt markets to meet its cash needs. Future budget problems or a
deterioration in California's general financial condition may have the
effect of impairing the ability of the issuers of California Municipal
Obligations to pay interest on, or repay the principal of, such
California Municipal Obligations. As a result of the deterioration in the
State's budget and cash situation between October 1991 and July 1994, the
rating on the State's general obligation bonds was reduced by S&P from
AAA to A, by Moody's from Aaa to A1 and by Fitch from AAA to A. These and
other factors may have the effect of impairing the ability of the issuers
of California Municipal Obligations to pay interest on, or repay
principal of, such Municipal Obligations. You should obtain and review a
copy of the SAI which more fully sets forth these and other risk factors.
CERTAIN RISK CONSIDERATIONS REGARDING THE COMMONWEALTH OF
MASSACHUSETTS. Because the Dreyfus 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 Dreyfus Premier Limited Term Massachusetts Municipal Fund's
investment in Massachusetts Municipal Obligations. 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 current year's revenues,
Massachusetts ended each of the fiscal years 1991 through 1996 with a
positive fiscal balance in its general operating funds. 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 Dreyfus 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
Dreyfus 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
[Page 23]
and impaired the borrowing abilities of such entities and
contributed to high interest rates on, and lower market prices for, debt
obligations issued by them. A recurrence of such financial difficulties
or a failure of certain financial recovery programs could result in
defaults or declines in the market values of various New York Municipal
Obligations in which the Fund may invest. If there should be a default or
other financial crisis relating to New York State, New York City, a State
or City agency, or a State municipality, the market value and
marketability of outstanding New York Municipal Obligations in the Fund's
portfolio and the interest income to the Fund could be adversely
affected. Moreover, the national recession and the significant slowdown
in the New York and regional economies in the early 1990s added
substantial uncertainty to estimates of the State's tax revenues, which,
in part, caused the State to incur cash-basis operating deficits in the
General Fund and issue deficit notes during the fiscal periods 1989
through 1992. The State's financial operations have improved, however,
during recent fiscal years. For its fiscal periods 1993 through 1996, the
State recorded balanced budgets on a cash basis, with substantial fund
balances in the General Fund in fiscal 1992-93 and 1993-94 and smaller
fund balances in fiscal 1994-95 and 1995-96. 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. 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 of New York City's general obligation bonds
from A to Baa1 and in July 1995, S&P lowered its ratings on such bonds
from A- to BBB+. 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, 1997, Dreyfus managed or
administered approximately $93 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,
[Page 25]
or arranges for one or more third parties to provide,
investment advisory, administrative, custody, fund accounting and
transfer agency services to the Funds. As the Funds' investment manager,
Dreyfus manages the Funds by making investment decisions based on the
Funds' investment objectives, policies and restrictions.
Kristin D. Lindquist has been employed by Dreyfus as the
portfolio manager of Dreyfus Premier Limited Term Massachusetts Municipal
Fund and Dreyfus 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, 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 Dreyfus 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. 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 10 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 $286 billion in assets as of June 30, 1997,
including approximately $94 billion in mutual fund assets. As of June 30,
1997, Mellon, through various subsidiaries, provided non-investment
services, such as custodial or administration services, for approximately
$1.306 trillion in assets, including approximately $63 billion in mutual
fund assets.
Under the Investment Management Agreement, the Funds have
agreed to pay Dreyfus a monthly fee at the annual rate of 0.50 of 1% of
the value of the Funds' average daily net assets. Dreyfus pays all of the
Funds' expenses, except brokerage fees, taxes, interest, fees and
expenses of non-interested Trustees (including counsel fees), Rule 12b-1
fees (if applicable) and extraordinary expenses. Although Dreyfus is not
obligated 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. From time to time, Dreyfus may
voluntarily
[Page 26]
waive a portion of the investment management fees payable by
the Funds, which would have the effect of lowering the overall expense
ratio and increasing yield and return to investors.
For the fiscal year ended June 30, 1997, 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, 1997 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 Agents in respect of these services.
In allocating brokerage transactions, 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's ultimate parent 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. Dreyfus Transfer, Inc., a wholly-owned
subsidiary of Dreyfus, P.O. Box 9671, Providence, Rhode Island 02940-9671
is each Fund's Transfer and Dividend Disbursing Agent (the "Transfer
Agent"). 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 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 a Fund distributed to them by virtue of such an account or
relationship. In addition, holders of Class R shares of a Fund who have
held their shares since April 4, 1994, may continue to purchase Class R
shares of the Fund, whether or not
[Page 27]
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.
Agents may receive different levels of compensation for
selling different Classes of shares. Management understands that some
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 Agent has agreed to transmit to
its clients a schedule of such fees. You should consult your 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
"The Dreyfus Family of Funds." Payments which are mailed should be sent
to Dreyfus Premier Limited Term California Municipal Fund, Dreyfus
Premier Limited Term Massachusetts Municipal Fund, or Dreyfus Premier
Limited Term New York Municipal Fund, P.O. Box 6587, Providence, Rhode
Island 02940-6587. If you are opening a new account, please include 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. 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, together with a Fund's 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 1-800-554-4611 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.
Fund shares also may be purchased through Dreyfus-Automatic
Asset BuilderRegistration Mark and the Government Direct deposit
Privilege described under "Shareholder Services." These services enable
you to make regularly scheduled investments and may provide you with a con
venient way to invest for long-term financial goals. You should be aware,
however, that
[Page 28]
periodic investment plans do not guarantee a profit and will
not protect an investor against loss in a declining market.
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.
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.
NAV is determined on each day that the New York Stock
Exchange ("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. Orders
received by the Transfer Agent or other agent in proper form before such
close of business are effective on, and will receive the public offering
price determined on, that day. Except in the case of certain orders
transmitted by dealers as described in the following paragraph, orders
received after such close of business are effective on, and receive the
share price determined on, the next business day.
Orders for the purchase of Fund shares received by dealers by
the close of trading on the floor of the NYSEon a 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. For
certain institutions that have entered into Agreements with the
Distributor, payment for the purchase of Fund shares may be transmitted,
and must be received by the Transfer Agent, within three business days
after the order is placed. If such payment is not received within three
business days after the order is placed, the order may be cancelled and
the institution could be held liable for resulting fees and/or losses.
[Page 30]
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>
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 Distributor may pay Agents an amount up to 1% of the NAV
of Class A shares purchased by their clients that are subject to a CDSC.
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 NAV, 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 NAV 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
[Page 31]
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 the
Funds. 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 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 Dreyfus 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 Agent must notify the Distributor if orders are made by wire,
or the Transfer Agent if orders are made by mail. The reduced sales load
is subject to confirmation of your holdings through a check of
appropriate records.
[Page 32]
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
1-800-554-4611 or, if calling from overseas, 516-794-5452.
SHAREHOLDER SERVICES
The services and privileges described under this heading may
not be available to clients of certain Agents and some Agents may impose
certain conditions on their clients which are different from those
described in this Prospectus. You should consult your Agent in this
regard.
FUND EXCHANGES
You may purchase, in exchange for shares of a Class, shares
of the same class of certain other funds managed or administered by
Dreyfus, to the extent such shares are offered for sale in your state of
residence. These funds have different investment objectives which may be
of interest to you. If you desire to use this service, please call
1-800-554-4611 to determine if it is available and whether any conditions
are imposed on its use.
To request an exchange, 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 1-800-554-4611. 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 1-800-554-4611,
or, by oral request from any of the authorized signatories on the
account, also by calling 1-800-554-4611. 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 1-800-554-4611. If calling from overseas,
call 516-794-5452. See "How to Redeem Fund Shares _ Procedures." Upon an
exchange into a new account, 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
[Page 33]
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 Agent must notify
the Distributor. Any such qualification is subject to confirmation of
your holdings through a check of appropriate records. See "Shareholder
Services" in the SAI. No fees currently are charged shareholders directly
in connection with exchanges, although each Fund reserves the right, upon
not less than 60 days' written notice, to charge shareholders a nominal
fee in accordance with rules promulgated by the SEC. Each Fund reserves
the right to reject any exchange request in whole or in part. The
availability of fund exchanges may be modified or terminated at any
time upon notice to shareholders.
The exchange of shares of one fund for shares of another is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder and, therefore, an exchanging shareholder may
realize a taxable gain or loss.
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 Dreyfus
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 Dreyfus Premier Limited
Term California Municipal Fund, Dreyfus Premier Limited Term
Massachusetts Municipal Fund, or Dreyfus 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 Dreyfus 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 1-800-554-4611.
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
[Page 34]
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 1-800-554-4611. You may cancel your participation in this
Privilege or change the amount of purchase at any time by mailing written
notification to Dreyfus Premier Limited Term California Municipal Fund,
Dreyfus Premier Limited Term Massachusetts Municipal Fund, or Dreyfus
Premier Limited Term New York Municipal Fund, P.O. Box 6587, Providence,
Rhode Island 02940-6587, and the notification will be effective three
business days following receipt. The Funds may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated.
DIVIDEND OPTIONS
Dividend Sweep enables you to invest automatically dividends
or dividends and other distributions, if any, paid by a Fund in shares of
the same class of another fund in the Dreyfus 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
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 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 1-800-554-4611.
You may cancel these Privileges by mailing written notification to
Dreyfus Premier Limited Term California Municipal Fund, Dreyfus Premier
Limited Term Massachusetts Municipal Fund, or Dreyfus 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
[Page 35]
each type of payment that you desire to include in this
Privilege. The appropriate form may be obtained by calling
1-800-554-4611. 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
1-800-554-4611. 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.
No CDSC with respect to Class B shares will be imposed on
withdrawals made under the Automatic Withdrawal Plan, provided that the
amounts withdrawn under the plan do not exceed on an annual basis 12% of
the account value at the time the shareholder elects to participate in
the Automatic Withdrawal Plan. Withdrawals with respect to Class B shares
under the Automatic Withdrawal Plan that exceed on an annual basis 12% of
the value of the shareholder's account will be subject to a CDSC on the
amounts exceeding 12% of the initial account value. Class C shares, and
Class A shares to which a CDSC applies, that are 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 by calling
1-800-554-4611, 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.
[Page 36]
HOW TO REDEEM FUND SHARES
GENERAL
You may request redemption of your shares at any time.
Redemption requests should be transmitted to the Transfer Agent as
described below. When a request is received in proper form, the Funds
will redeem the shares at the next determined NAV as described below. If
you hold Fund shares of more than one Class, any request for redemption
must specify the Class of shares being redeemed. If you fail to specify
the Class of shares to be redeemed or if you own fewer shares of the
Class than specified to be redeemed, the redemption request may be
delayed until the Transfer Agent receives further instructions from you
or your Agent.
The Funds impose no charges (other than any applicable CDSC)
when shares are redeemed. Agents or other institutions may charge their
clients a fee for effecting redemptions of Fund shares. Any certificates
representing Fund shares being redeemed must be submitted with the
redemption request. The value of the shares redeemed may be more or less
than their original cost, depending upon the Funds' then-current NAV.
The Funds ordinarily will make payment for all shares
redeemed within seven days after receipt by the Transfer Agent of a
redemption request in proper form, except as provided by the rules of the
SEC. However, if you have purchased Fund shares by check, by the
TeleTransfer Privilege or through Dreyfus-AUTOMATIC Asset Builder
Registration Mark 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 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.
Each Fund reserves the right to redeem your account at its
option upon not less than 45 days' written notice if the NAV of your
account is $500 or less and remains so during the notice period.
CONTINGENT DEFERRED SALES CHARGE _ CLASS B SHARES
A CDSC payable to the Distributor is imposed on any
redemption of Class B shares which reduces the current NAV of your Class
B shares to an amount which is lower than the dollar amount of all
payments by you for the purchase of Class B shares of a 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 a Fund's performance, a
CDSC may be applied to the then-current NAV rather than the purchase
price.
[Page 36]
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>
Year Since CDSC as a % of Amount
Purchase Payment Invested or Redemption
Was Made Proceeds
_________ ________________
<S> <C> <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 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, (c) redemptions pursuant to the Automatic Withdrawal Plan, as
described under "Shareholder Services_Automatic Withdrawal Plan" above,
and (d) 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
[Page 37]
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 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, or, if you have checked the
appropriate box and supplied the necessary information on the Account
Application or have filed a Shareholder Services Form with the Transfer
Agent, through the TELETRANSFER Privilege. If you are a client of a
Selected Dealer, you may redeem shares through the Selected Dealer.
Other redemption procedures may be in effect for clients of certain
Agents and institutions. The Funds makes available to certain large
institutions the ability to issue redemption instructions through
compatible computer facilities. 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 any redemption privilege at
any time or charge a service fee upon notice to shareholders. No such fee
currently is contemplated. Shares for which certificates have been issued
are not eligible for the TELETRANSFER Privilege.
You may redeem 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 Agent, and reasonably
believed by the Transfer Agent to be genuine. The Funds will require the
Transfer Agent to employ reasonable procedures, such as requiring a form
of personal identification, to confirm that instructions are genuine and,
if it does not follow such procedures, the Funds or the Transfer Agent
may be liable for any losses due to unauthorized or fraudulent
instructions. Neither the Funds nor the Transfer Agent will be liable for
following telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you
may experience difficulty in contacting the Transfer Agent by telephone
to request a TELETRANSFER redemption or an exchange of Fund shares. In
such cases, you should consider using the other redemption procedures
described herein. Use of these other redemption procedures may result in
your redemption request being processed at a later time than it would
have been if TELETRANSFER redemption had been used. During the delay, the
Funds' NAV may fluctuate.
REGULAR REDEMPTION. Under the regular redemption procedure,
you may redeem your shares by written request mailed to Dreyfus 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
[Page 38]
Medallion Program. For more information with respect to
signature-guarantees, please contact your 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 request by telephone that
redemption proceeds (minimum $500 per day) will be transferred between
your Fund account and your bank account. Only a bank 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.
If you have selected the TELETRANSFER Privilege, you may
request a TELETRANSFER redemption of Fund shares by telephoning
1-800-554-4611 or, if calling from overseas, 516-794-5452.
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 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
Upon written request, you may reinvest up to the number of
Class A or Class B shares you have redeemed, within 45 days of
redemption, at the then-prevailing NAV without a sales load, or reinstate
your account for the purpose of exercising the Fund Exchanges. Upon
reinstatement, with respect to Class B shares, or Class A shares of such
shares were subject to a CDSC, the shareholder's account will be credited
with an amount equal to the CDSC previously paid upon redemption of the
Class B shares reinvested. 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
[Page 39]
light of the terms governing Agreements with their Agents. An
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. The fees payable under the Distribution and
Service Plans are payable without regard to actual expenses incurred. 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 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 Agents that have entered into Agreements with the
Distributor. Under the Agreements, the Agents are obligated to provide
distribution related services with regard to the Funds and/or shareholder
services to the 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 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 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 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 Agents under the Service Plan and the basis on
which such payments are made.
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.
Each 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.
[Page 40]
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 Code provides that an individual generally will be taxed on
his or her net capital gain at a maximum rate of 28% with respect to
capital gain from securities held for more than one year but not more
than 18 months and a maximum rate of 28% with respect to capital gain
from securities held for more than 18 months. The Code, however, does not
address the application of these rules to distributions by regulated
investment companies; consequently, shareholders should consult their tax
advisers as to treatment of distributions of net capital gain from the
Fund. Dividends and other distributions also may be subject to state and
local taxes.
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. 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 that will include information as to
dividends and distributions from net capital gains, if any, paid during
the year.
The Code provides for the "carryover" of some or all of the
sales load imposed on Class A shares if (1) a shareholder 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 these cases, the amount of the sales load charged or
the purchase of 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
[Page 41]
redemption or the exchange and instead is added to the basis
of the shares acquired pursuant to the Reinvestment Privilege or the
exchange.
The Funds must withhold and remit to the U.S. Treasury
("backup withholding") 31% of taxable dividends, capital gain
distributions and redemption proceeds, regardless of the extent to which
gain or loss may be realized, paid to an individual or certain other
non-corporate shareholders if the shareholder fails to certify that the
TIN furnished to the Fund is correct. Backup withholding at that rate
also is required from dividends and capital gain distributions payable to
such a shareholder if (1) that shareholder fails to certify that he or
she 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, the IRS
notifies the Funds to institute backup withholding because the IRS
determines the shareholder's TIN is incorrect or that the shareholder has
failed to properly report such income.
A TIN is either the Social Security number, IRS individual
taxpayer identification number or employer identification number of the
record owner of the account. Any tax withheld as a result of backup
withholding does not constitute an additional tax imposed on the record
owner of the account and may be claimed as a credit on the record owner's
Federal income tax return.
The Funds may be subject to a non-deductible 4% excise tax,
measured with respect to certain undistributed amounts of taxable
investment income and capital gains.
You should consult your tax advisers regarding specific
questions as to Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance for each Class may
be calculated on the basis of average annual total return and/or total
return. These total return figures reflect changes in the price of the
shares and assume that any income dividends and/or capital gains
distributions made by the Funds during the measuring period were
reinvested in shares of the same Class. These figures also take into
account any applicable service and distribution fees. As a result, at any
given time, the performance of Class B and C should be expected to be
lower than that of Class A and the performance of Class A, B and C should
be expected to be lower than that of Class R. Performance for each Class
will be calculated separately.
Average annual total return is calculated pursuant to a
standardized formula which assumes that an investment was purchased with
an initial payment of $1,000 and that the investment was redeemed at the
end of a stated period of time, after giving effect to the reinvestment
of dividends and other distributions during the period. The return is
expressed as a percentage rate which, if applied on a compounded annual
basis, would result in the redeemable value of the investment at the end
of the period. Advertisements of the Funds' performance will include the
Funds' average annual total return for one, five and ten year periods, or
for shorter periods depending upon the length of time 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
[Page 42]
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 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")
without shareholder approval. 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
[Page 43]
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 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.
LTST/P1197
[Page 44]
- -----------------------------------------------------------------------------
DREYFUS PREMIER LIMITED TERM MUNICIPAL FUND
PROSPECTUS NOVEMBER 1, 1997
- -----------------------------------------------------------------------------
Dreyfus Premier Limited Term Municipal Fund (formerly, the
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,
1997 (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
- -----------------------------------------------------------------------------
[Page 1]
(CONTINUED FROM PAGE 1)
Class A shares are subject to a sales charge imposed at the
time of purchase. (Class A shares of the Fund were formerly called
Investor Shares.) Class B shares are subject to a contingent deferred
sales charge imposed on redemptions made within five years of purchase.
Class C shares are subject to a .75% contingent deferred sales charge
imposed on redemptions made within the first year of purchase. Class R
shares are sold primarily to bank trust departments and other financial
service providers (including Mellon Bank, and its affiliates) ("Banks")
acting on behalf of customers having a qualified trust or investment
account or relationship at such institution. (Class R shares of the Fund
were formerly called Trust Shares.) Other differences among the Classes
include the services offered to and the expenses borne by each Class and
certain voting rights, as described herein. These alternatives are
offered so that an investor may choose the method of purchasing shares
that is most beneficial given the amount of purchase, the length of time
the investor expects to hold the shares and other relevant circumstances.
TABLE OF CONTENTS
Expense Summary............................................. 3
Financial Highlights........................................ 4
Alternative Purchase Methods................................ 9
Description of the Fund..................................... 10
Management of the Fund...................................... 15
How to Buy Fund Shares...................................... 17
Shareholder Services........................................ 21
How to Redeem Fund Shares................................... 24
Distribution Plans (Class A Plan and Class B and Class C Plans) 28
Dividends, Other Distributions and Taxes....................... 29
Performance Information..................................... 30
General Information......................................... 31
[Page 2]
<TABLE>
EXPENSE SUMMARY
CLASS A CLASS B CLASS C CLASS R
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 3.00% none none none
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge) ....none* 3.00% .75% none
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
Management Fee .......................... 0.50% 0.50% 0.50% 0.50%
12b-1 Fee(1)............................. 0.25% 0.75% 0.75% none
Other Expenses(2)........................ 0.00% 0.00% 0.00% 0.00%
___- ___- ___- ___-
Total Fund Operating Expenses ........... 0.75% 1.25% 1.25% 0.50%
Example:
You would pay the following expenses on a
$1,000 investment, assuming (1) a 5% annual
return and (2) except where noted, redemption
at the end of each time period:
1 YEAR............................... $ 37 $43/$13(3) $20/$13(3) $ 5
3 YEARS.............................. $ 53 $60/$40(3) $ 40 $16
5 YEARS.............................. $ 70 $79/$69(3) $ 69 $28
10 YEARS............................. $120 $125** $151 $63
* A contingent deferred sales charge of 1% 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. 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 Plans
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 less than 0.01% of the
Fund's net assets. (See "Management of the Fund.")
(3) Assuming no redemption of shares.
</TABLE>
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF
FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A
5% ANNUAL RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN
AN ACTUAL RETURN GREATER OR LESS THAN 5%.
The purpose of the foregoing table is to assist you in understanding
the various costs and expenses that investors will bear, directly or
indirectly, the payment of which will reduce investors' return on an annual
basis. Long-term investors in Class A, B or C shares could pay more in 12b-1
fees than the economic equivalent of paying the maximum front-end sales
charges applicable to mutual funds sold by members of the National
Association of Securities Dealers, Inc. ("NASD"). The information in the
foregoing table does not reflect any fee waivers or expense reimbursement
arrangements that may be in effect. Certain 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 "Alternative Purchase
Methods," Management of the Fund," "How to Buy Fund Shares," "How to Redeem
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 "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 an Agent under its Selling Agreement ("Agreement") with
the Distributor. The Agreement requires each Agent to disclose to its clients
any compensation payable to such 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, related notes
and report of independent auditors that appear in the Fund's Annual Report
dated June 30, 1997 and that are incorporated by reference into the SAI. The
financial statements, 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. 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. 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.
<TABLE>
DREYFUS PREMIER LIMITED TERM MUNICIPAL FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR.*
YEAR ENDED JUNE 30,
PER SHARE DATA: 1997 1996 1995# 1994# 1993 1992 1991 1990 1989 1988*
____ ____ ____ ____ ____ ____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of year.. $11.89 $11.82 $11.66 $12.61 $12.21 $11.58 $11.44 $11.95 $11.36 $11.23
____ ____ ____ ____ ____ ____ ____ ____ ____ ____
Investment operations:
Net investment income.............. 0.54 0.54 0.53 0.54** 0.60** 0.70** 0.74** 0.76** 0.78** 0.76**
Net realized and unrealized gain
(losses) on investments 0.26 0.08 0.19 (0.41) 0.68 0.65 0.14 (0.18) 0.67 0.13
____ ____ ____ ____ ____ ____ ____ ____ ____ ____
Total from investment operations... 0.80 0.62 0.72 0.13 1.28 1.35 0.88 0.58 1.45 0.89
____ ____ ____ ____ ____ ____ ____ ____ ____ ____
Distributions:
Dividends from net investment income (0.54) (0.55) (0.53) (0.54) (0.60) (0.70) (0.74) (0.77) (0.79) (0.74)
Dividends from net realized
capital gains on investments (0.03) ._ (0.03) (0.54 (0.28) (0.02) ._ (0.32) (0.07) (0.02)
____ ____ ____ ____ ____ ____ ____ ____ ____ ____
Total Distributions................ (0.57) (0.55) (0.56) (1.08) (0.88) (0.72) (0.74) (1.09) (0.86) (0.76)
____ ____ ____ ____ ____ ____ ____ ____ ____ ____
Net Asset Value, end of year........ $12.12 $11.89 $11.82 $11.66 $12.61 $12.21 $11.58 $11.44 $11.95 $11.36
==== ==== ==== ==== ==== ==== ==== ==== ==== ====
Total Return........................ 6.92% 5.25% 6.37% 0.96% 10.95% 11.94% 7.97% 5.06% 13.29% 8.21%
==== ==== ==== ==== ==== ==== ==== ==== ==== ====
Ratios to average net assets/
Supplemental data:
Net Assets, end of year (in 000's). $17,323 $18,751 $21,375 $23,715 $18,251..$26,192 $18,042 $15,209 $13,304 $10,150
Ratio of expenses to
average net assets 0.75% 0.75% 0.75% 0.76% 1.03% 0.97% 0.81% 0.82% 0.79% 0.79%
Ratio of net investment income to
average net assets 4.52% 4.53% 4.59% 4.43% 4.91% 5.82% 6.43% 6.45% 6.82% 6.73%
Portfolio turnover rate............. 30.50% 55.07% 61.00% 57.00% 103% 30% 54% 76% 101% 81%
</TABLE>
[Page 4]
* 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 and 1988 were $0.49, $0.59, $0.68, $0.68, $0.70, $0.68,
and $0.70, 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 years ended June 30, 1994, 1993, 1992,
1991, 1990, 1989 and 1988 were 1.09%, 1.11%, 1.12%, 1.31%, 1.32%, 1.65%,
1.29% and 1.21%, respectively.
++ Exclusive of sales load.
# 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>
FINANCIAL HIGHLIGHTS
DREYFUS PREMIER LIMITED TERM MUNICIPAL FUND
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
Year Year Period
Ended Ended Ended
6/30/97 6/30/96 6/30/95*
<S> <C> <C> <C>
Per Share Data:
Net Asset Value, beginning of period $11.89 $11.82 $11.32
____ ____ ____
Investment operations:
Net investment income 0.48 0.48 0.24
Net realized and unrealized gain on investments 0.26 0.07 0.50
____ ____ ____
Total from investment operations 0.74 0.55 0.74
____ ____ ____
Distributions:
Dividends from net investment income (0.48) (0.48) (0.24)
Dividends from net realized gain on investments (0.03) _ _
Total Distributions (0.51) (0.98) (0.29)
Net Asset Value, end of period $12.12 $11.89 $11.82
==== ==== ====
Total Return 6.38% 4.71% 6.59%
==== ==== ====
Ratios/Supplemental data:
Net Assets, end of period (in 000's) $551 $ 500 $ 85
Ratio of expenses to average net assets 1.25% 1.25% 1.25%
Ratio of net investment income to average net assets 4.01% 3.98% 4.09%
Portfolio turnover rate 30.50% 55.07% .61%
* The Fund commenced selling Class B shares on December 28, 1994.
+ Annualized.
++ Not annualized.
+++ Exclusive of sales load.
</TABLE>
[Page 6]
<TABLE>
FINANCIAL HIGHLIGHTS
DREYFUS PREMIER LIMITED TERM MUNICIPAL FUND
FOR A CLASS C SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
Year Year Period
Ended Ended Ended
6/30/97 6/30/96 6/30/95*
<S> <C> <C> <C>
Per Share Data:
Net Asset Value, beginning of period $11.90 $11.82 $11.32
____ ____ ____
Investment operations:
Net investment income 0.49 0.48 0.24
Net realized and unrealized gain on investments 0.27 0.08 0.50
____ ____ ____
Total from investment operations 0.76 0.56 0.74
____ ____ ____
Distributions:
Dividends from net investment income (0.49) (0.48) (0.24)
Dividends from net realized gain on investments (0.03) _ _
____ ____ ____
Total Distributions (0.52) (0.48) (0.24)
Net Asset Value, end of period $12.14 $11.90 $11.82
==== ==== ====
Total Return 6.50% 4.81% 6.59%
==== ==== ====
Ratios/Supplemental data:
Net Assets, end of period (in 000's) $74 $ 150 $ 84
Ratio of expenses to average net assets 1.27% 1.24% 1.25%
Ratio of net investment income to
average net assets 4.17% 4.00% 4.09%
Portfolio turnover rate 30.50% 55.07% 61.00%
* The Fund commenced selling Class C shares on December 28, 1994.
+ Annualized.
++ Not annualized.
+++ Exclusive of sales load.
</TABLE>
[Page 7]
<TABLE>
FINANCIAL HIGHLIGHTS
DREYFUS PREMIER LIMITED TERM MUNICIPAL FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
Year Year Year Year Period
Ended Ended Ended Ended Ended
6/30/97 6/30/96 6/30/95# 6/30/94#* 6/30/93
<S> <C> <C> <C> <C> <C>
Per Share Data:
Net Asset Value, Beginning of period $11.89 $11.82 $11.66 $12.61 $12.21
____ ____ ____ ____ ____
Investment operations:
Net investment income 0.57 0.57 0.56 0.58*** 0.25***
Net realized and unrealized
gain (loss) on investments 0.26 0.08 0.19 (0.43) 0.40
____ ____ ____ ____ ____
Total from investment operations 0.83 0.65 0.75 0.15 0.65
____ ____ ____ ____ ____
Distributions:
Dividends from net
investment income (0.57) (0.58) (0.56) (0.56) (0.25)
Dividends from net
realized gain on investments (0.03) ._ (0.03 (0.54) ._
____ ____ ____ ____ ____
Total Distributions (0.60) (0.58) (0.59) (1.10) (0.25)
____ ____ ____ ____ ____
Net Asset Value, end of period $12.12 $11.89 $11.82 $11.66 $12.61
==== ==== ==== ==== ====
Total Return 7.17% 5.51% 6.64% 1.08% 5.36%
==== ==== ==== ==== ====
Ratios/Supplemental data:
Net Assets, end of year (in 000's) $25,741 $17,870 $16,727 $12,581 $8,974
Ratio of expenses to average net assets 0.50% 0.50% 0.50% 0.50% 0.68%
Ratio of net investment income to
average net assets 4.77% 4.77% 4.84% 4.69% 4.82%**
Portfolio turnover rate 30.50% 55.07% 61.00% 57.00% 103.00%
* 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.
+++ Not annualized.
</TABLE>
[Page 8]
ALTERNATIVE PURCHASE METHODS
The Fund offers you four methods of purchasing Fund shares;
you may choose the Class of shares that best suits
your needs, given the amount of your purchase, the length of time you
expect to hold your shares and any other relevant circumstances. Each Fund
share represents an identical pro rata interest in the Fund's investment
portfolio. All Fund shares are sold on a continuous basis.
Class A shares are sold at net asset value per share plus a
maximum initial sales charge of 3.0% of the public offering price imposed
at the time of purchase. The initial sales charge may be reduced or
waived for certain purchases. See "How to Buy Fund Shares_Class A
shares." These shares are subject to an annual 12b-1 fee at the rate of
0.25 of 1% of the value of the average daily net assets of Class A. See
"Distribution Plan_Class A shares."
Class B shares are sold at net asset value per share with no
initial sales charge at the time of purchase; as a result, the entire
purchase price is immediately invested in the Fund. Class B shares are
subject to a maximum 3% contingent deferred sales charge ("CDSC"), which
is assessed only if you redeem Class B shares within five years of
purchase. See "How to Buy Fund Shares _ Class B shares" and "How to
Redeem Fund Shares _ Contingent Deferred Sales Charge _ Class B shares."
These shares also are subject to an annual distribution fee at the rate
of 0.50 of 1%, and, 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%, and 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
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
[Page 9]
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 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 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. 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.
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
[Page 10]
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, that 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 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,
[Page 11]
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 investing in futures contracts and
options on futures contracts as described above. The Fund also 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.
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
[Page 12]
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 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
[Page 13]
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 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.
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 condition 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.
[Page 14]
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 t
he 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, 1997, Dreyfus managed or administered
approximately $93 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. He also is Vice President of
Boston Safe Deposit and Trust Company. Prior to joining Boston Safe
Deposit and Trust Company in October 1994, 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. 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
[Page 15]
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 $286 billion in assets as of June 30, 1997,
including approximately $94 billion in proprietary mutual fund assets. As
of June 30, 1997, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services,
for approximately $1.306 trillion in assets, including approximately $63
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 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. From time to time, Dreyfus may
voluntarily waive a portion of the investment management fees payable by
the Fund, which would have the effect of lowering the overall expense
ratio and increasing yield and return to investors.
For the fiscal year ended June 30, 1997, 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, 1997, 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 Agents in respect of these services.
In allocating brokerage transactions, 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's ultimate parent 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., a
wholly-owned subsidiary of Dreyfus, P.O. Box 9671, Providence, Rhode
Island 02940-9671, is 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.
[Page 16]
HOW TO BUY FUND SHARES
GENERAL _ Class A shares, Class B shares and Class C shares
may be purchased only by clients of 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.
Agents may receive different levels of compensation for
selling different Classes of shares. Management understands that some
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 Agent has agreed to transmit to
its clients a schedule of such fees. You should consult your 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
"The Dreyfus Family of Funds." Payments which are mailed should be sent
to Dreyfus Premier Limited Term Municipal Fund, P.O. Box 6587,
Providence, Rhode Island 02940-6587. If you are opening a new account,
please enclose 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.
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, together with the Fund's DDA# 044350/Dreyfus 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 number, if applicable. If your
initial purchase of Fund shares is by wire, you should call
1-800-554-4611 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
[Page 17]
available to certain large institutions the ability to issue
purchase instructions through compatible computer facilities.
Fund shares also may be purchased through Dreyfus-AUTOMATIC
Asset BuilderRegistration Mark and the Government Direct Deposit
Privilege described under "Shareholder Services." These services enable
you to make regularly scheduled investments and may provide you with a
convenient way to invest for long term financial goals. You should be
aware, however, that periodic investment plans do not guarantee a profit
and will not protect an investor against loss in a declining market.
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.
NAV is determined on each day that the New York Stock
Exchange ("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. Orders
received by the Transfer Agent or other agent in proper form before such
close of business are effective on, and will receive the public offering
price determined on, that day. Except in the case of certain orders
transmitted by dealers as described in the following paragraph, orders
received after such close of business are effective on, and receive the
public offering price determined on, the next business day.
Orders for the purchase of Fund shares received by dealers by
the close of trading on the floor of the NYSE on a 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
[Page 18]
Distributor or its designee before the close of its business
day. For certain institutions that have entered into Agreements with the
Distributor, payment for the purchase of Fund shares may be transmitted,
and must be received by the Transfer Agent, within three business days
after the order is placed. If such payment is not received within three
business days after the order is placed, the order may be canceled and
the institution could be held liable for resulting fees and/or losses.
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:
<TABLE>
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 Distributor may pay Agents an amount up to 1% of the NAV
of Class A shares purchased by their clients that are subject to a CDSC.
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 NAV, 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 NAV 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.
[Page 19]
Class A shares also may be purchased at NAV, subject to
appropriate documentation, through a broker-dealer or other financial
institution with the proceeds from the redemption of shares of a
registered open-end management investment company not managed by Dreyfus
or its affiliates. The purchase of Class A shares of the Fund must be
made within 60 days of such redemption and the shareholder must have
either (i) paid an initial sales charge or a contingent deferred sales
charge or (ii) been obligated to pay at any time during the holding
period, but did not actually pay on redemption, a deferred sales charge
with respect to such redeemed shares.
Class A shares also may be purchased at NAV, subject to
appropriate documentation, by (i) qualified separate accounts maintained
by an insurance company pursuant to the laws of any State or territory of
the United States, (ii) a State, county or city or instrumentality
thereof, (iii) a charitable organization (as defined in Section 501(c)(3)
of the Code) investing $50,000 or more in Fund shares, and (iv) a
charitable remainder trust (as defined in Section 501(c)(3) of the Code).
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 the
Fund. 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 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
Dreyfus 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 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
[Page 20]
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
1-800-554-4611 or, if calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES
The services and privileges described under this heading may
not be available to clients of certain Agents and some Agents may impose
certain conditions on their clients which are different from those
described in this Prospectus. You should consult your Agent in this
regard.
FUND EXCHANGES
You may purchase, in exchange for shares of a Class, shares
of the same class of certain other funds managed or administered by
Dreyfus, to the extent such shares are offered for sale in your state of
residence. These funds have different investment objectives which may be
of interest to you. If you desire to use this service, please call
1-800-554-4611 to determine if it is available and whether any conditions
are imposed on its use.
To request an exchange, 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 1-800-554-4611. 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 1-800-554-4611
or, by oral request from any of the authorized signatories on the
account, also by calling 1-800-554-4611. 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 1-800-554-4611. If calling from overseas,
call 516-794-5452. See "How to Redeem Fund Shares_Procedures." Upon an
exchange into a new account, 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,
[Page 21]
(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 Agent must notify
the Distributor. Any such qualification is subject to confirmation of
your holdings through a check of appropriate records. See "Shareholder
Services" in the SAI. No fees currently are charged shareholders directly
in connection with exchanges, although the Fund reserves the right, upon
not less than 60 days' written notice, to charge shareholders a nominal
fee in accordance with rules promulgated by the SEC. The Fund reserves
the right to reject any exchange request in whole or in part. The
availability of fund exchanges may be modified or terminated at any time
upon notice to shareholders.
The exchange of shares of one fund for shares of another is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder and, therefore, an exchanging shareholder may
realize a taxable gain or loss.
AUTO-EXCHANGE PRIVILEGE
Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares
of the Fund, in shares of the same class of other funds in the Dreyfus
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 Dreyfus 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 Dreyfus
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 1-800-554-4611.
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
1-800-554-4611. You may cancel your participation in this Privilege or
change the amount of purchase at any time by mailing written notification
to Dreyfus Premier Limited
[Page 22]
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 Dreyfus Premier Family of Funds
or certain of the Dreyfus Family of Funds of which you are an investor.
Shares of the other fund will be purchased at the then-current 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 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 1-800-554-4611.
You may cancel these Privileges by mailing written notification to
Dreyfus 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 1-800-554-4611. 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
1-800-554-4611. The Automatic Withdrawal Plan may be ended at any time by
the shareholder, the Fund or the Transfer Agent. Shares for which
certificates have been issued may not be redeemed through the Automatic
Withdrawal Plan.
[Page 23]
No CDSC with respect to Class B shares will be imposed on
withdrawals made under the Automatic Withdrawal Plan, provided that the
amounts withdrawn under the plan do not exceed on an annual basis 12% of
the account value at the time the shareholder elects to participate in
the Automatic Withdrawal Plan. Withdrawals with respect to Class B shares
under the Automatic Withdrawal Plan that exceed on an annual basis 12% of
the value of the shareholder's account will be subject to a CDSC on the
amounts exceeding 12% of the initial account value. Class C shares, and
Class A shares to which a CDSC applies, that are 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 by calling
1-800-554-4611, you become eligible for the reduced sales load applicable
to the total number of Eligible Fund shares purchased in a 13-month
period pursuant to the terms and conditions set forth in the Letter of
Intent. A minimum initial purchase of $5,000 is required. To compute the
applicable sales load, the offering price of shares you hold (on the date
of submission of the Letter of Intent) in any Eligible Fund that may be
used toward "Right of Accumulation" benefits described above may be used
as a credit toward completion of the Letter of Intent. However, the
reduced sales load will be applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount
indicated in the Letter of Intent for payment of a higher sales load if
you do not purchase the full amount indicated in the Letter of Intent.
The escrow will be released when you fulfill the terms of the Letter of
Intent by purchasing the specified amount. If your purchases qualify for
a further sales load reduction, the sales load will be adjusted to
reflect your total purchase at the end of 13 months. If total purchases
are less than the amount specified, you will be requested to remit an
amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If
such remittance is not received within 20 days, the Transfer Agent, as
attorney-in-fact pursuant to the terms of the Letter of Intent, will
redeem an appropriate number of Class A shares of the Fund held in escrow
to realize the difference. Signing a Letter of Intent does not bind you
to purchase, or the Fund to sell, the full amount indicated at the sales
load in effect at the time of signing, but you must complete the intended
purchase to obtain the reduced sales load. At the time you purchase Class
A shares, you must indicate your intention to do so under a Letter of
Intent.
HOW TO REDEEM FUND SHARES
GENERAL _ You may request redemption of your shares at any
time. Redemption requests should be transmitted to the Transfer Agent as
described below. When a request is received in proper form, the Fund will
redeem the shares at the next determined NAV as described below. If you
hold Fund shares of more than one Class, any request for redemption must
specify the Class of shares being redeemed. If you fail to specify the
Class of shares to be redeemed or if you own fewer shares of the Class
than specified to be redeemed, the redemption request may be delayed
until the Transfer Agent receives further instructions from you or your
Agent.
The Fund imposes no charges (other than any applicable CDSC)
when shares are redeemed. Agents or other institutions may charge their
clients a 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
[Page 24]
the rules of the SEC. HOWEVER, IF YOU HAVE PURCHASED FUND
SHARES BY CHECK, BY THE TELETRANSFER PRIVILEGE OR THROUGH DREYFUS-
AUTOMATIC ASSET BUILDERRegistration Mark 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 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 Fund reserves the right to redeem your account at its
option upon not less than 45 days' written notice if the NAV of your
account is $500 or less and remains so during the notice period.
CONTINGENT DEFERRED SALES CHARGE_CLASS B SHARES_A CDSC
payable to the Distributor is imposed on any redemption of Class B shares
which reduces the current NAV of your Class B shares to an amount which
is lower than the dollar amount of all payments by you for the purchase
of Class B shares of the Fund held by you at the time of redemption. No
CDSC will be imposed to the extent that the NAV of the Class B shares
redeemed does not exceed (i) the current NAV of Class B shares acquired
through reinvestment of dividends or other distributions, plus (ii)
increases in the NAV of your Class B shares above the dollar amount of all
your payments for the purchase of Class B shares held by you at the time
of redemption.
If the aggregate value of Class B shares redeemed has
declined below their original cost as a result of the Fund's performance,
a CDSC may be applied to the then-current NAV rather than the purchase
price.
In circumstances where the CDSC is imposed, the amount of the
charge will depend on the number of years from the time you purchased the
Class B shares until the time of redemption of such shares. Solely for
purposes of determining the number of years from the time of any payment
for the purchase of Class B shares, all payments during a month will be
aggregated and deemed to have been made on the first day of the month.
The following table sets forth the rates of the CDSC:
Year Since CDSC as a % of Amount
Purchase Payment Invested or Redemption
Was Made Proceeds
________- ____________
First.................................................... 3.00
Second................................................... 3.00
Third.................................................... 2.00
Fourth................................................... 2.00
Fifth.................................................... 1.00
Sixth.................................................... 0.00
In determining whether a CDSC is applicable to a redemption,
the calculation will be made in a manner that
results in the lowest possible rate. It will be assumed that the
redemption is made first of amounts representing shares acquired pursuant
to the reinvestment of dividends and other distributions; then of amounts
representing the increase in NAV of Class B shares above the total amount
pooippp
of payments for the purchase of Class B shares made during
[Page 25]
the preceding five years; then of amounts representing the
cost of shares purchased five years prior to the redemption; and finally,
of amounts representing the cost of shares held for the longest period of
time within the applicable five-year period.
For example, assume an investor purchased 100 shares at $10
share for a cost of $1,000. Subsequently, the shareholder acquired five
additional shares through dividend reinvestment. During the second year
after the purchase the investor decided to redeem $500 of his or her
investment. Assuming at the time of the redemption the NAV had
appreciated to $12 per share, the value of the investor's shares would be
$1,260 (105 shares at $12 per share). The CDSC would not be applied to
the value of the reinvested dividend shares and the amount which
represents appreciation ($260). Therefore, $240 of the $500 redemption
proceeds ($500 minus $260) would be charged at a rate of 3% (the
applicable rate in the second year after purchase) for a total CDSC of
$7.20.
CONTINGENT DEFERRED SALES CHARGE_CLASS C SHARES_A CDSC of
.75% payable to the Distributor is imposed on any redemption of Class C
shares within one year of the date of purchase. The basis for calculating
the payment of any such CDSC will be the method used in calculating the
CDSC for Class B shares. See "Contingent Deferred Sales Charge_Class B
shares" above.
WAIVER OF CDSC_The CDSC applicable to Class B and Class C
shares will be waived in connection with (a) redemptions made within one
year after the death or disability, as defined in Section 72(m)(7) of the
Code, of the shareholder, (b) redemptions as a result of a combination of
any investment company with the Fund by merger, acquisition of assets or
otherwise, (c) redemptions pursuant to the Automatic Withdrawal Plan, as
described under "Shareholder Services _ Automatic Withdrawal Plan" above,
and (d) redemptions by such shareholders as the SEC or its staff may
permit. If the Company's Board of Trustees determines 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 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 or, if you have checked
the appropriate box and supplied the necessary information on the Account
Application or have filed a Shareholder Services Form with the Transfer
Agent, through the TELETRANSFER Privilege. If you are a client of a
Selected Dealer, you may redeem shares through the Selected Dealer. 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. 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 any redemption privilege at any time or charge a
service fee upon notice to shareholders. No such fee currently is
contemplated. Shares for which certificates have been issued are not
eligible for the TELETRANSFER Privilege.
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 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
[Page 26]
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 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 Dreyfus 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
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 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 request by telephone that
redemption proceeds (minimum $500 per day) be transferred between your
Fund account and your bank account. Only a bank 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.
If you have selected the TELETRANSFER Privilege, you may
request a TELETRANSFER redemption of Fund shares by telephoning
1-800-554-4611 or, if calling from overseas, 516-794-5452.
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
[Page 27]
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_Upon written request, you may
reinvest up to the number of Class A or Class B shares you have redeemed,
within 45 days of redemption, at the then-prevailing NAV without a sales
load, or reinstate your account for the purpose of exercising Fund
Exchanges. Upon reinstatement, with respect to Class B shares, or Class A
shares of such shares were subject to a CDSC, the shareholder's account
will be credited with an amount equal to the CDSC previously paid upon
redemption of the shares reinvested. 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 Agents.
An Agent entitled to receive compensation for selling and servicing the
Fund's shares may receive different compensation with respect to one
class of shares over another. The fees payable under the Distribution and
Service Plans are payable without regard to actual expenses incurred. 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 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 Agents that have entered into Agreements with the
Distributor. Under the Agreements, the Agents are obligated to provide
distribution related services with regard to the Fund and/or shareholder
services to the 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 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 Agent is required to disclose
[Page 28]
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 Agents under the Service
Plan and the basis on which such payments are made.
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 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 Code provides that an individual generally
will be taxes on his or her net capital gain at a maximum rate of 28% with
respect to capital gain from securities held for more than one year but not
more than 18 months and at a maximum rate of 20% with respect to capital
gain from securities held for more than 18 months. The Code, however, does
not address the application of these rules to distributions by regulated
investment companies; consequently, shareholders should consult their tax
advisers as to treatment of distributions of net capital gain from the
Fund. 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. 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.
[Page 29]
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 that will include information as to
dividends and distributions from net capital gains, if any, paid during
the year.
The Code provides for the "carryover" of some or all of the
sales load imposed on Class A shares if (1) a shareholder 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 these cases, the amount of the sales load charged or
the purchase of 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 shares acquired
pursuant to the Reinvestment Privilege or the exchange.
The Fund must withhold and remit to the U.S. Treasury
("backup withholding") 31% of taxable dividends, capital gain
distributions and redemption proceeds, regardless of the extent to which
gain or loss may be realized, paid on individual or certain other
non-corporate shareholders if the shareholder fails to certify that the
TIN furnished to the Fund is correct. Backup withholding at that rate
also is required from dividends and capital gain distributions payable to
such a shareholder if (1) that shareholder fails to certify that he or
she 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, or (2) the IRS
notifies the Fund to institute backup withholding because the IRS determines
that the shareholder's TIN is incorrect or that the shareholder has
failed to properly report such income.
A TIN is either the Social Security number, IRS individual
taxpayer identification 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
[Page 30]
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 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.
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
[Page 31]
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") without shareholder approval. 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.
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 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.
PLT/P1197
#
[Page 32]
DREYFUS BASIC MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
NOVEMBER 1, 1997
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 Massachusetts Municipal Money Market Fund (formerly, the
Dreyfus/Laurel Massachusetts Tax-Free Money Fund) (the "Fund"), dated
November 1, 1997, 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-8
Investment Policies B-10
Redemption of Fund Shares B-21
Shareholder Services B-23
Determination of Net Asset Value B-25
Performance Information B-26
Dividends, other Distributions and Taxes B-27
Information about the Fund B-28
Principal Shareholders B-29
Custodian and Transfer Agent B-30
Counsel and Independent Auditors B-30
Financial Statements B-30
Appendix A - Risk Factors - Investing in
Massachusetts Municipal Obligations B-31
Appendix B - Information about Securities Ratings B-34
MANAGEMENT OF THE TRUST
Trustees and Officers
The Trust has a Board composed of eleven Trustees which supervises the
Fund'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; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 83 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.; from November 1995 to January 1997, Director, Access
Capital Strategic Community Investment Fund, Inc. - Bank Portfolio.
Age: 80 years old. Address: Massachusetts Business Development Corp.,
50 Milk Street, Boston, Massachusetts 02109.
o+JOSEPH S. DiMARTINO. Trustee of the Trust. Since January 1995, Mr.
DiMartino has served as Chairman of the Board for various funds in the
Dreyfus Family of Funds. He is also Chairman of the Board of Noel
Group, Inc., a venture capital company, and Staffing Resources, Inc. a
temporary placement agency. Mr. DiMartino also serves as a Director of
The Muscular Dystrophy Association, HealthPlan Services Corporation, a
provider of marketing, administrative and risk management services to
health and other benefit programs, Carlyle Industries, Inc. (formerly
Belding Heminway Company, Inc.), a button purchaser and distributor,
and Curtis Industries, Inc., a national distributor of security
products, chemicals and automotive and other hardware. Mr. DiMartino
is also a Board member of 152 other funds in the Dreyfus Family of
Funds. From November 1995 to January 1997, Director, Access Capital
Strategic Community Investment Fund, Inc. - Institutional Investment
Portfolio and Bank Portfolio. For more than five years prior to
January 1995, he was President, a director and, until August 1994,
Chief Operating Officer of Dreyfus and Executive Vice President and a
director of Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus, and until August 24, 1994, the Fund's distributor. From
August 1994 to December 31, 1994, he was a director of Mellon Bank
Corporation. Age: 54 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.; from November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Bank Portfolio. Age: 63 years old. Address: 40 Norfolk
Road, Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Trustee of the Trust; Partner, Reed, Smith, Shaw &
McClay (law firm); from November 1995 to January 1997, Director, Access
Capital Strategic Community Investment Fund, Inc. - Bank Portfolio.
Age: 69 years old. Address: 204 Woodcock Drive, Pittsburgh,
Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Trustee of the Trust; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; Director, National Picture
Frame Corporation; former Chairman of the Board and Director, Rexene
Corporation; Chairman of the Board and Director, Tetra Corporation 1991-
1993; Director, Medalist Corporation 1992-1993; from November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Institutional Investment Portfolio. Age: 76 years old.
Address: Way Hollow Road and Woodland Road, Sewickley, Pennsylvania
15143.
o+KENNETH A. HIMMEL. Trustee of the Trust; Former Director, The Boston
Company, Inc. ("TBC") and Boston Safe Deposit and Trust Company;
President and Chief Executive Officer, Himmel & Co., Inc.; Vice
Chairman, Sutton Place Gourmet, Inc.; Managing Partner, Franklin
Federal Partners; from November 1995 to January 1997, Director, Access
Capital Strategic Community Investment Fund, Inc. - Bank Portfolio.
Age: 51 years old. Address: Himmel and Company, Inc., 399 Boylston
Street, 11th Floor, Boston, Massachusetts 02116.
o*ARCH S. JEFFERY. Trustee of the Trust; Financial Consultant; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 80 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.; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 50 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; from November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. -
Institutional Investment Portfolio. Age: 66 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.; from November 1995 to January 1997,
Director, Access Capital Strategic Community Investment Fund, Inc. -
Bank Portfolio; Director, Massachusetts Electric Company; Director, The
Hymans Foundation, Inc., prior to February, 1993; Real Estate
Development Project Manager and Vice President, The Gunwyn Company.
Age: 48 years old. Address: 25 Braddock Park, Boston, Massachusetts
02116-5816.
_____________________________
* "Interested person" of the Trust, as defined in the Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
Officers of the Fund
#MARIE E. CONNOLLY. President and Treasurer of the Trust. President, Chief
Executive Officer, Chief Compliance Officer and director of Premier and
Funds Distributor, Inc., the ultimate parent of which is Boston
Institutional Group, Inc. Age: 40 years old.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Trust.
Assistant Vice President of Funds Distributor, Inc. From April 1993 to
January 1995, he was a Senior Fund Accountant for Investors Bank &
Trust Company. From December 1991 to March 1993, he was employed as a
Fund Accountant at TBC. Age: 28 years old.
#RICHARD W. INGRAM. Vice President and Assistant Treasurer of the Trust.
Vice President of Premier and Funds Distributor, Inc. From March 1994
to November 1995, he was Vice President and Division Manager for First
Data Investor Services Group. From 1989 to 1994, he was Vice
President, Assistant Treasurer and Tax Director-Mutual Funds of TBC.
Age: 42 years old.
#ELIZABETH A. KEELEY. Vice President and Assistant Secretary of the Trust.
Vice President of Premier and Funds Distributor, Inc. She has been
employed by Premier since 1995. Age: 28 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Trust. Vice
President of Premier and Funds Distributor, Inc. From September 1989
to July 1994, she was an Assistant Vice President and Client Manager
for TBC. Age: 33 years old.
#JOHN E. PELLETIER. Vice President and Secretary of the Trust. Senior Vice
President, General Counsel, Secretary and Clerk of Premier and Funds
Distributor, Inc. From February 1992 to July 1994, he served as
Counsel for the Boston Company Advisors, Inc. Age: 33 years old.
#MICHAEL S. PETRUCELLI. Vice President and Assistant Treasurer of the
Trust. Senior Vice President of Funds Distributor, Inc. From December
1989 through November 1996 he was employed by GE Investment Services
where he held various financial, business development and compliance
positions. He also served as Treasurer of the GE Funds and as Director
of the GE Investment Services. Age 36 years old.
#JOSEPH F. TOWER, III. Vice President and Assistant Treasurer of the Trust.
Senior Vice President, Treasurer and Chief Financial Officer of Premier
and Funds Distributor, 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: 35 years old.
__________________________________
# Officer also serves as an officer for other investment companies
advised by Dreyfus, including The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Funds, Inc.
The address of each officer of the Fund is 200 Park Avenue, New York,
NY 10166.
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 14,
1997.
For the fiscal year ended June 30, 1997, 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:
Total Compensation
from the Trust and
Name of Board Aggregate Fund Complex Paid
Member Compensation from to Board Member+
Trust#
Ruth Marie Adams $ 10,250 $31,500
Francis P. Brennan* $19,833 $63,750
Joseph S. DiMartino*** none $517,076***
James M. Fitzgibbons $11,166 $31,500
J. Tomlinson Fort** none none
Arthur L. Goeschel $11,500 $32,500
Kenneth A. Himmel $10,833 $30,750
Arch S. Jeffery** none none
Stephen J. Lockwood $10,833 $33,250
John J. Sciullo $11,500 $32,500
Roslyn M. Watson $11,166 $32,500
_____________________________
# 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 $4,295.88 for the Trust.
* Compensation of Francis P. Brennan includes a $25,000 retainer paid by
the Dreyfus/Laurel Funds to be the Chairman of the Board.
** For the fiscal year ended June 30, 1997, Joseph S. DiMartino, J.
Tomlinson Fort and Arch S. Jeffery were 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, 1997, 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 $399.27, $1,400.89 and $381.73
respectively, and for serving as a Board member of all funds in the
Dreyfus/Laurel Funds (including the Trust) were $32,500, $37,500 and
$32,500, respectively. In addition, Dreyfus reimbursed Messrs.
DiMartino, Fort and Jeffery a total of $2,181.89 for expenses
attributable to the Trust's Board meetings which is not included in the
$4,295.88 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 152 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 May 8, 1996. Dreyfus is a wholly-owned subsidiary of Mellon
Bank, N.A. ("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 May 8, 1996, 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. The Prior Management Agreement 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 last approved by the shareholders of
the Fund on March 29, 1994. The Prior Management Agreement became effective
on April 4, 1994. As stated above, Dreyfus, a wholly-owned subsidiary of
Mellon Bank, is the current Investment Manager pursuant to the Investment
Management Agreement, which was last approved by the Trust's Board of
Trustees on January 31, 1997 and approved by Fund shareholders on April 16,
1996.
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. Dreyfus may waive all or
a portion of its fees payable by the Fund from time to time. The Investment
Management Agreement provides that certain redemption, exchange and account
close-out charges are payable directly by the Fund's shareholders to the
Fund's Transfer Agent (although the Fund will waive such fees if the closing
balance in the shareholder's account on the business day immediately
preceding the effective date of the transaction is $50,000 or more) and the
fee payable by the Fund to Dreyfus is not reduced by the amount of charges
payable to the Transfer Agent.
The Investment Management Agreement will remain in effect through April
4, 1998 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; William T. Sandalls, Jr.,
Senior Vice President and Chief Financial Officer; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Paul Kadin, Vice President-
Corporate Development, 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; William V. Healey, Assistant Secretary; and
Mandell L. Berman, Burton C. Borgelt and Frank V. Cahouet, directors.
The following table shows the fees paid by the Fund to Mellon Bank (as
the prior investment adviser) and to Dreyfus (the current investment
manager), including any fee waivers or expense reimbursements, during the
Fund's fiscal years ending 1995, 1996 and 1997.
1997 1996(3) 1995(4)
Fees Fees Fees Fees Fees
Paid (2) Waived (2) Paid (2) Waived (2) Paid (1)
Dreyfus BASIC $305,905 $72,296 $337,253 $7,062 $397,565
Massachusetts Municipal
Money Market Fund
_______________________________
(1) From April 4, 1994 through October 16, 1994 Mellon Bank served as the
Fund's investment manager.
(2) Dreyfus voluntarily agreed to limit its management fee, or to reimburse
the Fund for its expenses, in order to ensure that the Fund's expenses
did not exceed .35% (annualized) of the value of the Fund's average
daily net assets from May 8, 1996 through May 7, 1997.
(3) Prior to May 8, 1996, Dreyfus served as investment manager to the Fund
under the Prior Management Agreement.
(4) For the fiscal year ended June 30, 1995, there were no fee waivers or
expense reimbursements.
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.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 P.M., New York
time, on any business day that Dreyfus Transfer Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York Stock
Exchange ("NYSE") are open for business will be credited to the
shareholder's Fund account on the next bank business day following such
purchase order. Purchase orders made after 4:00 P.M., New York time, on any
business day the Transfer Agent and the NYSE are open for business, or
orders made on Saturday, Sunday or any Fund holiday (e.g. when the NYSE is
not open for business), will be credited to the shareholders' Fund account
on the second bank business day following such purchase order. To qualify
to use the Dreyfus TeleTransfer Privilege, the initial payment for purchase
of Fund 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 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 "Massachusetts Municipal Obligations" shall mean
debt obligations issued by the Commonwealth of Massachusetts, 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 Massachusetts personal income taxes. "Municipal
Obligations" and "Massachusetts 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. The Fund will purchase an unrated municipal
lease only if the Board of Trustees determines that credit quality is
adequate, including an assessment that the lease will not be cancelled.
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 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 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.
A separate account of the Fund consisting of cash or liquid debt
securities equal to the amount of the when-issued commitments will be
established with the Fund's custodian. When the time comes to pay for when-
issued securities, the Fund will meet its obligations from then-available
cash flow, sale of securities held in the separate account, sale of other
securities or, although it would not normally expect to do so, from the sale
of the when-issued securities themselves (which may have a value greater or
lesser than the Fund's payment obligations). Sale of securities to meet
such obligations carries with it a greater potential for the realization of
capital gains, which are not exempt from Federal income tax.
Purchase of Securities with Stand-by Commitments
Pursuant to an exemptive order issued by the SEC under the Act, the
Fund may acquire stand-by 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
Investing in Massachusetts Municipal Obligations. Investors should consider
carefully the special risks inherent in the Fund's investment in
Massachusetts Municipal Obligations. 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 through 1996 with a
positive fiscal balance in its general operating funds. 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.
Master Feeder Option
The Fund 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.
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 net 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. Further, the Fund has given a representation that
investments will not be made in real estate limited partnerships. Should
the Trust determine that any such commitment is no longer in the best
interests of the Fund and its shareholders, it will revoke the commitment by
terminating sales of the Fund's shares in the state involved.
Portfolio Transactions
Decisions to buy and sell securities for the Fund and effectuation of
securities transactions are made by Dreyfus, subject to the overall
supervision and review of the Trustees. The same personnel are also in
charge of portfolio transactions for other clients of other subsidiaries and
affiliates of Dreyfus.
Purchases and sales of portfolio securities for the Fund will generally
be transacted with the issuer or a primary market maker on a net basis,
without the payment by the Fund of any brokerage commission for such
purchases or sales. Purchases from dealers serving as primary market makers
will reflect the spread between the bid and asked prices. In selecting
dealers and in executing portfolio transactions, Dreyfus seeks, on behalf of
the Fund, the best overall terms available. In doing so, Dreyfus considers
all matters it deems relevant, including the breadth of the market in the
security, the price of the security and the financial condition and
executing capability of the dealer.
Dealers may be selected who provide brokerage and/or research services
to the Trust and/or other accounts over which Dreyfus or its affiliates
exercise investment discretion. Such services may include advice concerning
the value of securities; the advisability of investing in, purchasing or
selling securities; the availability of securities or the purchasers or
sellers of securities; furnishing analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy and
performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement).
The receipt of research from dealers may be useful to Dreyfus in rendering
investment management services to the Trust and/or its other clients; and,
conversely, such information provided by its brokers or dealers who have
executed transaction orders on behalf of other clients of Dreyfus may be
useful to Dreyfus in carrying out its obligation to the Trust.
The Fund will not purchase Municipal Obligations during the existence
of any underwriting or selling group relating thereto of which an affiliate
is a member, except to the extent permitted by the SEC. Under certain
circumstances, the Fund may be at a disadvantage because of this limitation
in comparison with other investment companies which have a similar
investment objective but are not subject to such limitations.
Dreyfus will make investment decisions for the Fund independently from
those made for its other clients, other funds and clients of other
affiliates of Dreyfus. On occasion, however, the same investment decisions
will be made for the Fund as for one or more of Dreyfus' clients at about
the same time. In a case in which the Fund and one of these other clients
are simultaneously engaged in the purchase or sale of the same security, the
transactions will, to the extent feasible and practicable, be averaged as to
price and allocated as to amount among the Fund and/or the other client or
clients pursuant to a formula considered equitable. In some cases, this
system could have a detrimental effect on the price or volume of the
security to be purchased or sold on behalf of the Fund. In other cases,
however, it is believed that coordination and the ability to participate in
volume transactions will be to the benefit of the Fund.
For the fiscal years ended June 30, 1995, 1996 and 1997, no brokerage
commissions were paid by the Fund.
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. The Fund provides Redemption Checks
("Checks") automatically upon opening an account, unless the investor
specifically refuses the Check Redemption Privilege by checking the
applicable "No" box on the Account Application. Checks will be sent only to
the registered owner(s) of the account and only to the address of record.
The Check Redemption Privilege may be established for an existing account by
a separate signed Shareholder Services Form. The Account Application or
Shareholder Services Form must be manually signed by the registered
owner(s). Checks are drawn on the investor's account and may be made
payable to the order of any person in an amount of $1,000 or more ($500 for
shareholders who have held Fund shares since May 8, 1996). 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. The fee will be waived if the closing balance in the
shareholder's account on the business day immediately preceding the
effective date of the transaction is $50,000 or more. 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, telephone or letter 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 May 8, 1996) 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. The fee will be waived if the closing balance
in the shareholder's account on the business day immediately preceding the
effective date of the transaction is $50,000 or more. 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 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.
Share 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 also 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 May 8, 1996) 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. The fee will be waived if the
closing balance in the shareholder's account on the business day immediately
preceding the effective date of the transaction is $50,000 or more. See
"Purchase of Fund Shares--Dreyfus TeleTransfer Privilege."
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, limited in
amount during any 90-day period to the lesser of $250,000 or 1% of the value
of the Fund's net assets at the beginning of such period. Such commitment
is irrevocable without the prior approval of the SEC. In the case of
requests for redemption in excess of such amount, the Trustees and executive
officers of the Trust reserve the right to make payments in whole or in part
in securities or other assets in case of an emergency or any time a cash
distribution would impair the liquidity of the Fund to the detriment of the
existing shareholders. In this event, the securities would be valued in the
same manner as the Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges would be incurred.
Suspension of Redemptions. The right to redeem Fund shares may be
suspended or the date of payment postponed (a) for any period during which
the NYSE is closed (other than for customary weekend or holiday closings);
(b) when trading in the markets the Trust normally uses is restricted or
when an emergency exists as determined by the SEC so that disposal of the
Fund's investments or determination of its net asset value is not reasonably
practicable, or (c) for such other periods as the SEC, by order, may permit
for protection of the Fund's shareholders.
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 Privilege, 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
have held Fund shares since May 8, 1996) 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. The fee will be waived
if the closing balance in the shareholder's account on the business day
immediately preceding the effective date of the transaction is $50,000 or
more. 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, Martin
Luther King, Jr. 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 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 May 8, 1996, 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, 1997, the Fund's yield was 3.43%,
effective yield was 3.49% and equivalent taxable yield* was 6.45%.
_______________________________
* Example assumes a Federal marginal tax rate of 39.6% and a
Massachusetts marginal tax rate of 12% (combined effective rate of
46.85%).
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 Massachusetts Municipal Obligations
will be designated as exempt from Commonwealth of Massachusetts taxation in
the same percentage of the day's dividend as the actual interest on
Massachusetts 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 Massachusetts state
and local personal income taxes on exempt-interest income derived from
obligations of issuers located in Massachusetts, 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 to "The Dreyfus/Laurel Tax-Free Municipal Funds" effective
October 17, 1994. On May 8, 1996, the Fund's name was changed from
"Dreyfus/Laurel Massachusetts Tax-Free Money Fund" to "Dreyfus BASIC
Massachusetts 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 14, 1997, the following companies/individuals owned
beneficially 5% or more of the outstanding Fund shares: Boston & Co., Attn:
John Kacinko, 3 Mellon Bank Center, Pittsburgh, PA 15259; 63.0% record;
James F. Wade, 1 Devonshire Street, Apt. 3113, Boston, MA 02109-3511; 3.72%;
Boston Safe Deposit and Trust, Attn: Mutual Fund Operations, P.O. Box 3198,
Pittsburgh, PA 15230-3198; 3.01% record; Lewis/Boyle, Inc., 197 8th Street,
Apt. 430, Charlestown, MA 02129-4231; 2.28% record; Boston Safe Deposit &
Trust Co. Attn: Mutual Fund Operations, P.O. Box 3198, Pittsburgh, PA 15230-
3198, 1.79% record; Russell L. Epker, 180 Marlborough St., Boston MA 02116-
1800; 1.48% record; Seiyen, Farrington & Edward E. Farrington JTWROS, PO.
Box 319, Belmont, MA 02178-0003, 1.21% record.
CUSTODIAN AND TRANSFER AGENT
Mellon Bank, which is located at One Mellon Bank Center, Pittsburgh, PA
15258, serves as the Fund's custodian. Dreyfus Transfer, Inc., a wholly-
owned subsidiary of Dreyfus, located at One American Express Plaza,
Providence, Rhode Island 02903, and serves as 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, 1998, 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 financial statements of the Fund as of and for the fiscal year
ended June 30, 1997, including notes to the financial statements and
supplementary information, and the Independent Auditors Report, are included
in the Annual Report to shareholders. A copy of the Annual Report
accompanies this Statement of Additional Information. The financial
statements included in the Annual Report, and the Independent Auditors
Report thereon, contained therein, and related notes, are incorporated
herein by reference.
.
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 base don 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
benefited 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).
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, and expects
to do so at the close of the fiscal 1997.
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 heath insurance costs reflects this trend. In fiscal 1993,
Medicaid was the largest item in Massachusetts' budget and has been one of
the fastest growing budge 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, and 11.8% increase over
fiscal 1992. Medicaid expenses in fiscal 1994 were $3.31 billion and in
fiscal 1995 $3.398 billion, and in fiscal 1996 they were $3.415 billion.
The average annual growth from fiscal 1992 to fiscal 1996 was 3.9% 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 7.6% from $751.5 million in fiscal 1992 to $1.005
billion in fiscal 1996.
Payments for debt service on Massachusetts general obligation bonds and
notes have risen at an average annual rate of 10.27% from $649.8 million in
fiscal 1989 to $1.184 billion in fiscal 1996. Debt service payments were
$898.3 million in fiscal 1992, $1.14 billion in fiscal 1993 and $1.15
billion in fiscal 1994, $1.23 billion fiscal 1995 and $1.18 billion in
fiscal 1996. 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 totaled $240 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) .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(i) 2.5% of the total
charges and fees imposed in the preceding fiscal year, and (ii) an 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 19.2% of Massachusetts' budget was allocated to Local Aid.
Direct Local id 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 $3.246 billion in fiscal 1996. Recent increased are
largely a result of comprehensive education reform legislation enacted in
1993 that requires annual increased in state expenditures for education
funding, subject to annual legislative appropriations, above a fiscal 1993
base of approximately $1.288 billion. Increased 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
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.
DREYFUS BASIC CALIFORNIA MUNICIPAL MONEY MARKET FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
NOVEMBER 1, 1997
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, 1997, 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-8
Investment Policies........................................ B-9
Redemption of Fund Shares.................................. B-21
Shareholder Services....................................... B-23
Determination of Net Asset Value........................... B-25
Performance Information.................................... B-26
Dividends, Other Distributions and Taxes................... B-27
Information About the Fund................................. B-28
Principal Shareholders..................................... B-30
Custodian and Transfer Agent............................... B-30
Counsel and Independent Auditors........................... B-31
Financial Statements....................................... B-31
Appendix A - Risk Factors - Investing in
California Municipal Obligations......................... B-32
Appendix B - Information about Securities Ratings.......... B-45
MANAGEMENT OF THE TRUST
Trustees and Officers
The Trust has a Board composed of eleven Trustees which supervises the
Fund'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").
Trustees of the Trust
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; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 83 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.; from November 1995 to January 1997, Director, Access
Capital Strategic Community Investment Fund, Inc. - Bank Portfolio.
Age: 80 years old. Address: Massachusetts Business Development Corp.,
50 Milk Street, Boston, Massachusetts 02109.
o+JOSEPH S. DiMARTINO. Trustee of the Trust. Since January 1995, Mr.
DiMartino has served as Chairman of the Board for various funds in the
Dreyfus Family of Funds. He is also Chairman of the Board of Noel
Group, Inc., a venture capital company, and Staffing Resources, Inc., a
temporary placement agency. Mr. DiMartino also serves as a Director of
The Muscular Dystrophy Association, HealthPlan Services Corporation, a
provider of marketing, administrative and risk management services to
health and other benefit programs, Carlyle Industries, Inc., (formerly,
Belding Heminway Company, Inc.), a button purchaser and distributor,
and Curtis Industries, Inc., a national distributor of security
products, chemicals, and automotive and other hardware. Mr. DiMartino
is also a Board member of 152 other funds in the Dreyfus Family of
Funds. From November 1995 to January 1997, Director, Access Capital
Strategic Community Investment Fund, Inc. - Institutional Investment
Portfolio and Bank Portfolio. For more than five years prior to
January 1995, he was President, a director and, until August 1994,
Chief Operating Officer of Dreyfus and Executive Vice President and a
director of Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus and, until August 24, 1994, the Fund's distributor. From
August 1994 until December 31, 1994, he was a director of Mellon Bank
Corporation. Age: 54 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.; from November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Bank Portfolio. Age: 63 years old. Address: 40 Norfolk
Road, Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Trustee of the Trust; Partner, Reed, Smith, Shaw &
McClay (law firm); from November 1995 to January 1997, Director, Access
Capital Strategic Community Investment Fund, Inc. - Bank Portfolio.
Age: 69 years old. Address: 204 Woodcock Drive, Pittsburgh,
Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Trustee of the Trust; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; Director, National Picture
Frame Corporation; former Chairman of the Board and Director, Rexene
Corporation; Chairman of the Board and Director, Tetra Corporation 1991-
1993; Director, Medalist Corporation 1992-1993. From November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Institutional Investment Portfolio. Age: 76 years old.
Address: Way Hollow Road and Woodland Road, Sewickley, Pennsylvania
15143.
o+KENNETH A. HIMMEL. Trustee of the Trust; Former Director, The Boston
Company, Inc. ("TBC") and Boston Safe Deposit and Trust Company;
President and Chief Executive Officer, Himmel & Co., Inc.; Vice
Chairman, Sutton Place Gourmet, Inc.; Managing Partner, Franklin
Federal Partners. From November 1995 to January 1997, Director, Access
Capital Strategic Community Investment Fund, Inc. - Bank Portfolio..
Age: 51 years old. Address: Himmel and Company, Inc., 399 Boylston
Street, 11th Floor, Boston, Massachusetts 02116.
o*ARCH S. JEFFERY. Trustee of the Trust; Financial Consultant. From
November 1995 to January 1997 Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 80 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.; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 50 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; from November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. -
Institutional Investment Portfolio. Age: 66 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.; from November 1995 to January 1997.
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: 48 years old. Address: 25 Braddock Park, Boston, Massachusetts
02116-5816.
_______________________________________________
* "Interested person" of the Trust, as defined in the Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
Officers of the Trust
#MARIE E. CONNOLLY. President and Treasurer of the Trust. President, Chief
Executive Officer, Chief Compliance Officer and a director of Premier
and Funds Distributor, Inc., the ultimate parent of which is Boston
Institutional Group, Inc. Age: 40 years old.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Trust.
Assistant Vice President of Funds Distributor, Inc. From April 1993 to
January 1995, he was a Senior Fund Accountant for Investors Bank &
Trust Company. From December 1991 to March 1993, he was employed as a
Fund Accountant at TBC. Age: 28 years old.
#RICHARD W. INGRAM. Vice President and Assistant Treasurer of the Trust.
Vice President of Premier and Funds Distributor, Inc. From March 1994
to November 1995, he was Vice President and Division Manager for First
Data Investor Services Group. From 1989 to 1994, he was Vice
President, Assistant Treasurer and Tax Director-Mutual Funds of TBC.
Age: 42 years old.
#ELIZABETH A. KEELEY. Vice President and Assistant Secretary of the Trust.
Vice President of Premier and Funds Distributor, Inc. She has been
employed by Premier since 1995. Age: 28 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Trust. Vice
President of Premier and Funds Distributor, Inc. From September 1989
to July 1994, she was an Assistant Vice President and Client Manager
for TBC. Age: 33 years old.
#JOHN E. PELLETIER. Vice President and Secretary of the Trust. Senior Vice
President, General Counsel, Secretary, and Clerk of Premier and Funds
Distributor, Inc. From February 1992 to July 1994 he served as Counsel
for the Boston Company Advisors, Inc. Age: 33 years old.
#MICHAEL S. PETRUCELLI. Vice President and Assistant Treasurer of the
Trust. Senior Vice President of Funds Distributor, Inc. From December
1989 through November 1996 he was employed with GE Investment Services
where he held various financial, business development and compliance
positions. He also served as Treasurer of the GE Funds and as Director
of the GE Investment Services. Age: 36 years old.
#JOSEPH F. TOWER, III. Vice President and Assistant Treasurer of the Trust.
Senior Vice President, Treasurer and Chief Financial Officer of Premier
and Funds Distributors, 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: 35 years old.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
____________________________________
# Officer also serves as an officer for other investment companies
advised by Dreyfus, including The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Funds, Inc.
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 14,
1997.
For the fiscal year ended June 30, 1997, 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:
Total Compensation
from the Trust
Aggregate and Fund
Name of Board Compensation from Complex Paid to
Member the Trust# Board Member+
Ruth Marie Adams $ 10,250 $ 31,500
Francis P. Brennan* $19,833 $ 63,750
Joseph S. DiMartino** none $517,076***
James M. Fitzgibbons $11,166 $ 31,500
J. Tomlinson Fort** none none
Arthur L. Goeschel $11,500 $ 32,500
Kenneth A. Himmel $10,833 $ 30,750
Arch S. Jeffery** none none
Stephen J. Lockwood $10,833 $ 33,250
John J. Sciullo $11,500 $ 32,500
Roslyn M. Watson $11,166 $ 32,500
_____________________________
# 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 $4,295.88 for the Trust.
* Compensation of Francis P. Brennan includes a $25,000 retainer paid by the
Dreyfus/Laurel Funds to be the Chairman of the Board.
** For the fiscal year ended June 30, 1997, Joseph S. DiMartino, J. Tomlinson
Fort and Arch S. Jeffery were 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, 1997, 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 $399.27, $1,400.89
and $381.73, respectively, and for serving as a Board member of all funds
in the Dreyfus/Laurel Funds (including the Trust) were $32,500, $37,500 and
$32,500, respectively. In addition, Dreyfus reimbursed Messrs. DiMartino,
Fort and Jeffery a total of $2,181.89 for expenses attributable to the
Trust's Board meetings which is not included in the $4,295.88 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 152 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 November 20, 1995. Dreyfus is a wholly-owned subsidiary of
Mellon Bank, N.A. ("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. The Prior Management
Agreement 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 last approved by the
shareholders of the Fund on March 29, 1994. The Prior Management Agreement
became effective on April 4, 1994. As stated above, Dreyfus, a wholly-owned
subsidiary of Mellon Bank, is the current Investment Manager pursuant to the
Investment Management Agreement, which was last approved by the Trust's
Board of Trustees on January 31, 1997 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. Dreyfus may waive all or
a portion of its fees payable by the Fund from time to time. 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 (although the Fund will waive such fees if the closing
balance in the shareholders account on the business day immediately
preceding the effective date of the transaction is $50,000 or more) and the
fee payable by the Fund to Dreyfus is not reduced by the amount of charges
payable to the Transfer Agent.
The Investment Management Agreement will remain in effect through April
4, 1998 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; William T. Sandalls, Jr.,
Senior Vice President and Chief Financial Officer; Paul Kadin, 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, William V. Healey, Assistant Secretary; and
Mandell L. Berman, Burton C. Borgelt and Frank V. Cahouet, directors.
The following table shows the fees paid by the Fund to Mellon Bank (as
the prior investment adviser) and to Dreyfus (the current investment
manager), including any fee waivers or expense reimbursements by Mellon Bank
or Dreyfus, during the Fund's fiscal years ended June 30, 1995, 1996 and
1997.
1997 1996(3) 1995(1)
Fee Fee Fees Fees Fees
Paid(2) Waived(2) Paid(2) Waived(2) Paid
Dreyfus BASIC $248,756 $20,799 $88,979 $17,286 $90,816
California Municipal
Money Market Fund
_______________________________
(1) From April 4, 1994 through October 16, 1994, Mellon Bank served as the
Fund's investment manager.
(2) Dreyfus voluntarily agreed to limit its investment management fee, or
reimburse the Fund for its expenses, in order to ensure that the Fund's
expenses did not exceed .35% (annualized) of the value of the Fund's
average daily net assets from November 20, 1995 through November 19, 1996.
(3) Prior to November 20, 1995, Dreyfus served as investment manager to the
Fund under the Prior Management Agreement.
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.
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. To qualify
to use the Dreyfus TeleTransfer Privilege, the initial payment for purchase
of Fund shares must be drawn on, and redemption proceeds paid to, the same
bank and account as are designated on the Account Application or Shareholder
Services Form on file. If the proceeds of a particular redemption are to be
wired to an account at any other bank, the request must be in writing and
signature-guaranteed. See "Redemption of Fund Shares--Dreyfus TeleTransfer
Privilege."
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year the account is closed or during the following calendar year,
provided the information on the old Account Application is still applicable.
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.
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 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 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 stand-by 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. A
severe recession from 1990 through fiscal 1994 reduced revenues and
increased expenditures for social welfare programs, resulting in a period of
budget imbalance. During this period, expenditures exceeded revenues in
four out of six years, and the State accumulated and sustained a budget
deficit in its budget reserve, the Special Fund for Economic Uncertainties,
approaching $2.8 billion at its peak at June 30, 1993. By the 1993-94
fiscal year, the accumulated budget deficit was so large that it was
impractical to budget to retire it in one year, so a two-year program was
implemented, using the issuance of revenue anticipation warrants to carry a
portion of the deficit over the end of the fiscal year. When the economy
failed to recover sufficiently, a second two-year plan was implemented in
1994-95, again using cross-fiscal year revenue anticipation warrants to
partly finance the deficit into the 1995-96 fiscal year. As a consequence
of the accumulated budget deficits, the State's cash resources available to
pay its ongoing obligations were significantly reduced causing the State to
rely increasingly on external debt markets to meet its cash needs. Future
budget problems or a deterioration in California's general financial
condition may have the effect of impairing the ability of the issuers of
California Municipal Obligations to pay interest on, or repay the principal
of, such California Municipal Obligations. As a result of the deterioration
of the State's budget and cash situation between October 1991 and July 1994,
the rating on the State's general obligation bonds was reduced by S&P from
AAA to A, by Moody's from Aaa to A1 and by Fitch from AAA to A. These and
other factors may have the effect of impairing the ability of the issuers of
California Municipal Obligations to pay interest on, or repay principal of,
such California Municipal Obligations. Investors should review "Appendix A"
which sets forth additional information relating to investing in California
Municipal Obligations.
Master Feeder Option
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.
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.
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
affiliates 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, 1997, 1996 and 1995, 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. The Fund provides Redemption Checks
("Checks") automatically upon opening an account, unless the investor
specifically refuses the Check Redemption Privilege by checking the
applicable "No" box on the Account Application. Checks will be sent only to
the registered owner(s) of the account and only to the address of record.
The Check Redemption Privilege may be established for an existing account by
a separate signed Shareholder Services Form. The Account Application or
Shareholder Services Form must be manually signed by the registered
owner(s). Checks are drawn on the investor's Fund account and 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. The fee will be waived if
the closing balance in the shareholder's account on the business day
immediately preceding the effective date of the transaction is $50,000 or
more. When a Check is presented to the Transfer Agent for payment, the
Transfer Agent, as the investor's agent, will cause the Fund to redeem a
sufficient number of shares in the investor's account to cover the amount of
the Check and the $2.00 charge. Dividends are earned until the Check
clears. After clearance, a copy of the Check will be returned to the
investor. Investors generally will be subject to the same rules and
regulations that apply to checking accounts, although election of this
Privilege creates only a shareholder-transfer agent relationship with the
Transfer Agent.
If the amount of the Check, plus any applicable charges, is greater
than the value of the shares in an investor's account, the Check will be
returned marked insufficient funds. Checks should not be used to close an
account.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone or letter 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.
Share 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 also 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. The fee will be waived
if the closing balance in the shareholder's account on the business day
immediately preceding the effective date of the transaction is $50,000 or
more. See "Purchase of Fund Shares--Dreyfus TeleTransfer Privilege."
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, limited in
amount during any 90-day period to the lesser of $250,000 or 1% of the value
of the Fund's net assets at the beginning of such period. Such commitment
is irrevocable without the prior approval of the SEC. In the case of
requests for redemption in excess of such amount, the Trustees and executive
officers of the Trust reserve the right to make payments in whole or in part
in securities or other assets in case of an emergency or any time a cash
distribution would impair the liquidity of the Fund to the detriment of the
existing shareholders. In this event, the securities would be valued in the
same manner as the Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges would be incurred.
Suspension of Redemptions. The right to redeem Fund shares may be
suspended or the date of payment postponed (a) for any period during which
the NYSE is closed (other than for customary weekend or holiday closings);
(b) when trading in the markets the Trust normally uses is restricted or
when an emergency exists as determined by the SEC so that disposal of the
Fund's investments or determination of its net asset value is not reasonably
practicable, or (c) for such other periods as the SEC, by order, may permit
for protection of the Fund's shareholders.
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. The fee will be waived if the closing balance in the
shareholder's account on the business day immediately preceding the
effective date of the transaction is $50,000 or more. 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, Martin
Luther King, Jr. Day, President's Day, 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, 1997, the Fund's yield was 3.53%,
effective yield was 3.59% and equivalent taxable yield* was 6.44%.
_______________________________
* Example assumes a Federal marginal tax rate of 39.6% and a California
marginal tax rate of 9.3% (combined effective rate of 45.22%).
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 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 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 14, 1997, the following companies/individuals owned
beneficially or of record 5% or more of the outstanding shares of the Fund:
Boston & Co., Attention: John Kackino, 3 Mellon Bank Center, Pittsburgh, PA.
15259; 29.1% record; Matthew R. Barger, 3449 Pacific Avenue, San Francisco,
CA 94118-2029; 17.7% record; Charles R. Michael, 235 Montgomery Street,
Suite 969, San Francisco, CA 94104-3002; 3.3% record; Louis Reda Ttee,
Louis Reda Family Trust, 2170 Century Park, E Apt.1602S, Los Angeles, CA
90067-2231; 3.7% record; Scott Hedrick, 3000 Sand Hill Road, Suite 255,
Menlo Park, CA 94025-7116; 3.6% record; ABKO Trust, P.O. Box 6716, San
Pedro, CA 90734-6716; 3.1% record; Boston & Company, Mutual Funds
Operations, P.O. Box 3198, Pittsburgh, PA 15230-3198; 3.0% 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, 1998, 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 financial statements of the Fund as of and for the fiscal year
ended June 30, 1997, including notes to the financial statements and
supplementary information, and the Independent Auditors Report, are included
in the Annual Report to shareholders. A copy of the Annual Report
accompanies this Statement of Additional Information. The financial
statements included in the Annual Report, and the Independent Auditors'
Report thereon, are incorporated herein by reference.
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
years ending with 1991-92. However, at June 30, 1996, according to the
Department of Finance, the State's Special Fund for Economic Uncertainties
("SFEU") had a small negative balance of approximately $87 million, all but
eliminating the accumulated budget deficit from early 1990's.
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.
The State issued $3.0 billion of revenue anticipation notes for 1996-97
fiscal year end on August 7, 1996, which matured on June 30, 1997.
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 1996-97 Fiscal Year Budget projects $47.6 billion of General Fund
revenues and transfers and $47.3 billion of budgeted expenditures.
It projects $50.7 billion of General Fund revenues and transfers and
$50.3 billion of budgeted expenditures and projects a balance in the SEFU of
$552 million on June 30, 1998.
The 1997-98 Fiscal Year Budget was released by the Governor on January
9, 1997.
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
200 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 County Funds' loss at about $1.69 billion, or about 23% of
their initial deposits of approximately $7.5 billion. Many of the entities
which deposited monies in the Funds, including the County, are facing cash
flow difficulties because of the bankruptcy filing and may be required to
reduce programs or capital projects. This may also effect their ability to
meet there outstanding obligations.
The State has no existing obligation with respect to any outstanding
obligations or securities of the County or any of the other participating
entities. However, in the event the County is unable to maintain county
administered State programs because of insufficient resources, it may be
necessary for the State to intervene, but the State cannot presently predict
what, if any, action may occur.
State Finances. State moneys are segregated into the General Fund and
approximately 800 Special Funds including, Bond, Trust and Pension 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, 1996, the General Fund had outstanding loans from the SFEU and Special
Funds in the amount of $1.5 billion.
Articles XIIIA and XIIIB. XIIC and XIIID 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 1993-94 fiscal year, the State appropriations limit was $36.60
billion, and appropriations subject to limitation were $6.55 billion under
the limit. The limit for the 1994-95 fiscal year was $37.55 billion, and
appropriations subject to limitations were $5.93 billion under the limit.
The limit for the 1992 fiscal year was $39.31 billion, and the
appropriations subject to limitation were estimated to be $5.12 billion
under the limit. The limit for the 1996-97 fiscal year was $42 billion, and
the appropriations subject to limitation were estimated to be $7.12 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.
In November 1996, State voters approved Proposition 218, which added
Articles XIIIC and XIIID to the State Constitution generally requiring voter
approval of most tax or fee increases by local governments and curtailing
local governments' use of benefit assessments to fund certain property-
related services to finance infrastructure. The amendments extend to all
local government entities the requirement that all taxes for general
purposes be approved by a majority vote and that all taxes for special
purposes be approved by a two-thirds majority vote (including the
ratification of those taxes that have been imposed since January 1, 1995 up
to the effective date of the amendments). Proposition 218 also limits the
use of special assessments or "property-related" fees to services or
infrastructure that confer a "special benefit" to specific property; police,
fire and other services are now deemed to benefit the public at large and,
therefore, could not be funded by special assessments. Finally, the
amendments enable the voters to use their initiative power to repeal previously-
authorized taxes, assessments, fees and charges. It remains to
be seen what impact these Articles will have on existing and future
California debt obligations.
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. After 1995, the maximum personal
income tax rate returned to 9.3%, and the AMT rate dropped from 8.5% to 7%.
The personal income tax is adjusted annually by the change in the
consumer price index to prevent taxpayers from being pushed into higher tax
brackets without a real increase in income.
The sales tax is imposed upon retailers for the privilege of selling
tangible personal property in California. Most retail sales and leases are
subject to the tax. However, exemptions have been provided for certain
essentials such as food for home consumption, prescription drugs, gas,
electricity and water. Sales tax accounted for about 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, proposed a two-year solution to
pass the accumulated deficit. 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 1995-96 Budget Act was signed by the Governor on August 3, 1995, 34
days after the start of the fiscal year. The Budget Act projected General
Fund revenues and transfers of $44.1 billion, a 3.5% increase from the prior
year. Expenditures were budgeted at $43.4 billion, a 4% increase. The
Budget Act also projected Special Fund revenues of $12.7 billion and
appropriated Special Fund expenditures of $13.0 billion.
Final data for the 1995-96 Fiscal Year showed revenues and transfers of
$46.1 billion, some $2 billion over the original fiscal year estimate, which
was attributed to the strong economic recovery. Expenditures also
increased, to an estimated $45.4 billion, as a result of the requirement to
expend revenues for schools under Proposition 98, and among other things,
failure of the federal government to enact welfare reform during the fiscal
year and to budget new aid for illegal immigrant costs, both of which had
been counted on to allow reductions in State costs. Available internal
borrowable resources (available cash, after payment of all obligations due)
on June 30, 1996 was approximately $3.8 billion, representing a significant
improvement in the State's cash position, and ending the need for deficit
borrowing over the end of the fiscal year. The State's improved cash
position allowed it to repay the $4.0 billion Revenue Anticipation Warrant
issue on April 25, 1996, and to issue only $2.0 billion in revenue
anticipation notes during the fiscal year, which matured on June 28, 1996.
The 1996-97 Budget Act was signed by the Governor on July 15, 1996,
along with various implementing bills. The Governor vetoed about $82
million of appropriations (both General Fund and Special Fund). With the
signing of the Budget Act, the State implemented its regular cash flow
borrowing program with the issuance of $3.0 billion of Revenue Anticipation
Notes to mature on June 30, 1997. The Budget Act appropriated a modest
budget reserve in the SFEU of $305 million, as of June 30, 1997. The
Department of Finance projected that, on June 30, 1997, the State's
available internal borrowable (cash) resources will be $2.9 billion, and
after payment of all obligations due by that date, so that no cross-fiscal
year borrowing will be needed.
The Legislature rejected the Governor's proposed 15% cut in personal
income taxes (to be phased in over three years), and did not approve a 5%
cut in bank and corporation taxes, which was to be effective for income
years starting on January 1, 1997. As a result, revenues for the fiscal
year were estimated to total $47.64 billion, a 3.3% increase over the final
estimated 1995-96 revenues. Special Fund revenues were estimated to be
$13.3 billion.
The Budget Act contained General Fund appropriations totaling $47.25
billion, a 4.0% increase over the final estimated 1995-96 expenditures.
Special Fund expenditures were budgeted at $12.6 billion.
With the continued strong economic recovery in the State, the
Department of Finance has estimated, in connection with the release of the
Governor's 1997-98 Budget Proposal, that revenues for the 1996-97 fiscal
year will exceed initial projections by about $760 million. This increase
will be offset by higher expenditures for K-14 school aid (pursuant to
Proposition 98) and for health and welfare costs, because Federal law
changes and other Federal actions did not provide as much assistance to the
State as was initially planned in the Budget Act. The Department's updated
projections show a balance in the SFEU of $197 million, slightly lower than
projected in July 1996. The Department also projects the State's cash
position will be stronger than originally estimated, with unused internal
borrowable resources at June 30, 1997 of approximately $4.3 billion.
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.
DREYFUS BASIC NEW YORK MUNICIPAL MONEY MARKET FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
NOVEMBER 1, 1997
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,
1997, 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-8
Investment Policies........................................ B-10
Redemption of Fund Shares.................................. B-21
Shareholder Services....................................... B-24
Determination of Net Asset Value........................... B-25
Performance Information.................................... B-26
Dividends, other Distributions and Taxes................... B-27
Information about the Fund................................. B-29
Principal Shareholders..................................... B-30
Custodian and Transfer Agent............................... B-30
Counsel and Independent Auditors........................... B-31
Financial Statements....................................... B-31
Appendix A - Risk Factors - Investing in
New York Municipal Obligations........................... B-32
Appendix B - Information about Securities Ratings.......... B-45
MANAGEMENT OF THE TRUST
Trustees and Officers
The Trust has a Board composed of eleven Trustees which supervises the
Fund'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").
Trustees of the Trust
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; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 83 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.; from November 1995 to January 1997, Director, Access
Capital Strategic Community Investment Fund, Inc. - Bank Portfolio.
Age: 80 years old. Address: Massachusetts Business Development Corp.,
50 Milk Street, Boston, Massachusetts 02109.
o+JOSEPH S. DiMARTINO. Trustee of the Trust. Since January 1995, Mr.
DiMartino has served as Chairman of the Board for various funds in the
Dreyfus Family of Funds. He is also Chairman of the Board of Noel
Group, Inc., a venture capital company, and Staffing Resources, Inc. a
temporary placement agency. Mr. DiMartino also serves as a Director of
The Muscular Dystrophy Association, HealthPlan Services Corporation, a
provider of marketing, administrative and risk management services to
health and other benefit programs, Carlyle Industries, Inc. (formerly
Belding Heminway Company, Inc.), a button purchaser and distributor,
and Curtis Industries, Inc., a national distributor of security
products, chemicals and automotive and other hardware. Mr. DiMartino
is also a Board member of 152 other funds in the Dreyfus Family of
Funds. From November 1995 to January 1997, Director, Access Capital
Strategic Community Investment Fund, Inc. - Institutional Investment
Portfolio and Bank Portfolio. For more than five years prior to
January 1995, he was President, a director and, until August 1994,
Chief Operating Officer of Dreyfus and Executive Vice President and a
director of Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus, and until August 24, 1994, the Fund's distributor. From
August 1994 to December 31, 1994, he was a director of Mellon Bank
Corporation. Age: 54 years old. His address is 200 Park Avenue, New
York, New York 10166.
o+JAMES M. FITZGIBBONS. Trustee of the Trust; Chairman, Howes Leather
Company, Inc.; Director, Fiduciary Trust Company; Chairman, CEO and
Director, Fieldcrest-Cannon Inc.; Director, Lumber Mutual Insurance
Company; Director, Barrett Resources, Inc.; from November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Bank Portfolio. Age: 63 years old. Address: 40 Norfolk
Road, Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Trustee of the Trust; Partner, Reed, Smith, Shaw &
McClay (law firm); from November 1995 to January 1997, Director, Access
Capital Strategic Community Investment Fund, Inc. - Bank Portfolio.
Age: 69 years old. Address: 204 Woodcock Drive, Pittsburgh,
Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Trustee of the Trust; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; Director, National Picture
Frame Corporation; former Chairman of the Board and Director, Rexene
Corporation; Chairman of the Board and Director, Tetra Corporation 1991-
1993; Director, Medalist Corporation 1992-1993; from November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Institutional Investment Portfolio. Age: 76 years old.
Address: Way Hollow Road and Woodland Road, Sewickley, Pennsylvania
15143.
o+KENNETH A. HIMMEL. Trustee of the Trust; Former Director, The Boston
Company, Inc. ("TBC") and Boston Safe Deposit and Trust Company;
President and Chief Executive Officer, Himmel & Co., Inc.; Vice
Chairman, Sutton Place Gourmet, Inc.; Managing Partner, Franklin
Federal Partners; from November 1995 to January 1997, Director, Access
Capital Strategic Community Investment Fund, Inc. - Bank Portfolio;.
Age: 51 years old. Address: Himmel and Company, Inc., 399 Boylston
Street, 11th Floor, Massachusetts 02116.
o*ARCH S. JEFFERY. Trustee of the Trust; Financial Consultant; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 80 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.; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 50 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; from November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. -
Institutional Investment Portfolio. Age: 66 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.; from November 1995 to January 1997,
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: 48 years old. Address: 25 Braddock Park, Boston, Massachusetts
02116-5816.
_____________________________
* "Interested person" of the Trust, as defined in the Act.
o Member of the Audit Committee
+ Member of the Nominating Committee
Officers of the Trust
#MARIE E. CONNOLLY. President and Treasurer of the Trust. President, Chief
Executive Officer, Chief Compliance Officer and director of Premier and
Funds Distributor, Inc., the ultimate parent of which is Boston
Institutional Group, Inc. Age: 40 years old.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Trust.
Assistant Vice President of Funds Distributor, Inc. From April 1993 to
January 1995, he was a Senior Fund Accountant for Investors Bank &
Trust Company. From December 1991 to March 1993, he was employed as a
Fund Accountant at TBC. Age: 28 years old.
#RICHARD W. INGRAM. Vice President and Assistant Treasurer of the Trust.
Vice President of Premier and Funds Distributor, Inc. From March 1994
to November 1995, he was Vice President and Division Manager for First
Data Investor Services Group. From 1989 to 1994, he was Vice
President, Assistant Treasurer and Tax Director-Mutual Funds of TBC.
Age: 42 years old.
#ELIZABETH A. KEELEY. Vice President and Assistant Secretary of the Trust.
Vice President of Premier and Funds Distributor, Inc. She has been
employed by Premier since 1995. Age: 28 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Trust. Vice
President of Premier and Funds Distributor, Inc. From September 1989
to July 1994, she was an Assistant Vice President and Client Manager
for TBC. Age: 33 years old.
#JOHN E. PELLETIER. Vice President and Secretary of the Trust. Senior Vice
President, General Counsel, Secretary and Clerk of Premier and Funds
Distributor, Inc. From February 1992 to July 1994, he served as
Counsel for the Boston Company Advisors, Inc. Age: 33 years old.
#MICHAEL S. PETRUCELLI. Vice President and Assistant Treasurer of the
Trust. Senior Vice President of Premier and Funds Distributor, Inc.
From December 1989 through November 1996 he was employed by GE
Investment Services where he held various financial, business
development and compliance positions. He also served as Treasurer of
the GE Funds and as Director of the GE Investment Services. Age 36
years old.
#JOSEPH F. TOWER, III. Vice President and Assistant Treasurer of the Trust.
Senior Vice President, Treasurer and Chief Financial Officer of Premier
and Funds Distributor, 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: 35 years old.
__________________________________
# Officer also serves as an officer for other investment companies
advised by Dreyfus, including The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Funds, Inc.
The address of each officer of the Trust is 200 Park Avenue, New York,
New York 10166.
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 14,
1997.
For the fiscal year ended June 30, 1997, 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:
Total Compensation
from the Trust and Fund
Name of Board Aggregate Compensation Complex Paid
Member from Trust# to Board member+
Ruth Marie Adams $ 10,250 $31,500
Francis P.Brennan* $19,833 $63,750
Joseph S. DiMartino** none $517,076***
James M. Fitzgibbons $11,166 $31,500
J. Tomlinson Fort** none none
Arthur L. Goeschel $11,500 $32,500
Kenneth A. Himmel $10,833 $30,750
Arch S. Jeffery** none none
Stephen J. Lockwood $10,833 $ 33,250
John J. Sciullo $11,500 $32,500
Roslyn M. Watson $11,166 $32,500
_____________________________
# 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 $4,295.88 for the Trust.
* Compensation of Francis P. Brennan includes a $25,000 retainer paid by
the Dreyfus/Laurel Funds to be the Chairman of the Board.
** For the fiscal year ended June 30, 1997, Joseph S. DiMartino, J.
Tomlinson Fort and Arch S. Jeffery were 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, 1997, 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 $399.27, $1,400.89 and $381.73
respectively, and for serving as a Board member of all funds in the
Dreyfus/Laurel Funds (including the Trust) were $32,500, $37,500 and
$32,500, respectively. In addition, Dreyfus reimbursed Messrs.
DiMartino, Fort and Jeffery a total of $2,181.89 for expenses
attributable to the Trust's Board meetings which is not included in the
$4,295.88 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 152 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, N.A. ("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. The Prior Management
Agreement was last approved by the Trustees, including a majority of the
Trustees who are not "interested persons" of the Trust or Mellon Bank, on
November 22, 1993, (subject to shareholder approval) and approved by the
shareholders of the Fund on March 29, 1994. The Prior Management Agreement
became effective on April 4, 1994. As stated above, Dreyfus, a wholly-owned
subsidiary of Mellon Bank, is the current Investment Manager pursuant to the
Investment Management Agreement, which was last approved by the Trust's
Board of Trustees on January 31, 1997 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 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. Dreyfus may waive all or
a portion of its fees payable by the Fund from time to time. 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, although the Fund will waive such fees if the closing
balance in the shareholder's account on the business day immediately
preceding the effective date of the transaction is $50,000 or more, and the
fee payable by the Fund to Dreyfus is not reduced by the amount of charges
payable to the Transfer Agent.
The Investment Management Agreement will remain in effect through April
4, 1998 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; William T. Sandalls, Jr.,
Senior Vice President and Chief Financial Officer; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Paul Kadin, Vice President,
Corporate Development, 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; William V. Healey, Assistant Secretary; and
Mandell L. Berman, Burton C. Borgelt, Frank V. Cahouet, directors.
The following table shows the fees paid by the Fund to Mellon Bank (as
the prior investment adviser) or Dreyfus, including any fee waivers or
expense reimbursements, during the Fund's fiscal years ending June 30, 1995,
1996 and 1997.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1997 1996(3) 1995*(3)
Fee Fee Fee Fee Fee
Paid (2) Waived (2) Paid (2) Waived (2) Paid (1)
Dreyfus BASIC $974,598 $94,701 $251,149 $59,061 $48,800 New York
Municipal
Money Market Fund
</TABLE>
_______________________________
* From April 4, 1994 through October 16, 1994 Mellon Bank served as the
Fund's investment manager.
(1) For the fiscal year ended June 30, 1995, there were no fee waivers or
expense reimbursements.
(2) Dreyfus voluntarily 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 did not exceed .35% (unrealized) of the value of the
Fund's average daily net assets from December 8, 1995 through December
7, 1996.
(3) Prior to November 20, 1995, Dreyfus served as investment manager to the
Fund under the Prior Management Agreement.
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.
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. To qualify
to use the Dreyfus TeleTransfer Privilege, the initial payment for purchase
of Fund 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.
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.
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 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 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 stand-by 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
issue deficit notes during the fiscal periods 1989 through 1992. The
State's financial operations have improved, however, during recent fiscal
years. For its fiscal periods 1993 through 1996, the State recorded
balanced budgets on a cash basis, with substantial fund balances in the
General Fund in fiscal 1993-93 and 1993-94 and smaller fund balances in
fiscal 1994-95 and 1995-96. 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. 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 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.
Master Feeder Option
The Trust may in the future seek to achieve the Fund's investment
objective by investing all of the Fund's assets in another investment
company having the same investment 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.
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.
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
affiliates 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, 1997, 1996 and 1995, 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. The Fund provides Redemption Checks
("Checks") automatically upon opening an account, unless the investor
specifically refuses the Check Redemption Privilege by checking the
applicable "No" box on the Account Application. Checks will be sent only to
the registered owner(s) of the account and only to the address of record.
The Check Redemption Privilege may be established for an existing account by
a separate signed Shareholder Services Form. The Account Application or
Shareholder Services Form must be manually signed by the registered
owner(s). Checks are drawn on the investor's Fund account and may be made
payable to the order of any person in an amount of $1,000 or more ($500 for
shareholders who have 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. The fee will be waived if the closing balance in the
shareholder's account on the business day immediately preceding the
effective date of the transaction is $50,000 or more. 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, telephone or letter 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. The fee will be waived if the closing
balance in the shareholder's account on the business day immediately
preceding the effective date of the transaction is $50,000 or more.
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 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.
Share 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 also 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. The fee will be waived
if the closing balance in the shareholder's account on the business day
immediately preceding the effective date of the transaction is $50,000 or
more. See "Purchase of Fund Shares--Dreyfus TeleTransfer Privilege."
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, limited in
amount during any 90-day period to the lesser of $250,000 or 1% of the value
of the Fund's net assets at the beginning of such period. Such commitment
is irrevocable without the prior approval of the SEC. In the case of
requests for redemption in excess of such amount, the Trustees and executive
officers of the Trust reserve the right to make payments in whole or in part
in securities or other assets in case of an emergency or any time a cash
distribution would impair the liquidity of the Fund to the detriment of the
existing shareholders. In this event, the securities would be valued in the
same manner as the Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges would be incurred.
Suspension of Redemptions. The right to redeem Fund shares may be
suspended or the date of payment postponed (a) for any period during which
the NYSE is closed (other than for customary weekend or holiday closings);
(b) when trading in the markets the Trust normally uses is restricted or
when an emergency exists as determined by the SEC so that disposal of the
Fund's investments or determination of its net asset value is not reasonably
practicable, or (c) for such other periods as the SEC, by order, may permit
for protection of the Fund's shareholders.
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 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 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. The fee will be waived if the closing balance in the
shareholder's account on the business day immediately preceding the
effective date of the transaction is $50,000 or more. 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, Martin
Luther King, Jr. 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 3.50%,
effective yield was 3.56% and equivalent taxable yield* was 6.53%.
_______________________________
* Example assumes a Federal marginal tax rate of 39.6% and a New York
State and New York City marginal tax rate of 11.31 % (combined
effective rate of 46.43%).
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 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 14, 1997, 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, 1998, 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 financial statements of the Fund as of and for the fiscal year
ended June 30, 1997, including notes to the financial statements and
supplementary information, and the Independent Auditors Report, are included
in the Annual Report to shareholders. A copy of the Annual Report
accompanies this Statement of Additional Information. The financial
statements included in the Annual Report, and the Independent Auditors
Report thereon, contained therein, and related notes, are incorporated
herein by reference.
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.
The State's budget for the 1996-97 fiscal year was enacted by the
Legislature on August 4, 1997, more than four months after the start of the
fiscal year on April 1, 1997. 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 1997-98
fiscal year was formulated on August 11, 1997 and is based on the State's
budget as enacted by the Legislature and signed into law by the Governor as
well as actual results for the first quarter of the 1997-98 fiscal year.
After adjustments for comparability between fiscal years, the adopted
1997-98 budget projects an increase in General Fund disbursements of $1.7
billion, 5.2% over 1996-97 levels. The average age and growth rate over the
last three fiscal years has been 1.2% Adjusted State Funds (excluding
federal grants) disbursements are projected to increase by 5.4% from the
1996-97 fiscal year. All Governmental Funds projected disbursements
increase by 7.0% over the prior fiscal year, after adjustments for
comparability.
The 1997-98 State Financial Plan is projected to be balanced on a cash
basis. The Financial Plan projections include a reserve for future needs of
$530 million. As compared to the Governor's Executive Budget as amended on
February 1997, the State's adopted budget for 1997-98 increases General Fund
spending by $1.7 billion, primarily from increases for local assistance
($1.3 billion). Resources used to fund these additional expenditures
include increased revenues projected for 1997-98 fiscal year, increased
resources produced in the 1996-97 fiscal year that will be utilized in 1997-
98, reestimates of social services, fringe benefit and other spending, and
certain non-recurring resources. The total non-recurring resources included
in the 1997-98 financial plan are projected by State Division of the Budget
("DOB") to be $270 million, or 0.70% of total General Fund receipts.
The 1997-98 adopted budget includes multi-year tax reductions,
including a State funded property and local income tax reduction program,
estate tax relief, utility gross receipts tax reductions, permanent
reductions in the State sales tax on clothing, and elimination of
assessments on medical providers. These reductions are intended to reduce
the overall level of State and local taxes in New York and to improve the
State's competitive position vis-a-vis other states. The various elements
of the State and local tax and assessment reductions have little or no
impact on the 1997-98 Financial Plan, and do not begin to materially affect
the outyear projections until the State's 1999-2000 fiscal year.
The 1997-98 Financial Plan also includes: a projected General Fund
reserve of $530 million; a projected balance of $332 million in the Tax
Stabilization Reserve Fund; and a projected $65 million balance in the
Contingency Reserve Fund.
The major factor affecting the General Fund GAAP-basis results for 1996-
97 and the projections for 1997-98 is the 1996-97 cash-basis surplus, which
helped produce a GAAP-basis surplus in the 1996-97 fiscal year of $1.93
billion. The use of this cash-basis surplus to fund liabilities in the 1997-
98 fiscal year, offset by the $494 million change in the projected 1997-98
cash-basis fund balance, is the primary reason for the projected 1997-98
GAAP-basis deficit of $959 million. This represents an increase of $191
million from the prior projection, issued in January 1997 as part of the
1997-98 Executive Budget. The new projection reflects the impact of
legislative changes to the Executive Budget, and the increase in the 1996-97
cash-basis surplus since that time. Across the two fiscal years, the
General Fund accumulated deficit is projected to be reduced by $974 million
to $1.95 billion.
For 1997-98, total revenues in the General Fund are projected at $33.37
billion, total expenditures are projected at $34.66 billion, and net
operating sources and uses are projected to contribute $331 million. For
all governmental funds, total revenues are projected at $67.48 billion,
total expenditures are projected at $68.24 billion, and financing uses are
projected to exceed financing sources by $220 million. The all governmental
funds GAAP-basis Financial Plan projections show a deficiency of revenues
and other financing sources over expenditures and other financing uses of
$979 million, after a reported 1996-97 all funds surplus of $2.1 billion
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.
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.
GAAP-Basis Results--1996-97 Fiscal Year. The State completed its 1996-97
fiscal year with a combined Governmental Funds operating surplus of $2.1
billion, which included an operating surplus in the General Fund of $1.9
billion, in Capital Projects Funds of $98 million and in the Special Revenue
Funds of $65 million, offset in part by an operating deficit of $37 million
in the Debt Service Funds.
GAAP-Basis Results--1995-96 Fiscal Year. The State completed its 1995-96
fiscal year with a combined Governmental Funds operating surplus of $432
million, which included an operating surplus in the General Fund of $380
million, in the Capital Projects Funds of $276 million and in the Debt
Service Funds of $185 million. There was an operating deficit of $409
million in the Special Revenue Funds. The State's Combined Balance Sheet as
of March 31, 1996 showed an accumulated deficit in its combined Governmental
Funds of $1.23 billion, reflecting liabilities of $14.59 billion and assets
of $13.35 billion. This accumulated Governmental Funds deficit includes a
$2.93 billion accumulated deficit in the General Fund and an accumulated
deficit of $712 million in the Capital Projects Fund type as partially
offset by accumulated surpluses of $468 million and $1.94 billion in the
Special Revenue and Debt Service fund types, respectively.
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 was an operating surplus in the Special Revenue Funds of $39
million.
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.
In the State's 1997-98 fiscal year, the General Fund is expected to
account for approximately 48% of total Governmental Funds disbursements and
71% of total State Funds disbursements. The General Fund is projected to be
balanced on a cash basis for the 1997-98 fiscal year. Total receipts and
transfers from other funds are projected to be $35.09 billion, an increase
of $2.05 million from the prior fiscal year. Total General Fund
disbursements and transfers to other funds are projected to be $34.60
billion, an increase of $1.70 billion from the total 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. During its last five fiscal years, however, the State
recorded balanced budgets on a cash basis, with positive fund balances as
described below.
The State ended its 1996-97 fiscal year on March 31, 1997 in balance on
a cash basis, with a General Fund cash surplus as reported by DOB of
approximately $1.4 billion. The cash surplus was derived primarily from
higher-than-expected revenues and lower-than-expected spending for social
services programs. The Governor in his Executive Budget applied $1.05
billion of the cash surplus amount to finance the 1997-98 Financial Plan,
and the additional $373 million is available for use in financing the 1997-
98 Financial Plan when enacted by the State Legislature.
The General Fund closing fund balance was $433 million. Of that
amount, $317 million was in the Tax Stabilization Reserve Fund ("TSRF"),
after a required deposit of $15 million and an additional deposit of $65
million in 1996-97. The TSRF can be used in the event of any future General
Fund deficit, as provided under the State Constitution and State Finance
Law. In addition, $41 million remains on deposit in the Contingency Reserve
Fund ("CRF"). This fund assists the State in financing any extraordinary
litigation costs during the fiscal year. The remaining $75 million reflects
amounts on deposit in the Community Projects Fund. This fund was created to
fund certain legislative initiatives. The General Fund closing fund balance
does not include $1.86 billion in the tax refund reserve account, of which
$521 million was made available as a result of the Local Government
Assistance Corporation ("LGAC") financing program as was required to be on
deposit as of March 31, 1997.
General Fund receipts and transfers from other funds for the 1996-97
fiscal year totaled $33.04 billion, and an increase of 0.7% from the
previous fiscal year (excluding deposits into the tax refund reserve
account.). General Fund disbursements and transfers to other Funds totaled
$32.90 billion for the 1996-97 fiscal year an increase of 0.7% from 1995-96
levels.
The State ended its 1995-96 fiscal year on March 31, 1996 with a
General Fund cash surplus, as reported by DOB, of $445 million. Of that
amount, $65 million was deposited into the TSRF, and $380 million was used
to reduce 1996-97 Financial Plan liabilities by accelerating 1996-97
payments, deferring 1995-96 revenues, and making a deposit to the tax refund
reserve account.
The General Fund closing fund balance was $287 million, an increase of
$129 million from 1994-95 levels. The $129 million change in fund balance
is attributable to the $65 million voluntary deposit to the TSRF, a $15
million required deposit to the TSRF, a $40 million deposit to the CRF, and
a $9 million deposit to the Revenue Accumulation Fund. The closing fund
balance includes $237 million on deposit in the TSRF, to be used in the
event of any future General Fund deficit as provided under the State
Constitution and State Finance Law. In addition, $41 million is on deposit
in the CRF. The CRF was established in State fiscal year 1993-94 to assist
the State in financing the costs of extraordinary litigation. The remaining
$9 million reflects amounts on deposit in the Revenue Accumulation Fund.
This fund was created to hold certain tax receipts temporarily before their
deposit to other accounts. In addition, $678 million was on deposit in the
tax refund reserve account, of which $521 million was necessary to complete
the restructuring of the State's cash flow under the LGAC program.
General Fund receipts totaled $32.81 billion, a decrease of 1.1% from
1994-95 levels. This decrease reflects the impact of tax reductions enacted
and effective in both 1994 and 1995. General Fund disbursements totaled
$32.68 billion for the 1995-96 fiscal year, a decrease of 2.2% from 1994-95
levels.
The State ended its 1994-95 fiscal year with the General Fund in
balance. The $241 million decline in the fund balance reflects the planned
use of $264 million from the CRF, partially offset by the required deposit
of $23 million to the TSRF. In addition, $278 million was on deposit in the
tax refund reserve account, $250 million of which was deposited to continue
the process of restructuring the State's cash flow as part of the LGAC
program. The closing fund balance of $158 million reflects $157 million in
the TSRF and $1 million in the CRF.
General Fund receipts totaled $33.16 billion, an increase of 2.9% from
1993-94 levels. General Fund disbursements totaled $33.40 billion for the
1994-95 fiscal year, an increase of 4.7% from the previous fiscal year.
Cash-Basis Results--Other Governmental Funds. Activity in the three other
governmental funds has remained relatively stable over the last three fiscal
years ended march 31, 1997, 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, 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 are 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. Disbursements from Special
Revenue Funds increased from $24.38 billion to $26.02 billion over the last
three years primarily as a result of increased costs for the federal share
of Medicaid. Other activity reflected dedication of taxes to a new fund for
mass transportation, new lottery games, and new fees for criminal justice
programs. Although activity in this fund type is expected to comprise
approximately 42% of total governmental funds receipts in the 1997-98 fiscal
year, three-quarters of that activity relates to federally-funded programs.
Projected receipts in this fund type for the 1997-98 fiscal year total
$28.22 billion, an increase of $2.51 billion (9.7%) over the prior year.
Projected disbursements in this fund type total $28.45 billion, an increase
of $2.43 billion (9.3%) over 1996-97 levels. Disbursements from federal
funds, primarily the federal share of Medicaid and other social services
programs, are projected to total $21.19 billion in the 1997-98 fiscal year.
Remaining projected spending of $7.26 billion primarily reflects aid to SUNY
supported by tuition and dormitory fees, education aid funded from lottery
receipts, operating aid payments to the MTA funded from the proceeds of
dedicated transportation taxes, and costs of a variety of self-supporting
programs which deliver services financed by user fees.
The Capital Projects Funds are used to finance the acquisition,
construction or rehabilitation of major state capital facilities and to aid
local government units and Agencies in financing capital constructions.
Disbursements in the Capital Projects Funds declined from $3.62 billion to
$3.54 billion over the last three years, as spending for miscellaneous
capital programs decreased, partially offset by increases for mental
hygiene, health and environmental programs. The composition of this fund
type's receipts also changed as the dedicated transportation taxes began to
be deposited, general obligation bond proceeds declined substantially,
federal grants remained stable, and reimbursements from public authority
bonds (primarily transportation related) increased. The increase in the
negative fund balance in 1994-95 resulted from delays in reimbursements
caused by delays in the timing of public authority bond sales.
In the 1997-98 fiscal year, activity in these funds is expected to
comprise 5% of total governmental receipts.
Total receipts in this fund type for the 1997-98 fiscal year are
projected at $3.30 billion. Bond and note proceeds are expected to provide
$605 million in other financing sources. Disbursements from this fund type
are projected to be $3.70 billion, an increase of $154 million (4.3%) over
prior-year levels. The Dedicated Highway and Bridge Trust Fund is the
single largest dedicated fund, comprising an estimated $982 million (27%) of
the activity in this fund type. Total spending for capital projects will be
financed through a combination of sources: federal grants (29%), public
authority bond proceeds (31%), general obligation bond proceeds (15%), and
pay-as-you-go revenues (25%).
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.
Activity in the Debt Service Funds reflected increased use of bonds
during the three-year period for improvements to the State's capital
facilities and the continued implementation of the LGAC fiscal reform
program. The increases were moderated by the refunding savings achieved by
the State over the last several years using strict present value savings
criteria. The growth in LGAC debt service was offset by reduced short-term
borrowing costs reflected in the General Fund. This fund type is expected
to comprise 4% of total governmental fund receipts and 4.7% of total
government disbursements in the 1997-98 fiscal year. Receipts in these
funds in excess of debt service requirements may be transferred to the
General Fund and Special Revenue Funds, pursuant to law.
The Debt Service fund type consists of the General Debt Service Fund,
which is supported primarily by tax receipts transferred from the General
Fund, and other funds established to accumulate moneys for the payment of
debt service. In the 1997-998 fiscal year, total disbursements in this fund
type are projected at $3.17 billion, an increase of $641 million or 25.3%,
most of which is explained by increases in the General Fund transfer as
discussed earlier. The projected transfer from the General Fund of $2.07
billion is expected to finance 65% of these payments.
The remaining payments are expected to be financed by pledged revenues,
including $2.03 billion in taxes and $601 million in dedicated fees and
other miscellaneous receipts. After required impoundment for debt service,
$3.77 billion is expected to be transferred to the General Fund and other
funds in support of State operations. The largest transfer-$1.86 billion-is
made to the Special Revenue fund type in support of operations of the mental
hygiene agencies. Another $1.47 billion in excess sales taxes is expected
to be transferred to the General Fund, following payments of projected debt
service on LGAC bonds.
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 1997-98 fiscal year. The State expects to issue $605
million in general obligation bonds (including $140 million for purposes of
redeeming outstanding BANs) and $140 million in general obligation
commercial paper. The Legislature has also authorized the issuance of up to
$31 million in COPs during the State's 1997-98 fiscal year for equipment
purchases. The projection of the State regarding its borrowings for the
1997-98 fiscal year may change if circumstances require.
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, 1996, there were 17 Agencies that had outstanding debt
of $100 million or more. The aggregate outstanding debt, including
refunding bonds, of these 17 Agencies was $75.4 billion as of September 30,
1996. As of March 31, 1997, aggregate Agency debt outstanding as State-
supported debt was $32.8 billion and as State-related was $37.1 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.
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.
Since 1980, 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 1997-
98 State fiscal year, total State assistance to the MTA is estimated at
approximately $1.2 billion, an increase of $76 million over the 1996-97
fiscal year.
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.
State legislation accompanying the 1996-97 adopted State budget
authorized the MTA, TBTA and TA to issue an aggregate of $6.5 billion in
bonds to finance a portion of a new $11.98 billion MTA capital plan for the
1995 through 1999 calendar years (the "1995-99 Capital Program"), and
authorized the MTA to submit the 1995-99 Capital Program to the Capital
Program Review Board for approval. This plan will supersede the overlapping
portion of the MTA's 1992-96 Capital Program. This is the fourth capital
plan since the Legislature authorized procedures for the adoption, approval
and amendment of MTA capital programs and is designed to upgrade the
performance of the MTA's transportation systems by investing in new rolling
stock, maintaining replacement schedules for existing assets and bringing
the MTA system into a state of good repair. The 1995-99 Capital Program
assumes the issuance of an estimated $5.1 billion in bonds under this $6.5
billion aggregate bonding authority. The remainder of the plan is projected
to be financed through assistance from the State, the federal government,
and the City of New York, and from various other revenues generated from
actions taken by the MTA.
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 1995-1999 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 last several State fiscal years. 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 1996-97 fiscal year.
Fiscal difficulties experienced by the City of Yonkers resulted in the
re-establishment of the Financial Control Board for the City of Yonkers by
the State in 1984. That Board is charged with oversight of the fiscal
affairs of Yonkers. Future actions taken by the State to assist Yonkers
could result in increased State expenditures for extraordinary local
assistance.
Beginning in 1990, the City of Troy experienced a series of budgetary
deficits that resulted in the establishment of a Supervisory Board for the
City of Troy in 1994. The Supervisory Board's powers were increased in
1995, when Troy MAC was created to help Troy avoid default on certain
obligations. The legislation creating Troy MAC prohibits the City of Troy
from seeking federal bankruptcy protection while Troy MAC bonds are
outstanding.
Seventeen municipalities received extraordinary assistance during the
1996 legislative session through $50 million in special appropriations
targeted for distressed cities.
Municipalities and school districts have engaged in substantial
short-term and long-term borrowings. In 1995, the total indebtedness of all
localities in the State, other than the City, was approximately $19 billion.
A small portion (approximately $102.3 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.
Eighteen localities had outstanding indebtedness for deficit financing at
the close of their fiscal year ending in 1995.
From time to time, Federal expenditure reductions could reduce, or in
some cases eliminate, Federal funding of some local programs and accordingly
might impose substantial increased expenditure requirements on affected
localities 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. Longe-range, potential problems
of declining urban population, increasing expenditures and other economic
trends could adversely affect localities and require increasing State
assistance in the future.
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.
(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 has achieved balanced operating results for each of its fiscal years
since 1981 as reported in accordance with the then-applicable GAAP
standards. The City's ability to maintain balanced operating results in
future years is subject to numerous contingencies and future developments.
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.
During the 1990 and 1991 fiscal years, as a result of a slowing
economy, the City has experienced significant shortfalls in almost all of
its major tax sources and increases in social services costs, and was
required to take actions to close substantial budget gaps in order to
maintain balanced budgets in accordance with the Financial Plan.
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 forecast of the State's economy shows moderate expansion during the
first half of calendar 1997 with the trend continuing through the year.
Although industries that export goods and services are expected to continue
to do well, growth is expected to be moderated by tight fiscal constraints
on the health care and social services industries. On an average annual
basis, employment growth in the State is expected to be up substantially
from the 1996 rate. Personal income is expected to record moderate gains in
1997. Bonus payments in the securities industry are expected to increase
further from last year's record level.
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.
DREYFUS PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
DREYFUS PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
DREYFUS PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND
CLASS A, CLASS B, CLASS C AND CLASS R
DREYFUS PREMIER LIMITED TERM MUNICIPAL FUND
CLASS A, CLASS B, CLASS C AND CLASS R
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
NOVEMBER 1, 1997
This Statement of Additional Information ("SAI"), which is not a
prospectus, supplements and should be read in conjunction with the current
Prospectuses of the Dreyfus Premier Limited Term California Municipal Fund
("California Municipal Fund"), Dreyfus Premier Limited Term Massachusetts
Municipal Fund ("Massachusetts Municipal Fund"), and Dreyfus Premier Limited
Term New York Municipal Fund ("New York Municipal Fund") (formerly Premier
Limited Term California Municipal Fund, Premier Limited Term Massachusetts
Municipal Fund, and Premier Limited Term New York Municipal Fund,
respectively) and the Dreyfus Premier Limited Term Municipal Fund
("Municipal Fund") (formerly Premier Limited Term Municipal Fund)
(collectively, the "Funds"), dated November 1, 1997, 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 1-800-554-4611
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-24
Purchase of Fund Shares ....................................B-26
Distribution and Service Plans..............................B-28
Redemption of Fund Shares ..................................B-30
Shareholder Services .......................................B-31
Determination of Net Asset Value ...........................B-33
Dividends, Other Distributions and Taxes ...................B-34
Portfolio Transactions .....................................B-39
Performance Information ....................................B-41
Information About the Funds ................................B-46
Custodian, Transfer and Dividend Disbursing Agent,
Counsel and Independent Auditors .........................B-47
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(s)."
Portfolio Securities
The average distribution of investments (at value) in Municipal
Obligations by ratings for each Fund for the fiscal year ended June 30,
1997, computed on a monthly basis, was as follows:
<TABLE>
Fitch Investors Moody's Investors Standard & Poor's
Service, Inc. Service, Inc. Rating Group Municipal
("Fitch") or ("Moody's") or ("S&P") Fund
- --------------- ----------------- ------------------ ----------
<S> <C> <C> <C>
AAA Aaa AAA 60.0%
AA Aa AA 24.4
A A A 11.5
BBB BBB Baa 1.2
F-1, F-1+ MIG1, VMIG, P-1 SP-1+/SP-1,A-1 2.8
Not Rated Not Rated Not Rated .1*
------
100.0
=====
California
Fitch Moody's or S&P Municipal Fund
- ----- --------- --- ---------------
AAA Aaa AAA 72.5%
AA Aa AA 15.3
A A A 7.2
F-1, F-1+ MIG1, VMIG1, P-1 SP-1 4.8
Not Rated Not Rated Not Rated .2*
----
100.0
======
Massachusetts
Fitch Moody's or S&P Municipal Fund
- ---- -------- ---- --------------
AAA Aaa AAA 77.9%
AA Aa AA 7.6
A A A 10.9
F-1, F-1+ MIG1, VMIG1, P-1 A-1 3.6
-----
100.0
======
New York
Fitch or Moody's or S&P Municipal Fund
- ----- ----- ----- ----------------
AAA Aaa AAA 72.0%
AA Aa AA 11.4
A A A 9.7
BBB Baa BBB 4.1
F-1, F-1+ MIG1, VMIG, P-1 SP-1+/SP-1, A-1 2.8
-----
100.0%
======
_______________________________
* Included in the Not Rated category are securities comprising .1% and
.2%, 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 (.1%), for
Municipal Fund and AAA/Aaa (.2%) for California Municipal Fund,
respectively.
</TABLE>
The actual distribution of a Fund's Municipal Obligations by ratings on any
given date will vary. In addition, the distribution of a Fund's investments
by rating as set forth above should not be considered as representative of
that Fund's future portfolio composition.
Description of Municipal Obligations. For purposes of this SAI, 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 "Dividends, Other Distributions and
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
"Dividends, Other Distributions and 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
Appendix D to this SAI.
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 objective 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 15% of a Fund's assets in illiquid securities,
including repurchase agreements maturing in more than seven days.
Special Factors Affecting the Massachusetts Municipal Fund.
The Commonwealth of Massachusetts and certain of its cities and towns
and public bodies have experienced financial difficulties that have
adversely affected their credit standing. The prolonged effects of such
financial difficulties could adversely affect the market value of the
Massachusetts Municipal Obligations held by the Massachusetts Municipal
Fund. The information summarized below describes some of the more
significant factors that could affect the Fund or the ability of the
obligors to pay debt service on certain of these securities. The sources of
such information are the official statements of issuers located in the
Commonwealth of Massachusetts, as well as other publicly available
documents, and statements of public officials. The Trust has not
independently verified any of the information contained in such statements
and documents, but the Trust is not aware of facts which would render such
information inaccurate.
Investing in Massachusetts Municipal Obligations. Investors should
consider carefully the special risks inherent in the Fund's investment in
Massachusetts Municipal Obligations. Massachusetts' economic 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 through 1996 with a
positive fiscal balance in its general operating funds. 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 Fund's
investments in California Municipal Obligations are summarized below. This
summary information is derived principally from official statements and
prospectuses relating to securities offerings of the State of California and
various local agencies in California, available as of the date of this SAI
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 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. A
severe recession from 1990 through fiscal 1994 reduced revenues and
increased expenditures for social welfare programs, resulting in a period of
budget imbalance. During this period, expenditures exceeded revenues in
four out of six years, and the State accumulated and sustained a budget
deficit in its budget reserve, the Special Fund for Economic Uncertainties,
approaching $2.8 billion at its peak at June 30, 1993. By the 1993-94
fiscal year, the accumulated budget deficit was so large that it was
impractical to budget to retire it in one year, so a two-year program was
implemented, using the issuance of revenue anticipation warrants to carry a
portion of the deficit over the end of the fiscal year. When the economy
failed to recover sufficiently, a second two-year plan was implemented in
1994-95, again using cross-fiscal year revenue anticipation warrants to
partly finance the deficit into the 1995-96 fiscal year. As a consequence
of the accumulated budget deficits, the State's cash resources available to
pay its ongoing obligations were significantly reduced causing the State to
rely increasingly on external debt markets to meet its cash needs. Future
budget problems or a deterioration in California's general financial
condition may have the effect of impairing the ability of the issuers of
California Municipal Obligations to pay interest on, or repay the principal
of, such California Municipal Obligations. As a result of the deterioration
of the State's budget and cash situation between October 1991 and July 1994,
the rating on the State's general obligation bonds was reduced by S&P from
AAA to A, by Moody's from Aaa to A1 and by Fitch from AAA to A. These and
other factors may have the effect of impairing the ability of the issuers of
California Municipal Obligations to pay interest on, or repay principal of,
such California Municipal Obligations. Investors should review "Appendix B"
which sets forth 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 SAI. 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 recent fiscal
years. For its fiscal periods 1993 through 1996, the State recorded
balanced budgets on a cash basis, with substantial fund balances in the
General Fund in fiscal 1993-93 and 1993-94 and smaller fund balances in
fiscal 1994-95 and 1995-96. 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. 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 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 C" which
more fully sets forth these and other risk factors.
Master/Feeder Option. The Trust may in the future seek to achieve a
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 a Fund will be given at least 30
days' prior notice of any such investment. Such investment would be made
only if the Trust's Board of Trustees determines it to be in the best
interest of a Fund and its shareholders. In making that determination, the
Trust's Board of Trustees will consider, among other things, the benefits to
shareholders and/or the opportunity to reduce costs and achieve operational
efficiency. Although the Funds believe that the Board of Trustees will not
approve an arrangement that is likely to result in higher costs, no
assurance is given that risks will be materially reduced if this option is
implemented.
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 under
the Investment Company Act of 1940 (the "1940 Act"), as seconded here,
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 objective, 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.
MANAGEMENT OF THE FUNDS
PRINCIPAL SHAREHOLDERS
As of October 14, 1997, the following companies/individuals owned
beneficially 5% or more of the outstanding Class A shares of the Dreyfus
Premier Limited Term California Municipal Fund: Virginia Ripner, 2641 State
Street, Santa Barbara, CA 93105-5513; 14% record; Paul Mickelsen, 12
Corporate Plaza, Newport Beach, CA 92660; 5% record; Lorance Lisk, 819
Morningside Drive, Fullerton, CA 92835-3509; 5% record; and Elizabeth K.
D'arc, Trustee, D'arc Family Living Trust, 345 Olive Street, Menlo Park, CA
94025 - 5854; 5% record.
As of October 14, 1997, the following companies/individuals owned
beneficially 5% or more of the outstanding Class B shares of the Dreyfus
Premier Limited Term California Municipal Fund: Smith Barney, Inc., 388
Greenwich Street, New York, NY 10013 - 36% record; MLPF & S for The Sole
Benefit of It's Customers, 4800 Deer Lake Drive, Jacksonville, FL 32246 -
19% record; Ruth Roelke, 32149 Beachfront Lane, Westlake Village, CA 91361-
3605 19% record; and Donoldson Lufkin Jennette Securities Corp., P.O. Box
2052, Jersey City, NJ 07303; 17% record.
As of October 14, 1997, the following company owned beneficially 5% or more
of the outstanding Class R shares of the Dreyfus Premier Limited Term
California Municipal Fund: Boston and Company, P.O. Box 3198, Pittsburgh,
PA 15230-3198; 30% record.
As of October 14, 1997, the following companies/individuals owned
beneficially 5% or more of the outstanding Class A shares of the Dreyfus
Premier Limited Term Massachusetts Municipal Fund: Duncan McFarland, 299
Clapboardtree Street, Westwood, MA 02090-2907; 6% record; and Joseph R.
White, c/o PaineWebber, Account II, P.O. Box 572, Waltham, MA 02254-0572; 5%
record.
As of October 14, 1997, the following companies/individuals owned
beneficially 5% or more of the outstanding Class B shares of the Dreyfus
Premier Limited Term Massachusetts Municipal Fund: Beatrice and Ray D.
Cowell, P.O. Box 156, Otis, MA 01253-0156; 73% record; Millcent Markham, RR3
Box 86, Great Barrington, MA 01230-9809; 19% record; and Wexford Clearing
Services Corp., 12 Ticonderoga Lane, Millis, MA 02054-1451; 5% record.
As of October 14, 1997, the following companies/individuals owned
beneficially 5% or more of the outstanding Class C shares of the Dreyfus
Premier Limited Term Massachusetts Municipal Fund: Anthony Conklin Jr., 11
Sherry Circle, Amerst, MA 01002-3022; 82% record; Premier Mutual Fund
Services, Inc. Attn: Paul Prescott, 60 State St., Boston, MA 02109; 13%
record; and The Chase Manhattan Bank, IRA of Diane Loher, 80-66 88th Road,
Woohhaven, NY 11421; 5% record.
As of October 14, 1997, the following company owned beneficially 5% or
more of the outstanding Class R shares of the Dreyfus Premier Limited Term
Massachusetts Municipal Fund: Boston and Company, P.O. Box 3198,
Pittsburgh, PA 15230-3198; 28% record.
As of October 14, 1997, the following companies/individuals owned
beneficially 5% or more of the outstanding Class B shares of the Dreyfus
Premier Limited Term Municipal Fund: MLPF & S for The Sole Benefit of It's
Customers, 4800 Deer Lake Drive, Jacksonville, FL 32246-6484; 30% record;
Katherina Savidge, 4619 Groveland Ave., Royal Oak, MI 48073; 22% record;
David Zenelman, 60 Lismore Lane, Greenwich, CT 06831; 17% record; and Helen
Watson, 1117 Marquette Ave., Minneapolis, MN 55403-2449; 12% record.
As of October 14, 1997, the following companies/individuals owned
beneficially 5% or more of the outstanding Class C shares of the Dreyfus
Premier Limited Term Municipal Fund: Roger Harrison, 927 Bienvenida Ave.,
Pacific Palisades, CA 90272; 44% record; James Mecca, 135 Swinnick Drive,
Dunmore, PA 18512-2078; 16% record; Wong Tsai Shito, 721 5th Street, Hull,
IA 51239; 12% record; Donaldson, Lufkin Jennette Securities Corp., P.O. Box
2502, Jersey City, NJ 07303-9998; 8% record; and Susan K Buchter, 346 Old
Silo Road, Orange, CT 06477-1019; 5% record.
As of October 14, 1997, the following company owned beneficially 5% or
more of the outstanding Class R shares of Dreyfus Premier Limited Term
Municipal Fund: Boston Safe Deposit & Trust Company, P.O. Box 3198,
Pittsburgh, PA 15230-3198; 23% record.
As of October 14, 1997, the following companies/individuals owned
beneficially 5% or more of the outstanding Class A shares of the Dreyfus
Premier Limited Term New York Municipal Fund: Herman and Virginia Sandles,
94 Juniper Street, Islip, NY 11751-1224; 10% record; Paul Schwartz, 132 West
58th Street, New York, NY 10019-2135; 8% record; James Gruber, 59 Fremont
Street, Lindenhurst, NY 11757-3806; 7% record; and Anthony Cipolletta, 720
West Camino Real Ave., Arcadia, CA 91007-7839; 5% record.
As of October 14, 1997, the following companies/individuals owned
beneficially 5% or more of the outstanding Class B shares of the Dreyfus
Premier Limited Term New York Municipal Fund: Eugene Kvljanic, 42-16 28th
Avenue, Astoria, NY 11103; 35% record; Prudential Securites, Inc., Attn:
Theresa Romula, 315 South Bay Ave., Islip, NY 11751-4804; 15% record;
Prudential Securities, Inc., Attn. Anthony Granuzzo, 40 Lincoln Road, Putnam
Valley, NY 10579-2614; 9% record; Wheat First Securities, Inc., Attn. Mark
Specthrie, 19-21 Dewitt, Middletown, NY 10940-3913; 9% record; Glenn D.
Green, 4 Nathan Hale Drive, Setauket, NY 11733; 7% record; Prudencial
Securities, Inc., Attn. Joseph A. Vasti, 8 Dickens Street, Stony Point, NY
10980-3653; 6% record; and MLPF & S for The Sole Benefit of It's Customers,
4800 Deer Lake Drive, Jacksonville, FL 32246-6484; 5% record.
As of October 14, 1997, the following companies/individuals owned
beneficially 5% or more of the outstanding Class C shares of the Dreyfus
Premier Limited Term New York Municipal Fund: Doyle and Louise Brown, 34
Queen Anne Place, Hauppauge, NY 11788; 32% record; Mad Hucker Shanbhag, 290
Wood Acres Drive, East Amherst, NY 14051-1640; 31% record; James and Alice
Mchale, 2 Meadow Gate, St. James, NY 11780-134; 29% record; and BHC
Securities, Inc., One Commerce Square, 2005 Market St., Philadelphia, PA
1910; 5% record.
As of October 14, 997, the following company owned beneficially 5% or
more of the outstanding Class R shares of the Dreyfus Premier Limited Term
New York Municipal Fund: Boston Safe Deposit & Trust Co., P.O. Box 3198,
Pittsburgh, PA 15230-3198; 83% 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, N.A. ("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
Funds' 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 1940 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").
Trustees of the Trust
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; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 83 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.; from November 1995 to January 1997, Director, Access
Capital Strategic Community Investment Fund, Inc. - Bank Portfolio.
Age: 80 years old. Address: Massachusetts Business Development Corp.,
50 Milk Street, Boston, Massachusetts 02109.
o+JOSEPH S. DiMARTINO. Trustee of the Trust. Since January 1995, Mr.
DiMartino has served as Chairman of the Board for various funds in the
Dreyfus Family of Funds. He is also Chairman of the Board of Noel
Group, Inc., a venture capital company, and Staffing Resources, Inc., a
temporary placement agency. Mr. DiMartino also serves as a Director of
The Muscular Dystrophy Association, HealthPlan Services Corporation, a
provider of marketing, administrative and risk management services to
health and other benefit programs, Carlyle Industries, Inc. (formerly
Belding Heminway Company, Inc.), a button purchaser and distributor,
and Curtis Industries, Inc., a national distributor of security
products, chemicals and automotive and other hardware. Mr. DiMartino
is also a Board member of 152 other funds in the Dreyfus Family of
Funds. From November 1995 to January 1997, Director, Access Capital
Strategic Community Investment Fund, Inc. - Institutional Investment
Portfolio and Bank Portfolio. For more than five years prior to
January 1995, he was President, a director and, until August 1994,
Chief Operating Officer of Dreyfus and Executive Vice President and a
director of Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus, and until August 24, 1994, the Funds' distributor. From
August 1994 to December 31, 1994, he was a director of Mellon Bank
Corporation. Age: 54 years old. His address is 200 Park Avenue, New
York, New York 10166.
o+JAMES M. FITZGIBBONS. Trustee of the Trust; Chairman, Howes Leather
Company, Inc.; Director, Fiduciary Trust Company; Chairman, CEO and
Director, Fieldcrest-Cannon Inc.; Director, Lumber Mutual Insurance
Company; Director, Barrett Resources, Inc.; from November 1995 to
January 1997; Director, Access Capital Strategic Community Investment
Fund, Inc. - Bank Portfolio. Age: 63 years old. Address: 40 Norfolk
Road, Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Trustee of the Trust; Partner, Reed, Smith, Shaw &
McClay (law firm); from November 1995 to January 1997, Director, Access
Capital Strategic Community Investment Fund, Inc. - Bank Portfolio.
Age: 69 years old. Address: 204 Woodcock Drive, Pittsburgh,
Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Trustee of the Trust; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; Director, National Picture
Frame Corporation; former Chairman of the Board and Director, Rexene
Corporation; Chairman of the Board and Director, Tetra Corporation 1991-
1993; Director, Medalist Corporation 1992-1993; from November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Institutional Investment Portfolio. Age: 76 years old.
Address: Way Hollow Road and Woodland Road, Sewickley, Pennsylvania
15143.
o+KENNETH A. HIMMEL. Trustee of the Trust; Former Director, The Boston
Company, Inc. ("TBC") and Boston Safe Deposit and Trust Company;
President and Chief Executive Officer, Himmel & Co., Inc.; Vice
Chairman, Sutton Place Gourmet, Inc.; Managing Partner, Franklin
Federal Partners; from November 1995 to January 1997, Director, Access
Capital Strategic Community Investment Fund, Inc. - Bank Portfolio;.
Age: 51 years old. Address: Himmel and Company, Inc., 399 Boylston
Street, 11th Floor, Massachusetts 02116.
o*ARCH S. JEFFERY. Trustee of the Trust; Financial Consultant; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 80 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.; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 50 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; from November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. -
Institutional Investment Portfolio. Age: 66 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.; from November 1995 to January 1997,
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: 48 years old. Address: 25 Braddock Park, Boston, Massachusetts
02116-5816.
_____________________________
* "Interested person" of the Trust, as defined in the 1940 Act.
o Member of the Audit Committee
+ Member of the Nominating Committee
Officers of the Trust
#MARIE E. CONNOLLY. President and Treasurer of the Trust. President, Chief
Executive Officer, Chief Compliance Officer and director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which
is Boston Institutional Group, Inc. Age: 40 years old.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Trust.
Assistant Vice President of Funds Distributor, Inc. From April 1993 to
January 1995, he was a Senior Fund Accountant for Investors Bank &
Trust Company. From December 1991 to March 1993, he was employed as a
Fund Accountant at TBC. Age: 28 years old.
#RICHARD W. INGRAM. Vice President and Assistant Treasurer of the Trust.
Vice President of the Distributor and Funds Distributor, Inc. From
March 1994 to November 1995, he was Vice President and Division Manager
for First Data Investor Services Group. From 1989 to 1994, he was Vice
President, Assistant Treasurer and Tax Director-Mutual Funds of TBC.
Age: 42 years old.
#ELIZABETH A. KEELEY. Vice President and Assistant Secretary of the Trust.
Vice President of the Distributor and Funds Distributor, Inc. She has
been employed by the Distributor since 1995. Age: 28 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Trust. Vice
President of the Distributor and Funds Distributor, Inc. From
September 1989 to July 1994, she was an Assistant Vice President and
Client Manager for TBC. Age: 33 years old.
#JOHN E. PELLETIER. Vice President and Secretary of the Trust. Senior Vice
President, General Counsel, Secretary and Clerk of the Distributor and
Funds Distributor, Inc. From February 1992 to July 1994, he served as
Counsel for the Boston Company Advisors, Inc. Age: 33 years old.
#MICHAEL S. PETRUCELLI. Vice President and Assistant Treasurer of the
Trust. Senior Vice President of Funds Distributor, Inc. From December
1989 through November 1996 he was employed with GE Investment Services
where he held various financial, business development and compliance
positions. He also served as Treasurer of the GE Funds and as Director
of the GE Investment Services. Age: 36 years old.
#JOSEPH F. TOWER, III. Vice President and Assistant Treasurer of the Trust.
Senior Vice President, Treasurer and Chief Financial Officer of the
Distributor and Funds Distributor, 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: 35 years old.
____________________
# Officer also serves as an officer for other investment companies
advised by Dreyfus, including The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Funds, Inc.
The address of each officer of the Trust is 200 Park Avenue, New York,
New York 10166.
No officer or employee of the Distributor (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 1940 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 14,
1997.
For the fiscal year ended June 30, 1997, 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:
Total Compensation
Aggregate from the
Compensation Trust and Fund
Name of Board Member from the Trust# Complex Paid to Board+
- -------------------- --------------- ------------------------
Ruth Marie Adams $10,250 $31,500
Francis P. Brennan* 19,833 63,750
Joseph S. DiMartino** None 517,076***
James M. Fitzgibbons 11,166 31,500
J. Tomlinson Fort** None None
Arthur L. Goeschel 11,500 32,500
Kenneth A. Himmel 10,833 30,750
Arch S. Jeffery** None None
Stephen J. Lockwood 10,833 33,250
John J. Sciullo 11,500 32,500
Roslyn M. Watson 11,166 32,500
_____________________________
# 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 $4,295.88 for the Trust.
* Compensation of Francis P. Brennan includes $25,000 retainer paid by the
Dreyfus/Laurel Funds to be the Chairman of the Board.
** For the fiscal year ended June 30, 1997, Joseph S. DiMartino, J.
Tomlinson Fort and Arch S. Jeffery were 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, 1997, 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 $399.27, $1,400.89 and $381.73,
respectively, and for serving as a Board member of all funds in the
Dreyfus/Laurel Funds (including the Trust) were $32,500, $37,500 and
32,500, respectively. In addition, Dreyfus reimbursed Messrs.
DiMartino, Fort and Jeffery a total of $2,181.89 for expenses
attributable to the Trust's Board meetings which is not included in the
$4,295.88 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 152 mutual funds.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the section in the Funds' Prospectuses entitled "Management of the
Fund(s)."
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 Investment Management Agreement,
Dreyfus provides, or arranges for one or more third parties to provide,
investment advisory, administrative, custody, fund accounting and transfer
agency services to the Funds. As 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.
Mellon Bank served as investment manager to each Fund pursuant to the
Investment Management Agreement, which was approved by the shareholders of
each Fund on March 29, 1994, from April 4, 1994 through October 16, 1994.
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, 1997.
The 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 SAI. 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 as
full compensation for all services and facilities provided by it, a fee
computed daily and paid monthly at the annual rate set forth in each Fund's
Prospectus, applied to the average daily net assets of the Fund's investment
portfolio, less the accrued fees and expenses (including counsel fees) of
the non-interested Trustees of the Trust. Dreyfus may waive all or a
portion of its fees payable by a Fund from time to time.
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 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 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; William T. Sandalls, Jr.,
Senior Vice President and Chief Financial Officer; Paul Kadin, 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; William V. Healey, Assistant Secretary; and
Mandell L. Berman, Burton Borgelt and Frank V. Cahouet, directors.
The following table shows the fees paid by each Fund to Mellon Bank
(the prior investment adviser) and to Dreyfus (the current investment
manager) including any fee waivers or expense reimbursements, during the
years ended June 30, 1995, 1996 and 1997:
1997 1996 1995(1)
Fees Fees Fees Fees
Paid Paid Paid Waived
Municipal Fund $196,627 $183,084 $179,992 $42,914
Massachusetts Municipal Fund 225,861 188,533 172,146 40,947
California Municipal Fund 114,489 92,758 96,807 24,8011
New York Municipal Fund 34,904 26,270 27,290 8,0381
______________________________
(1)Fees paid to Mellon Bank for investment management services for the
period from July 1, 1994 through October 15, 1994.
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 Dreyfus Premier Family of
Funds, funds in the Dreyfus Family of Funds, and for certain other
investment companies.
For the fiscal year ended June 30, 1997, the Distributor retained no
commissions for Dreyfus Premier Limited Term Municipal Fund, Dreyfus Premier
Limited Term California Municipal Fund, Dreyfus Premier Limited Term
Massachusetts Municipal Fund and Dreyfus Premier Limited Term New York
Municipal Fund, respectively, from sales loads on the Funds' Class A shares.
For the fiscal year ended June 30, 1997, the Distributor retained $990 from
Dreyfus Premier Limited Term Municipal Fund and $262 from the contingent
deferred sales charge ("CDSC") on Class B shares for Dreyfus Preemier
Limited Term California Municipal Fund. For the fiscal year ended June 30,
1997, the Distributor retained no fees from the CDSC on Class B shares for
Dreyfus Premier Limited Term Massachusetts Municipal Fund and Dreyfus
Premier Limited Term New York Municipal Fund. For the fiscal year ended
June 30, 1997, the Distributor retained $4,838 from the CDSC on Class C
shares for Dreyfus Premier Limited Term Municipal Fund. For the same
period, the Distributor retained no fees from the CDSC on Class C shares for
Dreyfus Premier Limited Term California Municipal Fund, Dreyfus Premier
Limited Term Massachusetts Municipal Fund and Dreyfus 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 relevant Prospectus at a price based upon the net
asset value of the Class A shares.
<TABLE>
Municipal California Massachusetts New York
Fund Municipal Fund Municipal Fund Municipal Fund
<C> <C> <C> <C>
Net Asset Value per Share $12.12 $13.11 $12.15 $12.77
Per Share Sales Charge - 3.0%
of offering price (3.1% of
net asset value per share) $ 0.38 $ 0.41 $ 0.38 $ 0.40
Per Share Offering Price to
the Public $12.50 $13.52 $12.53 $13.17
</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 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 shareholder's Fund account on the second bank business day
following such purchase order. 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."
Class A, Class B and Class C shares are subject to annual fees for
distribution and shareholder services.
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.
Current Plans
Distribution Plan--Class A shares. Under the current Distribution Plan
for Class A ("Class 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, Class A shares.
The Class A Plan provides that a report of the amounts expended under
the Class 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 Class A Plan provides that it may not be
amended to increase materially the costs which a Fund may bear for
distribution pursuant to the Class A Plan without approval of a Fund's
shareholders, and that other material amendments of the Class 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 Class 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 Class A Plan, by vote cast in person at a meeting called
for the purpose of voting on the Class A Plan. The Class A Plan was so
approved by the Trustees a meeting held on January 31, 1997. The Class 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 Class 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 Class A Plan, 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.
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, 1997. 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.
For the year ended June 30, 1997, the distribution and service fees
were as follows:
Distribution Fees: Class A* Class B Class C
California Municipal Fund $19,656 $ 687 $ 126
Massachusetts Municipal Fund 39,958 2,291 47
New York Municipal Fund 5,196 658 312
Limited Term Municipal Fund 45,049 2,600 1,031
________________
* Distribution and servicing combined.
Service Fees: Class B Class C
California Municipal Fund $ 343 $ 63
Massachusetts Municipal Fund 1,145 24
New York Municipal Fund 329 156
Municipal Fund 1,300 515
Class R shares bear no service or distribution fee.
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."
Share 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
also 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."
Fund Exchanges. Shares of any Class of a Fund may be exchanged for
shares of the respective Class of certain other funds advised or
administered by Dreyfus. Shares of the same Class of such 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.
E. Shares of funds subject to a 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, an investor's Agent must
notify the Transfer Agent of the investor's prior ownership of shares with a
sales load and the investor's account number.
To request an exchange, an investor or an 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 exchange 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.
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 certain other funds in the Dreyfus 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 1-800-554-4611. Each Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchange service or the
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.
Class C shares and Class A shares to which a CDSC applies, and, unless
certain conditions described in the Prospectuses are satisfied, Class B
shares withdrawn pursuant to the Automatic Withdrawal Plan will be subject
to any applicable CDSC.
Dividend Sweep. Dividend Sweep allows investors to invest
automatically their dividends or dividends and capital gain distributions,
if any, from a Fund in shares of the same Class of certain other funds in
the Dreyfus Premier Family of Funds or 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, Martin Luther King, Jr.
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
Dreyfus 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) through the end of its current taxable year,
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 under "Dividends, Other Distributions and Taxes" in the
Funds' Prospectuses. In addition, if a shareholder sells shares of a 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 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' Prospectuses. Such distributions
("capital gain dividends"), if any, will be taxable to the shareholders as
long-term capital gains, regardless of how long a shareholder has held a
Fund's shares, and will be designated as capital gain dividends in a written
notice mailed by the Funds to the shareholders after the close of the Funds'
prior taxable year. If a shareholder receives a capital gain dividend with
respect to any share and if such share is held by the shareholder for six
months or less, then any loss (to the extent not disallowed pursuant to the
other six month rule described above) on the sale or exchange of such share,
to the extent of the capital gain dividend, shall be treated as a long-term
capital loss.
Dividends derived by the Funds from tax-exempt interest are designated
as tax-exempt in the same percentage of the day's dividend as the actual tax-
exempt income earned that day. Thus, the percentage of the dividend
designated as tax-exempt may vary from day to day. Similarly, dividends
derived by the Funds from interest on relevant state Municipal Obligations
will be designated as exempt from that state's taxation in the same
percentage of the day's dividend as the actual interest on that state's
Municipal Obligations earned on that day.
Each Fund is required to withhold and remit to the U.S. Treasury 31% of
the taxable dividends paid by the Funds, the distributions paid by the Funds
and the proceeds of redemptions or exchanges of Fund shares (in excess of
$10 on an annualized basis) with respect to any non-corporate shareholder
who fails to furnish or certify his or her correct taxpayer identification
number, who has been notified that he or she is to subject to back up
withholding due to underreporting of dividend or interest income or who
fails to certify that he or she has provided a correct taxpayer
identification number, and that he or she is not subject to such
withholding. A tax identification number is either the Social Security
number, IRS individual taxpayer identification number, or employer
identification number of the record owner. 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 cer
tain 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 limi
tation. 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 foreign currency
forward 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 transaction 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" and conversion transaction 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.
The Taxpayer Relief Act of 1997 included constructive sale provisions
that generally will apply if the Fund either (1) holds an appreciated
financial position with respect to stock, certain debt obligations, or
partnership interests ("appreciated financial position") and then enters
into a short sale, futures, forward, or offsetting notional principal
contract (collectively, a "Contract") respecting the same or substantially
identical property or (2) holds an appreciated financial position that is a
Contract and then acquires property that is the same as, or substantially
identical to, the underlying property. In each instance, with certain
exceptions, the Fund generally will be taxed as if the appreciated financial
position were sold at its fair market value on the date the Fund enters into
the financial position or acquires the property, respectively. Transaction
that are identified hedging or straddle transactions of the Code can be
subject to the constructive sale provisions.
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
4% 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 a 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 1940 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 Funds 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 Funds,
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.
The Funds paid no stated brokerage commissions for the fiscal years
ended July 30, 1997, 1996 and 1995.
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, 1996
and 1997 for the Municipal Fund were 55.07% and 30.50%, respectively. The
portfolio turnover rates for the fiscal years ended June 30, 1996 and 1997
for the Massachusetts Municipal Fund were 39.16% and 22.57%, respectively.
The portfolio turnover rates for the fiscal year ended June 30, 1996 and
1997 for the California Municipal Fund were 39.09% and 25.92%, respectively.
The portfolio turnover rates for the fiscal year ended June 30, 1996 and
1997 for the New York Municipal Fund were 43.43% and 15.00%, 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 California Municipal Fund's current yield for the 30-day period
ended June 30, 1997 was 3.80%, 3.42%, 3.43% and 4.17% for its Class A, Class
B, Class C and Class R shares, respectively. The Massachusetts Municipal
Fund's current yield for the 30-day period ended June 30, 1997 was 3.84%,
3.46%, 3.51% and 4.21%, for its Class A, Class B, Class C and Class R
shares, respectively. The New York Municipal Fund's current yield for the
30-day period ended June 30, 1997 was 3.84%, 3.48%, 3.41% and 4.20%, for its
Class A, Class B, Class C and Class R shares, respectively. The Municipal
Fund's current yield* for the 30-day period ended June 30, 1997 was 4.03%,
3.65%, 3.70% and 4.40% for its Class A, Class B, Class C and Class R shares,
respectively. The California Municipal Fund's equivalent taxable yield* for
the 30-day period ended June 30, 1997 was 6.94%, 6.24%, 6.26% and 7.61% for
its Class A, Class B, Class C and Class R shares, respectively. The
Massachusetts Municipal Fund's equivalent taxable yield* for the 30-day
period ended June 30, 1997 was 7.22%, 6.51%, 6.60% and 7.92% for its Class
A, Class B, Class C and Class R shares, respectively. The New York
Municipal Fund's equivalent taxable yield* for the 30-day period ended June
30, 1997 was 7.17%, 6.50%, 6.37% and 7.84% for its Class A, Class B, Class C
and Class R shares respectively. The Municipal Fund's equivalent taxable
yield* for the 30-day period ended June 30, 1997 was 6.67%, 6.04%, 6.13% and
7.28% 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.
The California Municipal Fund's average annual total returns for Class
A shares for the 1 and 5 year periods ended June 30, 1997 and for the period
March 7, 1988 (inception of Class A) through June 30, 1997, were 3.57%,
5.56% and 6.66%, respectively. The average annual total returns for Class B
shares for the 1 year period ended June 30, 1997 and for the period December
28, 1994 (inception of Class B) through June 30, 1997 was 3.25% and 6.38%,
respectively. The average annual total returns for Class C shares for the 1
year period ended June 30, 1997 and for the period December 28, 1994
(inception of Class C) through June 30, 1997 were 5.50%, and 7.21%,
respectively. The average annual total returns for Class R shares for the 1
year period ended June 30, 1997 and for the period February 1, 1993
(inception of Class R) through June 30, 1997, were 7.04% and 3.25%,
respectively.
* Examples assume a Federal marginal tax rate of 39.6% for the Municipal
Fund, a Massachusetts marginal tax rate of 46.85%, a California marginal tax
rate of 45.22% and a New York State and New York City marginal tax rate of
46.43%, respectively.
The Massachusetts Municipal Fund's average annual total returns for
Class A shares for the 1, 5 and 10 year periods ended June 30, 1997 were
3.16%, 5.28% and 7.04% respectively. The average annual total returns for
Class B shares for the 1 year period ended June 30, 1997 and for the period
December 28, 1994 (inception of Class B) through June 30, 1997 were 2.90%
and 6.08%, respectively. The average annual total returns for Class C
shares for the 1 year period ended June 30, 1997 and for the period December
28, 1994 (inception of Class C) through June 30, 1997 were 5.12% and 6.73%,
respectively. The average annual total returns for Class R shares for the 1
year period ended June 30, 1997 and for the period February 1, 1993
(inception of Class R) through June 30, 1997 were 6.70% and 5.69%,
respectively.
The New York Municipal Fund's average annual total returns for Class A
shares for the 1 and 5 year periods ended June 30, 1997 and for the period
March 7, 1988 (inception of Class A) through June 30, 1997 were 3.00%, 4.98%
and 5.98%, respectively. The average annual total returns for Class B for
the 1 year period ended June 30, 1997 and for the period December 28, 1994
(inception of Class B) through June 30, 1997 were 2.64% and 5.62%,
respectively. The average annual total returns for Class C for the 1 year
period ended June 30, 1997 and for the period December 28, 1994 (inception
of Class C) through June 30, 1997 were 4.80% and 6.41%, respectively. The
average annual total returns for Class R for the 1 year period ended June
30, 1997 and for the period February 1, 1993 (inception of Class R) through
June 30, 1997 were 6.34% and 5.36%, respectively.
The Municipal Fund's average annual total returns for Class A shares
for the 1, 5 and 10 year periods ended June 30, 1997 were 3.69%, 5.39% and
7.31%, respectively. The average annual total returns for Class B for the 1
year period ended June 30, 1997 and for the period December 28, 1994
(inception of Class B) through June 30, 1997 were 3.38% and 6.35%,
respectively. The average annual total returns for Class C for the 1 year
period ended June 30, 1997 and for the period December 28, 1994 (inception
of Class C) through June 30, 1997 were 5.75% and 7.16%, respectively. The
average annual total returns for Class R for the period ended June 30, 1997
and for the period February 1, 1993 (inception of Class R) through June 30,
1997 were 7.17% and 5.84%, 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 California Municipal Fund's total return for the period March 7,
1988 (commencement of operations) to June 30, 1997 for Class A was 82.41%.
Without giving effect to the applicable front-end sales load, the total
return for Class A was 88.02% for this period. 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, 1997 was 16.79% and
19.08%, respectively. Without giving effect to the applicable CDSC, the
total return for Class B and C was 18.79% and 19.08%, respectively. The
Dreyfus Premier Limited California Municipal Fund's total return for Class R
for the period from February 1, 1993 (inception date of Class R) through
June 30, 1997 was 29.76%.
The Massachusetts Municipal Fund's total return for the period
September 24, 1985 (commencement of operations) to June 30, 1997 for Class A
was 138.69%. Without giving effect to the applicable front-end sales load,
the total return for Class A was 146.09%. The 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, 1997 was 15.98% and
17.75%, respectively. Without giving effect to the applicable CDSC, the
total return for Class B and C was 17.98% and 17.75%, respectively. The
Massachusetts Municipal Fund's total return for Class R shares for the
period February 1, 1993 (inception of Class R) to June 30, 1997 was 27.63%.
The New York Municipal Fund's total return for Class A shares for the
period March 7, 1988 (comencement of operations) to June 30, 1997 was
71.81%. Without giving effect to the applicable front-end sales load, the
total return for Class A was 77.10%. The 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, 1997 was 14.71% and 16.89%, respectively.
Without giving effect to the applicable CDSC, the total return for Class B
and C was 16.71% and 16.89%, respectively. The New York Municipal Fund's
total return for Class R shares for the period February 1, 1993 (inception
of Class R) to June 30, 1997 was 25.88%.
The Municipal Fund's total return for Class A shares for the period
October 1, 1985 (commencement of operations) to June 30, 1997 was 156.20%.
Without giving effect to the applicable front-end sales load, the total
return for Class A was 164.14%. The 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, 1997 was 16.72% and 18.97%, respectively. Without
giving effect to the applicable CDSG, the total return for Class B and C was
18.72% and 18.97%, respectively. The Municipal Fund's total return for
Class R shares for the period February 1, 1993 (inception of Class R) to
June 30, 1997 was 28.43%.
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 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 9671, Providence, RI 02940-9671, 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, 1998, providing audit services including (1)
examination of the annual financial statements (2) assistance, review and
consultation in connection with the SEC (3) and review of the annual Federal
income tax return filed on behalf of each Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended June 30, 1997,
including notes to the financial statements and supplementary information,
and the Independent Auditors' Report, are included in the Annual Report to
shareholders. A copy of the Annual Report accompanies this Statement of
Additional Information. The financial statements included in the Annual
Report, and the Independent Auditors' Report thereon, contained therein, and
related notes, are incorporated herein by reference.
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).
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, and expects
to close with a portion balance at the close of fiscal 1997.
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 and in fiscal 1996, they were $3.415 billion.
The average annual growth from fiscal 1992 to fiscal 1996 was 3.9% 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 7.6% from $751.5 million in fiscal 1991 to $1.005
billion in fiscal 1996.
Payments for debt service on Massachusetts general obligation bonds and
notes have risen at an average annual rate of 10.27% from $649.8 million in
fiscal 1989 to $1.23 billion in fiscal 1996. Debt service payments were
$898.3 million in fiscal 1992, $1.14 billion in fiscal 1993 and $1.15
billion in fiscal 1994, $1.23 billion in fiscal 1995 and $1.8 billion in
fiscal 1996. 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 $240 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 19.2% 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 $3.246 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. However, at June 30, 1996, according to
the Department of Finance, the State's Special Fund for Economic
Uncertainties ("SFEU") had a small negative balance of approximately $87
million, all but eliminating the accumulation budge deficit from the early
1990s.
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 1996-97 Fiscal Year Budget projects $47.6 billion of General Fund
revenues and transfers and $47.3 billion of budgeted expenditures.
The 1997-98 Fiscal Year Budget was released by the Governor on January
9, 1997. It projects $50.7 billion of General Fund revenues and transfers
and $50.3 billion of budgeted expenditures, and projects a balance in the
SFEU of $553 million on June 30, 1998.
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
200 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 County 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 County Funds, including the County, are facing
cash flow difficulties because of the bankruptcy filing and may be required
to reduce programs or capital projects. This may also reflect their ability
to meet their outstanding obligations.
The State has no existing obligation with respect to any outstanding
obligations or securities of the County or any of the other participating
entities. However, in the event the County is unable to maintain county
administered State programs because of insufficient resources, it may be
necessary for the State to intervene, but the State cannot presently predict
what, if any, action may occur.
State Finances. State moneys are segregated into the General Fund and
approximately 800 Special Funds including Bond, Trust and Pension 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, 1996, the General Fund had outstanding loans from the SFEU and Special
Funds in the amount of $1.5 billion.
Articles XIIIA, XIIIB, XIIIC and XIIID 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.
The limit for the 1993-94 fiscal year, the State appropriations limit
was $36.6 billion, and appropriations subject to limitation were $6.55
billion under the limit. The limit for the 1991-95 fiscal year was $37.55
billion, and appropriations subject to limitations were $5.93 billion under
the limit. The limit for the 1995-96 fiscal year was $39.31 billion, and
the appropriations subject to limitation were estimated to be $5.12 billion
under the limit. The limit for the 1996-97 fiscal year was $42 billion, and
the appropriations subject to limitation were estimated to be $7.12 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.
In November 1996, State voters approved Proposition 218, which added
Articles XIIIC and XIIID to the State Constitution generally requiring voter
approval of most tax or fee increases by local governments and curtailing
local governments' use of benefit assessments to fund certain property-
related services to finance infrastructure. The amendments extend to all
local government entities the requirement that all taxes for general
purposes be approved by a majority vote and that all taxes for special
purposes be approved by a two-thirds majority vote (including the
ratification of those taxes that have been imposed since January 1, 1995 up
to the effective date of the amendments). Proposition 218 also limits the
use of special assessments or "property-related" fees to services or
infrastructure that confer a "special benefit" to specific property; police,
fire and other services are now deemed to benefit the public at large and,
therefore, could not be funded by special assessments. Finally, the
amendments enable the voters to use their initiative power to repeal
previously-authorized taxes, assessments, fees and charges. It remains to
be seen what impact these Articles will have on existing and future
California debt obligations.
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. After, 1995, the maximum
personal income tax rate returned to 9.3%, and the AMT rate dropped from
8.5% to 7%.
The personal income tax is adjusted annually by the change in the
consumer price index to prevent taxpayers from being pushed into higher tax
brackets without a real increase in income.
The sales tax is imposed upon retailers for the privilege of selling
tangible personal property in California. Most retail sales and leases are
subject to the tax. However, exemptions have been provided for certain
essentials such as food for home consumption, prescription drugs, gas,
electricity and water. Sales tax accounted for about 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 reconciliation's. 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, proposed a two-year solution to
pass the accumulated deficit. 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 1995-96 Budget Act was signed by the Governor on August 3, 1995, 34
days after the start of the fiscal year. The Budget Act projected General
Fund revenues and transfers of $44.1 billion, a 3.5% increase from the prior
year. Expenditures were budgeted at $43.4 billion, a 4% increase. The
Budget Act also projected Special Fund revenues of $12.7 billion and
appropriated Special Fund expenditures of $13.0 billion.
Final data for the 1995-96 Fiscal Year showed revenues and transfers of
$46.1 billion, some $2 billion over the original fiscal year estimate, which
was attributed to the strong economic recovery. Expenditures also
increased, to an estimated $45.4 billion, as a result of the requirement to
expend revenues for schools under Proposition 98, and among other things,
failure of the federal government to enact welfare reform during the fiscal
year and to budget new aid for illegal immigrant costs, both of which had
been counted on to allow reductions in State costs. Available internal
borrowable resources (available cash, after payment of all obligations due)
on June 30, 1996 was approximately $3.8 billion, representing a significant
improvement in the State's cash position, and ending the need for deficit
borrowing over the end of the fiscal year. The State's improved cash
position allowed it to repay the $4.0 billion Revenue Anticipation Warrant
issue on April 25, 1996, and to issue only $2.0 billion in revenue
anticipation notes during the fiscal year, which matured on June 28, 1996.
The 1996-97 Budget Act was signed by the Governor on July 15, 1996,
along with various implementing bills. The Governor vetoed about $82
million of appropriations (both General Fund and Special Fund). With the
signing of the Budget Act, the State implemented its regular cash flow
borrowing program with the issuance of $3.0 billion of Revenue Anticipation
Notes to mature on June 30, 1997. The Budget Act appropriated a modest
budget reserve in the SFEU of $305 million, as of June 30, 1997. The
Department of Finance projected that, on June 30, 1997, the State's
available internal borrowable (cash) resources will be $2.9 billion, and
after payment of all obligations due by that date, so that no cross-fiscal
year borrowing will be needed.
The Legislature rejected the Governor's proposed 15% cut in personal
income taxes (to be phased in over three years), and did not approve a 5%
cut in bank and corporation taxes, which was to be effective for income
years starting on January 1, 1997. As a result, revenues for the fiscal
year were estimated to total $47.64 billion, a 3.3% increase over the final
estimated 1995-96 revenues. Special Fund revenues were estimated to be
$13.3 billion.
The Budget Act contained General Fund appropriations totaling $47.25
billion, a 4.0% increase over the final estimated 1995-96 expenditures.
Special Fund expenditures were budgeted at $12.6 billion.
With the continued strong economic recovery in the State, the
Department of Finance has estimated, in connection with the release of the
Governor's 1997-98 Budget Proposal, that revenues for the 1996-97 fiscal
year will exceed initial projections by about $760 million. This increase
will be offset by higher expenditures for K-14 school aid (pursuant to
Proposition 98) and for health and welfare costs, because Federal law
changes and other Federal actions did not provide as much assistance to the
State as was initially planned in the Budget Act. The Department's updated
projections show a balance in the SFEU of $197 million, slightly lower than
projected in July 1996. The Department also projects the State's cash
position will be stronger than originally estimated, with unused internal
borrowable resources at June 30, 1997 of approximately $4.3 billion.
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.
The State's budget for the 1996-97 fiscal year was enacted by the
Legislature on August 4, 1997, more than four months after the start of the
fiscal year on April 1, 1997. 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 1997-98
fiscal year was formulated on August 11, 1997 and is based on the State's
budget as enacted by the Legislature and signed into law by the Governor as
well as actual results for the first quarter of the 1997-98 fiscal year.
After adjustments for comparability between fiscal years, the adopted
1997-98 budget projects an increase in General Fund disbursements of $1.7
billion, 5.2% over 1996-97 levels. The average age and growth rate over the
last three fiscal years has been 1.2% Adjusted State Funds (excluding
federal grants) disbursements are projected to increase by 5.4% from the
1996-97 fiscal year. All Governmental Funds projected disbursements
increase by 7.0% over the prior fiscal year, after adjustments for
comparability.
The 1997-98 State Financial Plan is projected to be balanced on a cash
basis. The Financial Plan projections include a reserve for future needs of
$530 million. As compared to the Governor's Executive Budget as amended on
February 1997, the State's adopted budget for 1997-98 increases General Fund
spending by $1.7 billion, primarily from increases for local assistance
($1.3 billion). Resources used to fund these additional expenditures
include increased revenues projected for 1997-98 fiscal year, increased
resources produced in the 1996-97 fiscal year that will be utilized in 1997-
98, reestimates of social services, fringe benefit and other spending, and
certain non-recurring resources. The total non-recurring resources included
in the 1997-98 financial plan are projected by State Division of the Budget
("DOB") to be $270 million, or 0.70% of total General Fund receipts.
The 1997-98 adopted budget includes multi-year tax reductions,
including a State funded property and local income tax reduction program,
estate tax relief, utility gross receipts tax reductions, permanent
reductions in the State sales tax on clothing, and elimination of
assessments on medical providers. These reductions are intended to reduce
the overall level of State and local taxes in New York and to improve the
State's competitive position vis-a-vis other states. The various elements
of the State and local tax and assessment reductions have little or no
impact on the 1997-98 Financial Plan, and do not begin to materially affect
the outyear projections until the State's 1999-2000 fiscal year.
The 1997-98 Financial Plan also includes: a projected General Fund
reserve of $530 million; a projected balance of $332 million in the Tax
Stabilization Reserve Fund; and a projected $65 million balance in the
Contingency Reserve Fund.
The major factor affecting the General Fund GAAP-basis results for 1996-
97 and the projections for 1997-98 is the 1996-97 cash-basis surplus, which
helped produce a GAAP-basis surplus in the 1996-97 fiscal year of $1.93
billion. The use of this cash-basis surplus to fund liabilities in the 1997-
98 fiscal year, offset by the $494 million change in the projected 1997-98
cash-basis fund balance, is the primary reason for the projected 1997-98
GAAP-basis deficit of $959 million. This represents an increase of $191
million from the prior projection, issued in January 1997 as part of the
1997-98 Executive Budget. The new projection reflects the impact of
legislative changes to the Executive Budget, and the increase in the 1996-97
cash-basis surplus since that time. Across the two fiscal years, the
General Fund accumulated deficit is projected to be reduced by $974 million
to $1.95 billion.
For 1997-98, total revenues in the General Fund are projected at $33.37
billion, total expenditures are projected at $34.66 billion, and net
operating sources and uses are projected to contribute $331 million. For
all governmental funds, total revenues are projected at $67.48 billion,
total expenditures are projected at $68.24 billion, and financing uses are
projected to exceed financing sources by $220 million. The all governmental
funds GAAP-basis Financial Plan projections show a deficiency of revenues
and other financing sources over expenditures and other financing uses of
$979 million, after a reported 1996-97 all funds surplus of $2.1 billion
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.
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.
GAAP-Basis Results--1996-97 Fiscal Year. The State completed its 1996-97
fiscal year with a combined Governmental Funds operating surplus of $2.1
billion, which included an operating surplus in the General Fund of $1.9
billion, in Capital Projects Funds of $98 million and in the Special Revenue
Funds of $65 million, offset in part by an operating deficit of $37 million
in the Debt Service Funds.
GAAP-Basis Results--1995-96 Fiscal Year. The State completed its 1995-96
fiscal year with a combined Governmental Funds operating surplus of $432
million, which included an operating surplus in the General Fund of $380
million, in the Capital Projects Funds of $276 million and in the Debt
Service Funds of $185 million. There was an operating deficit of $409
million in the Special Revenue Funds. The State's Combined Balance Sheet as
of March 31, 1996 showed an accumulated deficit in its combined Governmental
Funds of $1.23 billion, reflecting liabilities of $14.59 billion and assets
of $13.35 billion. This accumulated Governmental Funds deficit includes a
$2.93 billion accumulated deficit in the General Fund and an accumulated
deficit of $712 million in the Capital Projects Fund type as partially
offset by accumulated surpluses of $468 million and $1.94 billion in the
Special Revenue and Debt Service fund types, respectively.
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 was an operating surplus in the Special Revenue Funds of $39
million.
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.
In the State's 1997-98 fiscal year, the General Fund is expected to
account for approximately 48% of total Governmental Funds disbursements and
71% of total State Funds disbursements. The General Fund is projected to be
balanced on a cash basis for the 1997-98 fiscal year. Total receipts and
transfers from other funds are projected to be $35.09 billion, an increase
of $2.05 million from the prior fiscal year. Total General Fund
disbursements and transfers to other funds are projected to be $34.60
billion, an increase of $1.70 billion from the total 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. During its last five fiscal years, however, the State
recorded balanced budgets on a cash basis, with positive fund balances as
described below.
The State ended its 1996-97 fiscal year on March 31, 1997 in balance on
a cash basis, with a General Fund cash surplus as reported by DOB of
approximately $1.4 billion. The cash surplus was derived primarily from
higher-than-expected revenues and lower-than-expected spending for social
services programs. The Governor in his Executive Budget applied $1.05
billion of the cash surplus amount to finance the 1997-98 Financial Plan,
and the additional $373 million is available for use in financing the 1997-
98 Financial Plan when enacted by the State Legislature.
The General Fund closing fund balance was $433 million. Of that
amount, $317 million was in the Tax Stabilization Reserve Fund ("TSRF"),
after a required deposit of $15 million and an additional deposit of $65
million in 1996-97. The TSRF can be used in the event of any future General
Fund deficit, as provided under the State Constitution and State Finance
Law. In addition, $41 million remains on deposit in the Contingency Reserve
Fund ("CRF"). This fund assists the State in financing any extraordinary
litigation costs during the fiscal year. The remaining $75 million reflects
amounts on deposit in the Community Projects Fund. This fund was created to
fund certain legislative initiatives. The General Fund closing fund balance
does not include $1.86 billion in the tax refund reserve account, of which
$521 million was made available as a result of the Local Government
Assistance Corporation ("LGAC") financing program as was required to be on
deposit as of March 31, 1997.
General Fund receipts and transfers from other funds for the 1996-97
fiscal year totaled $33.04 billion, and an increase of 0.7% from the
previous fiscal year (excluding deposits into the tax refund reserve
account.). General Fund disbursements and transfers to other Funds totaled
$32.90 billion for the 1996-97 fiscal year an increase of 0.7% from 1995-96
levels.
The State ended its 1995-96 fiscal year on March 31, 1996 with a
General Fund cash surplus, as reported by DOB, of $445 million. Of that
amount, $65 million was deposited into the TSRF, and $380 million was used
to reduce 1996-97 Financial Plan liabilities by accelerating 1996-97
payments, deferring 1995-96 revenues, and making a deposit to the tax refund
reserve account.
The General Fund closing fund balance was $287 million, an increase of
$129 million from 1994-95 levels. The $129 million change in fund balance
is attributable to the $65 million voluntary deposit to the TSRF, a $15
million required deposit to the TSRF, a $40 million deposit to the CRF, and
a $9 million deposit to the Revenue Accumulation Fund. The closing fund
balance includes $237 million on deposit in the TSRF, to be used in the
event of any future General Fund deficit as provided under the State
Constitution and State Finance Law. In addition, $41 million is on deposit
in the CRF. The CRF was established in State fiscal year 1993-94 to assist
the State in financing the costs of extraordinary litigation. The remaining
$9 million reflects amounts on deposit in the Revenue Accumulation Fund.
This fund was created to hold certain tax receipts temporarily before their
deposit to other accounts. In addition, $678 million was on deposit in the
tax refund reserve account, of which $521 million was necessary to complete
the restructuring of the State's cash flow under the LGAC program.
General Fund receipts totaled $32.81 billion, a decrease of 1.1% from
1994-95 levels. This decrease reflects the impact of tax reductions enacted
and effective in both 1994 and 1995. General Fund disbursements totaled
$32.68 billion for the 1995-96 fiscal year, a decrease of 2.2% from 1994-95
levels.
The State ended its 1994-95 fiscal year with the General Fund in
balance. The $241 million decline in the fund balance reflects the planned
use of $264 million from the CRF, partially offset by the required deposit
of $23 million to the TSRF. In addition, $278 million was on deposit in the
tax refund reserve account, $250 million of which was deposited to continue
the process of restructuring the State's cash flow as part of the LGAC
program. The closing fund balance of $158 million reflects $157 million in
the TSRF and $1 million in the CRF.
General Fund receipts totaled $33.16 billion, an increase of 2.9% from
1993-94 levels. General Fund disbursements totaled $33.40 billion for the
1994-95 fiscal year, an increase of 4.7% from the previous fiscal year.
Cash-Basis Results--Other Governmental Funds. Activity in the three other
governmental funds has remained relatively stable over the last three fiscal
years ended march 31, 1997, 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, 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 are 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. Disbursements from Special
Revenue Funds increased from $24.38 billion to $26.02 billion over the last
three years primarily as a result of increased costs for the federal share
of Medicaid. Other activity reflected dedication of taxes to a new fund for
mass transportation, new lottery games, and new fees for criminal justice
programs. Although activity in this fund type is expected to comprise
approximately 42% of total governmental funds receipts in the 1997-98 fiscal
year, three-quarters of that activity relates to federally-funded programs.
Projected receipts in this fund type for the 1997-98 fiscal year total
$28.22 billion, an increase of $2.51 billion (9.7%) over the prior year.
Projected disbursements in this fund type total $28.45 billion, an increase
of $2.43 billion (9.3%) over 1996-97 levels. Disbursements from federal
funds, primarily the federal share of Medicaid and other social services
programs, are projected to total $21.19 billion in the 1997-98 fiscal year.
Remaining projected spending of $7.26 billion primarily reflects aid to SUNY
supported by tuition and dormitory fees, education aid funded from lottery
receipts, operating aid payments to the MTA funded from the proceeds of
dedicated transportation taxes, and costs of a variety of self-supporting
programs which deliver services financed by user fees.
The Capital Projects Funds are used to finance the acquisition,
construction or rehabilitation of major state capital facilities and to aid
local government units and Agencies in financing capital constructions.
Disbursements in the Capital Projects Funds declined from $3.62 billion to
$3.54 billion over the last three years, as spending for miscellaneous
capital programs decreased, partially offset by increases for mental
hygiene, health and environmental programs. The composition of this fund
type's receipts also changed as the dedicated transportation taxes began to
be deposited, general obligation bond proceeds declined substantially,
federal grants remained stable, and reimbursements from public authority
bonds (primarily transportation related) increased. The increase in the
negative fund balance in 1994-95 resulted from delays in reimbursements
caused by delays in the timing of public authority bond sales.
In the 1997-98 fiscal year, activity in these funds is expected to
comprise 5% of total governmental receipts.
Total receipts in this fund type for the 1997-98 fiscal year are
projected at $3.30 billion. Bond and note proceeds are expected to provide
$605 million in other financing sources. Disbursements from this fund type
are projected to be $3.70 billion, an increase of $154 million (4.3%) over
prior-year levels. The Dedicated Highway and Bridge Trust Fund is the
single largest dedicated fund, comprising an estimated $982 million (27%) of
the activity in this fund type. Total spending for capital projects will be
financed through a combination of sources: federal grants (29%), public
authority bond proceeds (31%), general obligation bond proceeds (15%), and
pay-as-you-go revenues (25%).
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.
Activity in the Debt Service Funds reflected increased use of bonds
during the three-year period for improvements to the State's capital
facilities and the continued implementation of the LGAC fiscal reform
program. The increases were moderated by the refunding savings achieved by
the State over the last several years using strict present value savings
criteria. The growth in LGAC debt service was offset by reduced short-term
borrowing costs reflected in the General Fund. This fund type is expected
to comprise 4% of total governmental fund receipts and 4.7% of total
government disbursements in the 1997-98 fiscal year. Receipts in these
funds in excess of debt service requirements may be transferred to the
General Fund and Special Revenue Funds, pursuant to law.
The Debt Service fund type consists of the General Debt Service Fund,
which is supported primarily by tax receipts transferred from the General
Fund, and other funds established to accumulate moneys for the payment of
debt service. In the 1997-998 fiscal year, total disbursements in this fund
type are projected at $3.17 billion, an increase of $641 million or 25.3%,
most of which is explained by increases in the General Fund transfer as
discussed earlier. The projected transfer from the General Fund of $2.07
billion is expected to finance 65% of these payments.
The remaining payments are expected to be financed by pledged revenues,
including $2.03 billion in taxes and $601 million in dedicated fees and
other miscellaneous receipts. After required impoundment for debt service,
$3.77 billion is expected to be transferred to the General Fund and other
funds in support of State operations. The largest transfer-$1.86 billion-is
made to the Special Revenue fund type in support of operations of the mental
hygiene agencies. Another $1.47 billion in excess sales taxes is expected
to be transferred to the General Fund, following payments of projected debt
service on LGAC bonds.
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 1997-98 fiscal year. The State expects to issue $605
million in general obligation bonds (including $140 million for purposes of
redeeming outstanding BANs) and $140 million in general obligation
commercial paper. The Legislature has also authorized the issuance of up to
$31 million in COPs during the State's 1997-98 fiscal year for equipment
purchases. The projection of the State regarding its borrowings for the
1997-98 fiscal year may change if circumstances require.
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, 1996, there were 17 Agencies that had outstanding debt
of $100 million or more. The aggregate outstanding debt, including
refunding bonds, of these 17 Agencies was $75.4 billion as of September 30,
1996. As of March 31, 1997, aggregate Agency debt outstanding as State-
supported debt was $32.8 billion and as State-related was $37.1 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.
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.
Since 1980, 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 1997-
98 State fiscal year, total State assistance to the MTA is estimated at
approximately $1.2 billion, an increase of $76 million over the 1996-97
fiscal year.
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.
State legislation accompanying the 1996-97 adopted State budget
authorized the MTA, TBTA and TA to issue an aggregate of $6.5 billion in
bonds to finance a portion of a new $11.98 billion MTA capital plan for the
1995 through 1999 calendar years (the "1995-99 Capital Program"), and
authorized the MTA to submit the 1995-99 Capital Program to the Capital
Program Review Board for approval. This plan will supersede the overlapping
portion of the MTA's 1992-96 Capital Program. This is the fourth capital
plan since the Legislature authorized procedures for the adoption, approval
and amendment of MTA capital programs and is designed to upgrade the
performance of the MTA's transportation systems by investing in new rolling
stock, maintaining replacement schedules for existing assets and bringing
the MTA system into a state of good repair. The 1995-99 Capital Program
assumes the issuance of an estimated $5.1 billion in bonds under this $6.5
billion aggregate bonding authority. The remainder of the plan is projected
to be financed through assistance from the State, the federal government,
and the City of New York, and from various other revenues generated from
actions taken by the MTA.
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 1995-1999 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 last several State fiscal years. 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 1996-97 fiscal year.
Fiscal difficulties experienced by the City of Yonkers resulted in the
re-establishment of the Financial Control Board for the City of Yonkers by
the State in 1984. That Board is charged with oversight of the fiscal
affairs of Yonkers. Future actions taken by the State to assist Yonkers
could result in increased State expenditures for extraordinary local
assistance.
Beginning in 1990, the City of Troy experienced a series of budgetary
deficits that resulted in the establishment of a Supervisory Board for the
City of Troy in 1994. The Supervisory Board's powers were increased in
1995, when Troy MAC was created to help Troy avoid default on certain
obligations. The legislation creating Troy MAC prohibits the City of Troy
from seeking federal bankruptcy protection while Troy MAC bonds are
outstanding.
Seventeen municipalities received extraordinary assistance during the
1996 legislative session through $50 million in special appropriations
targeted for distressed cities.
Municipalities and school districts have engaged in substantial
short-term and long-term borrowings. In 1995, the total indebtedness of all
localities in the State, other than the City, was approximately $19 billion.
A small portion (approximately $102.3 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.
Eighteen localities had outstanding indebtedness for deficit financing at
the close of their fiscal year ending in 1995.
From time to time, Federal expenditure reductions could reduce, or in
some cases eliminate, Federal funding of some local programs and accordingly
might impose substantial increased expenditure requirements on affected
localities 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. Longe-range, potential problems
of declining urban population, increasing expenditures and other economic
trends could adversely affect localities and require increasing State
assistance in the future.
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.
(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 has achieved balanced operating results for each of its fiscal years
since 1981 as reported in accordance with the then-applicable GAAP
standards. The City's ability to maintain balanced operating results in
future years is subject to numerous contingencies and future developments.
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.
During the 1990 and 1991 fiscal years, as a result of a slowing
economy, the City has experienced significant shortfalls in almost all of
its major tax sources and increases in social services costs, and was
required to take actions to close substantial budget gaps in order to
maintain balanced budgets in accordance with the Financial Plan.
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 forecast of the State's economy shows moderate expansion during the
first half of calendar 1997 with the trend continuing through the year.
Although industries that export goods and services are expected to continue
to do well, growth is expected to be moderated by tight fiscal constraints
on the health care and social services industries. On an average annual
basis, employment growth in the State is expected to be up substantially
from the 1996 rate. Personal income is expected to record moderate gains in
1997. Bonus payments in the securities industry are expected to increase
further from last year's record level.
APPENDIX D
DESCRIPTION OF STANDARD & POOR'S, MOODY'S, FITCH AND DUFF RATINGS
Municipal Bond, Note and Commercial Paper Ratings
Standard & Poor's ("S&P")
Municipal Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by
S&P. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.
AA An obligation rated `AA' differs from the highest rated
issues only in small degree. The obligors capacity to meet its
financial commitment on the obligation is very strong.
A An obligation rated `A' is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher rated categories. However,
the obligor's capacity to meet its financial commitment on the
obligation is still strong.
BBB An obligation rated `BBB' exhibits adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of
the obligor to meet its financial commitment on the obligation.
The ratings from `AA' to `BBB' may be modified by the addition of a
plus (+) or a minus (-) sign to show relative standing within the major
rating categories
Municipal Note Ratings
SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt service
is given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with
some vulnerability to adverse finance and economic changes over
the term of the notes.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A-1 This designation indicates that the degree of safety
regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics are denoted with a
plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation
is satisfactory. However, the relative degree of safety is not as
high as for issuers designated `A-1.'
A-3 Issues carrying this designation have an adequate capacity
for timely payment. They are, however, more vulnerable to the
adverse effects of changes in circumstances than obligations
carrying the higher designations.
Moody's
Municipal Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
generally are referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what
generally are known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa
securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which suggest
a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are 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. Such bonds lack outstanding investment charac
teristics and in fact have speculative characteristics as well.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within each generic rating classification from Aa through Baa.
The modifier 1 indicates a ranking for the security in the higher end
of a rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates a ranking in the lower end of a rating
category.
Municipal Notes and other Short-Term Obligations
There are four rating categories for short-term obligations that define
an investment grade situation. These are designated Moody's Investment
Grade as MIG 1 (best quality) through MIG 4 (adequate quality). Short-term
obligations of speculative quality are designated SG.
In the case of variable rate demand obligations (VRDOs), a two
component rating is assigned. The first element represents an evaluation of
the degree of risk associated with scheduled principal and interest
payments, and the other represents an evaluation of the degree of risk
associated with the demand feature. The short-term rating assigned to the
demand feature of VRDOs is designated as VMIG. When either the long- or
short-term aspect of a VRDO is not rated, that piece is designated NR, e.g.,
Aaa/NR or NR/VMIG 1.
MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
MIG-2/
MIG 2 This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
MIG 3/
VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG 4/
VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
Commercial Paper Rating
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated
issuers:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial markets
and assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited
above but to a lesser agree. Earnings trends and coverage ratios,
while sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt
protection measurements and may require relatively high financial
leverage. Adequate alternative liquidity is maintained.
Fitch Investor Services, Inc. ("Fitch")
Municipal Bond Ratings
AAA Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability
to pay interest and repay principal, which is unlikely to be
affected by reasonably forseeable events.
AA Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds
rated `AAA'. Because bonds rated in the `AAA' and `AA' categories
are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated
`F-1+'.
A Bonds considered to be investment grade and of high credit
quality, The obligor's ability to pay interest an repay principal
is considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with
higher ratings.
BBB Bonds considered to be investment grade and satisfactory
credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely to
have adverse impact on these bonds and, therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher
ratings
+/- Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating
category.
Municipal Short-Term and Commercial Paper Ratings
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
Although the credit analysis is similar to Fitch's bond rating
analysis, the short-term rating places greater emphasis than bond ratings on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
F-1+ Exceptionally Strong Credit Quality. Issues assigned this rating
are regarded as having the strongest degree of assurance for timely
payment.
F-1 Very Strong Credit Quality. Issues assigned this rating
reflect an assurance of timely payment only slightly less in
degree than issues rated `F-1+'.
F-2 Good Credit Quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as for issues assigned `F-1+' and
`F-1' ratings.
Duff & Phelps Inc. ("Duff & Phelps")
Municipal Long-Term Ratings
AAA Highest credit quality. The risks factors are negligible,
being only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is
modest but
AA may vary slightly from time to time because of economic
conditions.
AA-
A+ Protections factors are average but adequate. However, risk
factors are
A more variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered sufficient
for prudent
BBB investment. Considerable variability in risk during economic
cycles.
BBB-
Municipal Short-Term and Commercial Paper Ratings
D-1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-
free U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
D-1- High certainly of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors. Risk
factors are very small.
D-2 Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs
may enlarge total financial requirements, access to capital
markets is good. Risk factors are small.
D-3 Satisfactory liquidity and other protection factors qualify
issues as to investment grade. Risk factors are larger and
subject to more variation. Nevertheless, timely payment is
expected.
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 28) and the
Registrant's Semi Annual Report for the fiscal year ending June
30, 1997:
- 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 18f-3 Plan, incorporated by reference to Post-Effective
Amendment No. 45, filed on October 30, 1996.
Other Exhibits
______________
(a) Powers of Attorney.
Item 25. Persons Controlled by or under Common Control with
Registrant
--------------------------------------------------
Not applicable.
Item 26. Number of Holders of Securities
-------------------------------
Set forth below are the number of recordholders of securities
of each series of the Registrant as of October 14, 1997:
Number of Record Holders
------------------------
Title of Class
- ----------------
Dreyfus BASIC Massachusetts Municipal Money Market Fund 160
Dreyfus BASIC California Municipal Money Market Fund 327
Dreyfus BASIC New York Municipal Money Market Fund 1,503
Dreyfus Premier Limited Term Municipal Fund 1,170
Dreyfus Premier Limited Term California Municipal Fund 211
Dreyfus Premier Limited Term Massachusetts Municipal Fund 445
Dreyfus Premier Limited Term New York Municipal Fund 162
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.
BURTON C. BORGELT Chairman Emeritus of the Board and
Director Past Chairman, Chief Executive Officer and
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405;
Director:
DeVlieg-Bullard, Inc.
1 Gorham Island
Westport, Connecticut 06880
Mellon Bank Corporation***;
Mellon Bank, N.A.***
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
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 Officer:
and a Director Kleinwort Benson Investment Management
Americas Inc.*
LAWRENCE S. KASH Chairman, President and Chief
Vice Chairman-Distribution Executive Officer:
and a Director The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109;
Executive Vice President and Director:
Dreyfus Service Organization, Inc.**;
Director:
Dreyfus America Fund+++;
The Dreyfus Consumer Credit Corporation*;
The Dreyfus Trust Company++;
Dreyfus Service Corporation*;
World Balanced Fund++++;
President:
The Boston Company****;
Laurel Capital Advisors***;
Boston Group Holdings, Inc.;
Executive Vice President:
Mellon Bank, N.A.***;
Boston Safe Deposit and Trust
Company****
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 America Fund+++;
World Balanced 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 Service Corporation*;
Formerly, President and Director:
Sandalls & Co., Inc.
MARK N. JACOBS Vice President, Secretary and Director:
Vice President, Secretary:
General Counsel The Dreyfus Consumer Credit Corporation*;
and Secretary 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
WILLIAM V. HEALEY
Assistant Secretary
President:
The Truepenny Corporation
Vice President and Director:
The Dreyfus Consumer Credit Corporation
Secretary and Director:
Dreyfus Partnership Management Inc.
Director:
The Dreyfus Trust Company
Assistant Secretary:
Dreyfus Service Corporation
Dreyfus Investment Advisors, Inc.
Assistant Clerk:
Dreyfus Insurance Agency of Massachusetts,
Inc.
______________________________________
* The address of the business so indicated is 200 Park Avenue, New
York, New York 10166.
** The address of the business so indicated is 131 Second Street, Lewes,
Delaware 19958.
*** The address of the business so indicated is One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258.
**** The address of the business so indicated is One Boston Place, Boston,
Massachusetts 02108.
+ The address of the business so indicated is Atrium Building, 80 Route
4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144.
+++ The address of the business so indicated is 69, Route 'd'Esch,
L-1470 Luxembourg.
++++ The address of the business so indicated is 69, Route 'd'Esch,
L-2953 Luxembourg.
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) Dreyfus Investment Grade Bond Funds, Inc.
34) The Dreyfus/Laurel Funds, Inc.
35) The Dreyfus/Laurel Funds Trust
36) Dreyfus LifeTime Portfolios, Inc.
37) Dreyfus/Laurel Tax Free Municipal Funds
38) Dreyfus Liquid Assets, Inc.
39) Dreyfus Massachusetts Intermediate Municipal Bond Fund
40) Dreyfus Massachusetts Municipal Money Market Fund
41) Dreyfus Massachusetts Tax Exempt Bond Fund
42) Dreyfus MidCap Index Fund
43) Dreyfus Money Market Instruments, Inc.
44) Dreyfus Municipal Bond Fund, Inc.
45) Dreyfus Municipal Cash Management Plus
46) Dreyfus Municipal Money Market Fund, Inc.
47) Dreyfus New Jersey Intermediate Municipal Bond Fund
48) Dreyfus New Jersey Municipal Bond Fund, Inc.
49) Dreyfus New Jersey Municipal Money Market Fund, Inc.
50) Dreyfus New Leaders Fund, Inc.
51) Dreyfus New York Insured Tax Exempt Bond Fund
52) Dreyfus New York Municipal Cash Management
53) Dreyfus New York Tax Exempt Bond Fund, Inc.
54) Dreyfus New York Tax Exempt Intermediate Bond Fund
55) Dreyfus New York Tax Exempt Money Market Fund
56) Dreyfus 100% U.S. Treasury Intermediate Term Fund
57) Dreyfus 100% U.S. Treasury Long Term Fund
58) Dreyfus 100% U.S. Treasury Money Market Fund
59) Dreyfus 100% U.S. Treasury Short Term Fund
60) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
61) Dreyfus Pennsylvania Municipal Money Market Fund
62) Dreyfus Premier California Municipal Bond Fund
63) Dreyfus Premier Equity Funds, Inc.
64) Dreyfus Premier International Growth Fund, Inc.
65) Dreyfus Premier GNMA Fund
66) Dreyfus Premier Worldwide Growth Fund, Inc.
67) Dreyfus Premier Insured Municipal Bond Fund
68) Dreyfus Premier Municipal Bond Fund
69) Dreyfus Premier New York Municipal Bond Fund
70) Dreyfus Premier State Municipal Bond Fund
71) Dreyfus Premier Value Fund
72) Dreyfus S&P 500 Index Fund
73) Dreyfus Short-Intermediate Government Fund
74) Dreyfus Short-Intermediate Municipal Bond Fund
75) The Dreyfus Socially Responsible Growth Fund, Inc.
76) Dreyfus Stock Index Fund, Inc.
77) Dreyfus Tax Exempt Cash Management
78) The Dreyfus Third Century Fund, Inc.
79) Dreyfus Treasury Cash Management
80) Dreyfus Treasury Prime Cash Management
81) Dreyfus Variable Investment Fund
82) Dreyfus Worldwide Dollar Money Market Fund, Inc.
83) General California Municipal Bond Fund, Inc.
84) General California Municipal Money Market Fund
85) General Government Securities Money Market Fund, Inc.
86) General Money Market Fund, Inc.
87) General Municipal Bond Fund, Inc.
88) General Municipal Money Market Fund, Inc.
89) General New York Municipal Bond Fund, Inc.
90) General New York Municipal Money Market 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+ Director, Senior Vice President, Vice President
Tresurer and Chief Financial Officer and Assistant
Treasurer
Richard W. Ingram Executive Vice President Vice President
and Assistant
Treasurer
John E. Pelletier+ Senior Vice President, General Vice President
Counsel, Secretary and Clerk and Secretary
Elizabeth A. Keeley++ Vice President Vice President
and Assistant
Secretary
Mary A. Nelson+ Vice President Vice President
and Assistant
Treasurer
Paul Prescott+ Vice President None
Jean M. O'Leary+ Assistant Secretary and None
Assistant Clerk
William J. Nutt+ Director None
________________________________
+ Principal business address is 60 State Street, 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. Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
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 Board member or Board members when
requested in writing to do so by the holders of at least 10% of
the Registrant's outstanding shares 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 28th day of October, 1997.
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 10/28/97
- ---------------------------
Marie E. Connolly
/s/Francis P. Brennan* Trustee, 10/28/97
- --------------------------- Chairman of the Board
Francis P. Brennan
/s/Ruth Marie Adams* Trustee 10/28/97
- ---------------------------
Ruth Marie Adams
/s/Joseph S. DiMartino* Trustee 10/28/97
- ---------------------------
Joseph S. DiMartino
/s/James M. Fitzgibbons* Trustee 10/28/97
- ---------------------------
James M. Fitzgibbons
/s/Kenneth A. Himmel* Trustee 10/28/97
- ---------------------------
Kenneth A. Himmel
/s/Stephen J. Lockwood* Trustee 10/28/97
- ---------------------------
Stephen J. Lockwood
/s/Roslyn M. Watson* Trustee 10/28/97
- ---------------------------
Roslyn M. Watson
/s/J. Tomlinson Fort* Trustee 10/28/97
- ---------------------------
J. Tomlinson Fort
/s/Arthur L. Goeschel* Trustee 10/28/97
- ---------------------------
Arthur L. Goeschel
/s/Arch S. Jeffery* Trustee 10/28/97
- ---------------------------
Arch S. Jeffery
/s/John Sciullo* Trustee 10/28/97
- ---------------------------
John Sciullo
*By: /s/Elizabeth Keeley
---------------------------
Attorney-in-Fact
Independent Auditors' Consent
To the Shareholders and Board of Trustees
The Dreyfus/Laurel Tax-Free Municipal Funds
We consent to the use of our reports dated August 8, 1997 with respect to The
Dreyfus/Laurel Tax-Free Municipal Funds (comprised of Dreyfus Premier Limited
Term California Municipal Fund, Dreyfus Premier Limited Term Massachusetts
Municipal Fund, Dreyfus Premier Limited Term New York Municipal Fund, Dreyfus
Premier Limited Term Municipal Fund, Dreyfus BASIC New York Municipal Money
Market Fund, Dreyfus BASIC Massachusetts Municipal Money Market Fund and
Dreyfus BASIC California Municipal Money Market Fund) incorporated by
reference in the Statements of Additional Information and to the references
to our firm under the headings "Financial Highlights" in the Prospectuses;
"Custodian, Transfer and Dividend Disbursing Agent, Counsel and Independent
Auditors" in the Statement of Additional Information for Dreyfus Premier
Limited Term California Municipal Fund, Dreyfus Premier Limited Term
Massachusetts Municipal Fund, Dreyfus Premier Limited Term New York Municipal
Fund and Dreyfus Premier Limited Term Municipal Fund; and "Counsel and
Independent Auditors" in the Statements of Additional Information for Dreyfus
BASIC New York Municipal Money Market Fund, Dreyfus BASIC Massachusetts
Municipal Money Market Fund and Dreyfus BASIC California Municipal Money
Market Fund.
KPMG Peat Marwick LLP
New York, New York
October 21, 1997
WRITTEN CONSENT OF
THE BOARD OF TRUSTEES OF
THE DREYFUS/LAUREL FUNDS TRUST
THE UNDERSIGNED, being all the members of the Board of Directors of The
Dreyfus/Laurel Funds Trust (the "Fund"), DO HEREBY GIVE CONSENT in writing an
do hereby adopt the following resolution:
RESOLVED, that the Registration Statement and any and all amendments and
supplements thereto may be signed by Mark Karpe as the attorney-in-fact
for the proper officers of the Fund, with full power of substitution and
resubstitution; and that the appointment of such person as such attorney-
in-fact, shall have full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection with
such Registration Statement and any and all amendments and supplements
thereto, as fully to all intents and purposes as the officer for whom he
is acting as attorney-in-fact, might or could do in person.
IN WITNESS WHEREOF, the undersigned have executed this Consent as of
August 20, 1997.
______________________________ _____________________________
Ruth Marie Adams Kenneth A. Himmel
______________________________ _____________________________
Francis P. Brennan Arch S. Jeffery
______________________________ ___________________________________
Joseph S. DiMartino James M. Fitzgibbons
______________________________ ______________________________
J. Tomlinson Fort Arthur L.Goeschel
______________________________ ______________________________
Stephen J. Lockwood John J. Sciullo
______________________________
Roslyn M. Watson
POWER OF ATTORNEY
The undersigned hereby constitute and appoint Marie E. Connolly, Mark
Karpe, Elizabeth A. Keeley and John E. Pelletier and each of them, with full
power to act without the other, his or her true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him or
her, and in his or her name, place and stead, in any and all capacities
(until revoked in writing) to sign any and all amendments to the Registration
Statement for The Dreyfus/Laurel Funds Trust including post-effective
amendments and amendments thereto), and to file the same with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act
and thing ratifying and confirming all that said attorneys-in-fact and agents
or any of them, or their or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
_____________________________________
Marie E. Connolly
Dated: September 25, 1997
WRITTEN CONSENT OF
THE BOARD OF TRUSTEES OF
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
THE UNDERSIGNED, being all the members of the Board of Trustees of The
Dreyfus/Laurel Tax-Free Municipal Funds (the "Fund"), DO HEREBY GIVE CONSENT
in writing and do hereby adopt the following resolution:
RESOLVED, that the Registration Statement and any and all amendments and
supplements thereto may be signed by Mark Karpe as the attorney-in-fact
for the proper officers of the Fund, with full power of substitution and
resubstitution; and that the appointment of such person as such attorney-
in-fact, shall have full power and authority and perform each and every
act and thing requisite and necessary to be done in connection with such
Registration Statement and any and all amendments and supplements
thereto, as fully to all intents and purposes as the officer for whom he
is acting as attorney-in-fact, might or could do in person.
IN WITNESS WHEREOF, the undersigned have executed this Consent as of
September 25, 1997.
______________________________ _____________________________
Ruth Marie Adams Kenneth A. Himmel
______________________________ _____________________________
Francis P. Brennan Arch S. Jeffery
______________________________ ___________________________________
Joseph S. DiMartino James M. Fitzgibbons
______________________________ ______________________________
J. Tomlinson Fort Arthur L.Goeschel
______________________________ ______________________________
Stephen J. Lockwood John J. Sciullo
______________________________
Roslyn M. Watson
POWER OF ATTORNEY
The undersigned hereby constitute and appoint Marie E. Connolly, Mark
Karpe, Elizabeth A. Keeley and John E. Pelletier and each of them, with full
power to act without the other, his or her true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him or
her, and in his or her name, place and stead, in any and all capacities
(until revoked in writing) to sign any and all amendments to the Registration
Statement for The Dreyfus/Laurel Tax-Free Municipal Funds (including post-
effective amendments and amendments thereto), and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing ratifying and confirming all that said attorneys-in-fact
and agents or any of them, or their or his or her substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
_____________________________________
Marie E. Connolly
Dated: September 25, 1997
WRITTEN CONSENT OF
THE BOARD OF DIRECTORS OF
THE DREYFUS/LAUREL FUNDS, INC.
THE UNDERSIGNED, being all the members of the Board of Directors of The
Dreyfus/Laurel Funds, Inc. (the "Fund"), DO HEREBY GIVE CONSENT in writing and
do hereby adopt the following resolution:
RESOLVED, that the Registration Statement and any and all amendments and
supplements thereto may be signed by Mark Karpe as the attorney-in-fact
for the proper officers of the Fund, with full power of substitution and
resubstitution; and that the appointment of such person as such attorney-
in-fact, shall have full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection with
such Registration Statement and any and all amendments and supplements
thereto, as fully to all intents and purposes as the officer for whom he
is acting as attorney-in-fact, might or could do in person.
IN WITNESS WHEREOF, the undersigned have executed this Consent as of
August 20, 1997.
______________________________ _____________________________
Ruth Marie Adams Kenneth A. Himmel
______________________________ _____________________________
Francis P. Brennan Arch S. Jeffery
______________________________ ___________________________________
Joseph S. DiMartino James M. Fitzgibbons
______________________________ ______________________________
J. Tomlinson Fort Arthur L.Goeschel
______________________________ ______________________________
Stephen J. Lockwood John J. Sciullo
______________________________
Roslyn M. Watson
POWER OF ATTORNEY
The undersigned hereby constitute and appoint Marie E. Connolly, Mark
Karpe, Elizabeth A. Keeley and John E. Pelletier and each of them, with full
power to act without the other, his or her true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him or
her, and in his or her name, place and stead, in any and all capacities
(until revoked in writing) to sign any and all amendments to the Registration
Statement for The Dreyfus/Laurel Funds, Inc. (including post-effective
amendments and amendments thereto), and to file the same with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act
and thing ratifying and confirming all that said attorneys-in-fact and agents
or any of them, or their or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
_____________________________________
Marie E. Connolly
Dated: September 25, 1997
