File Nos. 33-43845
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. 52 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 51 [ 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
Mark N. Jacobs, Esq.
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, 1999 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.
----
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 Massachusetts Municipal Fund
______________________________________________________________________________
Dreyfus BASIC California Municipal Money Market Fund
Investing in short-term, high quality municipal obligations for current income
exempt from federal and California state income taxes
PROSPECTUS November 1, 1999
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
Contents
THE FUND
- ----------------------------------------------------
2 Goal/Approach
3 Main Risks
4 Past Performance
5 Expenses
6 Management
7 Financial Highlights
YOUR INVESTMENT
What every investor should know about the fund
- --------------------------------------------------------------------
8 Account Policies
11 Distributions and Taxes
12 Services for Fund Investors
14 Instructions for Regular Accounts
FOR MORE INFORMATION
Information for managing your fund account
- -------------------------------------------------------------------------------
Back Cover
Where to learn more about this and other Dreyfus funds
<PAGE>
The Fund
Dreyfus BASIC California
Municipal Money Market Fund
- ------------------------------
Ticker Symbol: DCLXX
GOAL/APPROACH
The fund seeks to provide a high level of current income exempt from federal and
California state income taxes to the extent consistent with the preservation of
capital and the maintenance of liquidity. This objective can be changed without
shareholder approval. As a money market fund, the fund is subject to maturity,
quality and diversification requirements designed to help it maintain a stable
share price. The fund must maintain an average dollar-weighted portfolio
maturity of 90 days or less, buy individual securities that have remaining
maturities of 13 months or less, and invest only in high quality
dollar-denominated obligations.
To pursue its goal, the fund normally invests substantially all of its assets in
municipal obligations that provide income exempt from federal and California
state personal income taxes. The fund occasionally may invest in taxable bonds
and/or municipal obligations that are exempt only from federal income tax.
Municipal obligations are typically divided into two types:
* general obligation bonds, which are secured by the
full faith and credit of the issuer and its taxing power
* revenue bonds, which are payable from the revenues
derived from a specific revenue source, such as charges
for water and sewer service or highway tolls
MORE INFORMATION ON THE FUND CAN BE FOUND IN THE CURRENT ANNUAL/SEMIANNUAL
REPORT (SEE BACK COVER).
Concepts to understand
CREDIT RATING: a measure of the issuer's expected ability to make all required
interest and principal payments in a timely manner. An issuer with the highest
credit rating has a very strong degree of certainty (or safety) with respect to
making all payments. An issuer with the second-highest credit rating still has a
strong capacity to make all payments, although the degree of safety is somewhat
less.
Generally, the fund is required to invest at least 95% of its assets in the
securities of issuers with the highest credit rating, with the remainder
invested in securities with the second-highest credit rating, or the unrated
equivalent as determined by Dreyfus.
PAGE 2
MAIN RISKS
The fund's yield will vary as the short-term securities in its portfolio mature,
and the proceeds are reinvested in securities with different interest rates.
Over time, the real value of the fund's yield may be substantially eroded by
inflation. An investment in the fund is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the fund. The following factors could
reduce the fund's income level and/or share price:
* interest rates could rise sharply, causing the
fund's share price to drop
* California's economy and revenues underlying its
municipal obligations may decline
* investing primarily in a single state may make the
fund's portfolio securities more sensitive to risks specific
to the state
* any of the fund's holdings could have its credit
rating downgraded or could default
Although the fund's objective is to generate income exempt from federal and
California state income taxes, interest from some of its holdings may be subject
to such taxes, including the federal alternative minimum tax. In addition, for
temporary defensive purposes, including when the fund manager believes that
acceptable California municipal obligations are unavailable for investment, the
fund may invest up to all of its assets in taxable bonds and/or securities that
may be subject to California state income tax, but are free from federal income
tax.
Other potential risks
The fund is non-diversified, which means that a relatively high percentage of
the fund's assets may be invested in a limited number of issuers. Therefore, its
performance may be more vulnerable to changes in the market value of a single
issuer or a group of issuers.
The Fund
PAGE 3
PAST PERFORMANCE
The tables below show some of the risks of investing in the fund. The first
table shows the changes in the fund's performance from year to year. The second
table averages the fund's performance over time. Both tables assume reinvestment
of dividends and distributions. Of course, past performance is no guarantee of
future results.
--------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
6.19 5.70 4.53 2.96 2.37 2.44 3.38 3.09 3.17 2.87
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
BEST QUARTER: Q2 '89 +1.61%
WORST QUARTER: Q2 '94 +0.52%
THE FUND'S YEAR-TO-DATE TOTAL RETURN AS OF 9/30/99 WAS 1.87%.
--------------------------------------------------------
Average annual total return AS OF 12/31/98
1 Year 5 Years 10 Years
- ------------------------------------------------------------------
2.87% 2.99% 3.66%
The fund's 7-day yield on 12/31/98 was 3.04%. For the fund's current yield, call
toll-free 1-800-645-6561.
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
PAGE 4
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below. Shareholder transaction fees are paid
from your account. Annual fund operating expenses are paid out of fund assets,
so their effect is included in the share price. The fund has no sales charge
(load) or Rule 12b-1 distribution fees.
--------------------------------------------------------
Fee table
SHAREHOLDER TRANSACTION FEES*
Exchange fee $5.00
Account closeout fee** $5.00
Wire and TeleTransfer redemption fee $5.00
Checkwriting charge $2.00
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ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.45%
Other expenses*** 0.01%
--------------------------------------------------------
TOTAL 0.46%
* CHARGED UNLESS YOU HAVE BEEN A FUND SHAREHOLDER
SINCE NOVEMBER 20, 1995 OR YOUR ACCOUNT BALANCE IS $50,000 OR MORE ON THE
BUSINESS DAY IMMEDIATELY PRECEDING THE EFFECTIVE DATE OF THE TRANSACTION.
** UNLESS BY EXCHANGE, WIRE OR TELETRANSFER FOR
WHICH A CHARGE APPLIES.
*** THE 0.01% AMOUNT NOTED IN "OTHER EXPENSES"
REFLECTS INTEREST PAYMENTS.
--------------------------------------------------------
<TABLE>
Expense example
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$52 $153 $263 $584
</TABLE>
This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. The figures
shown would be the same whether you sold your shares at the end of a period or
kept them. Because actual return and expenses will be different, the example is
for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most investment advisers and their funds,
Dreyfus pays all fund expenses except for brokerage fees, taxes, interest, fees
and expenses of the independent directors and extraordinary expenses.
The Fund
PAGE 5
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park
Avenue, New York, New York 10166. Founded in 1947, Dreyfus manages more than
$120 billion in over 160 mutual fund portfolios. For the past fiscal year, the
fund paid Dreyfus a management fee at the annual rate of 0.45% of the fund's
average daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a broad-based financial services company with a bank at
its core. With more than $426 billion of assets under management, and $2.0
trillion of assets under administration and custody, Mellon provides a full
range of banking, investment and trust products and services to individuals,
businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
PAGE 6
FINANCIAL HIGHLIGHTS
This table describes the fund's performance for the fiscal periods indicated.
"Total return" shows how much your investment in the fund would have increased
(or decreased) during each period, assuming you had reinvested all dividends and
distributions. These financial highlights have been independently audited by
KPMG LLP, whose report, along with the fund's financial statements, is included
in the annual report, which is available upon request.
<TABLE>
YEAR ENDED JUNE 30,
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations:
Investment income -- net .026 .031 .031 .031 .031
Distributions:
Dividends from investment
income -- net (.026) (.031) (.031) (.031) (.031)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 2.62 3.13 3.11 3.19 3.10
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses
to average net assets (%) .46 .46 .42 .44 .60
Ratio of net investment income
to average net assets (%) 2.58 3.08 3.09 3.36 3.07
Decrease reflected in above expense
ratios due to actions
by the manager (%) - - .03 .07 -
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 109,392 100,262 80,580 36,728 15,538
</TABLE>
The Fund
PAGE 7
Your Investment
ACCOUNT POLICIES
Buying shares
You pay no sales charges to invest in this fund. Your price for fund shares is
the fund's net asset value per share (NAV), which is generally calculated twice
a day, at 12:00 noon and 4:00 p.m. Eastern time, every day the New York Stock
Exchange is open. Your order will be priced at the next NAV calculated after
your order is accepted by the fund's transfer agent or other authorized entity.
The fund's portfolio securities are valued based on amortized cost.
Because the fund seeks tax-exempt income, it is not recommended for purchase in
IRAs or other qualified retirement plans.
--------------------------------------------------------
Minimum investments
Initial Additional
--------------------------------------------------------
REGULAR ACCOUNTS $25,000* $1,000**
All investments must be in U.S. dollars. Third-party
checks cannot be accepted. You may be charged a fee for
any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.
* THE MINIMUM INITIAL INVESTMENT IS $25,000 UNLESS THE INVESTOR HAS, IN THE
OPINION OF DREYFUS INSTITUTIONAL SERVICES DIVISION, ADEQUATE INTENT AND
AVAILABILITY OF ASSETS TO REACH A FUTURE LEVEL OF INVESTMENT OF $25,000.
** $100 FOR INVESTORS WHO HAVE HELD FUND SHARES SINCE NOVEMBER 20, 1995.
Concepts to understand
NET ASSET VALUE (NAV): a mutual fund's share price on a given day. A fund's NAV
is calculated by dividing the value of its net assets by the number of existing
shares.
AMORTIZED COST: the value of a fund's portfolio securities, which does not take
into account unrealized gains or losses. As a result, portfolio securities are
valued at their acquisition cost, adjusted over time based on the discounts or
premiums reflected in their purchase price. This method of valuation is designed
for a fund to be able to price its shares at $1.00 per share.
PAGE 8
Selling shares
You may sell (redeem) shares at any time. Your shares will be sold at the next
NAV calculated after your order is accepted by the fund's transfer agent or
other authorized entity. Any certificates representing fund shares being sold
must be returned with your redemption request. Your order will be processed
promptly and you will generally receive the proceeds within a week.
Before selling or writing a check for recently purchased shares, please note
that if the fund has not yet collected payment for the shares you are selling,
it may delay sending the proceeds for up to eight business days or until it has
collected payment.
--------------------------------------------------------
Limitations on selling shares by phone
Proceeds
sent by Minimum Maximum
- ----------------------------------------------------------------------------
CHECK NO MINIMUM $150,000 PER DAY
WIRE $5,000 $250,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
TELETRANSFER $1,000 $250,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
- ----------------------------------------------------------------------------
SHAREHOLDER TRANSACTION FEES*
Exchange fee $5.00
Account closeout fee** $5.00
Wire and TeleTransfer redemption fee $5.00
Checkwriting charge $2.00
* CHARGED UNLESS YOU HAVE BEEN A FUND SHAREHOLDER SINCE NOVEMBER 20, 1995 OR
YOUR ACCOUNT BALANCE IS $50,000 OR MORE ON THE BUSINESS DAY IMMEDIATELY
PRECEDING THE EFFECTIVE DATE OF THE TRANSACTION.
** UNLESS BY EXCHANGE, WIRE OR TELETRANSFER FOR WHICH A CHARGE APPLIES.
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $1,000 or more on accounts whose address has been changed within
the last 30 days
* requests to send the proceeds to a different payee or address
Written sell orders of $100,000 or more must also be signature guaranteed.
A SIGNATURE GUARANTEE helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.
Your Investment
PAGE 9
ACCOUNT POLICIES (CONTINUED)
General policies
Unless you decline telephone privileges on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.
The fund reserves the right to:
* refuse any purchase or exchange request
* change or discontinue its exchange privilege
* change its minimum investment amounts
* delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions)
The fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).
* BELOW $500 IF YOU HAVE BEEN A FUND SHAREHOLDER SINCE NOVEMBER 20, 1995.
Small account policies
To offset the relatively higher costs of servicing smaller accounts, the fund
charges regular accounts with balances below $2,000 an annual fee of $12. The
fee will be imposed during the fourth quarter of each calendar year.
The fee will be waived for: any investor whose aggregate Dreyfus mutual fund
investments total at least $25,000; IRA accounts; accounts participating in
automatic investment programs; and accounts opened through a financial
institution.
If your account falls below $10,000,* the fund may ask you to increase your
balance. If it is still below $10,000* after 45 days, the fund may close your
account and send you the proceeds.
PAGE 10
DISTRIBUTIONS AND TAXES
The fund usually pays its shareholders dividends from its net investment income
once a month, and distributes any net securities gains it has realized once a
year. Your distributions will be reinvested in the fund unless you instruct the
fund otherwise. There are no fees or sales charges on reinvestments.
The fund anticipates that substantially all of its dividends will be exempt from
federal and California state income taxes. Any dividends and distributions from
taxable investments are taxable as ordinary income. The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or take them in cash.
The tax status of your dividends and distributions will be detailed in your
annual tax statement from the fund.
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Concepts to understand
DIVIDENDS AND DISTRIBUTIONS: income or interest paid by the fund's portfolio
investments and passed on to fund shareholders net of expenses. These are
calculated on a per-share basis: each share earns the same rate of return, so
the more fund shares you own, the higher your distribution.
Your Investment
PAGE 11
SERVICES FOR FUND INVESTORS
Dreyfus Dividend Sweep
For automatically reinvesting the dividends and distributions from one Dreyfus
fund into another, use Dreyfus Dividend Sweep (not available for IRAs). You can
set up this service with your application or by calling 1-800-645-6561.
Retirement plans
Dreyfus offers a variety of retirement plans, including traditional and Roth
IRAs. Here's where you call for information:
* for traditional, rollover and Roth IRAs, call
1-800-645-6561
* for SEP-IRAs and Keogh accounts, call 1-800-358-091
Checkwriting privilege
You may write redemption checks against your account in amounts of $1,000 or
more. There is a $2.00 charge for each check written.* A fee also will be
charged by the transfer agent if you request a stop payment or if the transfer
agent cannot honor a redemption check due to insufficient funds or another valid
reason. Please do not postdate your checks or use them to close your account.
Exchange privilege
You can exchange $1,000 or more from one Dreyfus fund into another. You are
allowed only four exchanges out of the fund in a calendar year. You can request
your exchange in writing or by phone. Be sure to read the current prospectus for
any fund into which you are exchanging. Any new account established through an
exchange will have the same privileges as your original account (as long as they
are available). There is a $5.00 exchange fee,* and you may be charged a sales
load when exchanging into any fund that has one.
PAGE 12
Dreyfus TeleTransfer privilege
To move money between your bank account and your Dreyfus fund account with a
phone call, use the Dreyfus TeleTransfer privilege. You can set up TeleTransfer
on your account by providing bank account information and following the
instructions on your application. There is a $5.00 fee for TeleTransfer
redemptions.*
24-hour automated account access
You can easily manage your Dreyfus accounts, check your account balances,
transfer money between your Dreyfus funds, get price and yield information and
much more -- when it's convenient for you.
Account statements
Every Dreyfus investor automatically receives regular account statements. You'll
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.
Dreyfus Financial Centers
Through a nationwide network of Dreyfus Financial Centers, Dreyfus offers a full
array of investment services and products. This includes information on mutual
funds, brokerage services, tax-advantaged products and retirement planning.
Experienced financial consultants can help you make informed choices and provide
you with personalized attention in handling account transactions. The Financial
Centers also offer informative seminars and events. To find the Financial Center
nearest you, call 1-800-499-3327.
* UNLESS YOU HAVE BEEN A FUND SHAREHOLDER SINCE NOVEMBER 20, 1995 OR YOUR
ACCOUNT BALANCE IS $50,000 OR MORE ON THE BUSINESS DAY IMMEDIATELY
PRECEDING THE EFFECTIVE DATE OF THE TRANSACTION.
Your Investment
PAGE 13
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
The Dreyfus Family of Funds
P.O. Box 9387, Providence, RI 02940-9387
By Telephone
WIRE Have your bank send your
investment to Boston Safe Deposit and
Trust Company, with these instructions:
* ABA# 011001234
* DDA# 043508
* the fund name
* your Social Security or tax ID number
* name(s) of investor(s)
Call us to obtain an account number.
Return your application.
Via the Internet
COMPUTER Visit the Dreyfus Web site
http://www.dreyfus.com and follow the
instructions to download an account
application.
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your
account number on your check.
Mail the slip and the check to:
The Dreyfus Family of Funds
P.O. Box 105,
Newark, NJ 07101-0105
WIRE Have your bank send your
investment to Boston Safe Deposit and
Trust Company, with these instructions:
* ABA# 011001234
* DDA# 043508
* the fund name
* your account number
* name(s) of investor(s)
ELECTRONIC CHECK Same as wire, but insert
"4540" before your account number.
TELETRANSFER Request TeleTransfer on your
application. Call us to request your transaction.
PAGE 14
TO SELL SHARES
Write a redemption check OR write a letter of
instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation,
if required (see "Account Policies -- Selling Shares").
Mail your request to:
The Dreyfus Family of Funds
P.O. Box 9671,
Providence, RI
02940-9671
WIRE Be sure the fund has your bank account
information on file. Call us to request your
transaction. Proceeds will be wired to your bank.
TELETRANSFER Be sure the fund has your bank account
information on file. Call us to request your
transaction. Proceeds will be sent to your bank by
electronic check.
CHECK Call us to request your transaction.
A check will be sent to the address of record.
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS FAMILY OF FUNDS
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$5,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
Your Investment
PAGE 15
NOTES
<PAGE>
<PAGE>
For More Information
Dreyfus BASIC California Municipal
Money Market Fund
A series of The Dreyfus/Laurel
Tax-Free Municipal Funds
-----------------------------
SEC file number: 811-3700
More information on this fund is available free upon
request, including the following:
Annual/Semiannual Report
Describes the fund's performance and lists portfolio
holdings.
Statement of Additional Information (SAI)
Provides more details about the fund and its policies. A
current SAI is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference (is
legally considered part of this prospectus).
To obtain information:
BY TELEPHONE
Call 1-800-645-6561
BY MAIL Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request
to [email protected]
ON THE INTERNET Text-only
versions of fund documents
can be viewed online or
downloaded from:
SEC
http://www.sec.gov
DREYFUS
http://www.dreyfus.com
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 1999 Dreyfus Service Corporation
307P1199
<PAGE>
Dreyfus BASIC Massachusetts Municipal Money Market Fund
Investing in short-term, high quality municipal obligations for current income
exempt from federal and Massachusetts income taxes
PROSPECTUS November 1, 1999
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
Contents
THE FUND
- ----------------------------------------------------
2 Goal/Approach
3 Main Risks
4 Past Performance
5 Expenses
6 Management
7 Financial Highlights
YOUR INVESTMENT
What every investor should know about the fund
- --------------------------------------------------------------------
8 Account Policies
11 Distributions and Taxes
12 Services for Fund Investors
14 Instructions for Regular Accounts
FOR MORE INFORMATION
Information for managing your fund account
- -------------------------------------------------------------------------------
Back Cover
Where to learn more about this and other Dreyfus funds
<PAGE>
The Fund
Dreyfus BASIC Massachusetts
Municipal Money Market Fund
----------------------
Ticker Symbol: DMRXX
GOAL/APPROACH
The fund seeks to provide a high level of current income exempt from federal and
Massachusetts state income taxes to the extent consistent with the preservation
of capital and the maintenance of liquidity. This objective can be changed
without shareholder approval. As a money market fund, the fund is subject to
maturity, quality and diversification requirements designed to help it maintain
a stable share price. The fund must maintain an average dollar-weighted
portfolio maturity of 90 days or less, buy individual securities that have
remaining maturities of 13 months or less, and invest only in high quality
dollar-denominated obligations.
To pursue its goal, the fund normally invests substantially all of its assets in
municipal obligations that provide income exempt from federal and Massachusetts
personal income taxes. The fund occasionally may invest in taxable bonds and/or
municipal obligations that are exempt only from federal income tax. Municipal
obligations are typically divided into two types:
* GENERAL OBLIGATION BONDS, which are secured by the full faith and credit of
the issuer and its taxing power
* REVENUE BONDS, which are payable from the revenues derived from a specific
revenue source, such as charges for water and sewer service or highway
tolls
MORE INFORMATION ON THE FUND CAN BE FOUND IN THE CURRENT ANNUAL/SEMIANNUAL
REPORT (SEE BACK COVER).
Concepts to understand
CREDIT RATING: a measure of the issuer's expected ability to make all required
interest and principal payments in a timely manner. An issuer with the highest
credit rating has a very strong degree of certainty (or safety) with respect to
making all payments. An issuer with the second-highest credit rating still has a
strong capacity to make all payments, although the degree of safety is somewhat
less.
Generally, the fund is required to invest at least 95% of its assets in the
securities of issuers with the highest credit rating, with the remainder
invested in securities with the second-highest credit rating, or the unrated
equivalent as determined by Dreyfus.
PAGE 2
MAIN RISKS
The fund's yield will vary as the short-term securities in its portfolio mature,
and the proceeds are reinvested in securities with different interest rates.
Over time, the real value of the fund's yield may be substantially eroded by
inflation. An investment in the fund is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the fund. The following factors could
reduce the fund's income level and/or share price:
* interest rates could rise sharply, causing the fund's share price to drop
* Massachusetts's economy and revenues underlying its municipal obligations
may decline
* investing primarily in a single state may make the fund's portfolio
securities more sensitive to risks specific to the state
* any of the fund's holdings could have its credit rating downgraded or could
default
Although the fund's objective is to generate income exempt from federal and
Massachusetts personal income taxes, interest from some of its holdings may be
subject to such taxes, including the federal alternative minimum tax. In
addition, for temporary defensive purposes, including when the fund manager
believes that acceptable Massachusetts municipal obligations are unavailable for
investment, the fund may invest up to all of its assets in taxable bonds and/or
securities that may be subject to Massachusetts personal income tax, but are
free from federal income tax.
Other potential risks
The fund is non-diversified, which means that a relatively high percentage of
the fund's assets may be invested in a limited number of issuers. Therefore, its
performance may be more vulnerable to changes in the market value of a single
issuer or a group of issuers.
The Fund
PAGE 3
PAST PERFORMANCE
The tables below show some of the risks of investing in the fund. The first
table shows the changes in the fund's performance from year to year. The second
table averages the fund's performance over time. Both tables assume reinvestment
of dividends and distributions. Of course, past performance is no guarantee of
future results.
--------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
2.47 3.56 3.13 3.20 2.99
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
BEST QUARTER: Q2 '95 +0.92%
WORST QUARTER: Q1 '94 +0.44%
THE FUND'S YEAR-TO-DATE TOTAL RETURN AS OF 9/30/99 WAS 1.97%.
--------------------------------------------------------
Average annual total return AS OF 12/31/98
Since
inception
1 Year 5 Years (2/1/93)
--------------------------------------------------------
2.99% 3.07% 2.88%
The fund's 7-day yield on 12/31/98 was 2.99%. For the fund's current yield, call
toll-free 1-800-645-6561.
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
PAGE 4
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below. Shareholder transaction fees are paid
from your account. Annual fund operating expenses are paid out of fund assets,
so their effect is included in the share price. The fund has no sales charge
(load) or Rule 12b-1 distribution fees.
--------------------------------------------------------
Fee table
SHAREHOLDER TRANSACTION FEES*
Exchange fee $5.00
Account closeout fee** $5.00
Wire and TeleTransfer redemption fee $5.00
Checkwriting charge $2.00
--------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.45%
Other expenses 0.00%
--------------------------------------------------------
TOTAL 0.45%
* CHARGED UNLESS YOU HAVE BEEN A FUND SHAREHOLDER SINCE MAY 8, 1996 OR YOUR
ACCOUNT BALANCE IS $50,000 OR MORE ON THE BUSINESS DAY IMMEDIATELY
PRECEDING THE EFFECTIVE DATE OF THE TRANSACTION.
** UNLESS BY EXCHANGE, WIRE OR TELETRANSFER FOR WHICH A CHARGE APPLIES.
--------------------------------------------------------
Expense example
1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------
$51 $149 $257 $572
This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. The figures
shown would be the same whether you sold your shares at the end of a period or
kept them. Because actual return and expenses will be different, the example is
for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most investment advisers and their funds,
Dreyfus pays all fund expenses except for brokerage fees, taxes, interest, fees
and expenses of the independent directors and extraordinary expenses.
The Fund
PAGE 5
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park
Avenue, New York, New York 10166. Founded in 1947, Dreyfus manages more than
$120 billion in over 160 mutual fund portfolios. For the past fiscal year, the
fund paid Dreyfus a management fee at the annual rate of 0.45% of the fund's
average daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a broad-based financial services company with a bank at
its core. With more than $426 billion of assets under management, and $2.0
trillion of assets under administration and custody, Mellon provides a full
range of banking, investment and trust products and services to individuals,
businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
PAGE 6
FINANCIAL HIGHLIGHTS
This table describes the fund's performance for the fiscal periods indicated.
"Total return" shows how much your investment in the fund would have increased
(or decreased) during each period, assuming you had reinvested all dividends and
distributions. These financial highlights have been independently audited by
KPMG LLP, whose report, along with the fund's financial statements, is included
in the annual report, which is available upon request.
<TABLE>
YEAR ENDED JUNE 30,
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations:
Investment income -- net .027 .031 .031 .033 .032
Distributions:
Dividends from investment
income -- net (.027) (.031) (.031) (.033) (.032)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 2.76 3.17 3.12 3.31 3.25
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses
to average net assets (%) .45 .47 .37 .35 .35
Ratio of net investment income
to average net assets (%) 2.71 3.15 3.09 3.24 3.19
Decrease reflected in above expense
ratios due to actions
by the manager (%) - - .09 .02 -
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 122,751 111,394 90,264 52,317 25,485
</TABLE>
The Fund
PAGE 7
Your Investment
ACCOUNT POLICIES
Buying shares
YOU PAY NO SALES CHARGES to invest in this fund. Your price for fund shares is
the fund's net asset value per share (NAV), which is generally calculated twice
a day, at 12:00 noon and 4:00 p.m. Eastern time, every day the New York Stock
Exchange is open. Your order will be priced at the next NAV calculated after
your order is accepted by the fund's transfer agent or other authorized entity.
The fund's portfolio securities are valued based on amortized cost.
Because the fund seeks tax-exempt income, it is not recommended for purchase in
IRAs or other qualified retirement plans.
--------------------------------------------------------
Minimum investments
Initial Additional
--------------------------------------------------------
REGULAR ACCOUNTS $25,000* $1,000**
All investments must be in U.S. dollars. Third-party
checks cannot be accepted. You may be charged a fee for
any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.
* THE MINIMUM INITIAL INVESTMENT IS $25,000 UNLESS THE INVESTOR HAS, IN THE
OPINION OF DREYFUS INSTITUTIONAL SERVICES DIVISION, ADEQUATE INTENT AND
AVAILABILITY OF ASSETS TO REACH A FUTURE LEVEL OF INVESTMENT OF $25,000.
** $100 FOR INVESTORS WHO HAVE HELD FUND SHARES SINCE MAY 8, 1996.
Concepts to understand
NET ASSET VALUE (NAV): a mutual fund's share price on a given day. A fund's NAV
is calculated by dividing the value of its net assets by the number of existing
shares.
AMORTIZED COST: the value of a fund's portfolio securities, which does not take
into account unrealized gains or losses. As a result, portfolio securities are
valued at their acquisition cost, adjusted over time based on the discounts or
premiums reflected in their purchase price. This method of valuation is designed
for a fund to be able to price its shares at $1.00 per share.
PAGE 8
Selling shares
YOU MAY SELL (REDEEM) SHARES AT ANY TIME. Your shares will be sold at the next
NAV calculated after your order is accepted by the fund's transfer agent or
other authorized entity. Any certificates representing fund shares being sold
must be returned with your redemption request. Your order will be processed
promptly and you will generally receive the proceeds within a week.
BEFORE SELLING OR WRITING A CHECK for recently purchased shares, please note
that if the fund has not yet collected payment for the shares you are selling,
it may delay sending the proceeds for up to eight business days or until it has
collected payment.
--------------------------------------------------------
Limitations on selling shares by phone
Proceeds
sent by Minimum Maximum
--------------------------------------------------------
CHECK NO MINIMUM $150,000 PER DAY
WIRE $5,000 $250,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
TELETRANSFER $1,000 $250,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
--------------------------------------------------------
SHAREHOLDER TRANSACTION FEES*
Exchange fee $5.00
Account closeout fee** $5.00
Wire and TeleTransfer redemption fee $5.00
Checkwriting charge $2.00
* CHARGED UNLESS YOU HAVE BEEN A FUND SHAREHOLDER SINCE MAY 8, 1996 OR YOUR
ACCOUNT BALANCE IS $50,000 OR MORE ON THE BUSINESS DAY IMMEDIATELY
PRECEDING THE EFFECTIVE DATE OF THE TRANSACTION.
** UNLESS BY EXCHANGE, WIRE OR TELETRANSFER FOR WHICH A CHARGE APPLIES.
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $1,000 or more on accounts whose address has been changed within
the last 30 days
* requests to send the proceeds to a different payee or address
Written sell orders of $100,000 or more must also be signature guaranteed.
A signature guarantee helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.
Your Investment
PAGE 9
ACCOUNT POLICIES (CONTINUED)
General policies
UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.
THE FUND RESERVES THE RIGHT TO:
* refuse any purchase or exchange request
* change or discontinue its exchange privilege
* change its minimum investment amounts
* delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions)
The fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).
* BELOW $500 IF YOU HAVE BEEN A FUND SHAREHOLDER
SINCE MAY 8, 1996.
Small account policies
To offset the relatively higher costs of servicing smaller accounts, the fund
charges regular accounts with balances below $2,000 an annual fee of $12. The
fee will be imposed during the fourth quarter of each calendar year.
The fee will be waived for: any investor whose aggregate Dreyfus mutual fund
investments total at least $25,000; IRA accounts; accounts participating in
automatic investment programs; and accounts opened through a financial
institution.
If your account falls below $10,000,* the fund may ask you to increase your
balance. If it is still below $10,000* after 45 days, the fund may close your
account and send you the proceeds.
PAGE 10
DISTRIBUTIONS AND TAXES
THE FUND USUALLY PAYS ITS SHAREHOLDERS DIVIDENDS from its net investment income
once a month, and distributes any net securities gains it has realized once a
year. Your distributions will be reinvested in the fund unless you instruct the
fund otherwise. There are no fees or sales charges on reinvestments.
THE FUND ANTICIPATES THAT SUBSTANTIALLY ALL OF ITS DIVIDENDS will be exempt from
federal and Massachusetts personal income taxes. Any dividends and distributions
from taxable investments are taxable as ordinary income. The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or take them in cash.
The tax status of your dividends and distributions will be detailed in your
annual tax statement from the fund.
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Concepts to understand
DIVIDENDS AND DISTRIBUTIONS: income or interest paid by the fund's portfolio
investments and passed on to fund shareholders net of expenses. These are
calculated on a per-share basis: each share earns the same rate of return, so
the more fund shares you own, the higher your distribution.
Your Investment
PAGE 11
SERVICES FOR FUND INVESTORS
Dreyfus Dividend Sweep
FOR AUTOMATICALLY REINVESTING the dividends and distributions from one Dreyfus
fund into another, use Dreyfus Dividend Sweep (not available for IRAs). You can
set up this service with your application or by calling 1-800-645-6561.
Retirement plans
DREYFUS OFFERS A VARIETY OF RETIREMENT PLANS, including traditional and Roth
IRAs. Here's where you call for information:
* for traditional, rollover and Roth IRAs, call 1-800-645-6561
* for SEP-IRAs and Keogh accounts, call 1-800-358-091
Checkwriting privilege
YOU MAY WRITE REDEMPTION CHECKS against your account in amounts of $1,000 or
more. There is a $2.00 charge for each check written.* A fee also will be
charged by the transfer agent if you request a stop payment or if the transfer
agent cannot honor a redemption check due to insufficient funds or another valid
reason. Please do not postdate your checks or use them to close your account.
Exchange privilege
YOU CAN EXCHANGE $1,000 OR MORE from one Dreyfus fund into another. You are
allowed only four exchanges out of the fund in a calendar year. You can request
your exchange in writing or by phone. Be sure to read the current prospectus for
any fund into which you are exchanging. Any new account established through an
exchange will have the same privileges as your original account (as long as they
are available). There is a $5.00 exchange fee,* and you may be charged a sales
load when exchanging into any fund that has one.( )
PAGE 12
Dreyfus TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the Dreyfus TeleTransfer privilege. You can set up TeleTransfer
on your account by providing bank account information and following the
instructions on your application. There is a $5.00 fee for TeleTransfer
redemptions.*
24-hour automated account access
YOU CAN EASILY MANAGE YOUR DREYFUS ACCOUNTS, check your account balances,
transfer money between your Dreyfus funds, get price and yield information and
much more -- when it's convenient for you.
Account statements
EVERY DREYFUS INVESTOR automatically receives regular account statements. You'll
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.
Dreyfus Financial Centers
THROUGH A NATIONWIDE NETWORK of Dreyfus Financial Centers, Dreyfus offers a full
array of investment services and products. This includes information on mutual
funds, brokerage services, tax-advantaged products and retirement planning.
EXPERIENCED FINANCIAL CONSULTANTS can help you make informed choices and provide
you with personalized attention in handling account transactions. The Financial
Centers also offer informative seminars and events. To find the Financial Center
nearest you, call 1-800-499-3327.
* UNLESS YOU HAVE BEEN A FUND SHAREHOLDER SINCE MAY 8, 1996 OR YOUR ACCOUNT
BALANCE IS $50,000 OR MORE ON THE BUSINESS DAY IMMEDIATELY PRECEDING THE
EFFECTIVE DATE OF THE TRANSACTION.
Your Investment
PAGE 13
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
The Dreyfus Family of Funds
P.O. Box 9387, Providence, RI 02940-9387
By Telephone
WIRE Have your bank send your
investment to The Boston Safe Deposit
and Trust Company, with these instructions:
* ABA# 011001234
* DDA# 043508
* the fund name
* your Social Security or tax ID number
* name(s) of investor(s)
Call us to obtain an account number.
Return your application.
Via the Internet
COMPUTER Visit the Dreyfus Web site
http://www.dreyfus.com and follow the
instructions to download an account
application.
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your
account number on your check.
Mail the slip and the check to:
The Dreyfus Family of Funds
P.O. Box 105, Newark, NJ 07101-0105
WIRE Have your bank send your
investment to The Boston Safe Deposit
and Trust Company, with these instructions:
* ABA# 011001234
* DDA# 043508
* the fund name
* your account number
* name(s) of investor(s)
ELECTRONIC CHECK Same as wire, but insert
"4750" before your account number.
TELETRANSFER Request TeleTransfer on your
application. Call us to request your transaction.
PAGE 14
TO SELL SHARES
Write a redemption check OR write a letter of
instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation,
if required (see "Account Policies -- Selling Shares").
Mail your request to:
The Dreyfus Family of Funds
P.O. Box 9671, Providence, RI 02940-9671
WIRE Be sure the fund has your bank account information on file. Call us to
request your transaction. Proceeds will be wired to your bank.
TELETRANSFER Be sure the fund has your bank account information on file. Call
us to request your transaction. Proceeds will be sent to your bank by
electronic check.
CHECK Call us to request your transaction. A check will be sent to the address
of record.
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS FAMILY OF FUNDS
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$5,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
Your Investment
PAGE 15
NOTES
<PAGE>
<PAGE>
For More Information
Dreyfus BASIC Massachusetts
Municipal Money Market Fund
A series of The Dreyfus/Laurel
Tax-Free Municipal Funds
-----------------------------
SEC file number: 811-3700
More information on this fund is available free upon
request, including the following:
Annual/Semiannual Report
Describes the fund's performance and lists portfolio
holdings.
Statement of Additional Information (SAI)
Provides more details about the fund and its policies. A
current SAI is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference (is
legally considered part of this prospectus).
To obtain information:
BY TELEPHONE
Call 1-800-645-6561
BY MAIL Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request
to [email protected]
ON THE INTERNET Text-only
versions of fund documents
can be viewed online or
downloaded from:
SEC
http://www.sec.gov
DREYFUS
http://www.dreyfus.com
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 1999 Dreyfus Service Corporation
715P1199
<PAGE>
Dreyfus BASIC New York Municipal Money Market Fund
Investing in short-term, high quality municipal obligations for current income
exempt from federal, New York state and New York city income taxes
PROSPECTUS November 1, 1999
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
Contents
THE FUND
- ----------------------------------------------------
2 Goal/Approach
3 Main Risks
4 Past Performance
5 Expenses
6 Management
7 Financial Highlights
YOUR INVESTMENT
What every investor should know about the fund
- --------------------------------------------------------------------
8 Account Policies
11 Distributions and Taxes
12 Services for Fund Investors
14 Instructions for Regular Accounts
FOR MORE INFORMATION
Information for managing your fund account
- -------------------------------------------------------------------------------
Back Cover
Where to learn more about this and other Dreyfus funds
<PAGE>
The Fund
Dreyfus BASIC New York
Municipal Money Market Fund
- -------------------------------
Ticker Symbol: DNTXX
GOAL/APPROACH
The fund seeks to provide a high level of current income exempt from federal,
New York state and New York city income taxes to the extent consistent with the
preservation of capital and the maintenance of liquidity. This objective can be
changed without shareholder approval. As a money market fund, the fund is
subject to maturity, quality and diversification requirements designed to help
it maintain a stable share price. The fund must maintain an average
dollar-weighted portfolio maturity of 90 days or less, buy individual securities
that have remaining maturities of 13 months or less, and invest only in high
quality dollar-denominated obligations.
To pursue its goal, the fund normally invests substantially all of its assets in
municipal obligations that provide income exempt from federal, New York state
and New York city personal income taxes. The fund occasionally may invest in
taxable bonds and/or municipal obligations that are exempt only from federal
income tax. Municipal obligations are typically divided into two types:
* general obligation bonds, which are secured by the full faith and credit of
the issuer and its taxing power
* revenue bonds, which are payable from the revenues derived from a specific
revenue source, such as charges for water and sewer service or highway
tolls
MORE INFORMATION ON THE FUND CAN BE FOUND IN THE CURRENT ANNUAL/SEMIANNUAL
REPORT (SEE BACK COVER).
Concepts to understand
CREDIT RATING: a measure of the issuer's expected ability to make all required
interest and principal payments in a timely manner. An issuer with the highest
credit rating has a very strong degree of certainty (or safety) with respect to
making all payments. An issuer with the second-highest credit rating still has a
strong capacity to make all payments, although the degree of safety is somewhat
less.
Generally, the fund is required to invest at least 95% of its assets in the
securities of issuers with the highest credit rating, with the remainder
invested in securities with the second-highest credit rating, or the unrated
equivalent as determined by Dreyfus.
PAGE 2
MAIN RISKS
The fund's yield will vary as the short-term securities in its portfolio mature,
and the proceeds are reinvested in securities with different interest rates.
Over time, the real value of the fund's yield may be substantially eroded by
inflation. An investment in the fund is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the fund. The following factors could
reduce the fund's income level and/or share price:
* interest rates could rise sharply, causing the fund's share price to drop
* the economies of New York state or New York cities or the revenues
underlying their municipal obligations may decline
* investing primarily in a single state may make the fund's portfolio
securities more sensitive to risks specific to the state
* any of the fund's holdings could have its credit rating downgraded or could
default
Although the fund's objective is to generate income exempt from federal, New
York state and New York city income taxes, interest from some of its holdings
may be subject to such taxes, including the federal alternative minimum tax. In
addition, for temporary defensive purposes, including when the fund manager
believes that acceptable New York municipal obligations are unavailable for
investment, the fund may invest up to all of its assets in taxable bonds and/or
securities that may be subject to New York state and New York city income taxes,
but are free from federal income tax.
Other potential risks
The fund is non-diversified, which means that a relatively high percentage of
the fund's assets may be invested in a limited number of issuers. Therefore, its
performance may be more vulnerable to changes in the market value of a single
issuer or a group of issuers.
The Fund
<PAGE 3
PAST PERFORMANCE
The tables below show some of the risks of investing in the fund. The first
table shows the changes in the fund's performance from year to year. The second
table averages the fund's performance over time. Both tables assume reinvestment
of dividends and distributions. Of course, past performance is no guarantee of
future results.
--------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
5.94 5.51 4.54 2.96 2.12 2.19 3.42 3.08 3.17 2.94
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
BEST QUARTER: Q2 '89 +1.53%
WORST QUARTER: Q3 '94 +0.51%
THE FUND'S YEAR-TO-DATE TOTAL RETURN AS OF 9/30/99 WAS 1.95%.
--------------------------------------------------------
Average annual total return AS OF 12/31/98
1 Year 5 Years 10 Years
--------------------------------------------------------
2.94% 2.96% 3.58%
The fund's 7-day yield on 12/31/98 was 3.03%. For the fund's current yield, call
toll-free 1-800-645-6561.
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
PAGE 4
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below. Shareholder transaction fees are paid
from your account. Annual fund operating expenses are paid out of fund assets,
so their effect is included in the share price. The fund has no sales charge
(load) or Rule 12b-1 distribution fees.
--------------------------------------------------------
Fee table
SHAREHOLDER TRANSACTION FEES*
Exchange fee $5.00
Account closeout fee** $5.00
Wire and TeleTransfer redemption fee $5.00
Checkwriting charge $2.00
--------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.45%
Other expenses 0.00%
-------------------------------------------------------
TOTAL 0.45%
* CHARGED UNLESS YOU HAVE BEEN A FUND SHAREHOLDER SINCE DECEMBER 8, 1995 OR
YOUR ACCOUNT BALANCE IS $50,000 OR MORE ON THE BUSINESS DAY IMMEDIATELY
PRECEDING THE EFFECTIVE DATE OF THE TRANSACTION.
** UNLESS BY EXCHANGE, WIRE OR TELETRANSFER FOR WHICH A CHARGE APPLIES.
--------------------------------------------------------
<TABLE>
Expense example
1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$51 $149 $257 $572
</TABLE>
This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. The figures
shown would be the same whether you sold your shares at the end of a period or
kept them. Because actual return and expenses will be different, the example is
for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most investment advisers and their funds,
Dreyfus pays all fund expenses except for brokerage fees, taxes, interest, fees
and expenses of the independent directors and extraordinary expenses.
The Fund
PAGE 5
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park
Avenue, New York, New York 10166. Founded in 1947, Dreyfus manages more than
$120 billion in over 160 mutual fund portfolios. For the past fiscal year, the
fund paid Dreyfus a management fee at the annual rate of 0.45% of the fund's
average daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a broad-based financial services company with a bank at
its core. With more than $426 billion of assets under management, and $2.0
trillion of assets under administration and custody, Mellon provides a full
range of banking, investment, and trust products and services to individuals,
businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
PAGE 6
FINANCIAL HIGHLIGHTS
This table describes the fund's performance for the fiscal periods indicated.
"Total return" shows how much your investment in the fund would have increased
(or decreased) during each period, assuming you had reinvested all dividends and
distributions. These financial highlights have been independently audited by
KPMG LLP, whose report, along with the fund's financial statements, is included
in the annual report, which is available upon request.
<TABLE>
YEAR ENDED JUNE 30,
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations:
Investment income -- net .027 .031 .031 .031 .029
Distributions:
Dividends from investment
income -- net (.027) (.031) (.031) (.031) (.029)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 2.69 3.14 3.11 3.14 2.95
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses
to average net assets (%) .45 .45 .41 .43 .60
Ratio of net investment income
to average net assets (%) 2.65 3.09 3.08 3.43 2.97
Decrease reflected in above expense
ratios due to actions
by the manager (%) - - .04 .09 -
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 314,095 334,488 272,544 156,491 21,739
</TABLE>
The Fund
PAGE 7
Your Investment
ACCOUNT POLICIES
Buying shares
You pay no sales charges to invest in this fund. Your price for fund shares is
the fund's net asset value per share (NAV), which is generally calculated twice
a day, at 12:00 noon and 4:00 p.m. Eastern time, every day the New York Stock
Exchange is open. Your order will be priced at the next NAV calculated after
your order is accepted by the fund's transfer agent or other authorized entity.
The fund's portfolio securities are valued based on amortized cost.
Because the fund seeks tax-exempt income, it is not recommended for purchase in
IRAs or other qualified retirement plans.
--------------------------------------------------------
Minimum investments
Initial Additional
--------------------------------------------------------
REGULAR ACCOUNTS $25,000* $1,000**
All investments must be in U.S. dollars. Third-party
checks cannot be accepted. You may be charged a fee for
any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.
* THE MINIMUM INITIAL INVESTMENT IS $25,000 UNLESS THE INVESTOR HAS, IN THE
OPINION OF DREYFUS INSTITUTIONAL SERVICES DIVISION, ADEQUATE INTENT AND
AVAILABILITY OF ASSETS TO REACH A FUTURE LEVEL OF INVESTMENT OF $25,000.
** $100 FOR INVESTORS WHO HAVE HELD FUND SHARES SINCE DECEMBER 8, 1995.
Concepts to understand
NET ASSET VALUE (NAV): a mutual fund's share price on a given day. A fund's NAV
is calculated by dividing the value of its net assets by the number of existing
shares.
AMORTIZED COST: the value of a fund's portfolio securities, which does not take
into account unrealized gains or losses. As a result, portfolio securities are
valued at their acquisition cost, adjusted over time based on the discounts or
premiums reflected in their purchase price. This method of valuation is designed
for a fund to be able to price its shares at $1.00 per share.
PAGE 8
Selling shares
You may sell (redeem) shares at any time. Your shares will be sold at the next
NAV calculated after your order is accepted by the fund's transfer agent or
other authorized entity. Any certificates representing fund shares being sold
must be returned with your redemption request. Your order will be processed
promptly and you will generally receive the proceeds within a week.
Before selling or writing a check for recently purchased shares, please note
that if the fund has not yet collected payment for the shares you are selling,
it may delay sending the proceeds for up to eight business days or until it has
collected payment.
--------------------------------------------------------
Limitations on selling shares by phone
Proceeds
sent by Minimum Maximum
--------------------------------------------------------
CHECK NO MINIMUM $150,000 PER DAY
WIRE $5,000 $250,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
TELETRANSFER $1,000 $250,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
--------------------------------------------------------
SHAREHOLDER TRANSACTION FEES*
Exchange fee $5.00
Account closeout fee** $5.00
Wire and TeleTransfer redemption fee $5.00
Checkwriting charge $2.00
* CHARGED UNLESS YOU HAVE BEEN A FUND SHAREHOLDER SINCE DECEMBER 8, 1995 OR
YOUR ACCOUNT BALANCE IS $50,000 OR MORE ON THE BUSINESS DAY IMMEDIATELY
PRECEDING THE EFFECTIVE DATE OF THE TRANSACTION.
** UNLESS BY EXCHANGE, WIRE OR TELETRANSFER FOR WHICH A CHARGE APPLIES.
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $1,000 or more on accounts whose address has been changed within
the last 30 days
* requests to send the proceeds to a different payee or address
Written sell orders of $100,000 or more must also be signature guaranteed.
A SIGNATURE GUARANTEE helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.
Your Investment
PAGE 9
ACCOUNT POLICIES (CONTINUED)
General policies
Unless you decline telephone privileges on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.
The fund reserves the right to:
* refuse any purchase or exchange request
* change or discontinue its exchange privilege
* change its minimum investment amounts
* delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions)
The fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).
* BELOW $500 IF YOU HAVE BEEN A FUND SHAREHOLDER SINCE DECEMBER 8, 1995.
Small account policies
To offset the relatively higher costs of servicing smaller accounts, the fund
charges regular accounts with balances below $2,000 an annual fee of $12. The
fee will be imposed during the fourth quarter of each calendar year.
The fee will be waived for: any investor whose aggregate Dreyfus mutual fund
investments total at least $25,000; IRA accounts; accounts participating in
automatic investment programs; and accounts opened through a financial
institution.
If your account falls below $10,000,* the fund may ask you to increase your
balance. If it is still below $10,000* after 45 days, the fund may close your
account and send you the proceeds.
PAGE 10
DISTRIBUTIONS AND TAXES
The fund usually pays its shareholders dividends from its net investment income
once a month, and distributes any net securities gains it has realized once a
year. Your distributions will be reinvested in the fund unless you instruct the
fund otherwise. There are no fees or sales charges on reinvestments.
The fund anticipates that substantially all of its dividends will be exempt from
federal, New York state and New York city personal income taxes. Any dividends
and distributions from taxable investments are taxable as ordinary income. The
tax status of any distribution is the same regardless of how long you have been
in the fund and whether you reinvest your distributions or take them in cash.
The tax status of your dividends and distributions will be detailed in your
annual tax statement from the fund.
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Concepts to understand
DIVIDENDS AND DISTRIBUTIONS: income or interest paid by the fund's portfolio
investments and passed on to fund shareholders net of expenses. These are
calculated on a per-share basis: each share earns the same rate of return, so
the more fund shares you own, the higher your distribution.
Your Investment
PAGE 11
SERVICES FOR FUND INVESTORS
Dreyfus Dividend Sweep
For automatically reinvesting the dividends and distributions from one Dreyfus
fund into another, use Dreyfus Dividend Sweep (not available for IRAs). You can
set up this service with your application or by calling 1-800-645-6561.
Retirement plans
Dreyfus offers a variety of retirement plans, including traditional and Roth
IRAs. Here's where you call for information:
* for traditional, rollover and Roth IRAs, call 1-800-645-6561
* for SEP-IRAs and Keogh accounts, call 1-800-358-091
Checkwriting privilege
You may write redemption checks against your account in amounts of $1,000 or
more. There is a $2.00 charge for each check written.* A fee also will be
charged by the transfer agent if you request a stop payment or if the transfer
agent cannot honor a redemption check due to insufficient funds or another valid
reason. Please do not postdate your checks or use them to close your account.
Exchange privilege
You can exchange $1,000 or more from one Dreyfus fund into another. You are
allowed only four exchanges out of the fund in a calendar year. You can request
your exchange in writing or by phone. Be sure to read the current prospectus for
any fund into which you are exchanging. Any new account established through an
exchange will have the same privileges as your original account (as long as they
are available). There is a $5.00 exchange fee,* and you may be charged a sales
load when exchanging into any fund that has one.
PAGE 12
Dreyfus TeleTransfer privilege
To move money between your bank account and your Dreyfus fund account with a
phone call, use the Dreyfus TeleTransfer privilege. You can set up TeleTransfer
on your account by providing bank account information and following the
instructions on your application. There is a $5.00 fee for TeleTransfer
redemptions.*
24-hour automated account access
You can easily manage your Dreyfus accounts, check your account balances,
transfer money between your Dreyfus funds, get price and yield information and
much more -- when it's convenient for you.
Account statements
Every Dreyfus investor automatically receives regular account statements. You'll
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.
Dreyfus Financial Centers
Through a nationwide network of Dreyfus Financial Centers, Dreyfus offers a full
array of investment services and products. This includes information on mutual
funds, brokerage services, tax-advantaged products and retirement planning.
Experienced financial consultants can help you make informed choices and provide
you with personalized attention in handling account transactions. The Financial
Centers also offer informative seminars and events. To find the Financial Center
nearest you, call 1-800-499-3327.
* UNLESS YOU HAVE BEEN A FUND SHAREHOLDER SINCE DECEMBER 8, 1995 OR YOUR
ACCOUNT BALANCE IS $50,000 OR MORE ON THE BUSINESS DAY IMMEDIATELY
PRECEDING THE EFFECTIVE DATE OF THE TRANSACTION.
Your Investment
PAGE 13
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
The Dreyfus Family of Funds
P.O. Box 9387, Providence, RI 02940-9387
By Telephone
WIRE Have your bank send your
investment to Boston Safe Deposit and
Trust Company, with these instructions:
* ABA# 011001234
* DDA# 043508
* the fund name
* your Social Security or tax ID number
* name(s) of investor(s)
Call us to obtain an account number.
Return your application.
Via the Internet
COMPUTER Visit the Dreyfus Web site
http://www.dreyfus.com and follow the
instructions to download an account application.
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your
account number on your check.
Mail the slip and the check to:
The Dreyfus Family of Funds
P.O. Box 105,
Newark, NJ 07101-0105
WIRE Have your bank send your
investment to Boston Safe Deposit and
Trust Company, with these instructions:
* ABA# 011001234
* DDA# 043508
* the fund name
* your account number
* name(s) of investor(s)
ELECTRONIC CHECK Same as wire, but insert
"4780" before your account number.
TELETRANSFER Request TeleTransfer on your
application. Call us to request your transaction.
PAGE 14
TO SELL SHARES
Write a redemption check OR write a letter of
instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation,
if required (see "Account Policies -- Selling Shares").
Mail your request to:
The Dreyfus Family of Funds
P.O. Box 9671,
Providence, RI 02940-9671
WIRE Be sure the fund has your bank account
information on file. Call us to
request your transaction. Proceeds
will be wired to your bank.
TELETRANSFER Be sure the fund has your bank
account information on file. Call
us to request your transaction. Proceeds
will be sent to your bank by electronic check.
CHECK Call us to request your transaction.
A check will be sent to the address of record.
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS FAMILY OF FUNDS
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$5,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
Your Investment
PAGE 15
NOTES
<PAGE>
<PAGE>
For More Information
Dreyfus BASIC New York
Municipal Money Market Fund
A series of The Dreyfus/Laurel
Tax-Free Municipal Fund
-----------------------------
SEC file number: 811-3700
More information on this fund is available free upon
request, including the following:
Annual/Semiannual Report
Describes the fund's performance and lists portfolio
holdings.
Statement of Additional Information (SAI)
Provides more details about the fund and its policies. A
current SAI is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference (is
legally considered part of this prospectus).
To obtain information:
BY TELEPHONE Call 1-800-645-6561
BY MAIL Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request
to [email protected]
ON THE INTERNET Text-only
versions of fund documents
can be viewed online or
downloaded from:
SEC
http://www.sec.gov
DREYFUS
http://www.dreyfus.com
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 1999 Dreyfus Service Corporation
316P1199
<PAGE>
Dreyfus Premier Limited Term Massachusetts Municipal Fund
Investing for income that is exempt from federal and Massachusetts state income
taxes
PROSPECTUS November 1, 1999
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
The Fund
Dreyfus Premier Limited Term
Massachusetts Municipal Fund
- ----------------------------------
Ticker Symbols CLASS A: PLMMX
CLASS B: DPMBX
CLASS C: DPMCX
CLASS R: PMARX
Contents
The Fund
- --------------------------------------------------------------------------------
Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 1
Expenses 2
Management 3
Financial Highlights 4
Your Investment
- --------------------------------------------------------------------------------
Account Policies 6
Distributions and Taxes 8
Services for Fund Investors 9
Instructions for Regular Accounts 10
For More Information
- --------------------------------------------------------------------------------
INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.
GOAL/APPROACH
The fund seeks to maximize current income exempt from federal and Massachusetts
personal income taxes consistent with what is believed to be the prudent risk of
capital. This objective may be changed without shareholder approval. To pursue
its goal, the fund normally invests substantially all of its assets in municipal
bonds that provide income exempt from federal and Massachusetts personal income
taxes. The fund occasionally may invest in municipal obligations that are exempt
only from federal income tax and, for temporary defensive purposes, in such
obligations or taxable bonds. The fund's dollar-weighted average portfolio
maturity is not expected to exceed ten years. The fund generally invests in
municipal bonds with maturities ranging between three and ten years, although
there is no limit on the maturity of any individual security. The fund's
investments in municipal bonds must be of investment grade quality, or the
unrated equivalent as determined by Dreyfus.
Municipal bonds are typically divided into two types:
* GENERAL OBLIGATION BONDS, which are secured by the full faith and credit of
the issuer and its taxing power
* REVENUE BONDS, which are payable from the revenues derived from a specific
revenue source, such as charges for water and sewer service or highway
tolls
Concepts to understand
AVERAGE MATURITY: an average of the stated maturities of the bonds held in the
fund, based on their dollar-weighted proportions in the fund.
INVESTMENT GRADE BONDS: independent rating organizations analyze and evaluate a
bond issuer's credit history and ability to repay debts. Based on their
assessment, they assign letter grades that reflect the issuer's
creditworthiness. AAA or Aaa represents the highest credit rating, AA/Aa the
second highest, and so on down to D, for defaulted debt. Bonds rated BBB or Baa
and above are considered investment grade.
<PAGE>
MAIN RISKS
Prices of bonds tend to move inversely with changes in interest rates. While a
rise in rates may allow the fund to invest for higher yields, the most immediate
effect is usually a drop in bond prices and, therefore, in the fund's share
price as well. As a result, the value of your investment in the fund could go up
and down, which means that you could lose money. To the extent that the fund
maintains a longer maturity than short-term funds, its share price will react
more strongly to interest rate movements.
Other risk factors could have an effect on the fund's performance:
* if an issuer fails to make timely interest or principal payments, or there
is a decline in the credit quality of a bond, or perception of a decline,
the bond's value could fall, potentially lowering the fund's share price
* Massachusetts's economy and revenues underlying its municipal bonds may
decline
* investing primarily in a single state may make the fund's portfolio
securities more sensitive to risks specific to the stat
The fund is non-diversified, which means that a relatively high percentage of
the fund's assets may be invested in a limited number of issuers. Therefore, its
performance may be more vulnerable to changes in the market value of a single
issuer or a group of issuers.
Although the fund's objective is to generate income exempt from federal and
Massachusetts personal income taxes, interest from some of its holdings may be
subject to Massachusetts personal income or to the federal alternative minimum
tax. In addition, for temporary defensive purposes, including when the fund
manager believes that acceptable Massachusetts municipal obligations are
unavailable for investment, the fund may invest up to all of its assets in
taxable bonds and/or securities that are exempt only from federal income tax.
Other potential risks
The fund may invest in certain derivatives, such as futures and options.
Derivatives can be illiquid and highly sensitive to changes in their underlying
security, interest rate or index and, as a result, can be highly volatile. A
small investment in certain derivatives could have a potentially large impact on
the fund's performance.
PAST PERFORMANCE
The tables below show some of the risks of investing in the fund. The first
table shows how the performance of the fund's Class A shares has varied from
year to year. These performance figures do not reflect sales loads, and would be
lower if they did. The second table compares the performance of each of the
fund's share classes over time to that of the Lehman Brothers 10-Year Municipal
Bond Index, an unmanaged total-return performance benchmark. These returns
reflect any applicable sales loads. Both tables assume the reinvestment of
dividends and distributions. Of course, past performance is no guarantee of
future results.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
CLASS A SHARES
8.81 5.92 12.39 8.59 10.51 -2.86 12.03 3.85 7.11 5.25
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
BEST QUARTER: Q2 '89 +4.93%
WORST QUARTER: Q1 '94 -3.90%
THE FUND'S CLASS A YEAR-TO-DATE TOTAL RETURN AS OF 9/30/99 WAS -1.58%.
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/98
<TABLE>
Since
Inception date 1 Year 5 Years 10 Years inception
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A (9/24/85) 2.11% 4.33% 6.75% --
CLASS B (12/28/94) 1.79% -- -- 6.30%
CLASS C (12/28/94) 4.11% -- -- 6.56%
CLASS R (2/1/93) 5.50% 5.21% -- 5.96%
LEHMAN BROTHERS
BOND INDEX 6.76% 6.35% 8.33% 7.19%*
* BASED ON LIFE OF CLASS R. FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON
1/31/93 IS USED AS THE BEGINNING VALUE ON 2/1/93.
</TABLE>
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
The Fund 1
PAGE 1
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.
<TABLE>
Fee table
CLASS A CLASS B CLASS C CLASS R
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)
Maximum front-end sales charge on purchases
AS A % OF OFFERING PRICE 3.00 NONE NONE NONE
Maximum contingent deferred sales charge (CDSC)
AS A % OF PURCHASE OR SALE PRICE, WHICHEVER IS LESS NONE* 3.00 .75 NONE
- ---------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)
% OF AVERAGE DAILY NET ASSETS
Management fees .50 .50 .50 .50
Rule 12b-1 fee .25 .75 .75 NONE
Other expenses .00 .00 .00 .00
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL .75 1.25 1.25 .50
* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF $1
MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF REDEEMED WITHIN ONE YEAR.
</TABLE>
<TABLE>
Expense example
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A $374 $533 $704 $1,202
CLASS B
WITH REDEMPTION $427 $597 $786 $1,247**
WITHOUT REDEMPTION $127 $397 $686 $1,247**
CLASS C
WITH REDEMPTION $202 $397 $686 $1,511
WITHOUT REDEMPTION $127 $397 $686 $1,511
CLASS R $51 $160 $280 $628
** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.
</TABLE>
This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. Because actual
return and expenses will be different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most investment advisers and their funds,
Dreyfus pays all fund expenses except for brokerage fees, taxes, interest, fees
and expenses of the independent directors, Rule 12b-1 fees and extraordinary
expenses.
RULE 12B-1 FEE: the fee paid out of fund assets (attributable to appropriate
share classes) for distribution expenses and shareholder service. Because this
fee is paid out of the fund's assets on an ongoing basis, over time it will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
2
PAGE 2
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park
Avenue, New York, New York 10166. Founded in 1947, Dreyfus manages more than
$120 billion in over 160 mutual fund portfolios. For the past fiscal year, the
fund paid Dreyfus a management fee at the annual rate of 0.50% of the fund's
average daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a broad-based financial services company with a bank at
its core. With more than $426 billion of assets under management and $2.0
trillion of assets under administration and custody, Mellon provides a full
range of banking, investment and trust products and services to individuals,
businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
The Dreyfus asset management philosophy is based on the belief that discipline
and consistency are important to investment success. For each fund, Dreyfus
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide each fund
with a distinct, stable identity.
Kristin Lindquist has managed the fund, and has been employed by Dreyfus as a
portfolio manager, since October 1994. Ms. Lindquist is also a vice president of
Boston Safe Deposit and Trust Company, an affiliate of Dreyfus.
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
The Fund 3
PAGE 3
FINANCIAL HIGHLIGHTS
The following tables describe the performance of each share class for the fiscal
periods indicated. "Total return" shows how much your investment in the fund
would have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These financial highlights have been
independently audited by KPMG LLP, whose report, along with the fund's financial
statements, is included in the annual report, which is available upon request.
<TABLE>
YEAR ENDED JUNE 30,
CLASS A 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 12.34 12.15 11.97 11.91 11.74
Investment operations: Investment income -- net .51 .53 .54 .54 .55
Net realized and unrealized gain (loss)
on investments (.30) .24 .20 .08 .20
Total from investment operations .21 .77 .74 .62 .75
Distributions: Dividends from investment income -- net (.51) (.53) (.54) (.54) (.54)
Dividends from net realized gain on investments (.01) (.05) (.02) (.02) (.04)
Total distributions (.52) (.58) (.56) (.56) (.58)
Net asset value, end of period 12.03 12.34 12.15 11.97 11.91
Total return (%)* 1.60 6.41 6.36 5.22 6.60
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .75 .75 .75 .75 .75
Ratio of net investment income to average net assets (%) 4.10 4.30 4.47 4.44 4.65
Portfolio turnover rate (%) 16.35 6.63 22.57 39.16 25.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 15,045 16,355 16,093 15,689 16,501
* EXCLUSIVE OF SALES CHARGE.
</TABLE>
<TABLE>
YEAR ENDED JUNE 30,
CLASS B 1999 1998 1997 1996(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 12.37 12.18 11.99 11.91
Investment operations: Investment income -- net .44 .47 .48 .48
Net realized and unrealized gain (loss) on investments (.30) .24 .21 .10
Total from investment operations .14 .71 .69 .58
Distributions: Dividends from investment income -- net (.44) (.47) (.48) (.48)
Dividends from net realized gain on investments (.01) (.05) (.02) (.02)
Total distributions (.45) (.52) (.50) (.50)
Net asset value, end of period 12.06 12.37 12.18 11.99
Total return (%)(2) 1.09 5.87 5.90 4.87
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.25 1.25 1.25 1.25
Ratio of net investment income to average net assets (%) 3.56 3.78 3.96 3.67
Portfolio turnover rate (%) 16.35 6.63 22.57 39.16
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 901 637 464 452
(1) THE FUND COMMENCED SELLING CLASS B SHARES ON DECEMBER 28, 1994. FINANCIAL
HIGHLIGHTS FOR THE PERIOD ENDED JUNE 30,1995 FOR CLASS B SHARES ARE NOT
PRESENT BECAUSE NO SHARES HAD BEEN ISSUED TO THE PUBLIC AS OF THAT DATE.
(2) EXCLUSIVE OF SALES CHARGE.
</TABLE>
4
PAGE 4
<TABLE>
YEAR ENDED JUNE 30,
CLASS C 1999 1998 1997 1996 1995(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 12.38 12.15 11.97 11.91 11.45
Investment operations: Investment income -- net .44 .46 .49 .48 .26
Net realized and unrealized gain (loss) on investments (.29) .28 .20 .08 .45
Total from investment operations .15 .74 .69 .56 .71
Distributions: Dividends from investment income -- net (.44) (.46) (.49) (.48) (.25)
Dividends from net realized gain on investments (.01) (.05) (.02) (.02) --
Total distributions (.45) (.51) (.51) (.50) (.25)
Net asset value, end of period 12.08 12.38 12.15 11.97 11.91
Total return (%)(2) 1.18 6.19 5.87 4.68 6.24
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.25 1.23 1.25 1.25 1.25(3)
Ratio of net investment income to average net assets (%) 3.58 3.64 4.05 3.93 4.15(3)
Portfolio turnover rate (%) 16.35 6.63 22.57 39.16 25.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 332 282 7 16 18
(1) FROM DECEMBER 28, 1994 (COMMENCEMENT OF INITIAL OFFERING) TO JUNE 30, 1995.
(2) EXCLUSIVE OF SALES CHARGE.
(3) ANNUALIZED.
</TABLE>
<TABLE>
YEAR ENDED JUNE 30,
CLASS R 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 12.34 12.16 11.97 11.91 11.74
Investment operations: Investment income -- net .54 .56 .57 .57 .57
Net realized and unrealized gain (loss) on investments (.29) .23 .21 .08 .21
Total from investment operations .25 .79 .78 .65 .78
Distributions: Dividends from investment income -- net (.54) (.56) (.57) (.57) (.57)
Dividends from net realized gain on investments (.01) (.05) (.02) (.02) (.04)
Total distributions (.55) (.61) (.59) (.59) (.61)
Net asset value, end of period 12.04 12.34 12.16 11.97 11.91
Total return (%) 1.93 6.58 6.70 5.46 6.87
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .50 .50 .50 .50 .50
Ratio of net investment income to average net assets (%) 4.35 4.54 4.73 4.68 4.90
Portfolio turnover rate (%) 16.35 6.63 22.57 39.16 25.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 70,901 50,959 33,188 25,981 19,700
</TABLE>
The Fund 5
PAGE 5
Your Investment
ACCOUNT POLICIES
THE DREYFUS PREMIER FUNDS are designed primarily for people who are investing
through a third party, such as a bank, broker-dealer or financial adviser. Third
parties with whom you open a fund account may impose policies, limitations and
fees which are different from those described here.
YOU WILL NEED TO CHOOSE A SHARE CLASS before making your initial investment. In
making your choice, you should weigh the impact of all potential costs over the
length of your investment, including sales charges and annual fees. For example,
in some cases, it can be more economical to pay an initial sales charge than to
choose a class with no initial sales charge but higher annual fees and a CDSC.
* CLASS A shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares,
want to take advantage of the reduced sales charges available on larger
investments and/or have a longer-term investment horizon
* CLASS B shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work
immediately and/or have a longer-term investment horizon
* CLASS C shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work
immediately and/or have a shorter-term investment horizon
* CLASS R shares are designed for eligible institu- tions on behalf of their
clients (individuals generally may not purchase these shares directly)
Your financial representative can help you choose the share class that is
appropriate for you.
Reduced Class A sales charge
LETTER OF INTENT: lets you purchase Class A shares over a 13-month period and
receive the same sales charge as if all shares had been purchased at once.
RIGHT OF ACCUMULATION: lets you add the value of any Class A, B or C shares in
this fund or any other Dreyfus Premier fund sold with a sales load that you
already own to the amount of your next Class A investment for purposes of
calculating the sales charge.
CONSULT THE STATEMENT OF ADDITIONAL INFORMATION (SAI) OR YOUR FINANCIAL
REPRESENTATIVE FOR MORE DETAILS.
Share class charges
EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay a sales charge to buy or sell shares. Consult your financial representative
or the SAI to see if this may apply to you. Shareholders holding Class A shares
since December 28, 1994 are not subject to any front-end sales loads.
- --------------------------------------------------------------------------------
<TABLE>
Sales charges
CLASS A -- CHARGED WHEN YOU BUY SHARES
Sales charge Sales charge
deducted as a % as a % of your
Your investment of offering price net investment
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Less than $100,000 3.00% 3.10%
$100,000 -- $249,999 2.75% 2.80%
$250,000 -- $499,999 2.25% 2.30%
$500,000 -- $999,999 2.00% 2.00%
$1 million or more* 0.00% 0.00%
* A 1.00% CDSC may be charged on any shares sold within one year of purchase
(except shares bought through dividend reinvestment).
</TABLE>
Class A shares also carry an annual Rule 12b-1 fee of 0.25% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS B -- CHARGED WHEN YOU SELL SHARES
CDSC as a % of your initial
Time since you bought investment or your redemption
the shares you are selling (whichever is less)
- --------------------------------------------------------------------------------
Up to 2 years 3.00%
2 -- 4 years 2.00%
4 -- 5 years 1.00%
5 -- 6 years 0.00%
More than 6 years Shares will automatically
convert to Class A
Class B shares also carry an annual Rule 12b-1 fee of 0.75% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS C -- CHARGED WHEN YOU SELL SHARES
A 0.75% CDSC is imposed on redemptions made within the first year of purchase.
Class C shares also carry an annual Rule 12b-1 fee of 0.75% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS R -- NO SALES LOAD OR RULE 12B-1 FEES
6
PAGE 6
Buying shares
THE NET ASSET VALUE (NAV) of each class is generally calculated as of the close
of trading on the New York Stock Exchange ("NYSE") (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. The fund's investments generally are valued at fair value as
determined by an independent pricing service approved by the fund's board.
Because the fund seeks tax-exempt income, it is not recommended for purchase in
IRAs or other qualified retirement plans.
ORDERS TO BUY AND SELL SHARES received by dealers by the close of trading on the
NYSE and transmitted to the distributor or its designee by the close of its
business day (normally 5:15 p.m. Eastern time) will be based on the NAV
determined as of the close of trading on the NYSE that day.
- --------------------------------------------------------------------------------
Minimum investments
Initial Additional
- --------------------------------------------------------------------------------
REGULAR ACCOUNTS $1,000 $100; $500 FOR
TELETRANSFER INVESTMENTS
DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS
All investments must be in U.S. dollars. Third-party checks cannot be accepted.
You may be charged a fee for any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.
Concepts to understand
NET ASSET VALUE (NAV): the market value of one share, computed by dividing the
total net assets of a fund or class by its shares outstanding. The fund's Class
A shares are offered to the public at NAV plus a sales charge. Classes B, C and
R are offered at NAV, but Classes B and C generally are subject to higher annual
operating expenses and a CDSC.
Selling shares
YOU MAY SELL (REDEEM) SHARES AT ANY TIME through your financial representative,
or you can contact the fund directly. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. Any certificates representing fund shares being sold must be
returned with your redemption request. Your order will be processed promptly and
you will generally receive the proceeds within a week.
TO KEEP YOUR CDSC AS LOW AS POSSIBLE, each time you request to sell shares we
will first sell shares that are not subject to a CDSC, and then those subject to
the lowest charge. The CDSC is based on the lesser of the original purchase cost
or the current market value of the shares being sold, and is not charged on
shares you acquired by reinvesting your dividends. There are certain instances
when you may qualify to have the CDSC waived. Consult the SAI for details.
BEFORE SELLING RECENTLY PURCHASED SHARES, please note that if the fund has not
yet collected payment for the shares you are selling, it may delay sending the
proceeds for up to eight business days or until it has collected payment.
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $1,000 or more on accounts whose address has been changed within
the last 30 days
* requests to send the proceeds to a different payee or address
Written sell orders of $100,000 or more must also be signature guaranteed.
A SIGNATURE GUARANTEE helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.
Your Investment 7
PAGE 7
ACCOUNT POLICIES (CONTINUED)
General policies
UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.
THE FUND RESERVES THE RIGHT TO:
* refuse any purchase or exchange request that could adversely affect the
fund or its operations, including those from any individual or group who,
in the fund's view, is likely to engage in excessive trading (usually
defined as more than four exchanges out of the fund within a calendar year)
* refuse any purchase or exchange request in excess of 1% of the fund's total
assets
* change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions
* change its minimum investment amounts
* delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions)
The fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).
Small account policies
To offset the relatively higher costs of servicing smaller accounts, the fund
charges regular accounts with balances below $2,000 an annual fee of $12. The
fee will be imposed during the fourth quarter of each calendar year.
The fee will be waived for: any investor whose aggregate Dreyfus mutual fund
investments total at least $25,000; accounts participating in automatic
investment programs; and accounts opened through a financial institution.
If your account falls below $500, the fund may ask you to increase your balance.
If it is still below $500 after 45 days, the fund may close your account and
send you the proceeds.
DISTRIBUTIONS AND TAXES
THE FUND GENERALLY PAYS ITS SHAREHOLDERS dividends from its net investment
income once a month, and distributes any net capital gains it has realized once
a year. Each share class will generate a different dividend because each has
different expenses. Your distributions will be reinvested in additional shares
of the fund unless you instruct the fund otherwise. There are no fees or sales
charges on reinvestments.
THE FUND ANTICIPATES that virtually all of its income dividends will be exempt
from federal and Massachusetts personal income taxes. However, any dividends
paid from interest on taxable investments or short-term capital gains will be
taxable as ordinary income. Any distributions of long-term capital gains will be
taxable as such. The tax status of any distribution is the same regardless of
how long you have been in the fund and whether you reinvest your distributions
or take them in cash. In general, distributions are federally taxable as
follows:
- --------------------------------------------------------------------------------
Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------
INCOME GENERALLY GENERALLY
DIVIDENDS TAX EXEMPT TAX EXEMPT
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
The tax status of your dividends and distributions will be detailed in your
annual tax statement from the fund. Because everyone's tax situation is unique,
always consult your tax professional about federal, state and local tax
consequences.
Taxes on transactions
Any sale or exchange of fund shares may generate a tax liability.
The table above also can provide a guide for potential tax liability when
selling or exchanging fund shares. "Short-term capital gains" applies to fund
shares sold or exchanged up to 12 months after buying them. "Long-term capital
gains" applies to shares sold or exchanged after 12 months.
8
PAGE 8
SERVICES FOR FUND INVESTORS
THE THIRD PARTY THROUGH WHOM YOU PURCHASED fund shares may impose different
restrictions on these services and privileges offered by the fund, or may not
make them available at all. Consult your financial representative for more
information on the availability of these services and privileges.
Automatic services
BUYING OR SELLING SHARES AUTOMATICALLY is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application, or by
calling your financial representative or 1-800-554-4611.
- --------------------------------------------------------------------------------
For investing
DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.
DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.
DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another
(not available for IRAs).
- --------------------------------------------------------------------------------
For exchanging shares
DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
- --------------------------------------------------------------------------------
For selling shares
DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds. There will be no CDSC
on Class B shares, as long as the amounts
withdrawn do not exceed 12% annually
of the account value at the time the shareholder
elects to participate in the plan.
Exchange privilege
YOU CAN EXCHANGE SHARES WORTH $500 OR MORE from one class of the fund into the
same class of another Dreyfus Premier fund. You can request your exchange by
contacting your financial representative. Be sure to read the current prospectus
for any fund into which you are exchanging before investing. Any new account
established through an exchange will generally have the same privileges as your
original account (as long as they are available). There is currently no fee for
exchanges, although you may be charged a sales load when exchanging into any
fund that has a higher one.
TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the TeleTransfer privilege. You can set up TeleTransfer on your
account by providing bank account information and following the instructions on
your application, or contact your financial representative.
Reinvestment privilege
UPON WRITTEN REQUEST, YOU CAN REINVEST up to the number of Class A or B shares
you redeemed within 45 days of selling them at the current share price without
any sales charge. If you paid a CDSC, it will be credited back to your account.
This privilege may be used only once.
Account statements
EVERY FUND INVESTOR automatically receives regular account statements. You'll
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.
Your Investment 9
PAGE 9
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing
By Telephone
WIRE Have your bank send your
investment to Boston Safe Deposit &
Trust Co., with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your Social Security or tax ID number
* name(s) of investor(s)
* dealer number if applicable
Call us to obtain an account number.
Return your application with the account
number on the application.
Automatically
WITH AN INITIAL INVESTMENT Indicate
on your application which automatic
service(s) you want. Return your
application with your investment.
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your
account number on your check.
Mail the slip and the check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing
WIRE Have your bank send your
investment to Boston Safe Deposit &
Trust Co., with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your account number
* name(s) of investor(s)
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before
your account number insert "4280" for
Class A, "4290" for Class B, "4300" for
Class C, or "4930" for Class R.
TELETRANSFER Request TeleTransfer on your
application. Call us to request your transaction.
ALL SERVICES Call us or your financial
representative to request a form to add
any automatic investing service (see "Services
for Fund Investors"). Complete and return
the form along with any other required materials.
TO SELL SHARES
Write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other
documentation, if required (see page 7).
Mail your request to:
The Dreyfus Family of Funds
P.O. Box 6587, Providence, RI02940-6587
Attn: Institutional Processing
TELETRANSFER Call us or your financial
representative to request your transaction.
Be sure the fund has your bank account
information on file. Proceeds will be sent to
your bank by electronic check.
AUTOMATIC WITHDRAWAL PLAN Call us or your
financial representative to request a
form to add the plan. Complete the form,
specifying the amount and frequency of
withdrawals you would like.
Be sure to maintain an account balance of
$5,000 or more.
To open an account, make subsequent investments or to sell shares, please
contact your financial representative
or call toll free in the U.S. 1-800-554-4611.
Make checks payable to: THE DREYFUS FAMILY OF FUNDS.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
10
PAGE 10
Account Application p1
<PAGE>
Account Application p2
<PAGE>
NOTES
<PAGE>
For More Information
Dreyfus Premier Limited Term
Massachusetts Municipal Fund
A series of The Dreyfus/Laurel
Tax-Free Municipal Funds
- --------------------------------------
SEC file number: 811-3700
More information on this fund is available free upon request, including the
following:
Annual/Semiannual Report
Describes the fund's performance, lists portfolio holdings and contains a letter
from the fund's portfolio manager discussing recent market conditions, economic
trends and fund strategies that significantly affected the fund's performance
during the last fiscal year.
Statement of Additional Information (SAI)
Provides more details about the fund and its policies. A current SAI is on file
with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).
To obtain information:
BY TELEPHONE
Call your financial representative or 1-800-554-4611
BY MAIL Write to:
The Dreyfus Premier Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
ON THE INTERNET Text-only versions of fund documents can
be viewed online or downloaded from:
http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 1999 Dreyfus Service Corporation
346P1199
<PAGE>
Dreyfus Premier Limited Term Municipal Fund
Investing for income that is exempt from federal income tax
PROSPECTUS November 1, 1999
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
The Fund
Dreyfus Premier
Limited Term Municipal Fund
---------------------------------
Ticker Symbols CLASS A: PLTMX
CLASS B: DPLBX
CLASS C: DPLCX
CLASS R: DPLRX
Contents
The Fund
- --------------------------------------------------------------------------------
Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 1
Expenses 2
Management 3
Financial Highlights 4
Your Investment
- --------------------------------------------------------------------------------
Account Policies 6
Distributions and Taxes 8
Services for Fund Investors 9
Instructions for Regular Accounts 10
For More Information
- --------------------------------------------------------------------------------
INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.
GOAL/APPROACH
The fund seeks to maximize current income exempt from federal income tax
consistent with the prudent risk of capital. This objective may be changed
without shareholder approval. To pursue its goal, the fund normally invests
substantially all of its assets in municipal bonds that provide income exempt
from federal income tax. The fund occasionally, including for temporary
defensive purposes, may invest in taxable bonds. The fund's dollar-weighted
average portfolio maturity is not expected to exceed ten years. The fund
generally invests in municipal bonds with maturities ranging between three and
ten years, although there is no limit on the maturity of any individual
security. The fund's investments in municipal bonds must be of investment grade
quality, or the unrated equivalent as determined by Dreyfus.
Municipal bonds are typically divided into two types:
* GENERAL OBLIGATION BONDS, which are secured by the full faith and credit of
the issuer and its taxing power
* REVENUE BONDS, which are payable from the revenues derived from a specific
revenue source, such as charges for water and sewer service or highway
tolls
Concepts to understand
AVERAGE MATURITY: an average of the stated maturities of the bonds held in the
fund, based on their dollar-weighted proportions in the fund.
INVESTMENT GRADE BONDS: independent rating organizations analyze and evaluate a
bond issuer's credit history and ability to repay debts. Based on their
assessment, they assign letter grades that reflect the issuer's
creditworthiness. AAA or Aaa represents the highest credit rating, AA/Aa the
second highest, and so on down to D, for defaulted debt. Bonds rated BBB or Baa
and above are considered investment grade.
MAIN RISKS
Prices of bonds tend to move inversely with changes in interest rates. While a
rise in rates may allow the fund to invest for higher yields, the most immediate
effect is usually a drop in bond prices and, therefore, in the fund's share
price as well. As a result, the value of your investment in the fund could go up
and down, which means that you could lose money. To the extent that the fund
maintains a longer maturity than short-term funds, its share price will react
more strongly to interest rate movements.
Other risk factors could have an effect on the fund's performance:
* if an issuer fails to make timely interest or principal payments, or there
is a decline in the credit quality of a bond, or perception of a decline,
the bond's value could fall, potentially lowering the fund's share price
* changes in economic, business or political conditions relating to a
particular municipal project or state in which the fund invests may have an
impact on the fund's share price
The fund is non-diversified, which means that a relatively high percentage of
the fund's assets may be invested in a limited number of issuers. Therefore, its
performance may be more vulnerable to changes in the market value of a single
issuer or a group of issuers.
Although the fund's objective is to generate income exempt from federal income
tax, interest from some of its holdings may be subject to federal income tax
including the alternative minimum tax. In addition, for temporary defensive
purposes, the fund may invest up to all of its assets in taxable bonds.
Other potential risks
The fund, at times, may invest in certain derivatives, such as futures and
options. Derivatives can be illiquid and highly sensitive to changes in their
underlying security, interest rate or index and, as a result, can be highly
volatile. A small investment in certain derivatives could have a potentially
large impact on the fund's performance.
PAST PERFORMANCE
The tables below show some of the risks of investing in the fund. The first
table shows how the performance of the fund's Class A shares has varied from
year to year. These performance figures do not reflect sales loads, and would be
lower if they did. The second table compares the performance of each of the
fund's share classes over time to that of the Lehman Brothers 10-Year Municipal
Bond Index, an unmanaged total-return performance benchmark. These returns
reflect any applicable sales loads. Both tables assume the reinvestment of
dividends and distributions. Of course, past performance is no guarantee of
future results.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
CLASS A SHARES
9.90 6.12 11.60 8.22 11.25 -3.57 12.73 3.84 7.23 5.43
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
BEST QUARTER: Q2 '89 +6.87%
WORST QUARTER: Q1 '94 -4.18%
THE FUND'S CLASS A YEAR-TO-DATE TOTAL RETURN AS OF 9/30/99 WAS -1.20%.
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/98
<TABLE>
Since
Inception date 1 Year 5 Years 10 Years inception
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS A (10/1/85) 2.28% 4.36% 6.85% --
CLASS B (12/28/94) 1.98% -- -- 6.50%
CLASS C (12/28/94) 4.32% -- -- 6.81%
CLASS R (2/1/93) 5.69% 5.24% -- 6.10%
LEHMAN BROTHERS
BOND INDEX 6.76% 6.35% 8.33% 7.19%*
* BASED ON LIFE OF CLASS R. FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON
1/31/93 IS USED AS THE BEGINNING VALUE ON 2/1/93.
</TABLE>
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
The Fund 1
PAGE 1
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.
Fee table
<TABLE>
CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)
Maximum front-end sales charge on purchases
AS A % OF OFFERING PRICE 3.00 NONE NONE NONE
Maximum contingent deferred sales charge (CDSC)
AS A % OF PURCHASE OR SALE PRICE, WHICHEVER IS LESS NONE* 3.00 .75 NONE
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)
% OF AVERAGE DAILY NET ASSETS
Management fees .50 .50 .50 .50
Rule 12b-1 fee .25 .75 .75 NONE
Other expenses** .00 .00 .00 .00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL** .75 1.25 1.25 .50
* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF
$1 MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF REDEEMED WITHIN ONE
YEAR.
** "OTHER EXPENSES" AND "TOTAL" EXPENSES DO NOT REFLECT EXTRAORDINARY EXPENSES
INCURRED BY THE FUND DURING THE FISCAL YEAR ENDED JUNE 30,1999. "OTHER
EXPENSES" WOULD HAVE BEEN .04% FOR CLASS A, .03% FOR CLASS B, .01% FOR
CLASS C AND .04% FOR CLASS R AND "TOTAL" EXPENSES WOULD HAVE BEEN .79% FOR
CLASS A, 1.28% FOR CLASS B, 1.26% FOR CLASS C AND .54% FOR CLASS R,
RESPECTIVELY, IF EXTRAORDINARY EXPENSES WERE REFLECTED.
</TABLE>
<TABLE>
Expense example
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A $374 $533 $704 $1,202
CLASS B
WITH REDEMPTION $427 $597 $786 $1,247**
WITHOUT REDEMPTION $127 $397 $686 $1,247**
CLASS C
WITH REDEMPTION $202 $397 $686 $1,511
WITHOUT REDEMPTION $127 $397 $686 $1,511
CLASS R $51 $160 $280 $628
** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.
</TABLE>
This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. Because actual
return and expenses will be different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most investment advisers and their funds,
Dreyfus pays all fund expenses except for brokerage fees, taxes, interest, fees
and expenses of the independent directors, Rule 12b-1 fees and extraordinary
expenses.
RULE 12B-1 FEE: the fee paid out of fund assets (attributable to appropriate
share classes) for distribution expenses and shareholder service. Because this
fee is paid out of the fund's assets on an ongoing basis, over time it will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
2
PAGE 2
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park
Avenue, New York, New York 10166. Founded in 1947, Dreyfus manages more than
$120 billion in over 160 mutual fund portfolios. For the past fiscal year, the
fund paid Dreyfus a management fee at the annual rate of 0.50% of the fund's
average daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a broad-based financial services company with a bank at
its core. With more than $426 billion of assets under management and $2.0
trillion of assets under administration and custody, Mellon provides a full
range of banking, investment and trust products and services to individuals,
businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
The Dreyfus asset management philosophy is based on the belief that discipline
and consistency are important to investment success. For each fund, Dreyfus
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide each fund
with a distinct, stable identity.
John Flahive has managed the fund, and has been employed by Dreyfus as a
portfolio manager, since November 1994. Mr. Flahive is also a vice president of
Boston Safe Deposit and Trust Company, an affiliate of Dreyfus.
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
The Fund 3
PAGE 3
FINANCIAL HIGHLIGHTS
The following tables describe the performance of each share class for the fiscal
periods indicated. "Total return" shows how much your investment in the fund
would have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These financial highlights have been
independently audited by KPMG LLP, whose report, along with the fund's financial
statements, is included in the annual report, which is available upon request.
<TABLE>
YEAR ENDED JUNE 30,
CLASS A 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 12.32 12.12 11.89 11.82 11.66
Investment operations: Investment income -- net .50 .52 .54 .54 .53
Net realized and unrealized gain (loss) on investments (.28) .26 .26 .08 .19
Total from investment operations .22 .78 .80 .62 .72
Distributions: Dividends from investment income -- net (.50) (.52) (.54) (.55) (.53)
Dividends from net realized gain on investments (.01) (.06) (.03) -- (.03)
Total distributions (.51) (.58) (.57) (.55) (.56)
Net asset value, end of period 12.03 12.32 12.12 11.89 11.82
Total return (%)* 1.78 6.52 6.92 5.25 6.37
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .79 .77 .75 .75 .75
Ratio of net investment income to average net assets (%) 4.06 4.24 4.52 4.53 4.59
Portfolio turnover rate (%) 28.19 14.62 30.50 55.07 61.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 27,084 17,423 17,323 18,751 21,375
* EXCLUSIVE OF SALES CHARGE.
YEAR ENDED JUNE 30,
CLASS B 1999 1998 1997 1996 1995(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 12.31 12.12 11.89 11.82 11.32
Investment operations: Investment income -- net .44 .46 .48 .48 .24
Net realized and unrealized gain (loss) on investments (.28) .25 .26 .07 .50
Total from investment operations .16 .71 .74 .55 .74
Distributions: Dividends from investment income -- net (.44) (.46) (.48) (.48) (.24)
Dividends from net realized gain on investments (.01) (.06) (.03) -- --
Total distributions (.45) (.52) (.51) (.48) (.24)
Net asset value, end of period 12.02 12.31 12.12 11.89 11.82
Total return (%)(2) 1.25 5.89 6.38 4.71 6.59(3)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.28 1.27 1.25 1.25 1.25(4)
Ratio of net investment income to average net assets (%) 3.55 3.68 4.01 3.98 4.09(4)
Portfolio turnover rate (%) 28.19 14.62 30.50 55.07 61.00(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 2,779 1,240 551 500 85
(1) FROM DECEMBER 28, 1994 (COMMENCEMENT OF INITIAL OFFERING) TO JUNE 30, 1995.
(2) EXCLUSIVE OF SALES CHARGE. (3) NOT ANNUALIZED. (4) ANNUALIZED.
</TABLE>
4
PAGE 4
<TABLE>
YEAR ENDED JUNE 30,
CLASS C 1999 1998 1997 1996 1995(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 12.34 12.14 11.90 11.82 11.32
Investment operations: Investment income -- net .44 .46 .49 .48 .24
Net realized and unrealized gain (loss) on investments (.27) .26 .27 .08 .50
Total from investment operations .17 .72 .76 .56 .74
Distributions: Dividends from investment income -- net (.44) (.46) (.49) (.48) (.24)
Dividends from net realized gain on investments (.01) (.06) (.03) -- --
Total distributions (.45) (.52) (.52) (.48) (.24)
Net asset value, end of period 12.06 12.34 12.14 11.90 11.82
Total return (%)(2) 1.35 6.02 6.50 4.81 6.59(3)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.26 1.27 1.27 1.24 1.25(4)
Ratio of net investment income to average net assets (%) 3.58 3.71 4.17 4.00 4.09(4)
Portfolio turnover rate (%) 28.19 14.62 30.50 55.07 61.00(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 1,534 209 74 150 84
(1) FROM DECEMBER 28, 1994 (COMMENCEMENT OF INITIAL OFFERING) TO JUNE 30, 1995.
(2) EXCLUSIVE OF SALES CHARGE. (3) NOT ANNUALIZED. (4) ANNUALIZED.
YEAR ENDED JUNE 30,
CLASS R 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 12.31 12.12 11.89 11.82 11.66
Investment operations: Investment income -- net .53 .55 .57 .57 .56
Net realized and unrealized gain (loss) on investments (.28) .25 .26 .08 .19
Total from investment operations .25 .80 .83 .65 .75
Distributions: Dividends from investment income -- net (.53) (.55) (.57) (.58) (.56)
Dividends from net realized gain on investments (.01) (.06) (.03) -- (.03)
Total distributions (.54) (.61) (.60) (.58) (.59)
Net asset value, end of period 12.02 12.31 12.12 11.89 11.82
Total return (%) 2.02 6.69 7.17 5.51 6.64
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .54 .52 .50 .50 .50
Ratio of net investment income to average net assets (%) 4.32 4.47 4.77 4.77 4.84
Portfolio turnover rate (%) 28.19 14.62 30.50 55.07 61.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 64,575 43,018 25,741 17,870 16,727
</TABLE>
The Fund 5
PAGE 5
Your Investment
ACCOUNT POLICIES
THE DREYFUS PREMIER FUNDS are designed primarily for people who are investing
through a third party, such as a bank, broker-dealer or financial adviser. Third
parties with whom you open a fund account may impose policies, limitations and
fees which are different from those described here.
YOU WILL NEED TO CHOOSE A SHARE CLASS before making your initial investment. In
making your choice, you should weigh the impact of all potential costs over the
length of your investment, including sales charges and annual fees. For example,
in some cases, it can be more economical to pay an initial sales charge than to
choose a class with no initial sales charge but higher annual fees and a CDSC.
* CLASS A shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares,
want to take advantage of the reduced sales charges available on larger
investments and/or have a longer-term investment horizon
* CLASS B shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work
immediately and/or have a longer-term investment horizon
* CLASS C shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work
immediately and/or have a shorter-term investment horizon
* CLASS R shares are designed for eligible institutions on behalf of their
clients (individuals generally may not purchase these shares directly)
Your financial representative can help you choose the share class that is
appropriate for you.
Reduced Class A sales charge
LETTER OF INTENT: lets you purchase Class A shares over a 13-month period and
receive the same sales charge as if all shares had been purchased at once.
RIGHT OF ACCUMULATION: lets you add the value of any Class A, B or C shares in
this fund or any other Dreyfus Premier fund sold with a sales load that you
already own to the amount of your next Class A investment for purposes of
calculating the sales charge.
CONSULT THE STATEMENT OF ADDITIONAL INFORMATION (SAI) OR YOUR FINANCIAL
REPRESENTATIVE FOR MORE DETAILS.
Share class charges
EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay a sales charge to buy or sell shares. Consult your financial representative
or the SAI to see if this may apply to you. Shareholders holding Class A shares
since December 28, 1994 are not subject to any front-end sales loads.
- --------------------------------------------------------------------------------
Sales charges
CLASS A -- CHARGED WHEN YOU BUY SHARES
<TABLE>
Sales charge Sales charge
deducted as a % as a % of your
Your investment of offering price net investment
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Less than $100,000 3.00% 3.10%
$100,000 -- $249,999 2.75% 2.80%
$250,000 -- $499,999 2.25% 2.30%
$500,000 -- $999,999 2.00% 2.00%
$1 million or more* 0.00% 0.00%
* A 1.00% CDSC may be charged on any shares sold within one year of purchase
(except shares bought through dividend reinvestment).
</TABLE>
Class A shares also carry an annual Rule 12b-1 fee of 0.25% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS B -- CHARGED WHEN YOU SELL SHARES
CDSC as a % of your initial
Time since you bought investment or your redemption
the shares you are selling (whichever is less)
- --------------------------------------------------------------------------------
Up to 2 years 3.00%
2 -- 4 years 2.00%
4 -- 5 years 1.00%
5 -- 6 years 0.00%
More than 6 years Shares will automatically
convert to Class A
Class B shares also carry an annual Rule 12b-1 fee of 0.75% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS C -- CHARGED WHEN YOU SELL SHARES
A 0.75% CDSC is imposed on redemptions made within the first year of purchase.
Class C shares also carry an annual Rule 12b-1 fee of 0.75% of the class's
average daily net assets.
- --------------------------------------------------------------------------------
CLASS R -- NO SALES LOAD OR RULE 12B-1 FEES
6
PAGE 6
Buying shares
THE NET ASSET VALUE (NAV) of each class is generally calculated as of the close
of trading on the New York Stock Exchange ("NYSE") (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. The fund's investments generally are valued at fair value as
determined by an independent pricing service approved by the fund's board.
Because the fund seeks tax-exempt income, it is not recommended for purchase in
IRAs or other qualified retirement plans.
ORDERS TO BUY AND SELL SHARES received by dealers by the close of trading on the
NYSE and transmitted to the distributor or its designee by the close of its
business day (normally 5:15 p.m. Eastern time) will be based on the NAV
determined as of the close of trading on the NYSE that day.
- --------------------------------------------------------------------------------
Minimum investments
Initial Additional
- --------------------------------------------------------------------------------
REGULAR ACCOUNTS $1,000 $100; $500 FOR
TELETRANSFER INVESTMENTS
DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS
All investments must be in U.S. dollars. Third-party checks cannot be accepted.
You may be charged a fee for any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.
Concepts to understand
NET ASSET VALUE (NAV): the market value of one share, computed by dividing the
total net assets of a fund or class by its shares outstanding. The fund's Class
A shares are offered to the public at NAV plus a sales charge. Classes B, C and
R are offered at NAV, but Classes B and C generally are subject to higher annual
operating expenses and a CDSC.
Selling shares
YOU MAY SELL (REDEEM) SHARES AT ANY TIME through your financial representative,
or you can contact the fund directly. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. Any certificates representing fund shares being sold must be
returned with your redemption request. Your order will be processed promptly and
you will generally receive the proceeds within a week.
TO KEEP YOUR CDSC AS LOW AS POSSIBLE, each time you request to sell shares we
will first sell shares that are not subject to a CDSC, and then those subject to
the lowest charge. The CDSC is based on the lesser of the original purchase cost
or the current market value of the shares being sold, and is not charged on
shares you acquired by reinvesting your dividends. There are certain instances
when you may qualify to have the CDSC waived. Consult the SAI for details.
BEFORE SELLING RECENTLY PURCHASED SHARES, please note that if the fund has not
yet collected payment for the shares you are selling, it may delay sending the
proceeds for up to eight business days or until it has collected payment.
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $1,000 or more on accounts whose address has been changed within
the last 30 days
* requests to send the proceeds to a different payee or address
Written sell orders of $100,000 or more must also be signature guaranteed.
A SIGNATURE GUARANTEE helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.
Your Investment 7
PAGE 7
ACCOUNT POLICIES (CONTINUED)
General policies
UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.
THE FUND RESERVES THE RIGHT TO:
* refuse any purchase or exchange request that could adversely affect the
fund or its operations, including those from any individual or group who,
in the fund's view, is likely to engage in excessive trading (usually
defined as more than four exchanges out of the fund within a calendar year)
* refuse any purchase or exchange request in excess of 1% of the fund's total
assets
* change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions
* change its minimum investment amounts
* delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions)
The fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).
Small account policies
To offset the relatively higher costs of servicing smaller accounts, the fund
charges regular accounts with balances below $2,000 an annual fee of $12. The
fee will be imposed during the fourth quarter of each calendar year.
The fee will be waived for: any investor whose aggregate Dreyfus mutual fund
investments total at least $25,000; accounts participating in automatic
investment programs; and accounts opened through a financial institution.
If your account falls below $500, the fund may ask you to increase your balance.
If it is still below $500 after 45 days, the fund may close your account and
send you the proceeds.
DISTRIBUTIONS AND TAXES
THE FUND GENERALLY PAYS ITS SHAREHOLDERS dividends from its net investment
income once a month, and distributes any net capital gains it has realized once
a year. Each share class will generate a different dividend because each has
different expenses. Your distributions will be reinvested in additional shares
of the fund unless you instruct the fund otherwise. There are no fees or sales
charges on reinvestments.
THE FUND ANTICIPATES that virtually all of its income dividends will be exempt
from federal income tax. You may, however, have to pay state and local taxes. In
addition, any dividends paid from interest on taxable investments or short-term
capital gains will be taxable as ordinary income. Any distributions of long-term
capital gains will be taxable as such. The tax status of any distribution is the
same regardless of how long you have been in the fund and whether you reinvest
your distributions or take them in cash. In general, distributions are federally
taxable as follows:
- --------------------------------------------------------------------------------
Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------
INCOME GENERALLY GENERALLY
DIVIDENDS TAX EXEMPT TAX EXEMPT
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
The tax status of your dividends and distributions will be detailed in your
annual tax statement from the fund. Because everyone's tax situation is unique,
always consult your tax professional about federal, state and local tax
consequences.
Taxes on transactions
Any sale or exchange of fund shares may generate a tax liability.
The table above also can provide a guide for potential tax liability when
selling or exchanging fund shares. "Short-term capital gains" applies to fund
shares sold or exchanged up to 12 months after buying them. "Long-term capital
gains" applies to shares sold or exchanged after 12 months.
8
PAGE 8
SERVICES FOR FUND INVESTORS
THE THIRD PARTY THROUGH WHOM YOU PURCHASED fund shares may impose different
restrictions on these services and privileges offered by the fund, or may not
make them available at all. Consult your financial representative for more
information on the availability of these services and privileges.
Automatic services
BUYING OR SELLING SHARES AUTOMATICALLY is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application, or by
calling your financial representative or 1-800-554-4611.
- --------------------------------------------------------------------------------
For investing
DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.
DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.
DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another
(not available for IRAs).
- --------------------------------------------------------------------------------
For exchanging shares
DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
- --------------------------------------------------------------------------------
For selling shares
DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds. There will be no CDSC
on Class B shares, as long as the amounts
withdrawn do not exceed 12% annually
of the account value at the time the shareholder
elects to participate in the plan.
Exchange privilege
YOU CAN EXCHANGE SHARES WORTH $500 OR MORE from one class of the fund into the
same class of another Dreyfus Premier fund. You can request your exchange by
contacting your financial representative. Be sure to read the current prospectus
for any fund into which you are exchanging before investing. Any new account
established through an exchange will generally have the same privileges as your
original account (as long as they are available). There is currently no fee for
exchanges, although you may be charged a sales load when exchanging into any
fund that has a higher one.
TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the TeleTransfer privilege. You can set up TeleTransfer on your
account by providing bank account information and following the instructions on
your application, or contact your financial representative.
Reinvestment privilege
UPON WRITTEN REQUEST, YOU CAN REINVEST up to the number of Class A or B shares
you redeemed within 45 days of selling them at the current share price without
any sales charge. If you paid a CDSC, it will be credited back to your account.
This privilege may be used only once.
Account statements
EVERY FUND INVESTOR automatically receives regular account statements. You'll
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.
Your Investment 9
PAGE 9
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing
By Telephone
WIRE Have your bank send your
investment to Boston Safe Deposit &
Trust Co., with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your Social Security or tax ID number
* name(s) of investor(s)
* dealer number if applicable
Call us to obtain an account number.
Return your application with the account
number on the application.
Automatically
WITH AN INITIAL INVESTMENT Indicate
on your application which automatic
service(s) you want. Return your
application with your investment.
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your
account number on your check.
Mail the slip and the check to:
Name of Fund P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing
WIRE Have your bank send your
investment to Boston Safe Deposit &
Trust Co., with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your account number
* name(s) of investor(s)
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before
your account number insert "4310" for
Class A, "4320" for Class B, "4330" for
Class C, or "4940" for Class R.
TELETRANSFER Request TeleTransfer on your
application. Call us to request your transaction.
ALL SERVICES Call us or your financial
representative to request a form to add
any automatic investing service (see "Services
for Fund Investors"). Complete and return
the form along with any other required
materials.
TO SELL SHARES
Write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other
documentation, if required (see page 7).
Mail your request to:
The Dreyfus Family of Funds
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing
TELETRANSFER Call us or your financial representative to request your
transaction. Be sure the fund has your bank account information on file.
Proceeds will be sent to your bank by electronic check.
AUTOMATIC WITHDRAWAL PLAN Call us or your financial representative to request a
form to add the plan. Complete the form, specifying the amount and frequency of
withdrawals you would like.
Be sure to maintain an account balance of $5,000 or more.
To open an account, make subsequent investments or to sell shares, please
contact your financial representative or call toll free in the U.S.
1-800-554-4611. Make checks payable to: THE DREYFUS FAMILY OF FUNDS.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
10
PAGE 10
Application p1
<PAGE>
Application p2
<PAGE>
NOTES
<PAGE>
For More Information
Dreyfus Premier Limited Term Municipal Fund
A series of The Dreyfus/Laurel
Tax-Free Municipal Funds
- --------------------------------------
SEC file number: 811-3700
More information on this fund is available
free upon request, including the following:
Annual/Semiannual Report
Describes the fund's performance, lists portfolio holdings and contains a letter
from the fund's portfolio manager discussing recent market conditions, economic
trends and fund strategies that significantly affected the fund's performance
during the last fiscal year.
Statement of Additional Information (SAI)
Provides more details about the fund and its policies. A current SAI is on file
with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).
To obtain information:
BY TELEPHONE
Call your financial representative or 1-800-554-4611
BY MAIL Write to:
The Dreyfus Premier Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
ON THE INTERNET Text-only versions of fund documents
can be viewed online or downloaded from:
http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 1999 Dreyfus Service Corporation
347P1199
<PAGE>
- ------------------------------------------------------------------------------
DREYFUS BASIC CALIFORNIA MUNICIPAL MONEY MARKET FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
NOVEMBER 1, 1999
------------------------------------------------------------------------------
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 (the "Fund"), dated
November 1, 1999, 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, that is registered with the Securities and Exchange Commission
("SEC"). 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. -- Call 516-794-5452
TABLE OF CONTENTS
Page
Description of the Fund/Trust..............................................B-2
Management of the Fund.....................................................B-13
Management Arrangements....................................................B-19
Purchase of Shares.........................................................B-21
Redemption of Shares.......................................................B-24
Shareholder Services.......................................................B-28
Determination of Net Asset Value...........................................B-31
Performance Information....................................................B-32
Dividends, Other Distributions And Taxes...................................B-34
Portfolio Transactions.....................................................B-38
Information About the Fund/Trust...........................................B-39
Transfer and Dividend Disbursing Agent, Custodian, Counsel and
Independent Auditors.......................................................B-41
Financial Statements.......................................................B-42
Appendix A.................................................................B-43
Appendix B.................................................................B-65
<PAGE>
DESCRIPTION OF THE FUND/TRUST
The Trust is an open-end management investment company organized as an
unincorporated business trust under the laws of the Commonwealth of
Massachusetts by an Agreement and Declaration of Trust dated March 28, 1983,
amended and restated December 9, 1992, and subsequently further amended. On
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 was changed
from "Dreyfus/Laurel California Tax-Free Money Fund" to "Dreyfus BASIC
California Municipal Money Market Fund."
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
General 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" or "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 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'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 under 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 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 ("NAV") 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.
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.
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.
Certain Portfolio Securities
Description of Municipal Obligations. "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 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
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 Standard & Poor's
("S&P") and Moody's Investors Services, Inc. ("Moody's") represent the opinions
of these agencies as to the quality of Municipal Obligations which they rate. It
should be emphasized, however, that such ratings are relative and subjective and
are not absolute standards of quality. These ratings will be used by the Fund as
initial criteria for the selection of portfolio securities, but the Fund will
also rely upon the independent advice of Dreyfus to evaluate potential
investments. Among the factors which will be considered are the short-term and
long-term ability of the issuer to pay principal and interest and general
economic trends. Further information concerning the ratings of the NRSROs and
their significance is contained in the Appendix B to this Statement of
Additional Information.
After being purchased by the Fund, the rating of a Municipal Obligation
may be reduced below the minimum rating required for purchase by the Fund or the
issuer of the Municipal Obligation may default on its obligations with respect
to the Municipal Obligation. In that event, the Fund will dispose of the
Municipal Obligation as soon as practicable, consistent with achieving an
orderly disposition of the Municipal Obligation, unless the Trust's Board of
Trustees determines that disposal of the Municipal Obligation would not be in
the best interest of the Fund. In addition, it is possible that a Municipal
Obligation may cease to be rated or an NRSRO might not timely change its rating
of a particular Municipal Obligation to reflect subsequent events. Although
neither event will require the sale of such Municipal Obligation by the Fund,
Dreyfus will consider such event in determining whether the Fund should continue
to hold the Municipal Obligation. In addition, if an NRSRO changes its rating
system, the Fund will attempt to use comparable ratings as standards for its
investments in accordance with its investment objective and policies.
Floating Rate and Variable Rate Obligations. The Fund may purchase
floating rate and variable rate obligations, including participation interests
therein. Floating rate or variable rate obligations provide that the rate of
interest is set as a specific percentage of a designated base rate (such as the
prime rate at a major commercial bank) and that the Fund can demand payment of
the obligation at par plus accrued interest. Variable rate obligations provide
for a specified periodic adjustment in the interest rate, while floating rate
obligations have an interest rate which changes whenever there is a change in
the external interest rate. Frequently such obligations are secured by letters
of credit or other credit support arrangements provided by banks. The quality of
the underlying creditor or of the bank, as the case may be, must, as determined
by Dreyfus under the supervision of the Trustees, be equivalent to the quality
standard prescribed for the Fund. 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 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
generally 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 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 1940 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 0.5 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.
Custodial Receipts. The Fund may purchase securities, frequently referred
to as "custodial receipts," representing the right to receive future principal
and interest payments on municipal obligations underlying such receipts. A
number of different arrangements are possible. In a typical custodial receipt
arrangement, an issuer or a third party owner of a municipal obligation deposits
such obligation with a custodian in exchange for two or more classes of
receipts. The class of receipts that the Fund may purchase has the
characteristics of a typical tender option security backed by a conditional
"put," which provides the holder with the equivalent of a short-term variable
rate note. At specified intervals, the interest rate for such securities is
reset by the remarketing agent in order to cause the securities to be sold at
par through a remarketing mechanism. If the remarketing mechanism does not
result in a sale, the conditional put can be exercised. In either event, the
holder is entitled to full principal and accrued interest to the date of the
tender or exercise of the "put." The "put" may be terminable in the event of a
default in payment of principal or interest on the underlying municipal
obligation and for other reasons. Before purchasing such security, Dreyfus is
required to make certain determinations with respect to the likelihood of, and
the ability to monitor, the occurrence of the conditions that would result in
the put not being exercisable. The interest rate for these receipts generally is
expected to be below the coupon rate of the underlying municipal obligations and
generally is at a level comparable to that of a municipal obligation of similar
quality and having a maturity equal to the period between interest rate
readjustments. These custodial receipts are sold in private placements. The Fund
also may purchase directly from issuers, and not in a private placement,
municipal obligations having the characteristics similar to the custodial
receipts in which the Fund may invest.
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.
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 of California income taxes, the Fund will
invest in taxable obligations only if and when Dreyfus believes 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 illiquid securities, securities without readily available market
quotations and repurchase agreements maturing in more than seven days.
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.
Special Factors Affecting the Fund
Investing in California Municipal Obligations. You should review the
information in "Appendix A," which provides a brief summary of special
investment considerations and risk factors relating to investing in California
Municipal Obligations.
Certain Investments. 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, N.A. ("Mellon Bank"), an
affiliate of Dreyfus, has a lending relationship.
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 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.
Fundamental. The following limitations have been adopted by the Fund. The
Fund may not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of shareholders
duly called if the holders of more than 50% of the outstanding shares of the
Fund are present or represented by proxy; or (b) more than 50% of the
outstanding shares of the Fund, whichever is less. 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 1940 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 objective, policies and restrictions as the Fund.
Nonfundamental. The Fund has adopted the following additional
non-fundamental restrictions. These non-fundamental restrictions may be changed
without shareholder approval, in compliance with applicable law and regulatory
policy.
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 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.
3. 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 New York Stock Exchange ("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).
4. 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.
5. 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 1940 Act.
6. 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).
7. 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.
8. 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.
9. 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.
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.
MANAGEMENT OF THE FUND
Federal Law Affecting Mellon Bank
The Glass-Steagall Act of 1933 prohibits national banks from engaging in
the business of underwriting, selling or distributing securities and prohibits a
member bank of the Federal Reserve System from having certain affiliations with
an entity engaged principally in that business. The activities of Mellon Bank in
informing its customers of, and performing, investment and redemption services
in connection with the Fund, and in providing services to the Fund 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 its statutory and
regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of such
future statutes and regulations, could prevent Mellon Bank or Dreyfus from
continuing to perform all or a part of the above services for its customers
and/or the Fund. If Mellon Bank or Dreyfus were prohibited from serving the Fund
in any of its present capacities, the Board of Trustees would seek an
alternative provider(s) of such services.
Trustees and Officers of the Trust
The Trust's Board is responsible for the management and supervision of the
Fund. The Board approves all significant agreements between the Trust, on behalf
of the Fund, and those companies that furnish services to the Fund. These
companies are as follows:
The Dreyfus Corporation...............................Investment Adviser
Premier Mutual Fund Services, Inc............................Distributor
Dreyfus Transfer, Inc.....................................Transfer Agent
Mellon Bank.......................................Custodian for the Fund
The Trust has a Board composed of nine Trustees. 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") and the Dreyfus High
Yield Strategies Fund.
Trustees of the Trust
o+JOSEPH S. DIMARTINO. Chairman of the Board 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 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 packager and distributor; Century Business Services, Inc.
(formerly, International Alliance Services, Inc.), a provider of various
outservicing functions for small and medium sized companies; and Career
Blazers, Inc. (formerly Staffing Resources, Inc.), a temporary placement
agency. For more than five years prior to January 1995, he was President, a
director and, until August 24, 1994, Chief Operating Officer of Dreyfus and
Executive Vice President and a director of Dreyfus Service Corporation, a
wholly-owned subsidiary of Dreyfus. From August 1994 to December 31, 1994,
he was a director of Mellon Bank Corporation. Age: 56 years old. Address:
200 Park Avenue, New York, New York 10166.
o+JAMES M. FITZGIBBONS. Trustee of the Trust; Director, Lumber Mutual Insurance
Company; Director, Barrett Resources, Inc.; Chairman of the Board, Davidson
Cotton Company; former Chairman of the Board and CEO of Fieldcrest Cannon,
Inc. Age: 65 years old. Address: 40 Norfolk Road, Brookline, Massachusetts
02167.
o*J. TOMLINSON FORT. Trustee of the Trust; Of Counsel, Reed, Smith, Shaw &
McClay (law firm). Age: 71 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Trustee of the Trust; Director, Calgon Carbon Corporation;
Director, Cerex Corporation; former Chairman of the Board and Director,
Rexene Corporation. Age: 77 years old. Address: Way Hollow Road and
Woodland Road, Sewickley, Pennsylvania 15143.
o+KENNETH A. HIMMEL. Trustee of the Trust; President and CEO, The Palladium
Company; President and CEO, Himmel and Company, Inc.; CEO, American Food
Management; former Director, The Boston Company, Inc. ("TBC"), and Boston
Safe Deposit and Trust Company, each an affiliate of Dreyfus. Age: 53 years
old. Address: 625 Madison Avenue, New York, New York 10022.
o+STEPHEN J. LOCKWOOD. Trustee of the Trust; Chairman of the Board and CEO, LDG
Reinsurance Corporation; Vice Chairman, HCCH. Age: 52 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; Member of Advisory Committee, Decedents Estates Laws of
Pennsylvania. Age: 68 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 Health
Care, Inc.; Director, Massachusetts Electric Company; Director, the Hyams
Foundation, Inc. Age: 50 years old. Address: 25 Braddock Park, Boston,
Massachusetts 02116-5816.
o+BENAREE PRATT WILEY. Trustee of the Trust; President and CEO of The
Partnership, an organization dedicated to increasing the representation of
African Americans in positions of leadership, influence and decision-making
in Boston, MA; Trustee, Boston College; Trustee, WGBH Educational
Foundation; Trustee, Children's Hospital; Director, The Greater Boston
Chamber of Commerce; Director, The First Albany Companies, Inc.; from April
1995 to March 1998, Director, TBC. Age: 53 years old. Address: 334 Boylston
Street, Suite 400, Boston, Massachusetts.
- -----------------------------
* "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
#MARGARET W. CHAMBERS. Vice President and Secretary of the Trust. Senior Vice
President and General Counsel of Funds Distributor, Inc. From August 1996
to March 1998, she was Vice President and Assistant General Counsel for
Loomis, Sayles & Company, L.P. From January 1986 to July 1996, she was an
associate with the law firm of Ropes & Gray. Age: 40 years old.
#MARIE E. CONNOLLY. President and Treasurer of the Trust. President, Chief
Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which is
Boston Institutional Group, Inc. Age: 42 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. Age: 30 years old.
#JOHNP. COVINO. Vice President and Assistant Treasurer of the Trust. Vice
President and Treasury Group Manager of Treasury Servicing and
Administration of Funds Distributor, Inc. since December 1998. From
December 1995 to November 1998, he was employed by Fidelity Investments
where he held multiple positions in their Institutional Brokerage Group.
Prior to joining Fidelity, he was employed by SunGard Brokerage Systems
where he was responsible for the technology and development of the
accounting product group. Age: 36 years old.
#FREDRICK C. DEY. Vice President, Assistant Treasurer and Assistant Secretary of
the Trust. Vice President of New Business Development of Funds Distributor,
Inc. Age: 37 years old.
#CHRISTOPHER J. KELLEY. Vice President and Assistant Secretary of the Trust.
Vice President and Senior Associate General Counsel of Funds Distributor,
Inc. From April 1994 to July 1996, he was Assistant Counsel at Forum
Financial Group. Age: 34 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the Trust.
Manager of Treasury Services Administration of Funds Distributor, Inc. From
July 1994 to November 1995, she was a Fund Accountant for Investors Bank &
Trust Company. Age: 27 years old.
#MARYA. NELSON. Vice President and Assistant Treasurer of the Trust. Vice
President of the Distributor and Funds Distributor, Inc. Age: 35 years old.
#STEPHANIE D. PIERCE. Vice President, Assistant Treasurer and Assistant
Secretary of the Trust. Vice President of the Distributor and Funds
Distributor, Inc. From April 1997 to March 1998, she was employed as a
Relationship Manager with Citibank, N.A. From August 1995 to April 1997,
she was an Assistant Vice President with Hudson Valley Bank, and from
September 1990 to August 1995, she was a Second Vice President with Chase
Manhattan Bank. Age: 31 years old.
#GEORGE A. RIO. Vice President and Assistant Treasurer of the Trust. Executive
Vice President and Client Service Director of Funds Distributor, Inc. From
June 1995 to March 1998, he was Senior Vice President and Senior Key
Account Manager for Putnam Mutual Funds. From May 1994 to June 1995, he was
Director of Business Development for First Data Corporation. Age: 44 years
old.
#JOSEPH F. TOWER, III. Vice President and Assistant Treasurer of the Trust.
Senior Vice President, Treasurer, Chief Financial Officer and a director of
the Distributor and Funds Distributor, Inc. Age: 37 years old.
#ELBA VASQUEZ. Vice President and Assistant Secretary of the Trust. Assistant
Vice President of Funds Distributor, Inc. From March 1990 to May 1996, she
was employed by U.S. Trust Company of New York, where she held various
sales and marketing positions. Age: 37 years old.
#KAREN JACOPPO-WOOD. Vice President and Assistant Secretary of the Trust. Vice
President and Senior Counsel of Funds Distributor, Inc. since February
1997. From June 1994 to January 1996, she was manager of SEC Registration
at Scudder, Stevens & Clark, Inc. Age: 32 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. In addition, 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" of the Trust (as defined in the 1940 Act) $40,000 per
annum, plus $5,000 per joint Dreyfus/Laurel Funds Board meeting attended, $2,000
for separate committee meetings attended which are not held in conjunction with
a regularly scheduled Board meeting and $500 for Board meetings and separate
committee meetings attended that are conducted by telephone. The Dreyfus/Laurel
Funds also reimburse each Director/Trustee who is not an "interested person" of
the Trust (as defined in the 1940 Act) for travel and out-of-pocket expenses.
The Chairman of the Board receives an additional 25% of such compensation (with
the exception of reimbursable amounts). In the event that there is a joint
committee meeting of the Dreyfus/Laurel Funds and the Dreyfus High Yield
Strategies Fund, the $2,000 fee will be allocated between the Dreyfus/Laurel
Funds and the Dreyfus High Yield Strategies Fund.
In addition, the Trust currently has three Emeritus Board members who are
entitled to receive an annual retainer and a per meeting fee of one-half the
amount paid to them as Board members.
The aggregate amount of fees and expenses received by each current Trustee
from the Trust for the fiscal year ended June 30, 1999, and from all other funds
in the Dreyfus Family of Funds for which such person was a Board member (the
number of which is set forth in parentheses next to each Board member's total
compensation)* during the year ended December 31, 1998, were as follows:
Total Compensation
Aggregate From the Trust and
Name of Board Compensation Fund Complex Paid
Member From the to Board Member
Trust#
Joseph S. DiMartino** $24,154 $ 619,660 (187)
James M. Fitzgibbons $20,666 $ 60,010 (31)
J. Tomlinson Fort*** None None (31)
Arthur L. Goeschel $22,333 $ 61,010 (31)
Kenneth A. Himmel $18,133 $ 50,260 (31)
Stephen J. Lockwood $20,000 $ 51,010 (31)
John J. Sciullo $21,666 $ 59,010 (31)
Roslyn M. Watson $22,333 $ 61,010 (31)
Benaree Pratt Wiley $20,000 $ 49,628 (31)****
- ----------------------------
# Amounts required to be paid by the Trust directly to the non-interested
Trustees, that would be applied to offset a portion of the management fee
payable to Dreyfus, are in fact paid directly by Dreyfus to the non-interested
Trustees. Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $2,795.30 for the Trust.
* Represents the number of separate portfolios comprising the investment
companies in the Fund complex, including the Trust, for which the Board
member served.
** Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
*** J.Tomlinson Fort is paid directly by Dreyfus for serving as a Board member
of the Trust and the funds in the Dreyfus/Laurel Funds and separately by
the Dreyfus High Yield Strategies Fund. For the fiscal year ended June 30,
1999, the aggregate amount of fees received by J. Tomlinson Fort from
Dreyfus for serving as a Board member of the Trust was $21,666. For the
year ended December 31, 1998, the aggregate amount of fees received by Mr.
Fort for serving as a Board member of all funds in the Dreyfus/Laurel Funds
(including the Trust) and Dreyfus High Yield Strategies Fund (for which
payment is made directly by the fund) was $59,010. In addition, Dreyfus
reimbursed Mr. Fort a total of $1,117.68 for expenses attributable to the
Trust's Board meetings which is not included in the $2,795.30 amount in
note # above.
****Represents payment for the period from April 23, 1998 (the date she was
elected as a Board member) through December 31, 1998.
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 4, 1999.
Principal Shareholders. As of October 4, 1999, the following shareholders
owned beneficially or of record 5% or more of the outstanding Fund shares:
Boston & Co., 3 Mellon Bank Center, Pittsburgh, PA 15259, 37.31%; Mathew R.
Bargar, 3449 Pacific Avenue, San Francisco, CA 94118-2029, 22.10%; and Charles
R. Michael, 35 Montgomery Street, Suite 969, San Francisco, CA 94104-3002,
4.04%.
A shareholder who beneficially owns, directly or indirectly, more than 25%
of the Fund's voting securities may be deemed a "control person" (as defined in
the 1940 Act) of the Fund.
Management Arrangements
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Expenses" and "Management."
Dreyfus is a wholly-owned subsidiary of Mellon Financial Corporation
("Mellon"). Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal 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 25 largest bank holding companies in the United States based
on total assets.
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Trust (the
"Investment Management Agreement") dated November 20, 1995, which was last
approved by the Trust's Board of Trustees on February 4, 1999 to continue until
April 4, 2000 and approved by Fund shareholders on November 15, 1995. 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. The Investment Management
Agreement is subject to review and approval at least annually by the Board of
Trustees.
The Investment Management Agreement will continue from year to year
provided that a majority of the Trustees who are not "interested persons" of the
Trust and either a majority of all Trustees or a majority (as defined in the
1940 Act) of the shareholders of the Fund approve its continuance. The Trust 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 Trust. The Investment Management Agreement will terminate immediately and
automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus: Christopher
M. Condron, Chairman of the Board and Chief Executive Officer; Stephen E.
Canter, President, Chief Operating Officer, Chief Investment Officer and a
director; Thomas F. Eggers, Vice Chairman-Institutional and a director; Lawrence
S. Kash, Vice Chairman and a director; Ronald P. O'Hanley III, Vice Chairman; J.
David Officer, Vice Chairman and a director; William T. Sandalls, Jr., Executive
Vice President; Mark N. Jacobs, Vice President, General Counsel and Secretary;
Diane P. Durnin, Vice President-Product Development; Patrice M. Kozlowski, Vice
President-Corporate Communications; Mary Beth Leibig, Vice President-Human
Resources; Andrew S. Wasser, Vice-President-Information Systems; Theodore A.
Schachar, Vice President; Wendy Strutt, Vice President; Richard Terres, Vice
President; William H. Maresca, Controller; James Bitetto, Assistant Secretary;
Steven F. Newman, Assistant Secretary; and Mandell L. Berman, Burton C. Borgelt,
Steven G. Elliott, Martin C. McGuinn, Richard W. Sabo and Richard F. Syron,
directors.
Under Dreyfus' personal securities trading policy ("the Policy"), Dreyfus
employees must preclear personal transactions in securities not exempt under the
Policy. In addition, Dreyfus employees must report their personal securities
transactions and holdings, which are reviewed for compliance with the Policy. In
that regard, Dreyfus' portfolio managers and other investment personnel also are
subject to the oversight of Mellon's Investment Ethics Committee. Dreyfus
portfolio managers and other investment personnel who comply with the Policy's
preclearance and disclosure procedures, and the requirements of the Committee,
may be permitted to purchase, sell or hold securities which also may be or are
held in fund(s) they manage or for which they otherwise provide investment
advice.
Expenses. 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) the Rule 12b-1 fees
described, as applicable. 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. Under the unitary fee, Dreyfus
provides, or arranges for one or more third parties to provide, investment
advisory, administrative, custody, fund accounting and transfer agency services
to the Fund. For the provision of such services directly, or through one or more
third parties, Dreyfus receives as full compensation for all services and
facilities provided by it, a fee computed daily and paid monthly at the annual
rate of 0.45 of 1% of the value of the Fund's average daily net assets. 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. 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 expense ratio of the Fund and increasing return to investors.
Expenses attributable to the Fund are charged against the Fund's assets; other
expenses of the Trust are allocated among its funds on the basis determined by
the Trustees, including, but not limited to, proportionately in relation to the
net assets of each fund.
For the last three fiscal years, the Fund has had the following
expenses:
For the Fiscal Year Ended June 30,
1999 1998 19971
Advisory and/or $461,141 $402,329 $248,756
Management Fee
- ----------------
1.For the fiscal year ended June 30, 1997, the management fee payable by the
Fund amounted to $269,555, which amount was reduced by $20,799 pursuant to
undertakings then in effect, resulting in a net fee paid to Dreyfus of
$248,756 for fiscal 1997.
The Distributor. Premier Mutual Fund Services, Inc. (the "Distributor"),
located at 60 State Street, Boston, Massachusetts 02109, serves as the Fund's
distributor on a best efforts basis pursuant to an agreement which is renewable
annually. 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 certain
banks, securities brokers or dealers and other financial institutions ("Agents")
for these services. The Distributor also acts as sub-administrator for the Fund
and as distributor for the other funds in the Dreyfus Family of Funds.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies,"
"Services for Fund Investors," "Instructions for Regular Accounts."
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 an Agent. Share certificates are
issued only upon written request. No certificates are issued for fractional
shares. It is not recommended that the Fund be used as a vehicle for Keogh, IRA
or other qualified plans. The Fund reserves the right to reject any purchase
order.
The minimum initial investment is $25,000. The Fund may waive its minimum
initial investment requirement for new Fund accounts opened through an Agent
whenever Dreyfus Institutional Services Division ("DISD") determines for the
initial account opened through such Agent which is below the Fund's minimum
initial investment requirement that the existing accounts in the Fund opened
through that Agent have an average account size, or the Agent has adequate
intent and access to funds to result in maintenance of accounts in the Fund
opened through that Agent with an average account size, in an amount equal to or
in excess of $25,000. DISD will periodically review the average size of the
accounts opened through each Agent and, if necessary, reevaluate the Agent's
intent and access to funds. DISD will discontinue the waiver as to new accounts
to be opened through an Agent if DISD determines that the average size of
accounts opened through that Agent is less than $25,000 and the Agent does not
have the requisite intent and access to funds. Subsequent investments must be at
least $1,000 (or at least $100 in the case of persons who have held Fund shares
as of November 20, 1995). The initial investment must be accompanied by the
Fund's Account Application.
You may purchase Fund shares by check or wire, or through the Dreyfus
TeleTransfer Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds." Payments to open new accounts which are mailed should
be sent to The Dreyfus Family of Funds, P.O. Box 9387, Providence, Rhode Island
02940-9387, together with your Account Application. For subsequent investments,
your Fund account number should appear on the check and an investment slip
should be enclosed and sent to The Dreyfus Family of Funds, P.O. Box 105,
Newark, New Jersey 07101-0105. Neither initial nor subsequent investments should
be made by third party check. Purchase orders may be delivered in person only to
a Dreyfus Financial Center. These orders will be forwarded to the Fund and will
be processed only upon receipt thereby. For the location of the nearest Dreyfus
Financial Center, you should call the telephone number listed on the cover of
this Statement of Additional Information.
Wire payments may be made if your bank account is in a commercial bank
that is a member of the Federal Reserve System or any other bank having a
correspondent bank in New York City. Immediately available funds may be
transmitted by wire to Boston Safe Deposit and Trust Company, DDA# 043508
Dreyfus BASIC California Municipal Money Market Fund, for purchase of Fund
shares in your name. The wire must include your Fund account number (for new
accounts, your 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 the wire payment to obtain the Fund account number. You should
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 investors to a $50
penalty imposed by the Internal Revenue Service (the "IRS").
Net Asset Value Per Share. 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. See "Determination of Net Asset Value."
The offering price of Fund shares is their NAV. Investments and requests
to exchange or redeem shares received by the Transfer Agent or other entity
authorized to receive orders on behalf of the Fund before 4 p.m., Eastern time,
on each day that the NYSE is open (a "business day") are effective, and will
receive the price next determined, on 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, and receive the first share price determined, on the next
business day.
Dreyfus TeleTransfer Privilege. You may purchase Fund shares by telephone
through 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. 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 that is an ACH member may be so designated. Dreyfus TeleTransfer
purchase orders may be made at the Transfer Agent any time. Purchase orders
received by 4:00 p.m., New York time, on any business day that the Transfer
Agent and the 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 shareholder's 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 Shares -
Dreyfus TeleTransfer Privilege." 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.
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the calendar
year the account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.
In-Kind Purchases. If the following conditions are satisfied, the Fund may
at its discretion, permit the purchase of shares through an "in-kind" exchange
of securities. Any securities exchanged must meet the investment objective,
policies and limitations of the Fund, must have a readily ascertainable market
value, must be liquid and must not be subject to restrictions on resale. The
market value of any securities exchanged, plus any cash, must be at least equal
to $25,000. Shares purchased in exchange for securities generally cannot be
redeemed for fifteen days following the exchange in order to allow time for the
transfer to settle.
The basis of the exchange will depend upon the relative NAV of the shares
purchased and securities exchanged. Securities accepted by the Fund will be
valued in the same manner as the Fund values its assets. Any interest earned on
the securities following their delivery to the Fund and prior to the exchange
will be considered in valuing the securities. All interest, dividends,
subscription or other rights attached to the securities become the property of
the Fund, along with the securities. For further information about "in-kind"
purchases, call 1-800-645-6561.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies," "Services
For Fund Investors," "Instructions for Regular Accounts."
General. You may request redemption of Fund shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When a
request is received in proper form by the Transfer Agent or other entity
authorized to receive orders on behalf of the Fund, 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 the 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 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.
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. 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 Touch(R) 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, you should call the telephone number listed on the
cover of this Statement of Additional 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.
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 ("Checks")
drawn on your Fund account. The Fund provides Checks automatically upon opening
an account, unless you specifically refuse 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 your 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 November 20, 1995). An investor (other than one who has held Fund
shares since November 20, 1995), will be charged $2.00 for each check
redemption. When a Check is presented to the Transfer Agent for payment, the
Transfer Agent, as the investor's agent, will cause the Fund to redeem a
sufficient number of full or fractional 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. Checks
are free but the Transfer Agent will impose a fee for stopping payment of a
Check upon request or if the Transfer Agent cannot honor a Check because of
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. Investors should date Checks with the current date
when writing them. Please do not postdate Checks. If Checks are postdated, the
Transfer Agent will honor, upon presentment, even if presented before the date
of the Check, all postdated Checks which are dated within six months of
presentment for payment, if they are otherwise in good order.
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. However, the Fund will waive the 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. 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 usually 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. Holders of jointly registered Fund or bank accounts may have redemption
proceeds of only up to $250,000 wired within any 30-day period. Investors may
telephone redemption requests by calling 1-800-645-6561 or, if calling from
overseas, 516-794-5452.
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.
To change the commercial bank or account designated to receive redemption
proceeds, a written request must be sent to the Transfer Agent. This request
must be signed by each shareholder, with each signature guaranteed as described
below under "Share Certificates; Signatures."
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 designated. Redemption
proceeds will be on deposit in your 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. Investors should be aware that if they have selected the
Dreyfus TeleTransfer Privilege, any request for a wire redemption will be
effected as a Dreyfus TeleTransfer transaction through the ACH system unless
more prompt transmittal specifically is requested. 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.
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.
Redemption Commitment. The Trust 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 Trust's 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 such 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 sections in the Fund's Prospectus entitled "Account Policies" and
"Services for Fund Investors."
Fund Exchanges. An investor may purchase, in exchange for shares of the
Fund, shares of certain other eligible funds advised or administered by Dreyfus,
to the extent such shares are offered for sale in an investor's state of
residence. These funds have different investment objectives which may be of
interest to investors. Investors wishing to use this service should call
1-800-645-6561 to determine if it is available and whether any conditions are
imposed on its use. Investors (other than those who have 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.
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.
Any such exchange is subject to confirmation of a shareholder's holdings through
a check of appropriate records.
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. Before any exchange, investors 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 the investor
checks the applicable "No" box on the Account Application, indicating that the
investor specifically refuses 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 signed 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. Investors
who have previously established the Telephone Exchange Privilege may telephone
exchange instructions (including over The Dreyfus Touch(R) automated telephone
system) by calling 1-800-645-6561. If calling from overseas, investors may call
516-794-5452. 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.
By using the Telephone Exchange Privilege, the investor authorizes the
Transfer Agent to act on telephonic instructions (including over The Dreyfus
Touch(R) automated telephone system) from any person representing himself or
herself to be the investor or a representative of the investor's Agent, and
reasonably believed by the Transfer Agent to be genuine. Telephone exchanges may
be subject to limitations as to the amount involved. Shares issued in
certificate form are not eligible for telephone exchange. Exchanges out of the
Fund pursuant to Fund Exchanges are limited to four per calendar year. The Fund
reserves the right, upon not less than 60 days' written notice, to charge
shareholders who have held Fund shares since November 20, 1995 a nominal fee for
each exchange 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 investors.
The exchange of shares of one fund for shares of another is treated for
Federal income tax purpose 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 allows investors to invest
automatically 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.
For more information concerning this Privilege, or to request a Dividend
Options Form, investors should call toll free 1-800-645-6561. Investors may
cancel their 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, investors 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.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies."
The NAV for Fund shares 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. 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 Fund intends to maintain a constant NAV of $1.00 per share,
although there is no assurance that this can be done on a continuing basis.
The use of amortized cost is permitted by Rule 2a-7 under the 1940 Act.
Pursuant to the provisions of Rule 2a-7, the Trustees have established
procedures reasonably designed to stabilize the Fund's price per share, as
computed for the purpose of sale and redemption, at $1.00. These procedures
include the determination of the Trustees, at such times as they deem
appropriate, of the extent of deviation, if any, of the Fund's current NAV per
share, using market values, from $1.00; periodic review by the Trustees of the
amount of and the methods used to calculate the deviation; maintenance of
records of the determination; and review of such deviations. The procedures
employed to stabilize the Fund's price per share require the Trustees to
consider promptly what action, if any, should be taken by the Trustees if such
deviation exceeds 1/2 of one percent. Such procedures also require the Trustees
to take appropriate action to eliminate or reduce, to the extent reasonably
practicable, material dilution or other unfair effects resulting from any
deviation. Such action may include: 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. In addition to such procedures, Rule 2a-7 requires the Fund to
purchase instruments having remaining maturities of 397 days or less, to
maintain a dollar-weighted average portfolio maturity of 90 days or less and to
invest only in securities determined by the Trustees to be of high quality, as
defined in Rule 2a-7, with minimal credit risks.
In periods of declining interest rates, the indicated daily yield on Fund
shares computed by dividing the annualized daily income on the Fund by the NAV
per share computed as above may tend to be higher than a similar computation
made by using a method of valuation based on market prices and estimates. In
periods of rising interest rates, the indicated daily yield on Fund shares
computed the same way may tend to be lower than a similar computation made by
using a method of calculation based upon market prices and estimates.
NYSE Closings. The holidays (as observed) on which the NYSE is currently
scheduled to be closed are: New Year's Day, Dr. Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Past Performance."
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. 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 computes its current annualized and compound effective yields
using standardized methods required by the SEC. The annualized yield for the
Fund is computed by (a) determining the net change in the value of a
hypothetical account having a balance of one share at the beginning of a seven
calendar day period; (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 both the original share and such additional
shares, but does not include realized gains and losses or unrealized
appreciation and depreciation. Compound effective yields are computed by adding
1 to the base period return (calculated as described above), raising that sum to
a power equal to 365/7 and subtracting 1. The Fund's tax equivalent 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.
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the Fund's yield fluctuates, its yield cannot be compared
with yields on savings accounts or other investment alternatives that provide an
agreed-to or guaranteed fixed yield for a stated period of time. However, yield
information may be useful to an investor considering temporary investments in
money market instruments. In comparing the yield of one money market fund to
another, consideration should be given to the Fund's investment policies,
including the types of investments made, length of maturities of portfolio
securities, the methods used by the Fund to compute the yield (methods may
differ) and whether there are any special account charges which may reduce
effective yield.
For the seven-day period ended June 30, 1999, the Fund's yield was 3.05%,
effective yield was 3.10% and equivalent taxable yield* was 5.57%.
From time to time, advertising materials for the Fund may refer to
Morningstar ratings and related analyses supporting the rating.
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 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.
From time to time, advertising materials may refer to studies performed by
Dreyfus or its affiliates, such as "The Dreyfus Tax Informed Investing Study" or
"The Dreyfus Gender Investment Comparison Study (1996-1997)" or other such
studies.
- --------
* 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%).
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the Section in the Fund's Prospectus entitled "Distributions and Taxes."
General. The Fund ordinarily declares dividends from net investment income
on each day that the NYSE 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 an
investor's option, paid in cash. If an investor redeems all shares in their
account at any time during the month, all dividends to which the investor is
entitled will be paid along with the proceeds of the redemption. If an omnibus
accountholder indicates 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 of his or her Fund shares, that portion of
the accrued dividends will be paid along with the proceeds of the redemption.
Dividends from net realized short-term capital 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 capital gains unless capital loss
carryovers, if any, have been utilized or have expired. The Fund does not expect
to realize any long-term capital gains or losses. Investors may choose whether
to receive dividends in cash or to reinvest them in additional Fund shares at
NAV. All expenses are accrued daily and deducted before declaration of dividends
to investors.
Except as provided below, shares of the Fund 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, investors may receive the dividend declared on the day of
purchase. Investors 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 continue to qualify for treatment as a
regulated investment company ("RIC") under the Code. 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. To qualify for treatment as a RIC under the Code, the
Fund - which is treated as a separate corporation for federal tax purposes - (1)
must distribute to its shareholders each year at least 90% of its investment
company taxable income (generally consisting of net taxable investment income
and net short-term capital gains, plus its net interest income excludable from
gross income under section 103(a) of the Code) ("Distribution Requirement"), (2)
must derive at least 90% of its annual gross income from specified sources
("Income Requirement"), and (3) must meet certain asset diversification and
other requirements. If the Fund failed to qualify for treatment as a RIC for any
taxable year, (1) it would be taxed at corporate rates on the full amount of its
taxable income for that year without being able to deduct the distributions it
makes to its shareholders and (2) the shareholders would treat all those
distributions, including distributions that otherwise would be "exempt-interest
dividends," as dividends (that is, ordinary income) to the extent of the Fund's
earnings and profits. In addition, the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest and make substantial
distributions before requalifying for RIC treatment. The Fund also 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.
The Fund may be subject to a 4% nondeductible excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary (taxable) income for that year and capital gain net income for the
one-year period ending October 31 of that year, plus certain other amounts. To
avoid the application of this excise tax, 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.
Distributions by the Fund that are designated by it as "exempt-interest
dividends" generally may be excluded from gross income. 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
regardless of whether they are received in cash or reinvested in additional Fund
shares, even if the value of shares is below cost. If investors purchase shares
shortly before a taxable distribution (i.e., any distribution other than an
exempt-interest dividend paid by the Fund), they must pay income taxes on the
distribution, even though the value of the investment (plus cash received, if
any) remains the same. In addition, the share price at the time investors
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 as a capital gain
distribution and will be taxable.
Dividends from the Fund's investment company taxable income together with
distributions from net realized short-term capital gains, if any (collectively,
"dividend distributions"), will be taxable to U.S. shareholders, including
certain non-qualified retirement plans, as ordinary income to the extent of the
Fund's earnings and profits, whether received in cash or reinvested in
additional Fund shares. Distributions by the Fund of net capital gain, when
designated as such, are taxable as long-term capital gains, regardless of the
length of time of share ownership. The Fund is not expected to realize long-term
capital gains, or, therefore, to make distributions of net capital gain (the
excess of net long-term capital gain over net short-term capital loss). Nor will
dividends paid by the Fund be eligible for the dividends-received deductions
allowed to corporations.
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.
Dividends paid by the Fund to qualified retirement plans ordinarily will
not be subject to taxation until the proceeds are distributed from the plans.
The Fund will not report to the Internal Revenue Service ("IRS") distributions
paid to such plans. Generally, distributions from Qualified Retirement Plans,
except those representing returns of non-deductible contributions thereto, will
be taxable as ordinary income and, if made prior to the time the participant
reaches age 59 1/2, generally will be subject to an additional tax equal to 10%
of the taxable portion of the distribution. The administrator, trustee or
custodian of a qualified retirement plan will be responsible for reporting
distributions from the plan to the IRS. Moreover, certain contributions to a
qualified retirement plan in excess of the amounts permitted by law may be
subject to an excise tax. If a distributee of an "eligible rollover
distribution" from a qualified retirement plan does not elect to have the
distribution paid directly from the plan to an eligible retirement plan in a
"direct rollover," the distribution is subject to a 20% income tax withholding.
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.
In January of each year, the Fund will send shareholders a Form 1099-DIV
notifying them of the status for federal income tax purposes of their dividends
from the Fund 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.
Shareholders must furnish the Fund with their TIN and state whether they
are subject to backup withholding for prior under-reporting, certified under
penalties of perjury. Unless previously furnished, investments received without
such a certification will be returned. The Fund is required to withhold 31% of
all dividends payable to any individuals and certain other non-corporate
shareholders who do not provide the Fund with a correct TIN or who otherwise are
subject to backup withholding. A TIN is either the Social Security number, IRS
individual taxpayer identification number, or employer identification number of
the record owner of an account. Any tax withheld as a result of backup
withholding does not constitute an additional tax imposed on the record owner
and may be claimed as a credit on the record owner's Federal income tax return.
State and Local Taxes. Depending upon the extent of its activities in
states and localities in which it is deemed to be conducting business, the Fund
may be subject to the tax laws thereof. 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 the
Fund is "effectively connected" with a U.S. trade or business carried on by the
shareholder, as discussed below. Special U.S. federal income tax rules that
differ from those described below may apply to certain foreign persons who
invest in the Fund such as a foreign shareholder entitled to claim the benefits
of an applicable tax treaty. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of an
investment in the Fund.
Foreign Shareholders - Dividends. Dividends (other than exempt-interest
dividends) distributed to a foreign shareholder whose ownership of Fund shares
is not effectively connected with a U.S. trade or business carried on by the
foreign shareholder ("effectively connected") generally will be subject to a
U.S. federal withholding tax of 30% (or lower treaty rate). If a foreign
shareholder's ownership of Fund shares is effectively connected, however, then
all distributions to that shareholder will not be subject to such withholding
and instead 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.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as shares
of the Fund, that they own at the time of their death. Certain credits against
that tax and relief under applicable tax treaties may be available.
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.
Returned Checks. If an investor elects to receive dividends in cash, and
the investor's dividend check is returned to the Fund as undeliverable or
remains uncashed for six months, the Fund reserves the right to reinvest that
dividend and all future dividends payable in additional Fund shares at NAV. No
interest will accrue on amounts represented by uncashed dividend or redemption
checks.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund by
Dreyfus. Debt securities purchased and sold by the 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 Fund 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 the 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. Dreyfus may
use research services of and place brokerage commissions with broker-dealers
affiliated with it or Mellon Bank if the commissions are reasonable, fair and
comparable to commissions charged by non-affiliated firms for similar services.
Dreyfus is authorized to allocate purchase and sale orders for portfolio
securities to certain financial institutions, including, in the case of agency
transactions, financial institutions that are affiliated with Dreyfus or Mellon
Bank or that have sold shares of the Fund, if Dreyfus believes that the quality
of the transaction and the commission are comparable to what they would be with
other qualified brokerage firms.
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 Dreyfus in carrying out its obligation to the Fund. The receipt of
such research services does not reduce the normal independent research
activities of Dreyfus; however, it enables it to avoid the additional expenses
which might otherwise be incurred if it were to attempt to develop comparable
information through its own staff.
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.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund 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 Fund are concerned. In other cases,
however, the ability of the Fund to participate in volume transactions will
produce better executions for the Fund. 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 Fund outweighs
any disadvantages that may be Statement of Additional Information to exist from
exposure to simultaneous transactions.
The Fund paid no stated brokerage commissions for the fiscal years ended
June 30, 1999, 1998 and 1997.
INFORMATION ABOUT THE FUND/TRUST
Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. Fund shares
are without par value, have no preemptive or subscription rights, and are freely
transferable.
The Trust is a "series fund," which is a mutual fund divided into separate
portfolios, each of which is treated as a separate entity for certain matters
under the 1940 Act and for other purposes. A shareholder of one portfolio is not
deemed to be a shareholder of any other portfolio. For certain matters
shareholders vote together as a group; as to others they vote separately by
portfolio. The Trustees have authority to create an unlimited number of shares
of beneficial interest, without par value, in separate series. 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.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Trust to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Trustees or the
appointment of auditors. However, the holders of at least 10% of the shares
outstanding and entitled to vote may require the Trust to hold a special meeting
of shareholders for purposes of removing a Trustee from office. 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.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an investment
company, such as the Trust, will not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each series affected by such matter. Rule 18f-2 further provides that a series
shall be deemed to be affected by a matter unless it is clear that the interests
of each series in the matter are identical or that the matter does not affect
any interest of such series. The Rule exempts the selection of independent
accountants and the election of Trustees from the separate voting requirements
of the Rule.
The Fund will send annual and semi-annual financial statements to all of
its shareholders.
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.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, serves as the Trust's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Trust, the
Transfer Agent arranges for the maintenance of shareholder account records for
the Trust, 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 Trust during the
month, and is reimbursed for certain out-of-pocket expenses.
Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as the custodian of the Fund's investments.
Under a custody agreement with the Trust, Mellon Bank holds the Fund's portfolio
securities and keeps all necessary accounts and records. 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.
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 LLP, 757 Third Avenue, New York, NY 10017, was appointed by the Board
of Trustees to serve as the Fund's independent auditors for the year ending June
30, 2000, providing audit services including (1) examination of the annual
financial statements, (2) assistance, review and consultation in connection with
SEC filings and (3) review of the annual Federal income tax return filed on
behalf of the Fund.
FINANCIAL STATEMENTS
The financial statements of the Fund for the fiscal year ended June 30,
1999, 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.
<PAGE>
APPENDIX A
INVESTING IN CALIFORNIA MUNICIPAL OBLIGATIONS
The following information is a summary of special factors affecting
investments in California Municipal Securities and is drawn from the Official
Statement issued by the State for its public bond issue on April 1, 1999. The
sources of payment for such obligations and the marketability thereof may be
affected by financial or other difficulties experienced by the State of
California and certain of its municipalities and public authorities. It does not
purport to be a complete description and is based on information from official
statements relating to securities offerings of California issuers.
State Finances
The Budget Process. The State's fiscal year begins on July 1 and ends on
June 30. The State operates on a budget basis, using a modified accrual system
of accounting, with revenues credited in the period in which they are measurable
and available and expenditures debited in the period in which the corresponding
liabilities are incurred.
The annual budget is proposed by the Governor by January 10 of each year
for the next fiscal year (the "Governor's Budget"). Under state law, the annual
proposed Governor's Budget cannot provide for projected expenditures in excess
of projected revenues and balances available from prior fiscal years. Following
the submission of the Governor's Budget, the Legislature takes up the proposal.
Under the State Constitution, money may be drawn from the Treasury only
through an appropriation made by law. The primary source of the annual
expenditure authorizations is the Budget Act as approved by the Legislature and
signed by the Governor. The Budget Act must be approved by a two-thirds majority
vote of each House of the Legislature. The Governor may reduce or eliminate
specific line items in the Budget Act or any other appropriations bill without
vetoing the entire bill. Such individual line-item vetoes are subject to
override by a two-thirds majority vote of each House of the Legislature.
Appropriations also may be included in legislation other than the Budget
Act. Bills containing appropriations (except for local school and community
college ("K-14") education) must be approved by a two-thirds majority vote in
each House of the Legislature and be signed by the Governor. Bills containing
K-14 education appropriations only require a simple majority vote. Continuing
appropriations, available without regard to fiscal year, may also be provided by
statute or the State Constitution. There is litigation pending concerning the
validity of such continuing appropriations. See "Litigation" below.
Funds necessary to meet an appropriation need not be in the State
Treasury at the time such appropriation is enacted; revenues may be appropriated
in anticipation of their receipt.
The General Fund. The moneys of the State are segregated into the General
Fund and over 900 special funds, including bond, trust and pension funds. The
General Fund consists of revenues received by the State Treasury and not
required by law to be credited to any other fund, as well as earnings from the
investment of state moneys not allocable to another fund. The General Fund is
the principal operating fund for the majority of governmental activities and is
the depository of most of the major revenue sources of the State. The General
Fund may be expended as a consequence of appropriation measures enacted by the
Legislature and approved by the Governor, as well as appropriations pursuant to
various constitutional authorizations and initiative statutes.
The Special Fund for Economic Uncertainties. The Special Fund for Economic
Uncertainties ("SFEU") is funded with General Fund revenues and was established
to protect the State from unforeseen revenue reductions and/or unanticipated
expenditure increases. Amounts in the SFEU may be transferred by the State
Controller as necessary to meet cash needs of the General Fund. The State
Controller is required to return moneys so transferred without payment of
interest as soon as there are sufficient moneys in the General Fund.
The legislation creating the SFEU (Government Code ss.16418) contains a
continuous appropriation from the General Fund authorizing the State Controller
to transfer to the SFEU, as of the end of each fiscal year, the lesser of (i)
the unencumbered balance in the General Fund and (ii) the difference between the
State's "appropriations subject to limitation" for the fiscal year then ended
and its "appropriations limit" as defined in Section 8 of Article XIII B of the
State Constitution and established in the Budget Act for that fiscal year, as
jointly estimated by the State's Legislative Analyst's Office and the Department
of Finance. For a further description of Article XIII B, see "State
Appropriations Limit" below. In certain circumstances, moneys in the SFEU may be
used in connection with disaster relief.
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 State Controller is required to add the balance in the SFEU to the
balance in the General Fund so as to show the total moneys then available for
General Fund purposes.
The June 30, 1999, SFEU projection reflects the latest revenue
projections and expenditure amounts as updated in the 1999-00 Governor's Budget.
As in any year, the Budget Act and related trailer bills are not the only pieces
of legislation which appropriate funds. Other factors including re-estimates of
revenues and expenditures, existing statutory requirements, and additional
legislation introduced and passed by the Legislature may impact the reserve
amount.
In the 1999-00 Governor's Budget, released January 8, 1999, the
Department of Finance projects the SFEU will have a balance of about $617
million at June 30, 1999 and $415 million at June 30, 2000. The June 30, 1999
estimate is reduced from an estimate of approximately $1.2 billion after
adoption of the 1998-99 Budget Act. See "Current State Budget" below.
Welfare Reform. Congress passed and the President signed (on August 22,
1996) the Personal Responsibility and Work Opportunity Reconciliation Act of
1996 (P.L. 104-193, the "Law") fundamentally reforming the nation's welfare
system. Among its many provisions, the Law includes: (i) conversion of Aid to
Families with Dependent Children from an entitlement program to a block grant
titled Temporary Assistance for Needy Families (TANF), with lifetime time limits
on TANF recipients, work requirements and other changes; (ii) provisions denying
certain federal welfare and public benefits to legal noncitizens (this provision
has been amended by subsequent federal law), allowing states to elect to deny
additional benefits (including TANF) to legal noncitizens, and generally denying
almost all benefits to illegal immigrants; and (iii) changes in the Food Stamp
program, including reducing maximum benefits and imposing work requirements.
California's response to the federal welfare reforms is embodied in
Chapter 270, Statutes of 1997. This new basic state welfare program is called
California Work Opportunity and Responsibility to Kids ("CalWORKs"), which
replaced the former Aid to Families with Dependent Children (AFDC) and Greater
Avenues to Independence (GAIN) programs, effective January 1, 1998. Consistent
with the federal law, CalWORKs contains new time limits on receipt of welfare
aid, both lifetime as well as for any current period on aid. The centerpiece of
CalWORKs is the linkage of eligibility to work participation requirements.
Administration of the new CalWORKs program is largely at the county level, and
counties are given financial incentives for success in this program.
The long-term impact of the new federal Law and CalWORKs cannot be
determined until there has been more experience and until an independent
evaluation of the CalWORKs program is completed. In the short-term, the
implementation of the CalWORKs program has continued the trend of declining
welfare caseloads. The CalWORKs caseload trend is projected to be 651,350 in
1998-99 and 598,000 in 1999-00, down from a high of 921,000 cases in 1994-95.
The 1999-00 Governor's Budget limits CalWORKs expenditures to the annual
$3.7 billion federal TANF Block Grant and prior year carryover amounts, and the
state General Fund and county General Fund combined Maintenance of Effort
Requirement of $2.9 billion. Any decision to maintain or exceed the Maintenance
of Effort Requirement would need to be made in the context of available
resources and competing budget demands.
Local Governments. The primary units of local government in California are
the counties, ranging in population from 1,200 in Alpine County to over
9,600,000 in Los Angeles County. Counties are responsible for the provision of
many basic services, including indigent health care, welfare, jails and public
safety in unincorporated areas. There are also about 470 incorporated cities,
and thousands of other special districts formed for education, utility and other
services. The fiscal condition of local governments has been constrained since
the enactment of "Proposition 13" in 1978, which reduced and limited the future
growth of property taxes, and limited the ability of local governments to impose
"special taxes" (those devoted to a specific purpose) without two-thirds voter
approval. Counties, in particular, have had fewer options to raise revenues than
many other local government entities, and have been required to maintain many
services.
In the aftermath of Proposition 13, the State provided aid to local
governments from the General Fund to make up some of the loss of property tax
moneys, including taking over the principal responsibility for funding K-12
schools and community colleges. During the recession, the Legislature eliminated
most of the remaining components of post-Proposition 13 aid to local government
entities other than K-14 education districts by requiring cities and counties to
transfer some of their property tax revenues to school districts. However, the
Legislature also provided additional funding sources (such as sales taxes) and
reduced certain mandates for local services. Since then the State has also
provided additional funding to counties and cities through such programs as
health and welfare realignment, welfare reform, trial court restructuring, the
COPs program supporting local public safety departments, and various other
measures. In his 1999-00 Budget Proposal, the Governor has proposed a review and
"accounting" of state-local fiscal relationships, with the goal of ultimately
restoring local government finances to an equivalent fiscal condition to the
period prior to the 1991-93 recession-induced tax shifts. Litigation has been
brought challenging the legality of the property tax shifts from counties to
schools. See "Litigation" below.
Historically, funding for the State's trial court system was divided
between the State and the counties. However, Chapter 850, Statutes of 1997,
implemented a restructuring of the State's trial court funding system. Funding
for the courts, with the exception of costs for facilities, local judicial
benefits, and revenue collection, was consolidated at the State level. The
county contribution for both their general fund and fine and penalty amounts is
capped at the 1994-95 level and becomes part of the Trial Court Trust Fund,
which supports all trial court operations. The State assumed responsibility for
future growth in trial court funding. The consolidation of funding is intended
to streamline the operation of the courts, provide a dedicated revenue source,
and relieve fiscal pressure on the counties. Beginning in 1998-99, the county
general fund contribution for court operations is reduced by $300 million, and
cities will retain $62 million in fine and penalty revenue previously remitted
to the State; the General Fund reimbursed the $362 million revenue loss to the
Trial Court Trust Fund. The 1999-00 Governor's Budget would further reduce the
county general fund contribution by an additional $48 million to reduce by 50
percent the contributions of the next 18 smallest counties and reduce by 5
percent the general fund contribution of the remaining 21 counties.
The entire statewide welfare system has been changed in response to the
change in federal welfare law enacted in 1996 (see "Welfare Reform" above).
Under the CalWORKs program, counties are given flexibility to develop their own
plans, consistent with state law, to implement the program and to administer
many of its elements, and their costs for administrative and supportive services
are capped at the 1996-97 levels. Counties are also given financial incentives
if, at the individual county level or statewide, the CalWORKs program produces
savings associated with specified standards. Counties will still be required to
provide "general assistance" aid to certain persons who cannot obtain welfare
from other programs.
In 1996, voters approved Proposition 218, entitled the "Right to Vote on
Taxes Act," which incorporates new Articles XIII C and XIII D into the
California Constitution. These new provisions place limitations on the ability
of local government agencies to impose or raise various taxes, fees, charges and
assessments without voter approval. Certain "general taxes" imposed after
January 1, 1995, must be approved by voters in order to remain in effect. In
addition, Article XIIIC clarifies the right of local voters to reduce taxes,
fees, assessments or charges through local initiatives. There are a number of
ambiguities concerning the Proposition and its impact on local governments and
their bonded debt which will require interpretation by the courts or the
Legislature. Proposition 218 does not affect the State or its ability to levy or
collect taxes.
State Appropriations Limit. The State is subject to an annual
appropriations limit imposed by Article XIII B of the State Constitution (the
"Appropriations Limit"). The Appropriations Limit does not restrict
appropriations to pay debt service on voter-authorized bonds.
Article XIII B prohibits the State from spending "appropriations subject
to limitation" in excess of the Appropriations Limit. "Appropriations subject to
limitation," with respect to the State, 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 that entity in providing the
regulation, product or service," but "proceeds of taxes" exclude most state
subventions to local governments, tax refunds and some benefit payments such as
unemployment insurance. No limit is imposed on appropriations of funds which are
not "proceeds of taxes," such as reasonable user charges or fees and certain
other non-tax funds.
Not included in the Appropriations Limit are appropriations for the debt
service costs of bonds existing or authorized by January 1, 1979, or
subsequently authorized by the voters, appropriations required to comply with
mandates of courts or the federal government, appropriations for qualified
capital outlay projects, appropriations of revenues derived from any increase in
gasoline taxes and motor vehicle weight fees above January 1, 1990 levels, and
appropriation of certain special taxes imposed by initiative (e.g., cigarette
and tobacco taxes). The Appropriations Limit may also be exceeded in cases of
emergency.
The State's Appropriations Limit in each year is based on the limit for
the prior year, adjusted annually for changes in state 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 or any transfer of the financial source for the provisions of
services from tax proceeds to non tax proceeds. The measurement of change in
population is a blended average of statewide overall population growth, and
change in attendance at K-14 districts. The Appropriations Limit is tested over
consecutive two-year periods. Any excess of the aggregate "proceeds of taxes"
received over such two-year period above the combined Appropriations Limits for
those two years is divided equally between transfers to K-14 districts and
refunds to taxpayers.
The Legislature has enacted legislation to implement Article XIII B which
defines certain terms used in Article XIII B and sets forth the methods for
determining the Appropriations Limit. California Government Code Section 7912
requires an estimate of the 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 following table shows the State's Appropriations Limit for the past
three fiscal years, the current fiscal year, and the next fiscal year. In the
Governor's Budget for Fiscal Year 1999-00 proposed on January 8, 1999, the
Department of Finance projects the State's Appropriations Subject to Limitations
will be $7.1 billion under the State's Appropriations Limit in Fiscal Year
1999-00.
State Appropriations Limit
(Millions)
Fiscal Years
-----------------------------
1995-96 1996-97 1997-98 1998-99* 1999-00*
------- ------- ------- -------- -------
State Appropriations Limit $39,309 $42,002 $44,778 $47,573 $50,052
- -----------------------------
Appropriations Subject to (34,186) (35,103) (40,735) (40,797) (42,926)
Limit -------- -------- -------- -------- --------
Amount (Over)/Under Limit $5,123 $6,899 $4,043 $6,776 $7,126
====== ====== ====== ====== ======
*Estimated/Projected
SOURCE: State of California, Department of Finance.
Proposition 98. On November 8, 1988, voters of the State approved
Proposition 98, a combined initiative constitutional amendment and statute
called the "Classroom Instructional Improvement and Accountability Act."
Proposition 98 changed State funding of public education below the university
level and the operation of the State 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 on June 5,
1990), K-14 schools are guaranteed the greater of (a) in general, a fixed
percent 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 XIII B by reference to State per capita personal income) and
enrollment ("Test 2"), or (c) a third test, which would replace Test 2 in any
year when the percentage growth in per capita General Fund revenues from the
prior year plus one half of one percent is less than the percentage growth in
State 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. Legislation adopted prior to the end of the 1988-89 Fiscal Year,
implementing Proposition 98, determined the K-14 schools' funding guarantee
under Test 1 to be 40.3 percent of the General Fund tax revenues, based on
1986-87 appropriations. However, that percent has been adjusted to approximately
35 percent to account for a subsequent redirection of local property taxes,
since such redirection directly affects the share of General Fund revenues to
schools.
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. Proposition 98 also contains provisions
transferring certain State tax revenues in excess of the Article XIII B limit to
K-14 schools. See "State Finances--State Appropriations Limit" above.
During the recession in the early 1990s, General Fund revenues for
several years were less than originally projected, so that the original
Proposition 98 appropriations turned out to be higher than the minimum
percentage provided in the law. The Legislature responded to these developments
by designating the "extra" Proposition 98 payments in one year as a "loan" from
future years' Proposition 98 entitlements, and also intended that the "extra"
payments would not be included in the Proposition 98 "base" for calculating
future years' entitlements. By implementing these actions, per-pupil funding
from Proposition 98 sources stayed almost constant at approximately $4,200 from
Fiscal Year 1991-92 to Fiscal Year 1993-94.
In 1992, a lawsuit was filed, called California Teachers' Association v.
Gould, which challenged the validity of these off-budget loans. The settlement
of this case, finalized in July, 1996, provides, among other things, that both
the State and K-14 schools share in the repayment of prior years' emergency
loans to schools. Of the total $1.76 billion in loans, the State will repay $935
million by forgiveness of the amount owed, while schools will repay $825
million. The State share of the repayment will be reflected as an appropriation
above the current Proposition 98 base calculation. The schools' share of the
repayment will count as appropriations that count toward satisfying the
Proposition 98 guarantee, or from "below" the current base. Repayments are
spread over the eight-year period of 1994-95 through 2001-02 to mitigate any
adverse fiscal impact.
Substantially increased General Fund revenues, above initial budget
projections, in the fiscal years 1994-95 through 1998-99 have resulted in
retroactive increases in Proposition 98 appropriations from subsequent fiscal
years' budgets. Because of the State's increasing revenues, per-pupil funding at
the K-12 level has increased by about 42 percent from the level in place from
1991-92 through 1993-94, and is estimated at about $5,944 per ADA in 1999-00. A
significant amount of the "extra" Proposition 98 monies in the last few years
have been allocated to special programs, most particularly an initiative to
allow each classroom from grades K-3 to have no more than 20 pupils by the end
of the 1997-98 school year. Although General Fund revenue growth is expected to
slow in 1999-00, there are also new initiatives proposed to improve pupil
reading skills, to enhance teacher quality, and to increase school
accountability. See "Current State Budget" for further discussion of education
funding.
State Indebtedness
General. The State Treasurer is responsible for the sale of debt
obligations of the State and its various authorities and agencies. The State has
always paid the principal of and interest on its general obligation bonds,
general obligation commercial paper, lease-purchase debt and short-term
obligations, including revenue anticipation notes and revenue anticipation
warrants, when due.
Capital Facilities Financing.
General Obligation Bonds. The State Constitution prohibits the creation
of general obligation indebtedness of the State unless a bond law is approved by
a majority of the electorate voting at a general election or a direct primary.
General obligation bond acts provide that debt service on general obligation
bonds shall be appropriated annually from the General Fund and all debt service
on general obligation bonds is paid from the General Fund. Under the State
Constitution, debt service on general obligation bonds is the second charge to
the General Fund after the application of moneys in the General Fund to the
support of the public school system and public institutions of higher education.
Certain general obligation bond programs receive revenues from sources other
than the sale of bonds or the investment of bond proceeds.
As of February 1, 1999, the State had outstanding $19,184,961,000
aggregate principal amount of long-term general obligation bonds, and unused
voter authorizations for the future issuance of $14,326,874,000 of long-term
general obligation bonds. This latter figure consists of $3,566,744,000 of
authorized commercial paper notes, described below (of which $484,250,000 had
been issued), which had not yet been refunded by general obligation bonds, and
$10,760,130,000 of other authorized but unissued general obligation debt.
At the November 3, 1998 election, voters approved a bond measure
("Proposition 1A") totaling $9.2 billion for public school construction and
renovation, and for higher education facilities. Not more than half the total
bond authorization from Proposition 1A can be issued (including bonds in the
form of commercial paper) before June 30, 2000. Proposition 1A also encourages
the Treasurer to sell the bonds in a manner such that the ratio of State debt
service to General Fund revenue does not exceed 6 percent.
Commercial Paper Program. Pursuant to legislation enacted in 1995, voter
approved general obligation indebtedness may be issued either as long-term
bonds, or, for some but not all bond acts, as commercial paper notes. Commercial
paper notes may be renewed or may be refunded by the issuance of long-term
bonds. The State intends to issue long-term general obligation bonds from time
to time to retire its general obligation commercial paper notes. Pursuant to the
terms of the bank credit agreement presently in effect supporting the general
obligation commercial paper program, not more than $2.0 billion of general
obligation commercial paper notes may be outstanding at any time; this amount
may be increased or decreased in the future. Commercial paper notes are deemed
issued upon authorization by the respective Finance Committees, whether or not
such notes are actually issued. As of February 1, 1999, the Finance Committees
had authorized the issuance of up to $3,566,744,000 of commercial paper notes;
as of that date $484,250,000 aggregate principal amount of general obligation
commercial paper notes was actually issued and outstanding.
Lease-Purchase Debt. In addition to general obligation bonds, the State
builds and acquires capital facilities through the use of lease-purchase
borrowing. Under these arrangements, the State Public Works Board, another State
or local agency or a joint powers authority issues bonds to pay for the
construction of facilities such as office buildings, university buildings or
correctional institutions. These facilities are leased to a State agency or the
University of California under a long-term lease which provides the source of
payment of the debt service on the lease-purchase bonds. In some cases, there is
not a separate bond issue, but a trustee directly creates certificates of
participation in the State's lease obligation, which are marketed to investors.
Under applicable court decisions, such lease arrangements do not constitute the
creation of "indebtedness" within the meaning of the Constitutional provisions
which require voter approval. For purposes of this section, "lease-purchase
debt" or "lease-purchase financing" means principally bonds or certificates of
participation for capital facilities where the rental payments providing the
security are a direct or indirect charge against the General Fund and also
includes revenue bonds for a State energy efficiency program secured by payments
made by various State agencies under energy service contracts. Certain of the
lease-purchase financings are supported by special funds rather than the General
Fund. The State had $6,689,709,397 General Fund-supported lease-purchase debt
outstanding at February 1, 1999. The State Public Works Board, which is
authorized to sell lease revenue bonds, had $1,594,712,000 authorized and
unissued as of February 1, 1999. Also, as of that date certain joint powers
authorities were authorized to issue approximately $69,500,000 of revenue bonds
to be secured by State leases.
Non-Recourse Debt. Certain State agencies and authorities issue revenue
obligations for which the General Fund has no liability. Revenue bonds represent
obligations payable from State revenue-producing enterprises and projects, which
are not payable from the General Fund, and conduit obligations payable only from
revenues paid by private users of facilities financed by the revenue bonds. The
enterprises and projects include transportation projects, various public works
projects, public and private educational facilities (including the California
State University and University of California systems), housing, health
facilities and pollution control facilities. There are 17 agencies and
authorities authorized to issue revenue obligations (excluding lease-purchase
debt). State agencies and authorities had $25,463,613,639 aggregate principal
amount of revenue bonds and notes which are non-recourse to the General Fund
outstanding as of December 31, 1998.
Cash Flow Borrowings. As part of its cash management program, the State
has regularly issued short-term obligations to meet cash flow needs. The
following table shows the amount of revenue anticipation notes ("Notes") and
revenue anticipation warrants ("Warrants") issued over the past five fiscal
years. Between spring 1992 and summer 1994, the State had depended upon external
borrowing, including borrowings extending into the subsequent fiscal year, to
meet its cash needs, including repayment of maturing Notes and Warrants. The
State has not had to resort to such cross-year borrowing after the 1994-95
Fiscal Year.
The State issued $1.7 billion of revenue anticipation notes for the
1998-99 Fiscal Year to mature on June 30, 1999. The Governor's Proposed Budget
anticipates the issuance of $2.5 billion of revenue anticipation notes for the
1999-00 Fiscal Year.
State of California
Revenue Anticipation Notes and Warrants Issued
Fiscal Years 1994-95 to 1998-99
Principal
Fiscal Amount Date of Maturity
Year Type (Billions) Issue Date
1994-1995 Warrants Series C-D $4.0 July 26, 1994 April 25, 1996
Notes Series A-C 3.0 August 3, 1994 June 28, 1995
1995-1996 Notes 2.0 April 25, 1996 June 28, 1996
1996-1997 Notes Series A-C 3.0 August 6, 1996 June 30, 1997
1997-1998 Notes 3.0 September 9, 1997 June 30, 1998
1998-1999 Notes 1.7 October 1, 1998 June 30, 1999
SOURCE: State of California, Office of the Treasurer.
Prior Fiscal Years' Financial Results
Fiscal Years Prior to 1995-96. Pressures on the State's budget in the late
1980's and early 1990's were caused by a combination of external economic
conditions (including a recession which began in 1990) and growth of the largest
General Fund Programs--K-14 education, health, welfare and corrections --at
rates faster than the revenue base. During this period, expenditures exceeded
revenues in four out of six years up to 1992-93, and the State accumulated and
sustained a budget deficit approaching $2.8 billion at its peak at June 30,
1993. Between the 1991-92 and 1994-95 Fiscal Years, each budget required
multibillion dollar actions to bring projected revenues and expenditures into
balance, including significant cuts in health and welfare program expenditures;
transfers of program responsibilities and funding from the State to local
governments; transfer of about $3.6 billion in annual local property tax
revenues from other local governments to local school districts, thereby
reducing state funding for schools under Proposition 98; and revenue increases
(particularly in the 1991-92 Fiscal Year budget), most of which were for a short
duration.
Despite these budget actions, the effects of the recession led to large,
unanticipated budget deficits. By the 1993-94 Fiscal Year, the accumulated
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 in 1993-94, 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. See "State Indebtedness--Cash Flow Borrowings" above.
Another consequence of the accumulated budget deficits, together with
other factors such as disbursement of funds to local school districts "borrowed"
from future fiscal years and hence not shown in the annual budget, was to
significantly reduce the State's cash resources available to pay its ongoing
obligations. When the Legislature and the Governor failed to adopt a budget for
the 1992-93 Fiscal Year by July 1, 1992, which would have allowed the State to
carry out its normal annual cash flow borrowing to replenish its cash reserves,
the State Controller issued registered warrants to pay a variety of obligations
representing prior years' or continuing appropriations, and mandates from court
orders. Available funds were used to make constitutionally-mandated payments,
such as debt service on bonds and warrants. Between July 1 and September 4,
1992, when the budget was adopted, the State Controller issued a total of
approximately $3.8 billion of registered warrants.
For several fiscal years during the recession, the State was forced to
rely on external debt markets to meet its cash needs, as a succession of notes
and revenue anticipation warrants, often needed to pay previously maturing notes
or warrants, were issued in the period from June 1992 to July 1994. These
borrowings were used also in part to spread out the repayment of the accumulated
budget deficit over the end of a fiscal year, as noted earlier. The last and
largest of these borrowings was $4.0 billion of revenue anticipation warrants
which were issued in July, 1994 and matured on April 25, 1996. See "State
Indebtedness--Cash Flow Borrowings" above.
1995-96 through 1997-98 Fiscal Years. The State's financial condition
improved markedly during the 1995-96, 1996-97 and 1997-98 fiscal years, with a
combination of better than expected revenues, slowdown in growth of social
welfare programs, and continued spending restraint based on the actions taken in
earlier years. The State's cash position also improved, and no external deficit
borrowing has occurred over the end of these three fiscal years.
The economy grew strongly during these fiscal years, and as a result, the
General Fund took in substantially greater tax revenues (around $2.2 billion in
1995-96, $1.6 billion in 1996-97 and $2.4 billion in 1997-98) than were
initially planned when the budgets were enacted. These additional funds were
largely directed to school spending as mandated by Proposition 98, and to make
up shortfalls from reduced federal health and welfare aid in 1995-96 and
1996-97. The accumulated budget deficit from the recession years was finally
eliminated.
The following were major features of the 1997-98 Budget Act:
1. For the second year in a row, the Budget contained a large increase in
funding for K-14 education under Proposition 98, reflecting strong revenues
which exceeded initial budgeted amounts. Part of the nearly $1.75 billion in
increased spending was allocated to prior fiscal years. Funds were provided to
fully pay for the cost-of-living-increase component of Proposition 98, and to
extend the class size reduction and reading initiatives. See "State
Finances--Proposition 98" above.
2. The Budget Act reflected payment of $1.228 billion to satisfy a court
judgment in a lawsuit regarding payments to the State pension fund, and brought
funding of the State's pension contribution back to the quarterly basis which
existed prior to the deferral actions which were invalidated by the courts.
3. Funding from the General Fund for the University of California and
California State University was increased by about 6 percent ($121 million and
$107 million, respectively), and there was no increase in student fees.
4. Because of the effect of the pension payment, most other State
programs were continued at 1996-97 levels, adjusted for caseload changes.
5. Health and welfare costs were contained, continuing generally the
grant levels from prior years, as part of the initial implementation of the new
CalWORKs program.
6. Unlike prior years, this Budget Act did not depend on uncertain
federal budget actions. About $300 million in federal funds, already included in
the federal fiscal year 1997 and 1998 budgets, was included in the Budget Act,
to offset incarceration costs for illegal aliens.
7. The Budget Act contained no tax increases, and no tax reductions. The
Renters Tax Credit was suspended for another year, saving approximately $500
million.
Current State Budget
1998-99 Fiscal Year Budget. When the Governor released his proposed
1998-99 Fiscal Year Budget on January 9, 1998, he projected General Fund
revenues for the 1998-99 Fiscal Year of $55.4 billion, and proposed expenditures
in the same amount. By the time the Governor released the May Revision to the
1998-99 Budget ("May Revision") on May 14, 1998, the Administration projected
that revenues for the 1997-98 and 1998-99 Fiscal Years combined would be more
than $4.2 billion higher than was projected in January. The Governor proposed
that most of this increased revenue be dedicated to fund a 75 percent cut in the
Vehicle License Fee ("VLF").
The Legislature passed the 1998-99 Budget Bill on August 11, 1998, and the
Governor signed it on August 21, 1998. Some 33 companion bills necessary to
implement the budget were also signed. In signing the Budget Bill, the Governor
used his line-item veto power to reduce expenditures by $1.360 billion from the
General Fund, and $160 million from special funds. Of this total, the Governor
indicated that about $250 million of vetoed funds were "set aside" to fund
programs for education. Vetoed items included education funds, salary increases
and many individual resources and capital projects.
The 1998-99 Budget Act was based on projected General Fund revenues and
transfers of $57.0 billion (after giving effect to various tax reductions
enacted in 1997 and 1998), a 4.2 percent increase from the then revised 1997-98
figures. Special Fund revenues were estimated at $14.3 billion. The revenue
projections were based on the May Revision. Economic problems overseas since
that time may affect the May Revision projections.
After giving effect to the Governor's vetoes, the Budget Act provided
authority for expenditures of $57.3 billion from the General Fund (a 7.3 percent
increase from 1997-98), $14.7 billion from Special Funds, and $3.4 billion from
bond funds. The Budget Act projected a balance in the SFEU at June 30, 1999 (but
without including the "set aside" veto amount) of $1.255 billion, a little more
than 2 percent of General Fund revenues. The Budget Act assumed the State will
carry out its normal intra-year cash flow borrowing in the amount of $1.7
billion of revenue anticipation notes, which were issued on October 1, 1998.
Revenues and expenditures for 1998-99 as updated in the 1999-00
Governor's Budget are $56.3 billion and $58.3 billion, respectively. As a
result, the projected balance in the SFEU at June 30, 1999 has been reduced to
$617 million. See "Proposed 1999-00 Budget" below for discussion of more recent
revenue estimates from the Legislative Analyst's Office.
The most significant feature of the 1998-99 budget was agreement on a
total of $1.4 billion of tax cuts. The central element is a bill which provides
for a phased-in reduction of the VLF. Since the VLF is currently transferred to
cities and counties, the bill provides for the General Fund to replace the lost
revenues. Started on January 1, 1999, the VLF has been reduced by 25 percent, at
a cost to the General Fund of approximately $500 million in the 1998-99 Fiscal
Year and about $1 billion annually thereafter.
In addition to the cut in VLF, the 1998-99 budget includes both temporary
and permanent increase in the personal income tax dependent credit ($612 million
General Fund cost in 1998-99, but less in future years), a nonrefundable renters
tax credit ($133 million), and various targeted business tax credits ($106
million).
Other significant elements of the revised 1998-99 Budget are as follows:
1. Proposition 98 funding for K-12 schools is increased by $2.2 billion
in General Fund moneys over the latest revised 1997-98 levels, over $1 billion
higher than the minimum Proposition 98 guarantee. Of the 1998-99 funds, major
new programs include money for instructional and library materials, deferred
maintenance, support for increasing the school year to 180 days and reduction of
class sizes in Grade 9. Overall, per-pupil spending for K-12 schools under
Proposition 98 is increased to $5,752, which is $478 over the 1997-98 level. The
Budget also includes $250 million as repayment of prior years' loans to schools,
as part of the settlement of the CTA v. Gould lawsuit. See "State
Finances--Proposition 98" above.
2. Funding for higher education increased substantially above the actual
1997-98 level. General Fund support was increased by $339 million (15.6 percent)
for the University of California and $271 million (14.5 percent) for the
California State University system. In addition, General Fund support for
Community Colleges increased by $183 million (9.0 percent).
3. The Budget includes increased funding for health, welfare and social
services programs. A 4.9 percent grant increase was included in the basic
welfare grants, the first increase in those grants in 9 years. Future increases
will depend on sufficient General Fund revenue to trigger the phased cuts in VLF
described above.
4. Funding for the judiciary and criminal justice programs increased by
about 15 percent over 1997-98, primarily to reflect increased state support for
local trial courts and rising prison population.
5. Various other highlights of the revised Budget included new funding
for resources projects, dedication of $240 million of General Fund moneys for
capital outlay projects, funding of a state employee salary increase, funding of
2,000 new Department of Transportation positions to accelerate transportation
construction projects, and funding of the Infrastructure and Economic
Development Bank ($50 million).
6. The State of California received approximately $167 million of federal
reimbursements to offset costs related to the incarceration of undocumented
alien felons for federal fiscal year 1997. The state anticipates receiving
approximately $173 million in federal reimbursements for federal fiscal year
1998.
The revised 1998-99 budget as reported in the 1999-00 Governor's Budget,
also reflects the latest estimated costs or savings as provided in various
pieces of legislation passed and signed after the 1998 Budget Act. Major budget
items include costs for the All-American Canal, state's share of purchase of
Headwaters Forest, and additional funds for state prisons and juvenile
facilities. The revised budget reflects a $433 million reduction in the State's
obligation to contribute to the State Teachers' Retirement System ("STRS") in
1998-99.
Proposed 1999-00 Budget. On January 8, 1999, Governor Davis released his
proposed budget for Fiscal Year 19992000 (the "Governor's Budget"). The
Governor's Budget generally reported that General Fund revenues for FY 1998-99
and FY 1999-00 would be lower than earlier projections (primarily due to the
overseas economic downturn), while some caseloads would be higher than earlier
projections. The Governor's Budget was designed to meet ongoing caseloads and
basic inflation adjustments, and included certain new programs.
The Governor's Budget projects General Fund revenues and transfers in
1999-00 of $60.3 billion. This includes anticipated initial payments from the
tobacco litigation settlement of about $560 million, and receipt of one-time
revenue from sale of assets. The Governor also assumes receipt of about $400
million of federal aid for certain health and welfare programs and reimbursement
for costs for incarceration of undocumented felons, above the amount presently
received by California from the federal government. The Governor's Budget notes
that more accurate revenue estimates will be available in May and June before
adoption of the budget. Among other things, the amount of realized capital gains
for 1998 is still unknown, given the large fluctuations in the stock market last
year. The Governor has not proposed any tax cuts or increases.
The Governor's Budget proposes General Fund expenditures of $60.5
billion. The Governor's Budget gives highest priority to education, with
Proposition 98 funding increasing by almost 5 percent. The Governor proposed
certain new education initiatives focused on improving reading skills, teacher
quality and school accountability. The Governor proposed modest increase in
funding for higher education, and an 8 percent increase in SSP payments (a
State-funded welfare program), while assuming decreases in Medi-Cal and CaIWORKs
grant costs due to lowering caseloads. The Governor also proposes to reduce
expenditures by deferring certain previously budgeted expenditures totaling
about $170 million.
Based on the proposed revenues and expenditures, the Governor's Budget
projects the June 30, 2000 balance in the SFEU would drop to about $415 million.
On February 16, 1999, the Legislative Analyst released a report on the
1999-00 Governor's Budget (the "LAO Report"). The LAO Report was based in part
on actual revenues received in December, 1998 and January, 1999, which had not
been available when the Governor's Budget was prepared. These revenues were
higher than had been predicted in the Governor's Budget, apparently reflecting
stronger than expected economic activity in the nation and the State. The LAO
report projected that General Fund revenues in 1998-99 could be as much as $750
million higher than predicted in the Governor's Budget, and 1999-00 revenues
could be $550 million above the Governor's Budget.
The Governor's Budget includes a proposal to implement changes in law to
make "midcourse corrections" in the State's budget if ongoing revenues fall
short of projections during a fiscal year or expenditures increase
significantly. The proposals include two components: restoring authority for the
Director of Finance to reduce expenditures in certain circumstances, and an
automatic "trigger" mechanism which would produce spending cuts if certain
conditions were met. These proposals will require legislative action.
Economy and Population
Introduction. California's economy, the largest among the 50 states and
one of the largest in the world, has major components in high technology, trade,
entertainment, agriculture, manufacturing, tourism, construction and services.
Since 1994, California's economy has been performing strongly after suffering a
deep recession between 1990-94.
Population and Labor Force. The State's July 1, 1997 population of over
32.9 million represented over 12 percent of the total United States population.
California's population is concentrated in metropolitan areas. As of the
April 1, 1990 census, 96 percent resided in the 23 Metropolitan Statistical
Areas in the State. As of July 1, 1997, the 5-county Los Angeles area accounted
for 49 percent of the State's population, with 16.0 million residents, and the
10-county San Francisco Bay Area represented 21 percent, with a population of
6.9 million.
The following table shows California's population data for 1993 through
1998.
<PAGE>
Population 1993-98
% Increase % Increase
Over Over California
California Preceding United States Preceding as % of
Year Population(a) Year Population(a) Year United States
1993 31,517,000 1.1 257,753,000 1.1 12.2
1994 31,790,000 0.9 260,292,000 1.0 12.2
1995 32,063,000 0.9 262,761,000 0.9 12.2
1996 32,383,000 1.0 265,179,000 0.9 12.2
1997 32,957,000 1.8 267,636,000 0.9 12.3
1998 33,494,000 1.6 270,029,000 0.9 12.4
- ----------------
(a) Population as of July 1.
SOURCE: U.S. Department of Commerce, Bureau of the Census; State of
California, Department of Finance.
The following table presents civilian labor force data for the resident
population, age 16 and over, for the years 1992 to 1998.
Labor Force
1992-98
Labor Force Trends
(Thousands) Unemployment Rate (%)
--------------------- ----------------------
Labor United
Year Force Employment California States
----- ------ ---------- ---------- ------
1992 15,404 13,973 9.3 7.5
1993 15,359 13,918 9.4 6.9
1994 15,450 14,122 8.6 6.1
1995 15,412 14,203 7.8 5.6
1996 15,568 14,444 7.2 5.4
1997 15,971 14,965 6.3 4.9
1998 p/ 16,260 15,302 5.9 4.5
- ------------------
p/ Preliminary
SOURCE: State of California, Employment Development Department.
Employment, Income, Construction and Export Growth. The following table
shows California's nonagricultural employment distribution and growth for 1990
and 1998.
Payroll Employment By Major Sector
1990 and 1998
Employment % Distribution
(Thousands) of Employment
-------------- --------------
Industry Sector 1990 1998 1990 1998
--------------- ---- ---- ---- ----
Mining ......................... 39 29 0.3 0.2
Construction.................... 605 605 4.8 4.5
Manufacturing...................
Nondurable Goods.......... 721 739 5.7 5.4
High Technology........... 686 520 5.4 3.8
Other Durable Goods....... 690 683 5.4 5.0
Transportation and Utilities... 624 680 4.9 5.0
Wholesale and Retail Trade...... 3,002 3,129 23.7 23.0
Finance, Insurance
and Real Estate........... 825 781 6.5 5.7
Services........................ 3,395 4,234 26.8 31.2
Government......................
Federal................... 362 279 2.9 2.1
State and Local........... 1,713 1,906 13.5 14.0
----- ----- ---- ----
TOTAL
NONAGRICULTURAL........... 12,662 13,586 100 100
====== ====== === ===
- --------------------
SOURCE: State of California, Employment Development Department and State of
California, Department of Finance.
The following tables show California's total and per capita income
patterns for selected years.
Total Personal Income 1992-97
California
----------------------------------------------------
California
% of
Year Millions % Change U.S.
- ---------- ---------- ---------- ----------
1992 684,674 4.8* 13.1
1993 698,130 2.0 12.8
1994 a 718,321 2.9 12.5
1995 754,269 5.0 12.4
1996 798,020 5.8 12.5
1997 846,017 6.0 12.5
- ----------------------
* Change from prior year.
a Reflects Northridge earthquake, which caused an estimated $15 billion drop in
personal income.
Note: Omits income for government employees overseas.
SOURCE: U.S. Department of Commerce, Bureau of Economic Analysis.
Per Capita Personal Income 1992-97
California
United % of
Year California % Change States % Change U.S.
---- ---------- -------- ------ -------- ----
1992 22,163 3.2* 20,546 4.7* 107.9
1993 22,388 1.0 21,220 3.3 105.5
1994a 22,899 2.3 22,056 3.9 103.8
1995 23,901 4.4 23,063 4.6 103.6
1996 25,050 4.8 24,169 4.8 103.6
1997 26,218 4.7 25,298 4.7 103.6
- -----------------------
* Change from prior year
a Reflects Northridge earthquake, which caused an estimated $15 billion drop in
personal income.
SOURCE: U.S. Department of Commerce, Bureau of Economic Analysis.
Employee Relations. In 1998-99, the state work force is estimated to be
comprised of approximately 290,000 personnel years. Of this total, approximately
90,000 personnel years represent employees of institutions of higher education.
Civil service employees who are subject to collective bargaining represent
approximately 147,000 personnel years. The California State Employees'
Association (CSEA), represents 9 of the 21 collective bargaining units, or
approximately 52 percent of those employees subject to collective bargaining.
The Ralph C. Dills Act provides that state employees, defined as any
civil service employee of the State and teachers under the jurisdiction of the
Department of Education or the Superintendent of Public Instruction, and
excluding certain other categories, have a right to form, join, and participate
in the activities of employee organizations for the purpose of representation on
all matters of employer-employee relations. Law enforcement employees have the
right to be represented separately from other employees. The chosen employee
organization has the fight to represent its members, except that once an
employee organization is recognized as the exclusive representative of a
bargaining unit, only that organization may represent employees in that unit.
The scope of representation is limited to wages, hours, and other terms
and conditions of employment. Representatives of the Governor are required to
meet and confer in good faith and endeavor to reach agreement with the employee
organization, and, if agreement is reached, to prepare a memorandum of
understanding (MOU) and present it to the Legislature for ratification. The
Governor and the recognized employee organization are authorized to agree
mutually on the appointment of a mediator for the purpose of settling any
disputes between the parties, or either party could request the Public
Employment Relations Board to appoint a mediator.
As of mid-March 1999, for 1998-99, all twenty-one collective bargaining
units have reached agreement with the State. Five have ratified Memorandums of
Understanding (MOU) which will expire on June 30, 1999, and the other sixteen
MOUs are pending Legislative and union members' ratification. The State has not
experienced a major work stoppage in the last 23 years.
Employees' Retirement Systems. The two largest retirement benefit programs
administered by the State are the Public Employees' Retirement System ("PERS")
and the STRS. PERS had assets with a market value of $139.7 billion as of
October 31, 1998, a decrease of $3.6 billion from June 30, 1998. STRS had assets
with a market value in excess of $88.3 billion as of June 30, 1998, an increase
of $13.5 billion from June 30, 1997.
Information Technology. The State's reliance on information technology in
every aspect of its operations has made Year 2000-related ("Y2K") information
technology ("IT") issues a high priority for the State. The Department of
Information Technology ("DOIT"), an independent office reporting directly to the
Governor, is responsible for ensuring the State's information technology
processes are fully functional before the year 2000. The DOIT has created a Year
2000 Task Force and a California 2000 Office to establish statewide policy
requirements; to gather, coordinate, and share information; and to monitor
statewide progress. In December 1996, the DOIT began requiring departments to
report on Y2K activities and currently requires departmental monthly reporting
of Y2K status. The DOIT has emphasized to departments that efforts should be
focused on applications that support mission-critical business practices.
The risks posed by Y2K information technology related issues are not
confined to computer systems, but also include problems presented by embedded
microchips (products or systems that contain microchips to perform functions
such as traffic control, instruments used in hospitals or medical laboratories,
and California aqueduct monitoring). To address these problems, the Governor
issued Executive Order W-163-97, broadening the responsibilities of the DOIT to
resolve these issues as well as legal questions associated with Y2K issues. The
executive order also required that mission critical systems be remediated by
December 31, 1998, that purchases of new systems, hardware, software and
equipment be Year 2000 compliant and further limited new computer projects to
those required by law until a department's Y2K problems are resolved. The DOIT
has also more recently required departments to address interfacing of State IT
systems with external IT systems, and to report on contingency planning status
for problems which might occur if IT systems are not fully remediated by the end
of 1999.
In its quarterly report for the period ending December 31, 1998, ("January
Quarterly Report") the DOIT unveiled the new administration's strategy for
addressing Y2K issues. The key components of this strategy include
centralization and coordination of the State's Y2K efforts, delivery of
essential services and emergency preparedness, elimination of obstacles and
barriers in an effort to streamline the current funding request process, and
broad-based collaboration across public and private sectors through a
comprehensive communication plan. Departments, programs and systems will be
categorized by tier according to the amount of assistance required to become Y2K
compliant. The first tier, which consists of departments that are of no specific
cause of concern, will be required to report their status and may be subject to
independent review. The second tier consists of departments that require
targeted assistance. The California 2000 Project Office will deploy an action
team to provide the necessary assistance. The third tier consists of seriously
troubled departments where the California Year 2000 Project Office will assume
Y2K management responsibility.
In addition to setting forth a new action plan, the January Quarterly
Report updated the survey of State departments and reported that of a total of
about 564 mission critical IT systems, 372 had completed remediation. Of the
remaining 192 systems, 54 systems are scheduled to be retired and 138 are in the
process of being remediated. The January Quarterly Report also updated the
status of embedded systems, noting that State entities have not yet reported on
all facilities nor have they completed the survey of all of their facilities. Of
the 606 facilities that were reported, remediation has been completed in 52
facilities.
In the January Quarterly Report, the DOIT estimates total Y2K costs
identified by the departments under its supervision at about $342 million, of
which more than $200 million was projected to be expended in fiscal years
1998-1999 and 1999-2000. These costs are part of much larger overall IT costs
incurred annually by the State, including costs incurred by certain independent
State entities, such as the judiciary, the Legislature, the University of
California and California State University System. Furthermore, cost estimates
for embedded systems only apply to the subset of embedded systems posing the
highest risk to essential programs. For fiscal year 1998-99, the Legislature
created a $20 million fund for unanticipated Y2K costs, which can be increased
if necessary.
On February 18, 1999, the Bureau of State Audits (the "BSA") presented
its report concerning state agencies' progress in resolving Y2K problems. The
report highlighted the following issues: remediation efforts at 14 agencies that
it identified as critical; the status of Y2K compliance for other State
programs; deficiencies in Y2K planning at one of the primary data centers for
the State; and coordination among public and private entities to ensure
uninterrupted service of essential utilities.
The BSA indicated that each of the 14 agencies identified as
administering programs critical to the State has appointed a Y2K project
manager, developed an overall Y2K plan and is actively working to complete
planned tasks. However, the report further noted that although state agencies
are making progress toward correcting critical computer systems, remediation
efforts at 11 of these agencies are not complete. The report defined completion
as including three key steps: completion of all planned testing, removal of
threats from embedded technology, and resolution of potential problems caused by
data exchange partners. None of these 11 agencies have fully tested the systems
reviewed, which industry experts consider to be the most crucial and
time-consuming phase. Furthermore, seven agencies have not yet replaced or
corrected embedded microchips in equipment their systems rely upon.
As part of the audit, the BSA also surveyed all 140 agencies, which
administer 462 separate budgetary programs, listed in the Governor's Budget.
Although the BSA does not consider all of these programs to be as critical as
those administered by the 14 agencies it reviewed, the BSA has similar concerns
about testing, embedded technology and coordination with data exchange partners.
The report also contained certain recommendations for one of the State's two
primary data centers to enhance their Y2K efforts. Finally, the BSA noted that
no single entity is charged with overseeing the Y2K preparedness of all
utilities in California and recommended that the Governor or Legislature should
designate one representative or agency to assess and disclose the Y2K readiness
of critical public utilities.
The State Treasurer's Office reports that as of December 31, 1998, its
systems for bond payments were fully Y2K compliant. The State Controller's
Office reported that it had completed the necessary Y2K remediation projects for
the State fiscal and accounting system by December 31, 1998, consistent with the
Governor's Executive Order. The final steps of testing will be completed during
1999. Both offices are actively working with the outside entities with whom they
interface to ensure that they are also compliant.
In sum, although substantial progress has been made toward the goal of
Y2K compliance, the task is very large and will likely encounter unexpected
difficulties. The State cannot predict whether all mission critical systems will
be ready and tested by late 1999 or what the impact failure of any particular IT
system(s) or of outside interfaces with IT systems might have.
Litigation
On December 24, 1997, a consortium of California counties filed a test
claim with the Commission on State Mandates (the "Commission") asking the
Commission to determine whether the property tax shift from counties to school
districts beginning in 1993-94, is a reimbursable state mandated cost. See
"State Finances--Local Government" above. The test claim was heard on October
29, 1998, and the Commission on State Mandates found in favor of the State. In
March, 1999, Sonoma County filed suit in the Superior Court to overturn the
Commission's decision. The State is contesting this lawsuit. Should the courts
find in favor of the counties, the impact to the State General Fund could be as
high as $10.0 billion with an annual Proposition 98 General Fund cost of at
least $3.6 billion. This cost would grow in accordance with the annual assessed
value growth rate.
In Professional Engineers in California Government v. Wilson, the Superior
Court ruled in December 1998 that $30.7 million of the $258.2 million
transferred from the State Highway Account to the General Fund violated the
California Constitution. The court also invalidated $130.9 million transferred
from the Motor Vehicle Account to the General Fund. The court ordered further
briefing on the $130 million transfer from the State Highway Account to the
Motor Vehicle Account. A hearing on this transfer is scheduled for April 1999.
No decision has been made as to whether an appeal will be taken from the court's
ruling.
On June 24, 1998, plaintiffs in Howard Jarvis Taxpayers Association et al.
v Kathleen Connell filed a complaint for certain declaratory and injunctive
relief challenging the authority of the State Controller to make payments from
the State Treasury in the absence of a state budget. On July 21, 1998, the trial
court issued a preliminary injunction prohibiting the State Controller from
paying moneys from the State Treasury for fiscal year 1998-99, with certain
limited exceptions, in the absence of a state budget. The preliminary
injunction, among other things, prohibited the State Controller from making any
payments pursuant to any continuing appropriation.
On July 22 and 27, 1998, various employee unions which had intervened in
the case appealed the trial court's preliminary injunction and asked the Court
of Appeal to stay the preliminary injunction. On July 28, 1998, the Court of
Appeal granted the unions' requests and stayed the preliminary injunction
pending the Court of Appeal's decision on the merits of the appeal. On August 5,
1998, the Court of Appeal denied the plaintiffs' request to reconsider the stay.
Also on July 22, 1998, the State Controller asked the California Supreme Court
to immediately stay the trial court's preliminary injunction and to overrule the
order granting the preliminary injunction on the merits. On July 29, 1998, the
Supreme Court transferred the State Controller's request to the Court of Appeal.
The matters are now pending before the Court of Appeal. Briefs are being
submitted; no date has yet been set for oral argument.
In Thomas Hayes v. Commission on State Mandates, the Commission on State
Mandates issued a decision in December 1998 determining that a portion, but not
all, of the claims constituted state mandated local costs. The Commission is now
developing parameters and guidelines for claims for reimbursement. The
Department of Finance has not yet determined whether to seek judicial review of
the Commission's decision.
In Capitola Land v. Anderson and other related state and federal cases,
plaintiffs sought payments from the State under the AFDC-Foster Care program.
Judgment was rendered against the State in Capitola, which the State appealed
and lost. The State then filed a state plan amendment with the federal
Department of Health and Human Services to enable the State to comply with the
Capitola ruling and receive federal funding. The DHHS denied the state plan
amendment, and the State has filed suit against DHHS. The Legislature also
enacted a statute which required federal funding in order to comply with the
Capitola judgment. The State then refused to implement the Capitola judgment
based on the new statute. Certain plaintiffs moved for an order of contempt
against the State, which was granted by the trial court, but was stayed and
annulled by the Court of Appeal. The plaintiffs are petitioning the California
Supreme Court for review. If, as a result of this litigation, compliance with
the Capitola judgment is required and the judgment is applied retroactively,
liability to the State could exceed $200 million.
In the Northern California 1997 Flood Litigation, a substantial number of
plaintiffs have joined the suit against the State, local agencies, and private
companies and contractors seeking compensation for the damages they suffered as
a result of the 1997 flooding. Property damages have been estimated up to $2
billion. The State is vigorously defending the action.
In Just Say No to Tobacco Dough Campaign v. State of California, the
superior court issued an order in December 1998, granting the State's demurrer
to the entire action and dismissing the case. Plaintiffs have asked the court to
reconsider its ruling.
<PAGE>
APPENDIX B
Municipal Bond, Municipal Note, Bond, Note and Commercial Paper Ratings
S&P
Municipal Bond and 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 and 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 and 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 longterm 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 characteristics 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 midrange ranking; and the
modifier 3 indicates a ranking in the lower end of a rating category.
Municipal Note, Note 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:
1. Leading market positions in well-established industries. 2. High rates of
return on funds employed.
3. Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
4. Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
5. 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 IBCA, Inc. ("itch")
Municipal Bond and 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.
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")
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-
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.
- ----------------------------------------------------------------------------
DREYFUS BASIC MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
NOVEMBER 1, 1999
- -----------------------------------------------------------------------------
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 (the "Fund"), dated
November 1, 1999, 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, that is registered with the Securities and Exchange Commission
("SEC"). 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. -- Call 516-794-5452
TABLE OF CONTENTS
Page
----
Description of the Fund/Trust..................................... B-2
Management of the Fund............................................ B-14
Management Arrangements........................................... B-19
Purchase of Shares................................................ B-21
Redemption of Shares.............................................. B-24
Shareholder Services.............................................. B-29
Determination of Net Asset Value.................................. B-31
Performance Information........................................... B-32
Dividends, Other Distributions and Taxes.......................... B-34
Portfolio Transactions............................................ B-38
Information About the Fund/Trust.................................. B-40
Transfer and Dividend Disbursing Agent,
Custodian, Counsel and Independent Auditors....................... B-41
Financial Statements.............................................. B-42
Appendix A........................................................ B-43
Appendix B........................................................ B-45
<PAGE>
DESCRIPTION OF THE FUND
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 May
8, 1996, the Fund's "Investor" and "Class R" designations were eliminated, the
Fund became a single class fund, and the Fund's name was changed from
"Dreyfus/Laurel Massachusetts Tax-Free Money Fund" to "Dreyfus BASIC
Massachusetts Municipal Money Market Fund."
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
General 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" or "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 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'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 under 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. 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 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 ("NAV") 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.
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 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 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. The Fund
is authorized to borrow up to 10% of its total assets for temporary or emergency
purpose and to pledge its assets to the same extent in connection with such
borrowings.
Certain Portfolio Securities
Description of Municipal Obligations. "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 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
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 Standard & Poor's
("S&P") and Moody's Investors Services, Inc. ("Moody's") represent the opinions
of these agencies as to the quality of Municipal Obligations which they rate. It
should be emphasized, however, that such ratings are relative and subjective and
are not absolute standards of quality. These ratings will be used by the Fund as
initial criteria for the selection of portfolio securities, but the Fund will
also rely upon the independent advice of Dreyfus to evaluate potential
investments. Among the factors which will be considered are the short-term and
long-term ability of the issuer to pay principal and interest and general
economic trends. Further information concerning the ratings of the NRSROs and
their significance is contained in the Appendix B to this Statement of
Additional Information.
After being purchased by the Fund, the rating of a Municipal Obligation
may be reduced below the minimum rating required for purchase by the Fund or the
issuer of the Municipal Obligation may default on its obligations with respect
to the Municipal Obligation. In that event, the Fund will dispose of the
Municipal Obligation as soon as practicable, consistent with achieving an
orderly disposition of the Municipal Obligation, unless the Trust's Board of
Trustees determines that disposal of the Municipal Obligation would not be in
the best interest of the Fund. In addition, it is possible that a Municipal
Obligation may cease to be rated or an NRSRO might not timely change its rating
of a particular Municipal Obligation to reflect subsequent events. Although
neither event will require the sale of such Municipal Obligation by the Fund,
Dreyfus will consider such event in determining whether the Fund should continue
to hold the Municipal Obligation. In addition, if an NRSRO changes its rating
system, the Fund will attempt to use comparable ratings as standards for its
investments in accordance with its investment objective and policies.
Floating Rate and Variable Rate Obligations. The Fund may purchase
floating rate and variable rate obligations, including participation interests
therein. Floating rate or variable rate obligations provide that the rate of
interest is set as a specific percentage of a designated base rate (such as the
prime rate at a major commercial bank) and that the Fund can demand payment of
the obligation at par plus accrued interest. Variable rate obligations provide
for a specified periodic adjustment in the interest rate, while floating rate
obligations have an interest rate which changes whenever there is a change in
the external interest rate. Frequently such obligations are secured by letters
of credit or other credit support arrangements provided by banks. The quality of
the underlying creditor or of the bank, as the case may be, must, as determined
by Dreyfus under the supervision of the Trustees, be equivalent to the quality
standard prescribed for the Fund. 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 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
generally 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 1940 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 0.5 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.
Custodial Receipts. The Fund may purchase securities, frequently referred
to as "custodial receipts," representing the right to receive future principal
and interest payments on municipal obligations underlying such receipts. A
number of different arrangements are possible. In a typical custodial receipt
arrangement, an issuer or a third party owner of a municipal obligation deposits
such obligation with a custodian in exchange for two or more classes of
receipts. The class of receipts that the Fund may purchase has the
characteristics of a typical tender option security backed by a conditional
"put," which provides the holder with the equivalent of a short-term variable
rate note. At specified intervals, the interest rate for such securities is
reset by the remarketing agent in order to cause the securities to be sold at
par through a remarketing mechanism. If the remarketing mechanism does not
result in a sale, the conditional put can be exercised. In either event, the
holder is entitled to full principal and accrued interest to the date of the
tender or exercise of the "put." The "put" may be terminable in the event of a
default in payment of principal or interest on the underlying municipal
obligation and for other reasons. Before purchasing such security, Dreyfus is
required to make certain determinations with respect to the likelihood of, and
the ability to monitor, the occurrence of the conditions that would result in
the put not being exercisable. The interest rate for these receipts generally is
expected to be below the coupon rate of the underlying municipal obligations and
generally is at a level comparable to that of a municipal obligation of similar
quality and having a maturity equal to the period between interest rate
readjustments. These custodial receipts are sold in private placements. The Fund
also may purchase directly from issuers, and not in a private placement,
municipal obligations having the characteristics similar to the custodial
receipts in which the Fund may invest.
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.
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 taxes, the Fund will invest
in taxable obligations only if and when Dreyfus believes 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 illiquid securities, securities without readily available market
quotations and repurchase agreements maturing in more than seven days.
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.
Special Factors Affecting the Fund
Investing in Massachusetts Municipal Obligations. You should review the
information in "Appendix A", which provides a brief summary of special
investment considerations and risk factors relating to investing in
Massachusetts Municipal Obligations.
Certain Investments. 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, N.A. ("Mellon Bank"), an
affiliate of Dreyfus, has a lending relationship.
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 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.
Fundamental. The following limitations have been adopted by the Fund. The
Fund may not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of shareholders
duly called if the holders of more than 50% of the outstanding shares of the
Fund are present or represented by proxy; or (b) more than 50% of the
outstanding shares of the Fund, whichever is less. 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 1940 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 objective, policies, and restrictions as the Fund.
Nonfundamental. The Fund has adopted the following additional
non-fundamental restrictions. These non-fundamental restrictions may be
changed without shareholder approval, in compliance with applicable law and
regulatory policy.
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 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.
3. 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 New York Stock Exchange ("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).
4. 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.
5. 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 1940 Act.
6. 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).
7. 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.
8. 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.
9. 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.
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.
MANAGEMENT OF THE FUND
Federal Law Affecting Mellon Bank
The Glass-Steagall Act of 1933 prohibits national banks from engaging in
the business of underwriting, selling or distributing securities and prohibits a
member bank of the Federal Reserve System from having certain affiliations with
an entity engaged principally in that business. The activities of Mellon Bank in
informing its customers of, and performing, investment and redemption services
in connection with the Fund, and in providing services to the Fund 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 its statutory and
regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of such
future statutes and regulations, could prevent Mellon Bank or Dreyfus from
continuing to perform all or a part of the above services for its customers
and/or the Fund. If Mellon Bank or Dreyfus were prohibited from serving the Fund
in any of its present capacities, the Board of Trustees would seek an
alternative provider(s) of such services.
Trustees and Officers of the Trust
The Trust's Board is responsible for the management and supervision of the
Fund. The Board approves all significant agreements between the Trust, on behalf
of the Fund, and those companies that furnish services to the Fund. These
companies are as follows:
The Dreyfus Corporation...............................Investment Adviser
Premier Mutual Fund Services, Inc............................Distributor
Dreyfus Transfer, Inc.....................................Transfer Agent
Mellon Bank ......................................Custodian for the Fund
The Trust has a Board composed of nine Trustees. 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") and the Dreyfus High
Yield Strategies Fund.
Trustees of the Trust
o+JOSEPH S. DIMARTINO. Chairman of the Board 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 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 packager and distributor;
Century Business Services, Inc. (formerly, International Alliance
Services, Inc.), a provider of various outservicing functions for small
and medium sized companies; and Career Blazers, Inc. (formerly Staffing
Resources, Inc.), a temporary placement agency. For more than five
years prior to January 1995, he was President, a director and, until
August 24, 1994, Chief Operating Officer of Dreyfus and Executive Vice
President and a director of Dreyfus Service Corporation, a wholly-owned
subsidiary of Dreyfus. From August 1994 to December 31, 1994, he was a
director of Mellon Bank Corporation. Age: 56 years old. Address: 200
Park Avenue, New York, New York 10166.
o+JAMES M. FITZGIBBONS. Trustee of the Trust; Director, Lumber Mutual
Insurance Company; Director, Barrett Resources, Inc.; Chairman of the
Board, Davidson Cotton Company; former Chairman of the Board and CEO of
Fieldcrest Cannon, Inc. Age: 65 years old. Address: 40 Norfolk Road,
Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Trustee of the Trust; Of Counsel, Reed, Smith, Shaw &
McClay (law firm). Age: 71 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Trustee of the Trust; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; former Chairman of the Board
and Director, Rexene Corporation. Age: 77 years old. Address: Way
Hollow Road and Woodland Road, Sewickley, Pennsylvania 15143.
o+KENNETH A. HIMMEL. Trustee of the Trust; President and CEO, The Palladium
Company President and CEO, Himmel and Company, Inc.; CEO, American Food
Management; former Director, The Boston Company, Inc. ("TBC"), and
Boston Safe Deposit and Trust Company each an affiliate of Dreyfus.
Age: 53 years old. Address: 625 Madison Avenue, New York, New York
10022.
o+STEPHEN J. LOCKWOOD. Trustee of the Trust; Chairman of the Board and CEO,
LDG Reinsurance Corporation; Vice Chairman, HCCH. Age: 52 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; Member of Advisory Committee, Decedents Estates Laws of
Pennsylvania. Age: 68 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
Health Care, Inc.; Director, Massachusetts Electric Company; Director,
the Hyams Foundation, Inc. Age: 50 years old. Address: 25 Braddock
Park, Boston, Massachusetts 02116-5816.
o+BENAREE PRATT WILEY. Trustee of the Trust; President and CEO of The
Partnership, an organization dedicated to increasing the representation
of African Americans in positions of leadership, influence and
decision-making in Boston, MA; Trustee, Boston College; Trustee, WGBH
Educational Foundation; Trustee, Children's Hospital; Director, The
Greater Boston Chamber of Commerce; Director, The First Albany
Companies, Inc.; from April 1995 to March 1998, Director, TBC. Age: 53
years old. Address: 334 Boylston Street, Suite 400, Boston,
Massachusetts.
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* "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
#MARGARET W. CHAMBERS. Vice President and Secretary of the Trust. Senior
Vice President and General Counsel of Funds Distributor, Inc. From
August 1996 to March 1998, she was Vice President and Assistant General
Counsel for Loomis, Sayles & Company, L.P. From January 1986 to July
1996, she was an associate with the law firm of Ropes & Gray. Age: 40
years old.
#MARIE E. CONNOLLY. President and Treasurer of the Trust. President, Chief
Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which
is Boston Institutional Group, Inc. Age: 42 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. Age: 30 years old.
#JOHN P. COVINO. Vice President and Assistant Treasurer of the Trust. Vice
President and Treasury Group Manager of Treasury Servicing and
Administration of Funds Distributor, Inc. since December 1998. From
December 1995 to November 1998, he was employed by Fidelity Investments
where he held multiple positions in their Institutional Brokerage
Group. Prior to joining Fidelity, he was employed by SunGard Brokerage
Systems where he was responsible for the technology and development of
the accounting product group. Age: 36 years old.
#FREDRICK C. DEY. Vice President, Assistant Treasurer and Assistant
Secretary of the Trust. Vice President of New Business Development of
Funds Distributor, Inc. Age: 37 years old.
#CHRISTOPHER J. KELLEY. Vice President and Assistant Secretary of the
Trust. Vice President and Senior Associate General Counsel of Funds
Distributor, Inc. From April 1994 to July 1996, he was Assistant
Counsel at Forum Financial Group. Age: 34 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the Trust.
Manager of Treasury Services Administration of Funds Distributor, Inc.
From July 1994 to November 1995, she was a Fund Accountant for
Investors Bank & Trust Company. Age: 27 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Trust. Vice
President of the Distributor and Funds Distributor, Inc. Age: 35 years
old.
#STEPHANIE D. PIERCE. Vice President, Assistant Treasurer and Assistant
Secretary of the Trust. Vice President of the Distributor and Funds
Distributor, Inc. From April 1997 to March 1998, she was employed as a
Relationship Manager with Citibank, N.A. From August 1995 to April
1997, she was an Assistant Vice President with Hudson Valley Bank, and
from September 1990 to August 1995, she was a Second Vice President
with Chase Manhattan Bank. Age: 30 years old.
#GEORGE A. RIO. Vice President and Assistant Treasurer of the Trust.
Executive Vice President and Client Service Director of Funds
Distributor, Inc. From June 1995 to March 1998, he was Senior Vice
President and Senior Key Account Manager for Putnam Mutual Funds. From
May 1994 to June 1995, he was Director of Business Development for
First Data Corporation. Age: 44 years old.
#JOSEPH F. TOWER, III. Vice President and Assistant Treasurer of the Trust.
Senior Vice President, Treasurer, Chief Financial Officer and a
director of the Distributor and Funds Distributor, Inc. Age: 37 years
old.
#ELBA VASQUEZ. Vice President and Assistant Secretary of the Trust.
Assistant Vice President of Funds Distributor, Inc. From March 1990 to
May 1996, she was employed by U.S. Trust Company of New York, where she
held various sales and marketing positions. Age: 37 years old.
#KAREN JACOPPO-WOOD. Vice President and Assistant Secretary of the Trust.
Vice President and Senior Counsel of Funds Distributor, Inc. since
February 1997. From June 1994 to January 1996, she was manager of SEC
Registration at Scudder, Stevens & Clark, Inc. Age: 32 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. In addition, 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" of the Trust (as defined in the 1940 Act) $40,000 per
annum, plus $5,000 per joint Dreyfus/Laurel Funds Board meeting attended, $2,000
for separate committee meetings attended which are not held in conjunction with
a regularly scheduled Board meeting and $500 for Board meetings and separate
committee meetings attended that are conducted by telephone. The Dreyfus/Laurel
Funds also reimburse each Director/Trustee who is not an "interested person" of
the Trust (as defined in the 1940 Act) for travel and out-of-pocket expenses.
The Chairman of the Board receives an additional 25% of such compensation (with
the exception of reimbursable amounts). In the event that there is a joint
committee meeting of the Dreyfus/Laurel Funds and the Dreyfus High Yield
Strategies Fund, the $2,000 fee will be allocated between the Dreyfus/Laurel
Funds and the Dreyfus High Yield Strategies Fund.
In addition, the Trust currently has three Emeritus Board members who are
entitled to receive an annual retainer and a per meeting fee of one-half the
amount paid to them as Board members.
The aggregate amount of fees and expenses received by each current Trustee
from the Trust for the fiscal year ended June 30, 1999, and from all other funds
in the Dreyfus Family of Funds for which such person was a Board member (the
number of which is set forth in parentheses next to each Board member's total
compensation)* during the year ended December 31, 1998 were as follows:
Total Compensation
Aggregate From the Trust and
Name of Board Compensation Fund Complex Paid
Member From the to Board Member
Trust#
Joseph S. DiMartino** $24,154 $ 619,660 (187)
James M. Fitzgibbons $20,666 $ 60,010 (31)
J. Tomlinson Fort*** None None (31)
Arthur L. Goeschel $22,333 $ 61,010 (31)
Kenneth A. Himmel $18,133 $ 50,260 (31)
Stephen J. Lockwood $20,000 $ 51,010 (31)
John J. Sciullo $21,666 $ 59,010 (31)
Roslyn M. Watson $22,333 $ 61,010 (31)
Benaree Pratt Wiley $20,000 $ 49,628 (31) ****
- ----------------------------
# Amounts required to be paid by the Trust directly to the non-interested
Trustees, that would be applied to offset a portion of the management fee
payable to Dreyfus, are in fact paid directly by Dreyfus to the
non-interested Trustees. Amount does not include reimbursed expenses for
attending Board meetings, which amounted to $2,795.30 for the Trust.
* Represents the number of separate portfolios comprising the investment
companies in the Fund complex, including the Trust, for which the Board
member served.
** Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
*** J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board member
of the Trust and the funds in the Dreyfus/Laurel Funds and separately by
the Dreyfus High Yield Strategies Fund. For the fiscal year ended June 30,
1999, the aggregate amount of fees received by J. Tomlinson Fort from
Dreyfus for serving as a Board member of the Trust was $21,666. For the
year ended June 30, 1999, the aggregate amount of fees received by Mr. Fort
for serving as a Board member of all funds in the Dreyfus/Laurel Funds
(including the Trust) and Dreyfus High Yield Strategies Fund (for which
payment is made directly by the fund) was $59,010. In addition, Dreyfus
reimbursed Mr. Fort a total of $1,117.68 for expenses attributable to the
Trust's Board meetings which is not included in the $2,795.30 amount in
note # above.
**** Amount represents payment for the period from April 23, 1998 (the date she
was elected as a Board member) through December 31, 1998.
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 4, 1999.
Principal Shareholders. As of October 4, 1999, the following
shareholder(s) owned beneficially or of record 5% or more of the outstanding
Fund shares: Boston & Co., 3 Mellon Bank Center, Pittsburgh, PA 15259; 60.30%.
A shareholder who beneficially owns, directly or indirectly, more than 25%
of the Fund's voting securities may be deemed a "control person" (as defined in
the 1940 Act) of the Fund.
Management Arrangements
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Expenses" and "Management."
Dreyfus is a wholly-owned subsidiary of Mellon Financial Corporation
("Mellon"). Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal 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 25 largest bank holding companies in the United States based
on total assets.
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Trust (the
"Investment Management Agreement") dated May 8, 1996, which was last approved by
the Trust's Board of Trustees on February 4, 1999 to continue until April 4,
2000 and approved by Fund shareholders on April 16, 1996. 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. The Investment Management
Agreement is subject to review and approval at least annually by the Board of
Trustees.
The Investment Management Agreement will continue from year to year
provided that a majority of the Trustees who are not "interested persons" of the
Trust and either a majority of all Trustees or a majority (as defined in the
1940 Act) of the shareholders of the Fund approve its continuance. The Trust 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 Trust. The Investment Management Agreement will terminate immediately and
automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment
Officer and a director; Thomas F. Eggers, Vice Chairman-Institutional and a
director; Lawrence S. Kash, Vice Chairman and a director; Ronald P. O'Hanley
III, Vice Chairman; J. David Officer, Vice Chairman and a director; William
T. Sandalls, Jr., Executive Vice President; Mark N. Jacobs, Vice President,
General Counsel and Secretary; Diane P. Durnin, Vice President-Product
Development; Patrice M. Kozlowski, Vice President-Corporate Communications;
Mary Beth Leibig, Vice President-Human Resources; Andrew S. Wasser,
Vice-President-Information Systems; Theodore A. Schachar, Vice President;
Wendy Strutt, Vice President; Richard Terres, Vice President; William H.
Maresca, Controller; James Bitetto, Assistant Secretary; Steven F. Newman,
Assistant Secretary; and Mandell L. Berman, Burton C. Borgelt, Steven G.
Elliott, Martin C. McGuinn, Richard W. Sabo and Richard F. Syron, directors.
Under Dreyfus' personal securities trading policy ("the Policy"), Dreyfus
employees must preclear personal transactions in securities not exempt under the
Policy. In addition, Dreyfus employees must report their personal securities
transactions and holdings, which are reviewed for compliance with the Policy. In
that regard, Dreyfus' portfolio managers and other investment personnel also are
subject to the oversight of Mellon's Investment Ethics Committee. Dreyfus
portfolio managers and other investment personnel who comply with the Policy's
preclearance and disclosure procedures, and the requirements of the Committee,
may be permitted to purchase, sell or hold securities which also may be or are
held in fund(s) they manage or for which they otherwise provide investment
advice.
Expenses. 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 0.45
of 1% of the value of the Fund's average daily net assets. 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.
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
expense ratio of the Fund and increasing return to investors. Expenses
attributable to the Fund are charged against the Fund's assets; other expenses
of the Trust are allocated among its funds on the basis determined by the
Trustees, including, but not limited to, proportionately in relation to the net
assets of each fund.
For the last three fiscal years, the Fund has had the following expenses:
For the Fiscal Year Ended June 30,
1999 1998 19971
Advisory and/or $579,262 $531,090 $305,905
Management Fee
- ----------------
1. For the fiscal year ended June 30, 1997, the management fee payable by the
Fund amounted to $378,201, which amount was reduced by $72,296 pursuant to
undertakings then in effect, resulting in a net fee paid to Dreyfus of
$305,905 for fiscal 1997.
The Distributor. Premier Mutual Fund Services, Inc. (the "Distributor"),
located at 60 State Street, Boston, Massachusetts 02109, serves as the Fund's
distributor on a best efforts basis pursuant to an agreement which is renewable
annually. 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 certain
banks, securities brokers or dealers and other financial institutions ("Agents")
for these services. The Distributor also acts as sub-administrator for the Fund
and as distributor for the other funds in the Dreyfus Family of Funds.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies,"
"Services for Fund Investors," "Instructions for Regular Accounts."
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 an Agent. Share certificates are
issued only upon 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 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, you should call the telephone number listed on the cover of
this Statement of Additional 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 the wire payment to obtain the Fund account number. You should
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 investors to a $50
penalty imposed by the Internal Revenue Service (the "IRS").
Net Asset Value Per Share. 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.
See "Determination of Net Asset Value."
The offering price of Fund shares is their NAV. Investments and requests
to exchange or redeem shares received by the Transfer Agent or other entity
authorized to receive orders on behalf of the Fund before 4 p.m., Eastern time,
on each day that the NYSE is open (a "business day") are effective, and will
receive the price next determined on, 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, and receive the first share price determined, on the next
business day.
Dreyfus TeleTransfer Privilege. You may purchase Fund shares by telephone
through the Dreyfus TeleTransfer Privilege if they 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. 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 that is an ACH member may be so designated. Dreyfus TeleTransfer
purchase orders may be made at the Transfer Agent any time. Purchase orders
received by 4:00 p.m., New York time, on any business day that the Transfer
Agent and the 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 shareholder's 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 Shares -
Dreyfus TeleTransfer Privilege." 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.
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 the any securities exchanged, plus any cash, must be at least
equal to $25,000. Shares purchased in exchange for securities generally cannot
be redeemed for fifteen days following the exchange in order to allow time for
the transfer to settle.
The basis of the exchange will depend upon the relative NAV of the shares
purchased and securities exchanged. Securities accepted by the Fund will be
valued in the same manner as the Fund values its assets. Any interest earned on
the securities following their delivery to the Fund and prior to the exchange
will be considered in valuing the securities. All interest, dividends,
subscription or other rights attached to the securities become the property of
the Fund, along with the securities. For further information about "in-kind"
purchases, call 1-800-645-6561.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies," "Services
For Fund Investors," "Instructions for Regular Accounts."
General. You may request redemption of Fund shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When a
request is received in proper form by the Transfer Agent or other entity
authorized to receive orders on behalf of the Fund, 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.
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 the 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 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.
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. 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, Dreyfus TeleTransfer or Telephone
Exchange Privilege authorizes the Transfer Agent to act on telephone
instructions (including over The Dreyfus Touch(R) 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, investors may
redeem 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, you should call the telephone number listed on the
cover of this Statement of Additional 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.
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 ("Checks")
drawn on your Fund account. The Fund provides Checks automatically upon opening
an account, unless you specifically refuse 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 your 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). An investor (other than one who has held Fund shares
since May 8, 1996) will be charged $2.00 for each check redemption. When a Check
is presented to the Transfer Agent for payment, the Transfer Agent, as the
investor's agent, will cause the Fund to redeem a sufficient number of full or
fractional 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. Checks
are free but the Transfer Agent will impose a fee for stopping payment of a
Check upon request or if the Transfer Agent cannot honor a Check because of
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. Investors should date Checks with the current date
when writing them. Please do not postdate Checks. If Checks are postdated, the
Transfer Agent will honor, upon presentment, even if presented before the date
of the Check, all postdated Checks which are dated within six months of
presentment for payment, if they are otherwise in good order.
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. However, the Fund will waive the 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. 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 usually 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. Holders of jointly registered Fund or bank accounts may have redemption
proceeds of only up to $250,000 wired within any 30-day period. Investors may
telephone redemption requests by calling 1-800-645-6561 or, if calling from
overseas, 516-794-5452.
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.
To change the commercial bank or account designated to receive redemption
proceeds, a written request must be sent to the Transfer Agent. This request
must be signed by each shareholder, with each signature guaranteed as described
below under "Share Certificates; Signatures."
Telephone Redemption Privilege. You may request by telephone that
redemption proceeds (maximum $150,000 per day) be paid by check and mailed to
their 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 investors specifically
refuse it.
Dreyfus TeleTransfer Privilege. You may request by telephone that
redemption proceeds (minimum $1000 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 designated. Redemption
proceeds will be on deposit in your 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. Investors
should be aware that if they have selected the Dreyfus TeleTransfer Privilege,
any request for a wire redemption will be effected as a Dreyfus TeleTransfer
transaction through the ACH system unless more prompt transmittal specifically
is requested. 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.
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.
Redemption Commitment. The Trust 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 Trust's Trustees 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 such 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 sections in the Fund's Prospectus entitled "Account Policies" and
"Services for Fund Investors".
Fund Exchanges. An investor may purchase, in exchange for shares of the
Fund, shares of certain other eligible funds advised or administered by Dreyfus,
to the extent such shares are offered for sale in an investor's state of
residence. These funds have different investment objectives which may be of
interest to investors. Investors wishing to use this service should call
1-800-645-6561 to determine if it is available and whether any conditions are
imposed on its use. 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.
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.
Any such exchange is subject to confirmation of a shareholder's holdings through
a check of appropriate records.
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. Before any exchange, investors 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 the investor
checks the applicable "No" box on the Account Application, indicating that the
investor specifically refuses 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 signed 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. Investors
who have previously established the Telephone Exchange Privilege may telephone
exchange instructions (including over The Dreyfus Touch(R) automated telephone
system) by calling 1-800-645-6561. If calling from overseas, investors may call
516-794-5452. 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.
By using the Telephone Exchange Privilege, the investor authorizes the
Transfer Agent to act on telephonic instructions (including over The Dreyfus
Touch(R) automated telephone system) from any person representing himself or
herself to be the investor or a representative of the investor's Agent, and
reasonably believed by the Transfer Agent to be genuine. Telephone exchanges may
be subject to limitations as to the amount involved. Shares issued in
certificate form are not eligible for telephone exchange. Exchanges out of the
Fund pursuant to Fund Exchanges are limited to four per calendar year. The Fund
reserves the right, upon not less than 60 days' written notice, to charge
shareholders who have held Fund shares since May 8, 1996 a nominal fee for each
exchange 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 investors.
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 allows investors to invest
automatically 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.
For more information concerning this Privilege, or to request a Dividend
Options Form, investors should call toll free 1-800-645-6561. Investors may
cancel their 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, investors 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.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies."
The NAV for Fund shares 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. 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 Fund intends to maintain a constant NAV of $1.00 per share,
although there is no assurance that this can be done on a continuing basis.
The use of amortized cost is permitted by Rule 2a-7 under the 1940 Act.
Pursuant to the provisions of Rule 2a-7, the Trustees have established
procedures reasonably designed to stabilize the Fund's price per share, as
computed for the purpose of sale and redemption, at $1.00. These procedures
include the determination of the Trustees, at such times as they deem
appropriate, of the extent of deviation, if any, of the Fund's current NAV per
share, using market values, from $1.00; periodic review by the Trustees of the
amount of and the methods used to calculate the deviation; maintenance of
records of the determination; and review of such deviations. The procedures
employed to stabilize the Fund's price per share require the Trustees to
consider promptly what action, if any, should be taken by the Trustees if such
deviation exceeds 1/2 of one percent. Such procedures also require the Trustees
to take appropriate action to eliminate or reduce, to the extent reasonably
practicable, material dilution or other unfair effects resulting from any
deviation. Such action may include: 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. In addition to such procedures, Rule 2a-7 requires the Fund to
purchase instruments having remaining maturities of 397 days or less, to
maintain a dollar-weighted average portfolio maturity of 90 days or less and to
invest only in securities determined by the Trustees to be of high quality, as
defined in Rule 2a-7, with minimal credit risks.
In periods of declining interest rates, the indicated daily yield on Fund
shares computed by dividing the annualized daily income on the Fund by the NAV
per share computed as above may tend to be higher than a similar computation
made by using a method of valuation based on market prices and estimates. In
periods of rising interest rates, the indicated daily yield on Fund shares
computed the same way may tend to be lower than a similar computation made by
using a method of calculation based upon market prices and estimates.
NYSE Closings. The holidays (as observed) on which the NYSE is
currently scheduled to be closed are: New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Past Performance"
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. 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 computes its current annualized and compound effective yields
using standardized methods required by the SEC. The annualized yield for the
Fund is computed by (a) determining the net change in the value of a
hypothetical account having a balance of one share at the beginning of a seven
calendar day period; (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 both the original share and such additional
shares, but does not include realized gains and losses or unrealized
appreciation and depreciation. Compound effective yields are computed by adding
1 to the base period return (calculated as described above), raising that sum to
a power equal to 365/7 and subtracting 1. The Fund's tax equivalent 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.
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the Fund's yield fluctuates, its yield cannot be compared
with yields on savings accounts or other investment alternatives that provide an
agreed-to or guaranteed fixed yield for a stated period of time. However, yield
information may be useful to an investor considering temporary investments in
money market instruments. In comparing the yield of one money market fund to
another, consideration should be given to the Fund's investment policies,
including the types of investments made, length of maturities of portfolio
securities, the methods used by the Fund to compute the yield (methods may
differ) and whether there are any special account charges which may reduce
effective yield.
For the seven-day period ended June 30, 1999, the Fund's yield was 2.99%,
effective yield was 3.03% and equivalent taxable yield* was 5.26%.
- --------
* Example assumes a Federal marginal tax rate of 39.60% and a Massachusetts
marginal tax rate of 5.95% (combined effective rate of 43.19%).
From time to time, advertising materials for the Fund may refer to
Morningstar ratings and related analyses supporting the rating.
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 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.
From time to time, advertising materials may refer to studies performed by
Dreyfus or its affiliates, such as "The Dreyfus Tax Informed Investing Study" or
"The Dreyfus Gender Investment Comparison Study (1996-1997)" or other such
studies.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the Section in the Fund's Prospectus entitled "Distributions and Taxes."
General. The Fund ordinarily declares dividends from net investment income
on each day that the NYSE 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 an
investor's option, paid in cash. If an investor redeems all shares in their
account at any time during the month, all dividends to which the investor is
entitled will be paid along with the proceeds of the redemption. If an omnibus
accountholder indicates 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 of his or her Fund shares, that portion of
the accrued dividends will be paid along with the proceeds of the redemption.
Dividends from net realized short-term capital 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 capital gains unless capital loss
carryovers, if any, have been utilized or have expired. The Fund does not expect
to realize any long-term capital gains or losses. Investors may choose whether
to receive dividends in cash or to reinvest them in additional Fund shares at
NAV. All expenses are accrued daily and deducted before declaration of dividends
to investors.
Except as provided below, shares of the Fund 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, investors may receive the dividend declared on the day of
purchase. Investors 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 continue to qualify for treatment as a
regulated investment company ("RIC") under the Code. 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. To qualify for treatment as a RIC under the Code, the
Fund - which is treated as a separate corporation for federal tax purposes - (1)
must distribute to its shareholders each year at least 90% of its investment
company taxable income (generally consisting of net taxable investment income
and net short-term capital gains, plus its net interest income excludable from
gross income under section 103(a) of the Code) ("Distribution Requirement"), (2)
must derive at least 90% of its annual gross income from specified sources
("Income Requirement"), and (3) must meet certain asset diversification and
other requirements. If the Fund failed to qualify for treatment as a RIC for any
taxable year, (1) it would be taxed at corporate rates on the full amount of its
taxable income for that year without being able to deduct the distributions it
makes to its shareholders and (2) the shareholders would treat all those
distributions, including distributions that otherwise would be "exempt-interest
dividends," as dividends (that is, ordinary income) to the extent of the Fund's
earnings and profits. In addition, the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest and make substantial
distributions before requalifying for RIC treatment. The Fund also 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.
The Fund may be subject to a 4% nondeductible excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary (taxable) income for that year and capital gain net income for the
one-year period ending October 31 of that year, plus certain other amounts. To
avoid the application of this excise tax, 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.
Distributions by the Fund that are designated by it as "exempt-interest
dividends" generally may be excluded from gross income. Distributions by the
Fund of net capital gain, when designated as such, are taxable as long-term
capital gains, regardless of the length of time of share ownership. 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
regardless of whether they are received in cash or reinvested in additional Fund
shares, even if the value of shares is below cost. If investors purchase shares
shortly before a taxable distribution (i.e., any distribution other than an
exempt-interest dividend paid by the Fund), they must pay income taxes on the
distribution, even though the value of the investment (plus cash received, if
any) remains the same. In addition, the share price at the time investors
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 as a capital gain
distribution and will be taxable.
Dividends from the Fund's investment company taxable income together with
distributions from net realized short-term capital gains, if any (collectively,
"dividend distributions"), will be taxable to U.S. shareholders, including
certain non-qualified retirement plans, as ordinary income to the extent of the
Fund's earnings and profits, whether received in cash or reinvested in
additional Fund shares. Distributions by the Fund of net capital gain, when
designated as such, are taxable as long-term capital gains, regardless of the
length of time of share ownership. The Fund is not expected to realize long-term
capital gains, or, therefore, to make distributions of net capital gain (the
excess of net long-term capital gain over net short-term capital loss). Nor will
dividends paid by the Fund be eligible for the dividends-received deductions
allowed to corporations.
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 Massachusetts taxation in the same percentage of the day's dividend
as the actual interest on Massachusetts Municipal Obligations earned on that
day.
Dividends paid by the Fund to qualified retirement plans ordinarily will
not be subject to taxation until the proceeds are distributed from the plans.
The Fund will not report to the Internal Revenue Service ("IRS") distributions
paid to such plans. Generally, distributions from Qualified Retirement Plans,
except those representing returns of non-deductible contributions thereto, will
be taxable as ordinary income and, if made prior to the time the participant
reaches age 59 1/2, generally will be subject to an additional tax equal to 10%
of the taxable portion of the distribution. The administrator, trustee or
custodian of a qualified retirement plan will be responsible for reporting
distributions from the plan to the IRS. Moreover, certain contributions to a
qualified retirement plan in excess of the amounts permitted by law may be
subject to an excise tax. If a distributee of an "eligible rollover
distribution" from a qualified retirement plan does not elect to have the
distribution paid directly from the plan to an eligible retirement plan in a
"direct rollover," the distribution is subject to a 20% income tax withholding.
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.
In January of each year, the Fund will send shareholders a Form 1099-DIV
notifying them of the status for federal income tax purposes of their dividends
from the Fund 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.
Shareholders must furnish the Fund with their TIN and state whether they
are subject to backup withholding for prior under-reporting, certified under
penalties of perjury. Unless previously furnished, investments received without
such a certification will be returned. The Fund is required to withhold 31% of
all dividends payable to any individuals and certain other non-corporate
shareholders who do not provide the Fund with a correct TIN or who otherwise are
subject to backup withholding. A TIN is either the Social Security number, IRS
individual taxpayer identification number, or employer identification number of
the record owner of an account. Any tax withheld as a result of backup
withholding does not constitute an additional tax imposed on the record owner
and may be claimed as a credit on the record owner's Federal income tax return.
State and Local Taxes. Depending upon the extent of its activities in
states and localities in which it is deemed to be conducting business, the Fund
may be subject to the tax laws thereof. 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 the
Fund is "effectively connected" with a U.S. trade or business carried on by the
shareholder, as discussed below. Special U.S. federal income tax rules that
differ from those described below may apply to certain foreign persons who
invest in the Fund such as a foreign shareholder entitled to claim the benefits
of an applicable tax treaty. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of an
investment in the Fund.
Foreign Shareholders - Dividends. Dividends (other than exempt-interest
dividends) distributed to a foreign shareholder whose ownership of Fund shares
is not effectively connected with a U.S. trade or business carried on by the
foreign shareholder ("effectively connected") generally will be subject to a
U.S. federal withholding tax of 30% (or lower treaty rate). If a foreign
shareholder's ownership of Fund shares is effectively connected, however, then
all distributions to that shareholder will not be subject to such withholding
and instead 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.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of the Fund, that they own at the time of their death. Certain
credits against that tax and relief under applicable tax treaties may be
available.
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.
Returned Checks. If an investor elects to receive dividends in cash, and
the investor's dividend check is returned to the Fund as undeliverable or
remains uncashed for six months, the Fund reserves the right to reinvest that
dividend and all future dividends payable in additional Fund shares at NAV. No
interest will accrue on amounts represented by uncashed dividend or redemption
checks.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund by
Dreyfus. Debt securities purchased and sold by the 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 Fund 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 Fund 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 the 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. Dreyfus may
use research services of and place brokerage commissions with broker-dealers
affiliated with it or Mellon Bank if the commissions are reasonable, fair and
comparable to commissions charged by non-affiliated firms for similar services.
Dreyfus is authorized to allocate purchase and sale orders for portfolio
securities to certain financial institutions, including, in the case of agency
transactions, financial institutions that are affiliated with Dreyfus or Mellon
Bank or that have sold shares of the Fund, if Dreyfus believes that the quality
of the transaction and the commission are comparable to what they would be with
other qualified brokerage firms.
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 Dreyfus in carrying out its obligation to the Fund. The receipt of
such research services does not reduce the normal independent research
activities of Dreyfus; however, it enables Dreyfus to avoid the additional
expenses which might otherwise be incurred if it were to attempt to develop
comparable information through its own staff.
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.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund 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 Fund are concerned. In other cases,
however, the ability of the fund to participate in volume transactions will
produce better executions for the Fund. 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 Fund outweighs
any disadvantages that may be said to exist from exposure to simultaneous
transactions.
The Fund paid no stated brokerage commissions for the fiscal years ended
June 30, 1999, 1998 and 1997.
INFORMATION ABOUT THE FUND/TRUST
Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. Fund shares
are without par value, have no preemptive or subscription rights, and are freely
transferable.
The Trust is a "series fund," which is a mutual fund divided into separate
portfolios, each of which is treated as a separate entity for certain matters
under the 1940 Act and for other purposes. A shareholder of one portfolio is not
deemed to be a shareholder of any other portfolio. For certain matters
shareholders vote together as a group; as to others they vote separately by
portfolio. The Trustees have authority to create an unlimited number of shares
of beneficial interest, without par value, in separate series. 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.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Trust to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Trustees or the
appointment of auditors. However, the holders of at least 10% of the shares
outstanding and entitled to vote may require the Trust to hold a special meeting
of shareholders for purposes of removing a Trustee from office. 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.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an investment
company, such as the Trust, will not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each series affected by such matter. Rule 18f-2 further provides that a series
shall be deemed to be affected by a matter unless it is clear that the interests
of each series in the matter are identical or that the matter does not affect
any interest of such series. The Rule exempts the selection of independent
accountants and the election of Trustees from the separate voting requirements
of the Rule.
The Fund will send annual and semi-annual financial statements to all of
its shareholders.
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.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, serves as the Trust's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Trust, the
Transfer Agent arranges for the maintenance of shareholder account records for
the Trust, 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 Trust during the
month, and is reimbursed for certain out-of-pocket expenses.
Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as the custodian of the Fund's investments.
Under a custody agreement with the Trust, Mellon Bank holds the Fund's portfolio
securities and keeps all necessary accounts and records. 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.
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 LLP, 757 Third Avenue, New York, NY 10017, was appointed by the Board
of Trustees to serve as the Fund's independent auditors for the year ending June
30, 2000 providing audit services including (1) examination of the annual
financial statements, (2) assistance, review and consultation in connection with
SEC filings and (3) review of the annual Federal income tax return filed on
behalf of the Fund.
FINANCIAL STATEMENTS
The financial statements of the Fund for the fiscal year ended June 30,
1999, 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.
<PAGE>
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 recovery
following a slowdown that began in mid-1988. Massachusetts had benefited from an
annual job growth rate of approximately 2% since the early 1980's, but by 1989
employment started to decline. Between 1988 and 1992, total employment in
Massachusetts declined 10.7%. With the economic recovery that began in 1993,
however, employment levels have increased. Since 1994, total employment levels
have increased at yearly rates greater than or equal to 2.0%. In 1995, 1996 and
1997, total employment increased by 2.5%, 2.0% and 2.7%, respectively.
Employment levels increased in all sectors, including 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 (4.0% compared to 4.9% in 1997)
and the employment population ratio in Massachusetts in 1996 and 1997 was
slightly above the national average (66.4% compared to 63.2% for 1996 and 66.2%
compared with 63.8% for 1997).
Massachusetts ended each of the fiscal years 1994 to 1998 with a positive
closing fund balance in its budgeted operating funds, and expects to do so again
at the close of fiscal 1999.
In recent years, health 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. However, the rate of increase has abated in recent years,
due to a number of savings and cost-cutting initiatives, such as managed care
and utilization review. During fiscal years 1994, 1995, 1996, 1997 and 1998,
Medicaid expenditures were $3.313 billion, $3.398 billion, $3.416 billion,
$3.456 billion, and $3.666 billion, respectively. The average annual growth rate
from fiscal 1994 to fiscal 1998 was 2.1%. It is estimated that in fiscal 1999,
Medicaid expenditures will be $3.892.7 billion, an increase of 6.2% from fiscal
1998.
Massachusetts' pension costs have risen 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 rate of 3.54% from
$908.9 million in fiscal 1994 to $1.07 billion in fiscal 1998. The pension costs
in 1999 are estimated to be $990.8 billion.
Payments for debt service on Massachusetts general obligation bonds and
notes have risen at an average annual rate of 1.11% from $1.15 billion in fiscal
1994 to $1.21 billion in fiscal 1998. State law 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 April 1, 1999 the State
had approximately $15.5 billion of long-term general obligation debt outstanding
and short-term direct obligations of the Commonwealth totaled $464.2 million.
Certain independent authorities and agencies within the State are
statutorily authorized to use 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 22, to constrain
levels of property taxation and to limit the charges and fees imposed on cities
and towns by 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 22 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 22 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. Propositions 22 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 22 on local programs and services. In fiscal
1999, approximately 21.2% of Massachusetts' budgeted expenditures were allocated
to Local Aid.
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 effects, if any, such factors would have on Massachusetts'
Municipal Obligations cannot be predicted.
<PAGE>
APPENDIX B
Municipal Bond, Municipal Note, Bond, Note and Commercial Paper Ratings
S&P
Municipal Bond and 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 and 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 and 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 characteristics 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 midrange ranking; and the
modifier 3 indicates a ranking in the lower end of a rating category.
Municipal Note, Note 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:
1 Leading market positions in well-established industries.
2 High rates of return on funds employed.
3 Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
4 Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
5 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 IBCA, Inc. ("Fitch")
Municipal Bond and 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.
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")
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-
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.
- ------------------------------------------------------------------------------
DREYFUS BASIC NEW YORK MUNICIPAL MONEY MARKET FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
NOVEMBER 1, 1999
- ------------------------------------------------------------------------------
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 (the "Fund"), dated November
1, 1999, 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,
that is registered with the Securities and Exchange Commission ("SEC"). 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. -- Call 516-794-5452
TABLE OF CONTENTS
PAGE
Description of The Fund/Trust..............................................B-2
Management of The Fund.....................................................B-13
Management Arrangements....................................................B-19
Purchase of Shares.........................................................B-21
Redemption of Shares.......................................................B-24
Shareholder Services.......................................................B-28
Determination of Net Asset Value...........................................B-31
Performance Information....................................................B-32
Dividends, Other Distributions and Taxes...................................B-34
Portfolio Transactions.....................................................B-38
Information About The Fund/Trust...........................................B-39
Transfer and Dividend Disbursing Agent, Custodian, Counsel and
Independent Auditors.......................................................B-41
Financial Statements.......................................................B-42
Appendix A.................................................................B-43
Appendix B.................................................................B-68
<PAGE>
DESCRIPTION OF THE FUND
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
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 was changed
from "Dreyfus/Laurel New York Tax-Free Money Fund" to "Dreyfus BASIC New York
Municipal Money Market Fund."
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
General 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" or "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 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'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 under 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. 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 ("NAV") 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.
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. The Fund
is authorized to borrow up to 10% of its total assets for temporary or emergency
purpose and to pledge its assets to the same extent in connection with such
borrowings.
Certain Portfolio Securities
Description of Municipal Obligations. "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 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
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 Standard & Poor's
("S&P") and Moody's Investors Services, Inc. ("Moody's") represent the opinions
of these agencies as to the quality of Municipal Obligations which they rate. It
should be emphasized, however, that such ratings are relative and subjective and
are not absolute standards of quality. These ratings will be used by the Fund as
initial criteria for the selection of portfolio securities, but the Fund will
also rely upon the independent advice of Dreyfus to evaluate potential
investments. Among the factors which will be considered are the short-term and
long-term ability of the issuer to pay principal and interest and general
economic trends. Further information concerning the ratings of the NRSROs and
their significance is contained in the Appendix B to this Statement of
Additional Information.
After being purchased by the Fund, the rating of a Municipal Obligation
may be reduced below the minimum rating required for purchase by the Fund or the
issuer of the Municipal Obligation may default on its obligations with respect
to the Municipal Obligation. In that event, the Fund will dispose of the
Municipal Obligation as soon as practicable, consistent with achieving an
orderly disposition of the Municipal Obligation, unless the Trust's Board of
Trustees determines that disposal of the Municipal Obligation would not be in
the best interest of the Fund. In addition, it is possible that a Municipal
Obligation may cease to be rated or an NRSRO might not timely change its rating
of a particular Municipal Obligation to reflect subsequent events. Although
neither event will require the sale of such Municipal Obligation by the Fund,
Dreyfus will consider such event in determining whether the Fund should continue
to hold the Municipal Obligation. In addition, if an NRSRO changes its rating
system, the Fund will attempt to use comparable ratings as standards for its
investments in accordance with its investment objective and policies.
Floating Rate and Variable Rate Obligations. The Fund may purchase
floating rate and variable rate obligations, including participation interests
therein. Floating rate or variable rate obligations provide that the rate of
interest is set as a specific percentage of a designated base rate (such as the
prime rate at a major commercial bank) and that the Fund can demand payment of
the obligation at par plus accrued interest. Variable rate obligations provide
for a specified periodic adjustment in the interest rate, while floating rate
obligations have an interest rate which changes whenever there is a change in
the external interest rate. Frequently such obligations are secured by letters
of credit or other credit support arrangements provided by banks. The quality of
the underlying creditor or of the bank, as the case may be, must, as determined
by Dreyfus under the supervision of the Trustees, be equivalent to the quality
standard prescribed for the Fund. 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 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
generally 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 1940 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 0.5 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 ("IRS") 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.
Custodial Receipts. The Fund may purchase securities, frequently referred
to as "custodial receipts," representing the right to receive future principal
and interest payments on municipal obligations underlying such receipts. A
number of different arrangements are possible. In a typical custodial receipt
arrangement, an issuer or a third party owner of a municipal obligation deposits
such obligation with a custodian in exchange for two or more classes of
receipts. The class of receipts that the Fund may purchase has the
characteristics of a typical tender option security backed by a conditional
"put," which provides the holder with the equivalent of a short-term variable
rate note. At specified intervals, the interest rate for such securities is
reset by the remarketing agent in order to cause the securities to be sold at
par through a remarketing mechanism. If the remarketing mechanism does not
result in a sale, the conditional put can be exercised. In either event, the
holder is entitled to full principal and accrued interest to the date of the
tender or exercise of the "put." The "put" may be terminable in the event of a
default in payment of principal or interest on the underlying municipal
obligation and for other reasons. Before purchasing such security, Dreyfus is
required to make certain determinations with respect to the likelihood of, and
the ability to monitor, the occurrence of the conditions that would result in
the put not being exercisable. The interest rate for these receipts generally is
expected to be below the coupon rate of the underlying municipal obligations and
generally is at a level comparable to that of a municipal obligation of similar
quality and having a maturity equal to the period between interest rate
readjustments. These custodial receipts are sold in private placements. The Fund
also may purchase directly from issuers, and not in a private
placement, municipal obligations having the characteristics similar to the
custodial receipts in which the Fund may invest.
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.
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 New York State and New York City personal income
taxes, the Fund will invest in taxable obligations only if and when Dreyfus
believes 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 illiquid securities, securities without readily available market
quotations and repurchase agreements maturing in more than seven days.
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.
Special Factors Affecting the Fund
Investing in New York Municipal Obligations. You should review the
information in "Appendix A," which provides a brief summary of special
investment considerations and risk factors relating to investing in New York
Municipal Obligations.
Certain Investments. 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, N.A. ("Mellon Bank"), an
affiliate of Dreyfus, has a lending relationship.
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 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.
Fundamental. The following limitations have been adopted by the Fund. The
Fund may not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of shareholders
duly called if the holders of more than 50% of the outstanding shares of the
Fund are present or represented by proxy; or (b) more than 50% of the
outstanding shares of the Fund, whichever is less. 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 1940 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 objective, policies, and restrictions as the Fund.
Nonfundamental. The Fund has adopted the following additional
non-fundamental restrictions. These non-fundamental restrictions may be
changed without shareholder approval, in compliance with applicable law and
regulatory policy.
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 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.
3. 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 New York Stock Exchange ("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).
4. 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.
5. 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 1940 Act.
6. 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).
7. 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.
8. 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.
9. 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.
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.
MANAGEMENT OF THE FUND
Federal Law Affecting Mellon Bank
The Glass-Steagall Act of 1933 prohibits national banks from engaging in
the business of underwriting, selling or distributing securities and prohibits a
member bank of the Federal Reserve System from having certain affiliations with
an entity engaged principally in that business. The activities of Mellon Bank in
informing its customers of, and performing, investment and redemption services
in connection with the Fund, and in providing services to the Fund 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 its statutory and
regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of such
future statutes and regulations, could prevent Mellon Bank or Dreyfus from
continuing to perform all or a part of the above services for its customers
and/or the Fund. If Mellon Bank or Dreyfus were prohibited from serving the Fund
in any of its present capacities, the Board of Trustees would seek an
alternative provider(s) of such services.
Trustees and Officers of the Trust
The Trust's Board is responsible for the management and supervision of the
Fund. The Board approves all significant agreements between the Trust, on behalf
of the Fund, and those companies that furnish services to the Fund. These
companies are as follows:
The Dreyfus Corporation...............................Investment Adviser
Premier Mutual Fund Services, Inc............................Distributor
Dreyfus Transfer, Inc.....................................Transfer Agent
Mellon Bank.......................................Custodian for the Fund
The Trust has a Board composed of nine Trustees. 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") and the Dreyfus High
Yield Strategies Fund.
Trustees of the Trust
o+JOSEPH S. DIMARTINO. Chairman of the Board 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 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 packager and distributor;
Century Business Services, Inc. (formerly, International Alliance
Services, Inc.), a provider of various outservicing functions for small
and medium sized companies; and Career Blazers, Inc. (formerly Staffing
Resources, Inc.), a temporary placement agency. For more than five
years prior to January 1995, he was President, a director and, until
August 24, 1994, Chief Operating Officer of Dreyfus and Executive Vice
President and a director of Dreyfus Service Corporation, a wholly-owned
subsidiary of Dreyfus. From August 1994 to December 31, 1994, he was a
director of Mellon Bank Corporation. Age: 56 years old. Address: 200
Park Avenue, New York, New York 10166.
o+JAMES M. FITZGIBBONS. Trustee of the Trust; Director, Lumber Mutual
Insurance Company; Director, Barrett Resources, Inc.; Chairman of the
Board, Davidson Cotton Company; former Chairman of the Board and CEO of
Fieldcrest Cannon, Inc. Age: 65 years old. Address: 40 Norfolk Road,
Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Trustee of the Trust; Of Counsel, Reed, Smith, Shaw &
McClay (law firm). Age: 71 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Trustee of the Trust; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; former Chairman of the Board
and Director, Rexene Corporation. Age: 77 years old. Address: Way
Hollow Road and Woodland Road, Sewickley, Pennsylvania 15143.
o+KENNETH A. HIMMEL. Trustee of the Trust; President and CEO, The Palladium
Company; President and CEO, Himmel and Company, Inc.; CEO, American
Food Management; former Director, The Boston Company, Inc. ("TBC"), and
Boston Safe Deposit and Trust Company, each an affiliate of Dreyfus.
Age: 53 years old. Address: 625 Madison Avenue, New York, New York
10022.
o+STEPHEN J. LOCKWOOD. Trustee of the Trust; Chairman and CEO, LDG
Reinsurance Corporation; Vice Chairman, HCCH. Age: 52 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; Member of Advisory Committee, Decedents Estates Laws of
Pennsylvania. Age: 68 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
Health Care, Inc.; Director, Massachusetts Electric Company; Director,
the Hyams Foundation, Inc. Age: 50 years old. Address: 25 Braddock
Park, Boston, Massachusetts 02116-5816.
o+BENAREE PRATT WILEY. Trustee of the Trust; President and CEO of The
Partnership, an organization dedicated to increasing the representation
of African Americans in positions of leadership, influence and
decision-making in Boston, MA; Trustee, Boston College; Trustee, WGBH
Educational Foundation; Trustee, Children's Hospital; Director, The
Greater Boston Chamber of Commerce; Director, The First Albany
Companies, Inc.; from April 1995 to March 1998, Director, TBC. Age: 53
years old. Address: 334 Boylston Street, Suite 400, Boston,
Massachusetts.
- -----------------------------
* "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
#MARGARET W. CHAMBERS. Vice President and Secretary of the Trust. Senior Vice
President and General Counsel of Funds Distributor, Inc. From August 1996
to March 1998, she was Vice President and Assistant General Counsel for
Loomis, Sayles & Company, L.P. From January 1986 to July 1996, she was an
associate with the law firm of Ropes & Gray. Age: 40 years old.
#MARIE E. CONNOLLY. President and Treasurer of the Trust. President, Chief
Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which
is Boston Institutional Group, Inc. Age: 42 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. Age: 30 years old.
#JOHN P. COVINO. Vice President and Assistant Treasurer of the Trust. Vice
President and Treasury Group Manager of Treasury Servicing and
Administration of Funds Distributor, Inc. since December 1998. From
December 1995 to November 1998, he was employed by Fidelity Investments
where he held multiple positions in their Institutional Brokerage
Group. Prior to joining Fidelity, he was employed by SunGard Brokerage
Systems where he was responsible for the technology and development of
the accounting product group. Age: 36 years old.
#FREDRICK C. DEY. Vice President, Assistant Treasurer and Assistant
Secretary of the Trust. Vice President of New Business Development of
Funds Distributor, Inc. Age: 37 years old.
#CHRISTOPHER J. KELLEY. Vice President and Assistant Secretary of the
Trust. Vice President and Senior Associate General Counsel of Funds
Distributor, Inc. From April 1994 to July 1996, he was Assistant
Counsel at Forum Financial Group. Age: 34 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the Trust.
Manager of Treasury Services Administration of Funds Distributor, Inc.
From July 1994 to November 1995, she was a Fund Accountant for
Investors Bank & Trust Company. Age: 27 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Trust. Vice
President of the Distributor and Funds Distributor, Inc. Age: 35 years
old.
#STEPHANIE D. PIERCE. Vice President, Assistant Treasurer and Assistant
Secretary of the Trust. Vice President of the Distributor and Funds
Distributor, Inc. From April 1997 to March 1998, she was employed as a
Relationship Manager with Citibank, N.A. From August 1995 to April
1997, she was an Assistant Vice President with Hudson Valley Bank, and
from September 1990 to August 1995, she was a Second Vice President
with Chase Manhattan Bank. Age: 31 years old.
#GEORGE A. RIO. Vice President and Assistant Treasurer of the Trust.
Executive Vice President and Client Service Director of Funds
Distributor, Inc. From June 1995 to March 1998, he was Senior Vice
President and Senior Key Account Manager for Putnam Mutual Funds. From
May 1994 to June 1995, he was Director of Business Development for
First Data Corporation. Age: 44 years old.
#JOSEPH F. TOWER, III. Vice President and Assistant Treasurer of the Trust.
Senior Vice President, Treasurer, Chief Financial Officer and a
director of the Distributor and Funds Distributor, Inc. Age: 37 years
old.
#ELBA VASQUEZ. Vice President and Assistant Secretary of the Trust.
Assistant Vice President of Funds Distributor, Inc. From March 1990 to
May 1996, she was employed by U.S. Trust Company of New York, where she
held various sales and marketing positions. Age: 37 years old.
#KAREN JACOPPO-WOOD. Vice President and Assistant Secretary of the Trust.
Vice President and Senior Counsel of Funds Distributor, Inc. since
February 1997. From June 1994 to January 1996, she was manager of SEC
Registration at Scudder, Stevens & Clark, Inc. Age: 32 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. In addition, 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" of the Trust (as defined in the 1940 Act) $40,000 per
annum, plus $5,000 per joint Dreyfus/Laurel Funds Board meeting attended, $2,000
for separate committee meetings attended which are not held in conjunction with
a regularly scheduled Board meeting and $500 for Board meetings and separate
committee meetings attended that are conducted by telephone. The Dreyfus/Laurel
Funds also reimburse each Director/Trustee who is not an "interested person" of
the Trust (as defined in the 1940 Act) for travel and out-of-pocket expenses.
The Chairman of the Board receives an additional 25% of such compensation (with
the exception of reimbursable amounts). In the event that there is a joint
committee meeting of the Dreyfus/Laurel Funds and the Dreyfus High Yield
Strategies Fund, the $2,000 fee will be allocated between the Dreyfus/Laurel
Funds and the Dreyfus High Yield Strategies Fund.
In addition, the Trust currently has three Emeritus Board members who are
entitled to receive an annual retainer and a per meeting fee of one-half the
amount paid to them as Board members.
The aggregate amount of fees and expenses received by each current Trustee
from the Trust for the fiscal year ended June 30, 1999, and from all other funds
in the Dreyfus Family of Funds for which such person was a Board member (the
number of which is set forth in parentheses next to each Board member's total
compensation)* during the year ended December 31, 1998 were as follows: Total
Compensation Aggregate From the Trust and Name of Board Compensation Fund
Complex Paid Member From the to Board Member Trust#
Total Compensation
Aggregate From the Trust and
Name of Board Compensation Fund Comples Paid
Member From the Trust# to Board Member
Joseph S. DiMartino** $24,154 $ 619,660 (187)
James M. Fitzgibbons $20,666 $ 60,010 (31)
J. Tomlinson Fort*** None None (31)
Arthur L. Goeschel $22,333 $ 61,010 (31)
Kenneth A. Himmel $18,133 $ 50,260 (31)
Stephen J. Lockwood $20,000 $ 51,010 (31)
John J. Sciullo $21,666 $ 59,010 (31)
Roslyn M. Watson $22,333 $ 61,010 (31)
Benaree Pratt Wiley $20,000 $ 49,628 (31)****
- ----------------------------
# Amounts required to be paid by the Trust directly to the non-interested
Trustees, that would be applied to offset a portion of the management fee
payable to Dreyfus, are in fact paid directly by Dreyfus to the
non-interested Trustees. Amount does not include reimbursed expenses for
attending Board meetings, which amounted to $2,795.30 for the Trust.
* Represents the number of separate portfolios comprising the investment
companies in the Fund complex, including the Trust, for which the Board
member served.
** Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
*** J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board member
of the Trust and the funds in the Dreyfus/Laurel Funds and separately by
the Dreyfus High Yield Strategies Fund. For the fiscal year ended June 30,
1999, the aggregate amount of fees received by J. Tomlinson Fort from
Dreyfus for serving as a Board member of the Trust was $21,666. For the
year ended December 31, 1998, the aggregate amount of fees received by Mr.
Fort for serving as a Board member of all funds in the Dreyfus/Laurel Funds
(including the Trust) and Dreyfus High Yield Strategies Fund (for which
payment is made directly by the fund) was $59,010. In addition, Dreyfus
reimbursed Mr. Fort a total of $1,117.68 for expenses attributable to the
Trust's Board meetings which is not included in the $2,795.30 amount in
note # above.
**** Represents payment for the period from April 23, 1998 (the date she was
elected as a Board member) through December 31, 1998.
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 4, 1999.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Expenses" and "Management."
Dreyfus is a wholly-owned subsidiary of Mellon Financial Corporation
("Mellon"). Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal 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 25 largest bank holding companies in the United States based
on total assets.
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Trust (the
"Investment Management Agreement") dated December 8, 1995, which was last
approved by the Trust's Board of Trustees on February 4, 1999 to continue until
April 4, 2000 and approved by Fund shareholders on December 6, 1995. 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. The Investment Management
Agreement is subject to review and approval at least annually by the Board of
Trustees.
The Investment Management Agreement will continue from year to year
provided that a majority of the Trustees who are not "interested persons" of the
Trust and either a majority of all Trustees or a majority (as defined in the
1940 Act) of the shareholders of the Fund approve its continuance. The Trust 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 Trust. The Investment Management Agreement will terminate immediately and
automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment Officer
and a director; Thomas F. Eggers, Vice Chairman Institutional and a director;
Lawrence S. Kash, Vice Chairman and a director; Ronald P. O'Hanley III, Vice
Chairman; J. David Officer, Vice Chairman and a director; William T. Sandalls,
Jr., Executive Vice President; Mark N. Jacobs, Vice President, General Counsel
and Secretary; Diane P. Durnin, Vice President-Product Development; Patrice M.
Kozlowski, Vice President-Corporate Communications; Mary Beth Leibig, Vice
President-Human Resources; Andrew S. Wasser, Vice-President-Information Systems;
Theodore A. Schachar, Vice President; Wendy Strutt, Vice President; Richard
Terres, Vice President; William H. Maresca, Controller; James Bitetto, Assistant
Secretary; Steven F. Newman, Assistant Secretary; and Mandell L. Berman, Burton
C. Borgelt, Steven G. Elliott, Martin C. McGuinn, Richard W. Sabo and Richard F.
Syron, directors.
Under Dreyfus' personal securities trading policy ("the Policy"), Dreyfus
employees must preclear personal transactions in securities not exempt under the
Policy. In addition, Dreyfus employees must report their personal securities
transactions and holdings, which are reviewed for compliance with the Policy. In
that regard, Dreyfus' portfolio managers and other investment personnel also are
subject to the oversight of Mellon's Investment Ethics Committee. Dreyfus
portfolio managers and other investment personnel who comply with the Policy's
preclearance and disclosure procedures, and the requirements of the Committee,
may be permitted to purchase, sell or hold securities which also may be or are
held in fund(s) they manage or for which they otherwise provide investment
advice.
Expenses. 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 0.45
of 1% of the value of the Fund's average daily net assets. 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.
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
expense ratio of the Fund and increasing return to investors. Expenses
attributable to the Fund are charged against the Fund's assets; other expenses
of the Trust are allocated among its funds on the basis determined by the
Trustees, including, but not limited to, proportionately in relation to the net
assets of each fund. Dreyfus may waive all or a portion of its fees payable by
the Fund from time to time.
For the last three fiscal years, the Fund has had the following expenses:
For the Fiscal Year Ended June 30,
1999 1998 1997(1)
Advisory and/or $1,526,997 $1,435,212 $974,598
Management Fee
- ----------------
1.For the fiscal year ended June 30, 1997, the management fee payable by the
Fund amounted to $1,069,299, which amount was reduced by $94,701 pursuant to
undertakings then in effect, resulting in a net fee paid to Dreyfus of
$974,598 for fiscal 1997.
The Distributor. Premier Mutual Fund Services, Inc. (the "Distributor"),
located at 60 State Street, Boston, Massachusetts 02109, serves as the Fund's
distributor on a best efforts basis pursuant to an agreement which is renewable
annually. 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 certain
banks, securities brokers or dealers and other financial institutions ("Agents")
for these services. The Distributor also acts as sub-administrator for the Fund
and as distributor for the other funds in the Dreyfus Family of Funds.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies,"
"Services for Fund Investors," "Instructions for Regular Accounts."
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 an Agent. Share certificates are
issued only upon 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 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, you should call the telephone number listed on the cover of
this Statement of Additional Information.
Wire payments may be made if your bank account is in a commercial bank
that is a member of the Federal Reserve System or any other bank having a
correspondent bank in New York City. Immediately available funds may be
transmitted by wire to Boston Safe Deposit and Trust Company, DDA# 043508
Dreyfus BASIC New York Municipal Money Market Fund, for purchase of Fund shares
in your name. The wire must include your Fund account number (for new accounts,
your Taxpayer Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable. If your initial purchase of Fund
shares is by wire, you should call 1-800-645-6561 after completing the wire
payment to obtain the Fund account number. You should 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 investors to a $50
penalty imposed by the IRS.
Net Asset Value Per Share. 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. See "Determination of Net Asset Value."
The offering price of Fund shares is their NAV. Investments and requests
to exchange or redeem shares received by the Transfer Agent or other entity
authorized to receive orders on behalf of the Fund before 4 p.m., Eastern time,
on each day that the NYSE is open (a "business day") are effective, and will
receive the price next determined, on 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, and receive the first share price determined, on the next
business day.
Dreyfus TeleTransfer Privilege. You may purchase Fund shares by telephone
through 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. 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 that is an ACH member may be so designated. Dreyfus TeleTransfer
purchase orders may be made at the Transfer Agent any time. Purchase orders
received by 4:00 p.m., New York time, on any business day that the Transfer
Agent and the 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 shareholder's 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 ofDreyfus
TeleTransfer Privilege." 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.
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the calendar
year the account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.
In-Kind Purchases. If the following conditions are satisfied, the Fund may
at its discretion, permit the purchase of shares through an "in-kind" exchange
of securities. Any securities exchanged must meet the investment objective,
policies and limitations of the Fund, must have a readily ascertainable market
value, must be liquid and must not be subject to restrictions on resale. The
market value of any securities exchanged, plus any cash, must be at least equal
to $25,000. Shares purchased in exchange for securities generally cannot be
redeemed for fifteen days following the exchange in order to allow time for the
transfer to settle.
The basis of the exchange will depend upon the relative NAV of the shares
purchased and securities exchanged. Securities accepted by the Fund will be
valued in the same manner as the Fund values its assets. Any interest earned on
the securities following their delivery to the Fund and prior to the exchange
will be considered in valuing the securities. All interest, dividends,
subscription or other rights attached to the securities become the property of
the Fund, along with the securities. For further information about "in-kind"
purchases, call 1-800-645-6561.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies," "Services
For Fund Investors," "Instructions for Regular Accounts."
General. You may request redemption of Fund shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When a
request is received in proper form by the Transfer Agent or other entity
authorized to receive orders on behalf of the Fund, 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 Transfer Agent, the redemption proceeds will
be transmitted to the investor promptly upon bank clearance of the 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.
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. 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 TeleTransfer
Privilege.
The Telephone Redemption Privilege, the Dreyfus TeleTransfer Privilege or
Telephone Exchange Privilege authorizes the Transfer Agent to act on telephone
instructions (including over The Dreyfus Touch(R) 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, you should call the telephone number listed on the
cover of this Statement of Additional 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.
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 ("Checks")
drawn on a Fund account. The Fund provides Checks automatically upon opening an
account, unless you 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 your 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). An investor (other than one who has held Fund
shares since December 8, 1995) will be charged $2.00 for each check redemption.
When a Check is presented to the Transfer Agent for payment, the Transfer Agent,
as the investor's agent, will cause the Fund to redeem a sufficient number of
full or fractional 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. Checks
are free but the Transfer Agent will impose a fee for stopping payment of a
Check upon request or if the Transfer Agent cannot honor a Check because of
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. Investors should date Checks with the current date
when writing them. Please do not postdate Checks. If Checks are postdated, the
Transfer Agent will honor, upon presentment, even if presented before the date
of the Check, all postdated Checks which are dated within six months of
presentment for payment, if they are otherwise in good order.
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. However, the Fund will waive the 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. 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 usually 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. Holders of jointly registered Fund or bank accounts may have redemption
proceeds of only up to $250,000 wired within any 30-day period. Investors may
telephone redemption requests by calling 1-800-645-6561 or, if calling from
overseas, 516-794-5452.
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.
To change the commercial bank or account designated to receive redemption
proceeds, a written request must be sent to the Transfer Agent. This request
must be signed by each shareholder, with each signature guaranteed as described
below under "Share Certificates; Signatures."
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 $1000 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 designated. 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. Investors should be aware that if they have
selected the Dreyfus TeleTransfer Privilege, any request for a wire redemption
will be effected as a Dreyfus TeleTransfer transaction through the ACH system
unless more prompt transmittal specifically is requested. 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.
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.
Redemption Commitment. The Trust 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 Trust's Trustees 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 such 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 sections in the Fund's Prospectus entitled "Account Policies" and
"Services for Fund Investors".
Fund Exchanges. An investor may purchase, in exchange for shares of the
Fund, shares of certain other eligible funds advised or administered by Dreyfus,
to the extent such shares are offered for sale in an investor's state of
residence. These funds have different investment objectives which may be of
interest to investors. Investors wishing to use this service should call
1-800-645-6561 to determine if it is available and whether any conditions are
imposed on its use. Investors (other than those who have 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.
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.
Any such exchange is subject to confirmation of a shareholder's holdings through
a check of appropriate records.
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. Before any exchange, investors 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 the investor
checks the applicable "No" box on the Account Application, indicating that the
investor specifically refuses 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 signed 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. Investors who have previously established the Telephone Exchange
Privilege may telephone exchange instructions (including over The Dreyfus
Touch(R) automated telephone system) by calling 1-800-645-6561. If calling from
overseas, investors may call 516-794-5452. 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.
By using the Telephone Exchange Privilege, the investor authorizes the
Transfer Agent to act on telephonic instructions (including over The Dreyfus
Touch(R) automated telephone system) from any person representing himself or
herself to be the investor or a representative of the investor's Agent, and
reasonably believed by the Transfer Agent to be genuine. Telephone exchanges may
be subject to limitations as to the amount involved. Shares issued in
certificate form are not eligible for telephone exchange. Exchanges out of the
Fund pursuant to Fund Exchanges are limited to four per calendar year. The Fund
reserves the right, upon not less than 60 days' written notice, to charge
shareholders who have held Fund shares since December 8, 1995 a nominal fee for
each exchange 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 investors.
The exchange of shares of one fund for shares of another is treated for
Federal income tax purpose 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 allows investors to
invest automatically 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.
For more information concerning this Privilege, or to request a Dividend
Options Form, investors should call toll free 1-800-645-6561. Investors may
cancel their 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, investors 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.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies."
The NAV for Fund shares 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. 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 Fund intends to maintain a constant NAV of $1.00 per share,
although there is no assurance that this can be done on a continuing basis.
The use of amortized cost is permitted by Rule 2a-7 under the 1940 Act.
Pursuant to the provisions of Rule 2a-7, the Trustees have established
procedures reasonably designed to stabilize the Fund's price per share, as
computed for the purpose of sale and redemption, at $1.00. These procedures
include the determination of the Trustees, at such times as they deem
appropriate, of the extent of deviation, if any, of the Fund's current NAV per
share, using market values, from $1.00; periodic review by the Trustees of the
amount of and the methods used to calculate the deviation; maintenance of
records of the determination; and review of such deviations. The procedures
employed to stabilize the Fund's price per share require the Trustees to
consider promptly what action, if any, should be taken by the Trustees if such
deviation exceeds 1/2 of one percent. Such procedures also require the Trustees
to take appropriate action to eliminate or reduce, to the extent reasonably
practicable, material dilution or other unfair effects resulting from any
deviation. Such action may include: 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. In addition to such procedures, Rule 2a-7 requires the Fund to
purchase instruments having remaining maturities of 397 days or less, to
maintain a dollar-weighted average portfolio maturity of 90 days or less and to
invest only in securities determined by the Trustees to be of high quality, as
defined in Rule 2a-7, with minimal credit risks.
In periods of declining interest rates, the indicated daily yield on Fund
shares computed by dividing the annualized daily income on the Fund by the NAV
per share computed as above may tend to be higher than a similar computation
made by using a method of valuation based on market prices and estimates. In
periods of rising interest rates, the indicated daily yield on Fund shares
computed the same way may tend to be lower than a similar computation made by
using a method of calculation based upon market prices and estimates.
NYSE Closings. The holidays (as observed) on which the NYSE is
currently scheduled to be closed are: New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Past Performance"
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. 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 computes its current annualized and compound effective yields
using standardized methods required by the SEC. The annualized yield for the
Fund is computed by (a) determining the net change in the value of a
hypothetical account having a balance of one share at the beginning of a seven
calendar day period; (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 both the original share and such additional
shares, but does not include realized gains and losses or unrealized
appreciation and depreciation. Compound effective yields are computed by adding
1 to the base period return (calculated as described above), raising that sum to
a power equal to 365/7 and subtracting 1. The Fund's tax equivalent 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.
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the Fund's yield fluctuates, its yield cannot be compared
with yields on savings accounts or other investment alternatives that provide an
agreed-to or guaranteed fixed yield for a stated period of time. However, yield
information may be useful to an investor considering temporary investments in
money market instruments. In comparing the yield of one money market fund to
another, consideration should be given to the Fund's investment policies,
including the types of investments made, length of maturities of portfolio
securities, the methods used by the Fund to compute the yield (methods may
differ) and whether there are any special account charges which may reduce
effective yield.
For the seven-day period ended June 30, 1999, the Fund's yield was 2.87%,
effective yield was 2.91% and equivalent taxable yield* was 5.32%.
- --------
*Example assumes a Federal marginal tax rate of 39.6%, New York State marginal
tax rate of 6.85% and New York City marginal tax rate of 3.83% (combined
effective rate of 46.05%).
From time to time, advertising materials for the Fund may refer to
Morningstar ratings and related analyses supporting the rating.
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 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.
From time to time, advertising materials may refer to studies performed by
Dreyfus or its affiliates, such as "The Dreyfus Tax Informed Investing Study" or
"The Dreyfus Gender Investment Comparison Study (1996-1997)" or other such
studies.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the Section in the Fund's Prospectus entitled "Distributions and Taxes."
General. The Fund ordinarily declares dividends from net investment income
on each day that the NYSE 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 an
investor's option, paid in cash. If an investor redeems all shares in their
account at any time during the month, all dividends to which the investor is
entitled will be paid along with the proceeds of the redemption. If an omnibus
accountholder indicates 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 of his or her Fund shares, that portion of
the accrued dividends will be paid along with the proceeds of the redemption.
Dividends from net realized short-term capital 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 capital gains unless capital loss
carryovers, if any, have been utilized or have expired. The Fund does not expect
to realize any long-term capital gains or losses. Investors may choose whether
to receive dividends in cash or to reinvest them in additional Fund shares at
NAV. All expenses are accrued daily and deducted before declaration of dividends
to investors.
Except as provided below, shares of the Fund 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, investors may receive the dividend declared on the day of
purchase. Investors 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 continue to qualify for treatment as a
regulated investment company ("RIC") under the Code. 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. To qualify for treatment as a RIC under the Code, the
Fund - which is treated as a separate corporation for federal tax purposes - (1)
must distribute to its shareholders each year at least 90% of its investment
company taxable income (generally consisting of net taxable investment income
and net short-term capital gains, plus its net interest income excludable from
gross income under section 103(a) of the Code) ("Distribution Requirement"), (2)
must derive at least 90% of its annual gross income from specified sources
("Income Requirement"), and (3) must meet certain asset diversification and
other requirements. If the Fund failed to qualify for treatment as a RIC for any
taxable year, (1) it would be taxed at corporate rates on the full amount of its
taxable income for that year without being able to deduct the distributions it
makes to its shareholders and (2) the shareholders would treat all those
distributions, including distributions that otherwise would be "exempt-interest
dividends," as dividends (that is, ordinary income) to the extent of the Fund's
earnings and profits. In addition, the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest and make substantial
distributions before requalifying for RIC treatment. The Fund also 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.
The Fund may be subject to a 4% nondeductible excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary (taxable) income for that year and capital gain net income for the
one-year period ending October 31 of that year, plus certain other amounts. To
avoid the application of this excise tax, 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.
Distributions by the Fund that are designated by it as "exempt-interest
dividends" generally may be excluded from gross income. 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
regardless of whether they are received in cash or reinvested in additional Fund
shares, even if the value of shares is below cost. If investors purchase shares
shortly before a taxable distribution (i.e., any distribution other than an
exempt-interest dividend paid by the Fund), they must pay income taxes on the
distribution, even though the value of the investment (plus cash received, if
any) remains the same. In addition, the share price at the time investors
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 as a capital gain
distribution and will be taxable.
Dividends from the Fund's investment company taxable income together with
distributions from net realized short-term capital gains, if any (collectively,
"dividend distributions"), will be taxable to U.S. shareholders, including
certain non-qualified retirement plans, as ordinary income to the extent of the
Fund's earnings and profits, whether received in cash or reinvested in
additional Fund shares. Distributions by the Fund of net capital gain, when
designated as such, are taxable as long-term capital gains, regardless of the
length of time of share ownership. The Fund is not expected to realize long-term
capital gains, or, therefore, to make distributions of net capital gain (the
excess of net long-term capital gain over net short-term capital loss). Nor will
dividends paid by the Fund be eligible for the dividends-received deductions
allowed to corporations.
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 New York City and New York State taxation in the same percentage of the
day's dividend as the actual interest on New York Municipal Obligations earned
on that day.
Dividends paid by the Fund to qualified retirement plans ordinarily will
not be subject to taxation until the proceeds are distributed from the plans.
The Fund will not report to the IRS distributions paid to such plans. Generally,
distributions from Qualified Retirement Plans, except those representing returns
of non-deductible contributions thereto, will be taxable as ordinary income and,
if made prior to the time the participant reaches age 59 1/2, generally will be
subject to an additional tax equal to 10% of the taxable portion of the
distribution. The administrator, trustee or custodian of a qualified retirement
plan will be responsible for reporting distributions from the plan to the IRS.
Moreover, certain contributions to a qualified retirement plan in excess of the
amounts permitted by law may be subject to an excise tax. If a distributee of an
"eligible rollover distribution" from a qualified retirement plan does not elect
to have the distribution paid directly from the plan to an eligible retirement
plan in a "direct rollover," the distribution is subject to a 20% income tax
withholding.
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.
In January of each year, the Fund will send shareholders a Form 1099-DIV
notifying them of the status for federal income tax purposes of their dividends
from the Fund 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.
Shareholders must furnish the Fund with their TIN and state whether they
are subject to backup withholding for prior under-reporting, certified under
penalties of perjury. Unless previously furnished, investments received without
such a certification will be returned. The Fund is required to withhold 31% of
all dividends payable to any individuals and certain other non-corporate
shareholders who do not provide the Fund with a correct TIN or who otherwise are
subject to backup withholding. A TIN is either the Social Security number, IRS
individual taxpayer identification number, or employer identification number of
the record owner of an account. Any tax withheld as a result of backup
withholding does not constitute an additional tax imposed on the record owner
and may be claimed as a credit on the record owner's Federal income tax return.
State and Local Taxes. Depending upon the extent of its activities in
states and localities in which it is deemed to be conducting business, the Fund
may be subject to the tax laws thereof. 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 the
Fund is "effectively connected" with a U.S. trade or business carried on by the
shareholder, as discussed below. Special U.S. federal income tax rules that
differ from those described below may apply to certain foreign persons who
invest in the Fund such as a foreign shareholder entitled to claim the benefits
of an applicable tax treaty. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of an
investment in the Fund.
Foreign Shareholders - Dividends. Dividends (other than exempt-interest
dividends) distributed to a foreign shareholder whose ownership of Fund shares
is not effectively connected with a U.S. trade or business carried on by the
foreign shareholder ("effectively connected") generally will be subject to a
U.S. federal withholding tax of 30% (or lower treaty rate). If a foreign
shareholder's ownership of Fund shares is effectively connected, however, then
all distributions to that shareholder will not be subject to such withholding
and instead 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.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of the Fund, that they own at the time of their death. Certain
credits against that tax and relief under applicable tax treaties may be
available.
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 City and New York
State 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.
Returned Checks. If an investor elects to receive dividends in cash, and
the investor's dividend check is returned to the Fund as undeliverable or
remains uncashed for six months, the Fund reserves the right to reinvest that
dividend and all future dividends payable in additional Fund shares at NAV. No
interest will accrue on amounts represented by uncashed dividend or redemption
checks.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund by
Dreyfus. Debt securities purchased and sold by the 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 Fund 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 Fund 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 the 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.
Dreyfus may use research services of and place brokerage commissions with
broker-dealers affiliated with it or Mellon Bank if the commissions are
reasonable, fair and comparable to commissions charged by non-affiliated firms
for similar services.
Dreyfus is authorized to allocate purchase and sale orders for portfolio
securities to certain financial institutions, including, in the case of agency
transactions, financial institutions that are affiliated with Dreyfus or Mellon
Bank or that have sold shares of the Fund, if Dreyfus believes that the quality
of the transaction and the commission are comparable to what they would be with
other qualified brokerage firms.
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 Dreyfus in carrying out its obligation to the Fund. The receipt of
such research services does not reduce the normal independent research
activities of Dreyfus; however, it enables Dreyfus to avoid the additional
expenses which might otherwise be incurred if it were to attempt to develop
comparable information through its own staffs.
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.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund 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 Fund are concerned. In other cases,
however, the ability of the Fund to participate in volume transactions will
produce better executions for the Fund. 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 Fund outweighs
any disadvantages that may be said to exist from exposure to simultaneous
transactions.
The fund paid no stated brokerage commissions for the fiscal years ended
June 30, 1999, 1998 and 1997.
INFORMATION ABOUT THE FUND/TRUST
Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. Fund shares
are without par value, have no preemptive or subscription rights, and are freely
transferable.
The Trust is a "series fund," which is a mutual fund divided into separate
portfolios, each of which is treated as a separate entity for certain matters
under the 1940 Act and for other purposes. A shareholder of one portfolio is not
deemed to be a shareholder of any other portfolio. For certain matters
shareholders vote together as a group; as to others they vote separately by
portfolio. The Trustees have authority to create an unlimited number of shares
of beneficial interest, without par value, in separate series. 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 fund
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.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Trust to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Trustees or the
appointment of auditors. However, the holders of at least 10% of the shares
outstanding and entitled to vote may require the Trust to hold a special meeting
of shareholders for purposes of removing a Trustee from office. 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.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an investment
company, such as the Trust, will not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each series affected by such matter. Rule 18f-2 further provides that a series
shall be deemed to be affected by a matter unless it is clear that the interests
of each series in the matter are identical or that the matter does not affect
any interest of such series. The Rule exempts the selection of independent
accountants and the election of Trustees from the separate voting requirements
of the Rule.
The Fund will send annual and semi-annual financial statements to all of
its shareholders.
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.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, serves as the Trust's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Trust, the
Transfer Agent arranges for the maintenance of shareholder account records for
the Trust, 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 Trust during the
month, and is reimbursed for certain out-of-pocket expenses.
Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as the custodian of the Fund's investments.
Under a custody agreement with the Trust, Mellon Bank holds the Fund's portfolio
securities and keeps all necessary accounts and records. 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.
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 LLP, 757 Third Avenue, New York, NY 10017, was appointed by the Board
of Trustees to serve as the Fund's independent auditors for the year ending June
30, 2000, providing audit services including (1) examination of the annual
financial statements, (2) assistance, review and consultation in connection with
SEC filings and (3) review of the annual Federal income tax return filed on
behalf of the Fund.
<PAGE>
FINANCIAL STATEMENTS
The financial statements of the Fund for the fiscal year ended June 30,
1999, 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.
<PAGE>
APPENDIX A
INVESTING IN NEW YORK MUNICIPAL OBLIGATIONS
RISK FACTORS--INVESTING IN NEW YORK MUNICIPAL OBLIGATIONS
The following information is a summary of special factors affecting
investments in New York municipal obligations. It does not purport to be a
complete description and is based on information from the Annual Information
Statement of the State of New York dated June 26, 1998 and a supplement thereto
dated November 4, 1998. The factors affecting the financial condition of New
York State (the "State") and New York City (the "City") are complex and the
following description constitutes only a summary.
GENERAL
New York is the third most populous state in the nation and has a
relatively high level of personal wealth. The state's economy is diverse, with a
comparatively large share of the nation's finance, insurance, transportation,
communications and services employment, and a very small share of the nation's
farming and mining activity. The State's location and its excellent air
transport facilities and natural harbors have made it an important link in
international commerce. Travel and tourism constitute an important part of the
economy. Like the rest of the nation, New York has a declining proportion of its
workforce engaged in manufacturing, and an increasing proportion engaged in
service industries.
Services: The services sector, which includes entertainment, personal
services, such as health care and auto repairs, and business-related services,
such as information processing, law and accounting, is the State's leading
economic sector. The services sector accounts for more than three of every ten
nonagricultural jobs in New York and has a noticeably higher proportion of total
jobs than does the rest of the nation.
Manufacturing: Manufacturing employment continues to decline in importance
in New York, as in most other states, and New York's economy is less reliant on
this sector than is the nation. The principal manufacturing industries in recent
years produced printing and publishing materials, instruments and related
products, machinery, apparel and finished fabric products, electronic and other
electric equipment, food and related products, chemicals and allied products,
and fabricated metal products.
Trade: Wholesale and retail trade is the second largest sector in terms of
nonagricultural jobs in New York but is considerably smaller when measured by
income share. Trade consists of wholesale businesses and retail businesses, such
as department stores and eating and drinking establishments.
Finance, Insurance and Real Estate: New York City is the nation's leading
center of banking and finance and, as a result, this is a far more important
sector in the State than in the nation as a whole. Although this sector accounts
for under one-tenth of all nonagricultural jobs in the State, it contributes
over one-sixth of all nonfarm labor and proprietors' income.
Agriculture: Farming is an important part of the economy of large regions
of the State, although it constitutes a very minor part of total State output.
Principal agricultural products of the State include milk and dairy products,
greenhouse and nursery products, apples and other fruits, and fresh vegetables.
New York ranks among the nation's leaders in the production of these
commodities.
Government: Federal, State and local government together are the third
largest sector in terms of nonagricultural jobs, with the bulk of the employment
accounted for by local governments. Public education is the source of nearly
one-half of total state and local government employment.
Relative to the nation, the State has a smaller share of manufacturing and
construction and a larger share of service-related industries. The State's
finance, insurance, and real estate share, as measured by income, is
particularly large relative to the nation. The State is likely to be less
affected than the nation as a whole during an economic recession that is
concentrated in manufacturing and construction, but likely to be more affected
during a recession that is concentrated in the service-producing sector.
ECONOMIC OUTLOOK
U. S. ECONOMY
Economic growth during both 1998 and 1999 is expected to be slower than it
was during 1997. The financial and economic turmoil which started in Asia and
has spread to other parts of the world is expected to continue to negatively
affect U.S. trade balances throughout most of 1999. In addition, growth in
domestic consumption, which has been a major driving force behind the nation's
strong economic performance in recent years, is expected to slow in 1999 as
consumer confidence retreats from historic highs and the stock market ceases to
provide large amounts of extra discretionary income. However, the lower
short-term interest rates which are expected to be in force during 1999 should
help prevent a recession. The revised forecast projects real GDP growth of 3.4
percent in 1998, moderately below the 1997 growth rate. In 1999, real GDP growth
is expected to fall further, to 1.6 percent. The growth of nominal GDP is
projected to decline from 5.9 percent in 1997 to 4.6 percent in 1998 and 3.7
percent in 1999. The inflation rate is expected to drop to 1.7 percent in 1998
before rising to 2.7 percent in 1999. The annual rate of job growth is expected
to be 2.5 percent in 1998, almost equaling the strong growth rate experienced in
1997. In 1999, however, employment growth is forecast to slow markedly, to 1.9
percent. Growth in personal income and wages is expected to slow in 1998 and
again in 1999.
STATE ECONOMY
Continued growth is projected in 1998 and 1999 for employment, wages, and
personal income, although, for 1999, a significant slowdown in the growth rates
of personal income and wages are expected. The growth of personal income is
projected to rise from 4.7 percent in 1997 to 5.0 percent in 1998, but then drop
to 3.4 percent in 1999, in part because growth in bonus payments is expected to
moderate significantly, a distinct shift from the unusually high increases of
the last few years. Overall employment growth is expected to be 2.0 percent in
1998, the strongest in a decade, but is expected to drop to 1.0 percent in 1999,
reflecting the slowing growth of the national economy, continued spending
restraint in government, less robust profitability in the financial sector and
continued restructuring in the manufacturing, health care, and banking sectors.
STATE FINANCIAL PLAN
The State Constitution requires the Governor to submit to the legislature
a balanced executive budget which contains a complete plan of expenditures (the
"State Financial Plan") for the ensuing fiscal year and all moneys and revenues
estimated to be available therefor, accompanied by bills containing all proposed
appropriations or reappropriations and any new or modified revenue measures to
be enacted in connection with the executive budget. A final budget must be
approved before the statutory deadline of April 1. The State Financial Plan is
updated quarterly pursuant to law.
1998-99 FISCAL YEAR
The State's current fiscal year began on April 1, 1998 and ends on March
31, 1999 and is referred to herein as the State's 1998-99 fiscal year. The
Legislature adopted the debt service component of the State budget for the
1998-99 fiscal year on March 30, 1998 and the remainder of the budget on April
18, 1998. In the period prior to adoption of the budget for the current fiscal
year, the Legislature also enacted appropriations to permit the State to
continue its operations and provide for other purposes. On April 25, 1998, the
Governor vetoed certain items that the Legislature added to the Executive
Budget. The Legislature had not overridden any of the Governor's vetoes as of
the start of the legislative recess on June 19, 1998 (under the State
Constitution, the Legislature can override one or more of the Governor's vetoes
with the approval of two-thirds of the members of each house).
General Fund disbursements in 1998-99 are now projected to grow by $2.43
billion over 1997-98 levels, or $690 million more than proposed in the
Governor's Executive Budget, as amended. The change in General Fund
disbursements from the Executive Budget to the enacted budget reflects
legislative additions (net of the value of the Governor's vetoes), actions taken
at the end of the regular legislative session, as well as spending that was
originally anticipated to occur in 1997-98 but is now expected to occur in
1998-99. The State projects that the 1998-99 State Financial Plan is balanced on
a cash basis, with an estimated reserve for future needs of $761 million.
The State's enacted budget includes several new multi-year tax reduction
initiatives, including acceleration of State-funded property and local income
tax relief for senior citizens under the School Tax Relief Program (STAR),
expansion of the child care income-tax credit for middle-income families, a
phased-in reduction of the general business tax, and reduction of several other
taxes and fees, including an accelerated phase-out of assessments on medical
providers. The enacted budget also provides for significant increases in
spending for public schools, special education programs, and for the State and
City university systems. It also allocates $50 million for a new Debt Reduction
Reserve Fund (DRRF) that may eventually be used to pay debt service costs on or
to prepay outstanding State-supported bonds.
The 1998-99 State Financial Plan projects a closing balance in the General
Fund of $1.42 billion that is comprised of a reserve of $761 million available
for future needs, a balance of $400 million in the Tax Stabilization Reserve
Fund (TSRF), a balance of $158 million in the Community Projects Fund (CPF), and
a balance of $100 million in the Contingency Reserve Fund (CRF). The TSRF can be
used in the event of an unanticipated General Fund cash operating deficit, as
provided under the State Constitution and State Finance Law. The CPF is used to
finance various legislative and executive initiatives. The CRF provides
resources to help finance any extraordinary litigation costs during the fiscal
year.
Many complex political, social and economic forces influence the State's
economy and finances, which may in turn affect the State's Financial Plan. These
forces may affect the State unpredictably from fiscal year to fiscal year and
are influenced by governments, institutions, and organizations that are not
subject to the State's control. The State Financial Plan is also necessarily
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. The Division of Budget believes that
its projections of receipts and disbursements relating to the current State
Financial Plan, and the assumptions on which they are based, are reasonable.
Actual results, however, could differ materially and adversely from the
projections set forth herein, and those projections may be changed materially
and adversely from time to time. See "Special Considerations" below for a
discussion of risks and uncertainties faced by the State.
SECOND UPDATE (CURRENT FISCAL YEAR)
On October 30, 1998, the State issued the second of its three quarterly
updates to the 1998-99 Financial Plan. In the Mid-Year Update, the State
continues to project that the State Financial Plan for 1998-99 will remain in
balance. The State now projects total receipts in 1998-99 of $37.84 billion, an
increase of $29 million over the amount projected in the First Quarterly Update.
The State has made no changes to its July disbursement projections, with total
disbursements of $36.78 billion expected for the current fiscal year. The
additional receipts increase the State's projected surplus (reserve for future
needs) by $29 million over the July estimate, to $1.04 billion.
The Financial Plan now projects a closing balance in the General Fund of
$1.7 billion. The balance is comprised of the $1.04 billion reserve for future
needs, $400 million in the Tax Stabilization Reserve Fund, $100 million in the
Contingency Reserve Fund (after a planned deposit of $32 million in 1998-99),
and $158 million in the Community Projects Fund.
The State ended the first six months of 1998-99 fiscal year with a General
Fund cash balance of $5.02 billion, roughly $143 million higher than projected
in the cash flow accompanying the July Update to the Financial Plan. Total
receipts, including transfers from other funds, were approximately $52 million
higher than expected, with the increase comprised of additional tax revenues
($22 million) and transfers from other funds ($30 million). Total spending
through the first six months of the fiscal year was $16.28 billion, or $91
million lower than projected in July. This variance resulted primarily from
higher spending in Grants to Local Governments ($27 million), offset by lower
spending in State Operations ($124 million). These variances are timing-related
and should not affect total disbursements for the fiscal year.
OUTYEAR PROJECTIONS OF RECEIPTS AND DISBURSEMENTS
State law requires the Governor to propose a balanced budget each year. In
recent years, the State has closed projected budget gaps of $5.0 billion
(1995-96), $3.9 billion (1996-97), $2.3 billion (1997-98), and less than $1
billion (1998-99). The State, as a part of the 1998-99 Executive Budget
projections submitted to the Legislature in February 1998, projected a 1999-00
General Fund budget gap of approximately $1.7 billion and a 2000-01 gap of $3.7
billion. As a result of changes made in the 1998-99 enacted budget, the 1999-00
gap is now expected to be roughly $1.3 billion, or about $400 million less than
previously projected, after application of reserves created as part of the
1998-99 budget process. Such reserves would not be available against subsequent
year imbalances.
Sustained growth in the State's economy could contribute to closing
projected budget gaps over the next several years, both in terms of
higher-than-projected tax receipts and in lower-than-expected entitlement
spending. However, the State's projections in 1999-2000 currently assume actions
to achieve $600 million in lower disbursements and $250 million in additional
receipts from the settlement of State claims against the tobacco industry.
Consistent with past practice, the projections do not include any costs
associated with new collective bargaining agreements after the expiration of the
current round of contracts at the end of the 1998-99 fiscal year. The State
expects that the 1999-2000 Financial Plan will achieve savings from initiatives
by State agencies to deliver services more efficiently, workforce management
efforts, maximization of federal and non-General Fund spending offsets, and
other actions necessary to bring projected disbursements and receipts into
balance.
The State will formally update its outyear projections of receipts and
disbursements for the 2000-01 and 2001-02 fiscal years as a part of the
1999-2000 Executive Budget process, as required by law. The revised expectations
for years 2000-01 and 2001-02 will reflect the cumulative impact of tax
reductions and spending commitments enacted over the last several years as well
as new 1999-2000 Executive Budget recommendations. The STAR program, which
dedicates a portion of personal income tax receipts to fund school tax
reductions, has a significant impact on General Fund receipts. STAR is projected
to reduce personal income tax revenues available to the General Fund by an
estimated $1.3 billion in 2000-01. Measured from the 1998-99 base, scheduled
reductions to estate and gift, sales and other taxes, reflecting tax cuts
enacted in 1997-98 and 1998-99, will lower General Fund taxes and fees by an
estimated $1.8 billion in 2000-01. Disbursement projections for the outyears
currently assume additional outlays for school aid, Medicaid, welfare reform,
mental health community reinvestment, and other multi-year spending commitments
in law. See "Special Considerations" below for a description of other risks and
uncertainties associated with the State Financial Plan process.
SPECIAL CONSIDERATIONS
The economic and financial condition of the State may be affected by
various financial, social, economic and political factors. These factors can be
very complex, may vary from fiscal year to fiscal year, and are frequently the
result of actions taken not only by the State and its agencies and
instrumentalities, but also by entities, such as the federal government, that
are not under the control of the State. Because of the uncertainty and
unpredictability of these factors, their impact cannot, as a practical matter,
be included in the assumptions underlying the State's projections at this time.
The State Financial Plan is based upon forecasts of national and State
economic activity developed through both internal analysis and review of State
and national economic forecasts prepared by commercial forecasting services and
other public and private forecasters. 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, the extent of
corporate and governmental restructuring, the condition of the financial sector,
federal fiscal and monetary policies, the level of interest rates, 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 results in
the current fiscal year that are worse than predicted, with corresponding
material and adverse effects on the State's projections of receipts and
disbursements.
Projections of total State receipts in the Financial Plan are based on the
State tax structure in effect during the fiscal year and on assumptions relating
to basic economic factors and their historical relationships to State tax
receipts. In preparing projections of State receipts, economic forecasts
relating to personal income, wages, consumption, profits and employment have
been particularly important. The projection of receipts from most tax or revenue
sources is generally made by estimating the change in yield of such tax or
revenue source caused by economic and other factors, rather than by estimating
the total yield of such tax or revenue source from its estimated tax base. The
forecasting methodology, however, ensures that State fiscal year collection
estimates for taxes that are based on a computation of annual liability, such as
the business and personal income taxes, are consistent with estimates of total
liability under such taxes.
Projections of total State disbursements are based on assumptions relating
to economic and demographic factors, levels of disbursements for various
services provided by local governments (where the cost is partially reimbursed
by the State), and the results of various administrative and statutory
mechanisms in controlling disbursements for State operations. Factors that may
affect the level of disbursements in the fiscal year include uncertainties
relating to the economy of the nation and the State, the policies of the federal
government, and changes in the demand for and use of State services.
An additional risk to the State Financial Plan arises from the potential
impact of certain litigation and of federal disallowances now pending against
the State, which could adversely affect the State's projections of receipts and
disbursements. The State Financial Plan assumes no significant litigation or
federal disallowance or other federal actions that could affect State finances,
but has significant reserves in the event of such an action.
The Division of the Budget ("DOB") believes that its projections of
receipts and disbursements relating to the current State Financial Plan, and the
assumptions on which they are based, are reasonable. Actual results, however,
could differ materially and adversely from the projections set forth herein. In
the past, the State has taken management actions to address potential Financial
Plan shortfalls, and DOB believes it could take similar actions should variances
occur in its projections for the current fiscal year.
Despite recent budgetary surpluses recorded by the State, actions
affecting the level of receipts and disbursements, the relative strength of the
State and regional economy, and actions by the federal government have helped to
create projected structural budget gaps for the State. These gaps result from a
significant disparity between recurring revenues and the costs of maintaining or
increasing the level of support for State programs. To address a potential
imbalance in any given fiscal year, the State would be required to take actions
to increase receipts and/or or reduce disbursements as it enacts the budget for
that year, and, under the State Constitution, the Governor is required to
propose a balanced budget each year. There can be no assurance, however, that
the Legislature will enact the Governor's proposals or that the State's actions
will be sufficient to preserve budgetary balance in a given fiscal year or to
align recurring receipts and disbursements in future fiscal years. For example,
the fiscal effects of tax reductions adopted in the last several fiscal years
(including 1998-99) are projected to grow more substantially beyond the 1998-99
fiscal year, with the incremental annual cost of all currently enacted tax
reductions estimated at over $4 billion by the time they are fully effective in
State fiscal year 2002-03. These actions will place pressure on future budget
balance in New York State.
1998-99 STATE FINANCIAL PLAN
Four governmental fund types comprise the State Financial Plan: the
General Fund, the Special Revenue Funds, the Capital Projects Funds, and the
Debt Service Funds.
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. In the
State's 1998-99 fiscal year, the General Fund is expected to account for
approximately 47.6 percent of all Governmental Funds disbursements and 70.1
percent of total State Funds disbursements. General Fund moneys are also
transferred to other funds, primarily to support certain capital projects and
debt service payments in other fund types. Total receipts and transfers from
other funds are projected to be $37.56 billion, an increase of $3.01 billion
from the 1997-98 fiscal year. Total General Fund disbursements and transfers to
other funds are projected to be $36.78 billion, an increase of $2.43 billion
from the 1997-98 fiscal year.
PROJECTED GENERAL FUND RECEIPTS
Total General Fund receipts in 1998-99 are projected to be $37.56 billion,
an increase of over $3 billion from the $34.55 billion recorded in 1997-98. This
total includes $34.36 billion in tax receipts, $1.40 billion in miscellaneous
receipts, and $1.80 billion in transfers from other funds.
The transfer of a portion of the surplus recorded in 1997-98 to 1998-99
exaggerates the "real" growth in State receipts from year to year by depressing
reported 1997-98 figures and inflating 1998-99 projections. Conversely, the
incremental cost of tax reductions newly effective in 1998-99 and the impact of
statutes earmarking certain tax receipts to other funds work to depress apparent
growth below the underlying growth in receipts attributable to expansion of the
State's economy. On an adjusted basis, State tax revenues in the 1998-99 fiscal
year are projected to grow at approximately 7.5 percent, following an adjusted
growth of roughly nine percent in the 1997-98 fiscal year. The discussion below
summarizes the State's projections of General Fund taxes and other revenues for
the 1998-99 Fiscal year.
The Personal Income Tax is imposed on the income of individuals, estates
and trusts and is based with certain modifications on federal definitions of
income and deductions. This tax continues to account for over half of the
State's General Fund receipts base. Net personal income tax collections are
projected to reach $21.24 billion, nearly $3.5 billion above the reported
1997-98 collection total. Since 1997 represented the completion of the 20
percent income tax reduction program enacted in 1995, growth from 1997 to 1998
will be unaffected by major income tax reductions. Adding to the projected
annual growth is the net impact of the transfer of the surplus from 1997-98 to
the current year which affects reported collections by over $2.4 billion on a
year-over-year basis, as partially offset by the diversion of slightly over $700
million in income tax receipts to the STAR fund to finance the initial year of
the school tax reduction program. The STAR program was enacted in 1997 to
increase the State share of school funding and reduce residential school taxes.
Adjusted for these transactions, the growth in net income tax receipts is
roughly $1.7 billion, an increase of over 9 percent. This growth is largely a
function of over 8 percent growth in income tax liability projected for 1998 as
well as the impact of the 1997 tax year settlement on 1998-99 net collections.
User taxes and fees are comprised of three-quarters of the State four
percent sales and use tax (the balance, one percent, flows to support Local
Government Assistance Corporation (LGAC) debt service requirements), cigarette,
alcoholic beverage, container, and auto rental taxes, and a portion of the motor
fuel excise levies. Also included in this category are receipts from the motor
vehicle registration fees and alcoholic beverage license fees. A portion of the
motor fuel tax and motor vehicle registration fees and all of the highway use
tax are earmarked for dedicated transportation funds.
Receipts from user taxes and fees are projected to total $7.14 billion, an
increase of $107 million from reported collections in the prior year. The sales
tax component of this category accounts for all of the 1998-99 growth, as
receipts from all other sources decline $100 million. The growth in yield of the
sales tax in 1998-99, after adjusting for tax law and other changes, is
projected at 4.7 percent. The yields of most of the excise taxes in this
category show a long-term declining trend, particularly cigarette and alcoholic
beverage taxes. These General Fund declines are exacerbated in 1998-99 by
revenue losses from scheduled and newly enacted tax reductions, and by an
increase in earmarking of motor vehicle registration fees to the Dedicated
Highway and Bridge Trust Fund.
Business taxes include franchise taxes based generally on net income of
general business, bank and insurance corporations, as well as
gross-receipts-based taxes on utilities and gallonage-based petroleum business
taxes. Beginning in 1994, a 15 percent surcharge on these levies began to be
phased out and, for most taxpayers, there is no surcharge liability for taxable
periods ending in 1997 and thereafter.
Total business tax collections in 1998-99 are now projected to be $4.96
billion, $91 million less than received in the prior fiscal year. The category
includes receipts from the largely income-based levies on general business
corporations, banks and insurance companies, gross receipts taxes on energy and
telecommunication service providers and a per-gallon imposition on petroleum
business. The year-over-year decline in projected receipts in this category is
largely attributable to statutory changes between the two years. These include
the first year of utility-tax rate cuts and the Power for Jobs tax reduction
program for energy providers, and the scheduled additional diversion of General
Fund petroleum business and utility tax receipts to other funds. In addition,
profit growth is also expected to slow in 1998.
Other taxes include estate, gift and real estate transfer taxes, a tax on
gains from the sale or transfer of certain real estate (this tax was repealed in
1996), a pari-mutuel tax and other minor levies. They are now projected to total
$1.02 billion -- $75 million below last year's amount. Two factors account for a
significant part of the expected decline in collections from this category.
First, the effects of the elimination of the real property gains tax
collections; second, a decline in estate tax receipts, following the explosive
growth recorded in 1997-98, when receipts expanded by over 16 percent.
Miscellaneous receipts include investment income, abandoned property
receipts, medical provider assessments, minor federal grants, receipts from
public authorities, and certain other license and fee revenues. Total
miscellaneous receipts are projected to reach $1.40 billion, down almost $200
million from the prior year, reflecting the loss of non-recurring receipts in
1997-98 and the growing effects of the phase-out of the medical provider
assessments.
Transfers from other funds to the General Fund consist primarily of tax
revenues in excess of debt service requirements, particularly the one percent
sales tax used to support payments to LGAC. Transfers from other funds are
expected to total $1.8 billion, or $222 million less than total receipts from
this category during 1997-98. Total transfers of sales taxes in excess of LGAC
debt service requirements are expected to increase by approximately $51 million,
while transfers from all other funds are expected to fall by $273 million,
primarily reflecting the absence, in 1998-99, of a one-time transfer of nearly
$200 million for retroactive reimbursement of certain social services claims
from the federal government.
PROJECTED GENERAL FUND DISBURSEMENTS
General Fund disbursements in 1998-99, including transfers to support
capital projects, debt service and other funds are estimated at $36.78 billion.
This represents an increase of $2.43 billion or 7.1 percent from 1997-98. Nearly
one-half of the growth is for educational purposes, reflecting increased support
for public schools, special education programs and the State and City university
systems. The remaining increase is primarily for Medicaid, mental hygiene, and
other health and social welfare programs, including children and family
services. The 1998-99 Financial Plan also includes funds for the current
negotiated salary increases for State employees, as well as increased transfers
for debt service.
Grants to Local Governments is the largest category of General Fund
disbursements and includes financial assistance to local governments and
not-for-profit corporations, as well as entitlement benefits to individuals. The
1998-99 Financial Plan projects spending of $25.14 billion in this category, an
increase of $1.88 billion or 8.1 percent over the prior year. The largest annual
increases are for educational programs, Medicaid, other health and social
welfare programs, and community projects grants.
The 1998-99 budget provides $9.65 billion in support of public schools.
The year-to-year increase of $769 million is comprised of partial funding for a
1998-99 school year increase of $847 million as well as the remainder of the
1997-98 school year increase that occurs in State fiscal year 1998-99. Spending
for all other educational programs, which includes the State and City university
systems, the Tuition Assistance Programs, and handicapped programs, is estimated
at $3.00 billion, an increase of $270 million over 1997-98 levels.
Medicaid costs are estimated at $5.60 billion, an increase of $144 million
from the prior year. After adjusting 1997-98 for the $116 million prepayment of
an additional Medicaid cycle, Medicaid spending is projected to increase $260
million or 4.9 percent. Disbursements for all other health and social welfare
programs are projected to total $3.63 billion, an increase of $131 million from
1997-98. This includes an increase in support for children and families and
local public health programs, offset by a decline in welfare spending of $75
million that reflects continuing State and local efforts to reduce welfare
fraud, declining caseloads, and the impact of State and federal welfare reform
legislation.
Remaining disbursements primarily support community-based mental hygiene
programs, community and public health programs, local transportation programs,
and revenue sharing payments to local governments. Revenue sharing and other
general purpose aid to local governments are projected at $837 million, an
increase of approximately $37 million from 1997-98.
State operations spending reflects the administrative costs of operating
the State's agencies, including the prison system, mental hygiene institutions,
the State University system (SUNY), the Legislature, and the court system.
Personal service costs account for approximately 73 percent of spending in this
category. Since January 1995, the State's workforce has been reduced by about 10
percent and is projected to remain at its current level of approximately 191,000
persons in 1998-99.
State operations spending is projected at $6.70 billion, an increase of
$511 million of 8.3 percent from the prior year. This increase is primarily due
to an additional payroll cycle in 1998-99, a 3.5 percent general salary increase
on October 1, 1998 for most State employees, the loss of federal receipts that
would otherwise lower General Fund spending in mental hygiene programs, and a
projected 15.6 percent increase in the Judiciary's budget.
General State charges account primarily for the costs of providing fringe
benefits for State employees, including contributions to pension systems, the
employer's share of social security contributions, employer contributions toward
the cost of health insurance, and the costs of providing worker's compensation
and unemployment insurance benefits. This category also reflects certain fixed
costs such as payments in lieu of taxes, and payments of judgments against the
State or its public officers.
Disbursements in this category are estimated at $2.22 billion, a decrease
of $50 million from the prior year. This annual decline reflects projected
decreases in pension costs and Court of Claims payments, offset by modest
projected increases for health insurance contributions, social security costs,
and the loss of reimbursements due to a reduction in the fringe benefit rate
charged to positions financed by non-General Fund sources.
Debt service paid from the General Fund reflects debt service on
short-term obligations of the State, and includes only interest costs on the
State's commercial paper program. The 1998-99 debt service estimate is $11
million, reflecting relative stability in short-term interest rates. The State's
short-term TRAN borrowing program was eliminated in 1995.
Transfers to other funds from the General Fund are made primarily to
finance certain portions of State capital projects spending and debt service on
long-term bonds where these costs are not funded from other sources.
Transfers in support of debt service are projected at $2.13 billion in
1998-99, an increase of $110 million from 1997-98. The increase reflects the
impact of certain prior year bond sales (net of refunding savings), and certain
bond sales planned to occur during the 1998-99 fiscal year. The State Financial
Plan also establishes a transfer of $50 million to the new Debt Reduction
Reserve Fund. The Fund may be used, subject to enactment of new appropriations,
to pay the debt service costs on or to prepay State-supported bonds.
Transfers in support of capital projects provide General Fund support for
projects not otherwise financed through bond proceeds, dedicated taxes and other
revenues, or federal grants. These transfers are projected at $200 million for
1998-99, comparable to last year.
Remaining transfers from the General Fund to other funds are estimated to
decline $59 million in 1998-99 to $327 million. This decline is primarily the
net impact of one-time transfers in 1997-98 to the State University Tuition
Stabilization Fund and to the Lottery Fund to support school aid, offset by a
1998-99 increase in the State subsidy to the Roswell Park Cancer Research
Institute.
NON-RECURRING RESOURCES
The Division of the Budget estimates that the 1998-99 State Financial Plan
contains actions that provide non-recurring resources or savings totaling
approximately $64 million, the largest of which is a retroactive reimbursement
of federal welfare claims.
The 1998-99 Financial Plan projects a closing fund balance in the General
Fund of $1.42 billion. This fund balance is composed of a reserve of $761
million available for future needs, a $400 million balance in the TSRF, a $158
million balance in the CPF, and a balance of $100 million in the CRF, after a
projected deposit of $32 million in 1998-99.
OTHER GOVERNMENTAL FUNDS
In addition to the General Fund, the State Financial Plan includes Special
Revenue Funds, Capital Projects Funds and Debt Service Funds which are discussed
below. Amounts below do not include other sources and uses of funds transferred
to or from other fund types.
SPECIAL REVENUE FUNDS
Special Revenue Funds are used to account for the proceeds of specific
revenue sources such as federal grants that are legally restricted, either by
the Legislature or outside parties, to expenditures for specified purposes.
Although activity in this fund type is expected to comprise approximately 41
percent of total governmental funds receipts in the 1998-99 fiscal year,
three-quarters of that activity relates to federally-funded programs.
Total disbursements for programs supported by Special Revenue Funds are
projected at $29.97 billion, an increase of $2.32 billion or 8.4 percent from
1997-98. Federal grants account for approximately three-quarters of all spending
in the Special Revenue fund type. Disbursements from federal funds are estimated
at $21.78 billion, an increase of $1.12 billion or 5.4 percent. The single
largest program in this fund group is Medicaid, which is projected at $13.65
billion, an increase of $465 million or 3.5 percent above last year. Federal
support for welfare programs is projected at $2.53 billion, similar to 1997-98.
The remaining growth in federal funds is primarily due to the new Child Health
Plus program, estimated at $197 million in 1998-99. This program will expand
health insurance coverage to children of indigent families.
State special revenue spending is projected to be $8.19 billion, an
increase of $1.20 billion or 17.2 percent from last year's levels. Most of this
projected increase in spending is due to the $704 million cost of the first
phase of the STAR program, as well as $231 million in additional operating
assistance for mass transportation, and $113 million for the State share of the
new Child Health Plus program.
CAPITAL PROJECTS FUNDS
Capital Projects Funds account for the financial resources used in the
acquisition, construction, or rehabilitation of major State capital facilities,
and for capital assistance grants to certain local governments or public
authorities. This fund type consists of the Capital Projects Fund, which is
supported by tax receipts transferred from the General Fund, and various other
capital funds established to distinguish specific capital construction purposes
supported by other revenues. In the 1998-99 fiscal year, activity in these funds
is expected to comprise 5.5 percent of total governmental receipts.
Capital Projects Funds spending in fiscal year 1998-99 is projected at
$4.14 billion, an increase of $575 million or 16.1 percent from last year. The
major components of this expected growth are transportation and environmental
programs, including continued increased spending for 1996 Clean Water/Clean Air
Bond Act projects and higher projected disbursements from the Environmental
Protection Fund (EPF). Another significant component of this projected increase
is in the area of public protection, primarily for facility rehabilitation and
construction of additional prison capacity.
DEBT SERVICE FUNDS
Debt Service Funds are used to account for the payment of principal and
interest on long-term debt of the State and to meet commitments under
lease-purchase and other contractual-obligation financing arrangements. This
fund type is expected to comprise 3.8 percent of total governmental fund
receipts in the 1998-99 fiscal year. Receipts in these funds in excess of debt
service requirements may be transferred to the General Fund, Capital Projects
Funds and Special Revenue Funds, pursuant to law.
Total disbursements form the Debt Service Fund type are estimated at $3.36
billion in 1998-99, an increase of $275 million or 8.9 percent from 1997-98
levels. Of the increase, $102 million is for transportation purposes, including
debt service on bonds issued for State and local highway and bridge programs
financed through the New York State Thruway Authority and supported by the
Dedicated Highway and Bridge Trust Fund. Another $45 million is for education
purposes, including State and City University programs financed through the
Dormitory Authority of the State of New York (DASNY). The remainder is for a
variety of programs in such areas as mental health and corrections, and for
general obligation financings.
YEAR 2000 COMPLIANCE
New York State is currently addressing "Year 2000" data processing
compliance issues. The Year 2000 compliance issue ("Y2K") arises because most
computer software programs allocate two digits to the data field for "year" on
the assumption that the first two digits will be "19." Such programs will thus
interpret the year 2000 as the year 1900 absent reprogramming. Y2K could impact
both the ability to enter data into computer programs and the ability of such
programs to correctly process data.
In 1996, the State created the Office for Technology (OFT) to help address
statewide technology issues, including the Year 2000 issue. OFT has estimated
that investments of at least $140 million will be required to bring
approximately 350 State mission-critical and high-priority computer systems not
otherwise scheduled for replacement into Year 2000 compliance, and the State is
planning to spend $100 million in the 1998-99 fiscal year for this purpose.
Mission-critical computer applications are those which impact the health, safety
and welfare of the State and its citizens, and for which failure to be in Y2K
compliance could have a material and adverse impact upon State operations.
High-priority computer applications are those that are critical for a State
agency to fulfill its mission and deliver services, but for which they are
manual alternatives. Work has been completed on roughly 20 percent of these
systems. All remaining unfinished mission-critical and high-priority systems
have at least 40 percent or more of the work completed. Contingency planning is
underway for those systems which may be non-compliant prior to failure dates.
The enacted budget also continues funding for major systems scheduled for
replacement, including the State payroll, civil service, tax and finance and
welfare management systems, for which Year 2000 compliance is included as a part
of the project.
OFT is monitoring compliance on a quarterly basis and is providing
assistance and assigning resources to accelerate compliance for mission-critical
systems, with most compliance testing expected to be completed by mid-1999.
There can be no guarantee, however, that all of the State's mission-critical and
high-priority computer systems will be Year 2000 compliant and that there will
not be an adverse impact upon State operations or State finances as a result.
CASH-BASIS RESULTS FOR PRIOR FISCAL YEARS
The State reports its financial results on two bases of accounting: the
cash basis, showing receipts and disbursements; and the modified accrual basis,
prescribed by Generally Accepted Accounting Principles ("GAAP"), showing
revenues and expenditures.
GENERAL FUND 1995-96 THROUGH 1997-98
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 most 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. A narrative description
of cash-basis results in the General Fund is presented below.
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. A national recession, followed by the
lingering economic slowdown in New York and the regional economy, resulted in
repeated shortfalls in receipts and three budget deficits during those years.
During its last six fiscal years, however, the State has recorded balanced
budgets on a cash basis, with positive fund balances as described below.
1997-98 FISCAL YEAR
The State ended its 1997-98 fiscal year in balance on a cash basis, with a
General Fund cash surplus as reported by DOB of approximately $2.04 billion. The
cash surplus was derived primarily from higher-than-anticipated receipts and
lower spending on welfare, Medicaid, and other entitlement programs.
The General Fund had a closing balance of $638 million, an increase of
$205 million from the prior fiscal year. The balance is held in three accounts
within the General Fund: the Tax Stabilization Reserve Fund (TSRF), the
Contingency Reserve Fund (CRF) and the Community Projects Fund (CPF). The TSRF
closing balance was $400 million, following a required deposit of $15 million
(repaying a transfer made in 1991-92) and an extraordinary deposit of $68
million made from the 1997-98 surplus. The CRF closing balance was $68 million,
following a $27 million deposit from the surplus. The CPF, which finances
legislative initiatives, closed the fiscal year with a balance of $170 million,
an increase of $95 million. The General Fund closing balance did not include
$2.39 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 and was required to be on deposit on March 31, 1998.
General Fund receipts and transfers from other funds for the 1997-98
fiscal year (including net tax refund reserve account activity) totaled $34.55
billion, an annual increase of $1.51 billion, or 4.57 percent over 1996-97.
General Fund disbursements and transfers to other funds were $34.35 billion, an
annual increase of $1.45 billion or 4.41 percent.
1996-97 FISCAL YEAR
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
$1.42 billion. The cash surplus was derived primarily from higher-than-expected
receipts and lower-than-expected spending for social services programs.
The General Fund closing balance was $433 million, an increase of $146
million from the 1995-96 fiscal year. The balance included $317 million in the
TSRF, after a required deposit of $15 million and an additional deposit of $65
million in 1996-97. In addition, $41 million remained on deposit in the CRF. The
remaining $75 million reflected amounts then on deposit in the Community
Projects Fund. The General Fund closing balance did not include $1.86 billion in
the tax refund reserve account, of which $521 million was made available as a
result of the LGAC financing program and 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, an increase of 0.7 percent from the previous
fiscal year (including net tax refund reserve account activity). General Fund
disbursements and transfers to other funds totaled $32.90 billion for the
1996-97 fiscal year, an increase of 0.7 percent from the 1995-96 fiscal year.
1995-96 FISCAL YEAR
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. The cash surplus was
derived from higher-than-expected receipts, savings generated through agency
cost controls, and lower-than-expected welfare spending.
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 a $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 included $237
million on deposit in the TSRF. In addition, $41 million was on deposit in the
CRF. The remaining $9 million reflected amounts then on deposit in the Revenue
Accumulation Fund. The General Fund closing balance did not include $678 million
in the tax refund reserve account of which $521 million was made available as a
result of the LGAC financing program and was required to be on deposit as of
March 31, 1996.
General Fund receipts and transfers from other funds (including net refund
reserve account activity) totaled $32.81 billion, a decrease of 1.1 percent from
1994-95 levels. General Fund disbursements and transfers to other funds totaled
$32.68 billion for the 1995-96 fiscal year, a decrease of 2.2 percent from
1994-95 levels.
OTHER GOVERNMENTAL FUNDS (1995-96 THROUGH 1997-98)
Activity in the three other governmental funds has remained relatively
stable over the last three fiscal years, with federally-funded programs
comprising approximately two-thirds of these funds. The most significant change
in the structure of these funds has been the redirection of a portion of
transportation-related revenues from the General Fund to two new dedicated funds
in the Special Revenue and Capital Projects fund types. These revenues are used
to support the capital programs of the Department of Transportation and the
Metropolitan Transportation Authority (MTA).
In the Special Revenue Funds, disbursements increased from $26.26 billion
to $27.65 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.
Disbursements in the Capital Projects Funds declined over the three year
period from $3.97 billion to $3.56 billion 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.
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 costs 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.
LITIGATION
STATE FINANCE POLICIES
INSURANCE LAW
Proceedings have been brought by two groups of petitioners challenging
regulations promulgated by the Superintendent of Insurance that established
excess medical malpractice premium rates for fiscal years 1986-87 through
1996-97 (New York State Health Maintenance Organization Conference, Inc., et al.
v. Muhl, et al. ["HMO"], and New York State Conference of Blue Cross and Blue
Shield Plans, et al. v. Muhl, et al. ["Blue Cross 'I' and 'II'"], Supreme Court,
Albany County). By order filed January 22, 1997, the Court in Blue Cross I
permitted the plaintiffs in HMO to intervene and dismissed the challenges to the
rates for the period prior to 1995-96. By decision dated July 24, 1997, the
Court in Blue Cross I held that the determination made by the Superintendent in
establishing the 1995-96 rate was arbitrary and capricious and directed that
premiums paid pursuant to that determination be returned to the payors. The
State has appealed this decision. The petitioners did not cross appeal. In Blue
Cross II, by amended judgment dated April 2, 1998, the Supreme Court annulled
the regulation setting the 1996-97 premium rate and directed that all 1996-97
excess malpractice premiums be returned to the payors. The State will not be
obligated in either case to pay moneys to any petitioner. Adverse determinations
would result in refunds from the affected insurers.
TAX LAW
In New York Association of Convenience Stores, et al. v. Urbach, et al.,
petitioners, New York Association of Convenience Stores, National Association of
Convenience Stores, M.W.S. Enterprises, Inc. and Sugarcreek Stores, Inc. seek to
compel respondents, the Commissioner of Taxation and Finance and the Department
of Taxation and Finance, to enforce sales and excise taxes imposed pursuant to
Tax Law Articles 12-A, 20 and 28 on tobacco products and motor fuel sold to
non-Indian consumers on Indian reservations. In orders dated August 13, 1996 and
August 24, 1996, the Supreme Court, Albany County, ordered, inter alia, that
there be equal implementation and enforcement of said taxes for sales to
non-Indian consumers on and off Indian reservations, and further ordered that,
if respondents failed to comply within 120 days, no tobacco products or motor
fuel could be introduced onto Indian reservations other than for Indian
consumption or, alternately, the collection and enforcement of such taxes would
be suspended statewide. Respondents appealed to the Appellate Division, Third
Department, and invoked CPLR 5519(a)(1), which provides that the taking of the
appeal stayed all proceedings to enforce the orders pending the appeal.
Petitioner's motion to vacate the stay was denied. In a decision entered May 8,
1997, the Third Department modified the orders by deleting the portion thereof
that provided for the statewide suspension of the enforcement and collection of
the sales and excise taxes on motor fuel and tobacco products. The Third
Department held, inter alia, that petitioners had not sought such relief in
their petition and that it was an error for the Supreme Court to have awarded
such undemanded relief without adequate notice of its intent to do so. On May
22, 1997, respondents appealed to the Court of Appeals on other grounds, and
again invoked the statutory stay. On October 23, 1997, the Court of Appeals
granted petitioners' motion for leave to cross-appeal from the portion of the
Third Department's decision that deleted the statewide suspension of the
enforcement and collection of the sales and excise taxes on motor fuel and
tobacco. The case was argued before the Court of Appeals on March 24, 1998.
CLEAN WATER/CLEAN AIR BOND ACT OF 1996
In Robert L. Schulz, et al. v. The New York State Executive, et al.
(Supreme Court, Albany County, commenced October 16, 1996), plaintiffs challenge
the enactment of the Clean Water/Clean Air Bond Act of 1996 and its implementing
legislation (1996 Laws of New York, Chapters 412 and 413). Plaintiffs claim,
inter alia, that the Bond Act and its implementing legislation violate
provisions of the State Constitution requiring that such debt be authorized by
law for some single work or purpose distinctly specified therein and forbidding
incorporation of other statutes by reference.
In an opinion dated June 9, 1998, the Court of Appeals affirmed the July
17, 1997 order of the Appellate Division, Third Department, affirming the lower
court dismissal of this case.
LINE ITEM VETO
In an action commenced in June 1998 by the Speaker of the Assembly of the
State of New York against the Governor of the State of New York (Silver v.
Pataki, Supreme Court, New York County), the Speaker challenges the Governor's
application of his constitutional line item veto authority to certain portions
of budget bills adopted by the State Legislature contained in Chapters 56, 57
and 58 of the Laws of 1998.
STATE PROGRAMS
MEDICAID
Several cases challenge provisions of Chapter 81 of the Laws of 1995
which alter the nursing home Medicaid reimbursement methodology on and after
April 1, 1995. Included are New York State Health Facilities Association, et
al. v. DeBuono, et al., St. Luke's Nursing Center, et al. v. DeBuono, et al.,
New York Association of Homes and Services for the Aging v DeBuono et al
(three cases), Healthcare Association of New York State v. DeBuono and
Bayberry Nursing Home et al. v. Pataki, et al. Plaintiffs allege that the
changes in methodology have been adopted in violation of procedural and
substantive requirements of State and federal law.
In a consolidated action commenced in 1992, Medicaid recipients and home
health care providers and organizations challenge promulgation by the State
Department of Social Services (DSS) in June 1992 of a home assessment resource
review instrument (HARRI), which is to be used by DSS to determine eligibility
for and the nature of home care services for Medicaid recipients, and challenge
the policy of DSS of limiting reimbursable hours of service until a patient is
assessed using the HARRI (Dowd, et al. v. Bane, Supreme Court, New York County).
In several cases, plaintiffs seek retroactive claims for reimbursement
for services provided to Medicaid recipients who were also eligible for
Medicare during the period January 1, 1987 to June 2, 1992. Included are
Matter of New York State Radiological Society v. Wing, Appel v. Wing, E.F.S.
Medical Supplies v. Dowling, Kellogg v. Wing, Lifshitz v. Wing, New York
State Podiatric Medical Association v. Wing and New York State Psychiatric
Association v. Wing. These cases were commenced after the State's
reimbursement methodology was held invalid in New York City Health and
Hospital Corp. v. Perales. The State contends that these claims are
time-barred. In a judgment dated September 5, 1996, the Supreme Court,
Albany County, dismissed Matter of New York State Radiological Society v.
Wing as time-barred. By order dated November 26, 1997, the Appellate
Division, Third Department, affirmed that judgment. By decision dated June
9, 1998, the Court of Appeals denied leave to appeal.
Several cases, including Port Jefferson Health Care Facility, et al. v.
Wing (Supreme Court, Suffolk County), challenge the constitutionality of Public
Health Law ss. 2807-d, which imposes a tax on the gross receipts hospitals and
residential health care facilities receive from all patient care services.
Plaintiffs allege that the tax assessments were not uniformly applied, in
violation of federal regulations. In a decision dated June 30, 1997, the Court
held that the 1.2 percent and 3.8 percent assessments on gross receipts imposed
pursuant to Public Health Law ss.ss. 2807-d(2)(b)(ii) and 2807-d(2)(b)(iii),
respectively, are unconstitutional. An order entered August 27, 1997 enforced
the terms of the decision. The State has appealed that order.
SHELTER ALLOWANCE
In an action commenced in March 1987 against State and New York City
officials (Jiggetts, et al. v. Bane, et al., Supreme Court, New York County),
plaintiffs allege that the shelter allowance granted to recipients of public
assistance is not adequate for proper housing. In a decision dated April 16,
1997, the Court held that the shelter allowance promulgated by the Legislature
and enforced through DSS regulations is not reasonably related to the cost of
rental housing in New York City and results in homelessness to families in New
York City. A judgment was entered on July 25, 1997, directing, inter alia, that
the State (i) submit a proposed schedule of shelter allowances (for the Aid to
Dependent Children program and any successor program) that bears a reasonable
relation to the cost of housing in New York City; and (ii) compel the New York
City Department of Social Services to pay plaintiffs a monthly shelter allowance
in the full amount of their contract rents, provided they continue to meet the
eligibility requirements for public assistance, until such time as a lawful
shelter allowance is implemented, and provide interim relief to other eligible
recipients of Aid to Dependent Children under the interim relief system
established in this case. The State has appealed to the Appellate Division,
First Department from each and every provision of this judgment except that
portion directing the continued provision of interim relief.
CIVIL RIGHTS CLAIMS
In an action commenced in 1980 (United States, et al. v. Yonkers Board of
Education, et al.), the United States District Court for the Southern District
of New York found, in 1985, that Yonkers and its public schools were
intentionally segregated. In 1986, the District Court ordered Yonkers to develop
and comply with a remedial educational improvement plan (EIP I). On January 19,
1989, the District Court granted motions by Yonkers and the NAACP to add the
State Education Department, the Yonkers Board of Education, and the State Urban
Development Corporation as defendants, based on allegations that they had
participated in the perpetuation of the segregated school system. On August 30,
1993, the District Court found that vestiges of a dual school system continued
to exist in Yonkers. On March 27, 1995, the District Court made factual findings
regarding the role of the State and the other State defendants (the State) in
connection with the creation and maintenance of the dual school system, but
found no legal basis for imposing liability. On September 3, 1996, the United
States Court of Appeals for the Second Circuit, based on the District Court's
factual findings, held the State defendants liable under 42 USC ss. 1983 and the
Equal Educational Opportunity Act, 20 USC ss.ss. 1701, et seq., for the unlawful
dual school system, because the State, inter alia, had taken no action to force
the school district to desegregate despite its actual or constructive knowledge
of de jure segregation. By order dated October 8, 1997, the District Court held
that vestiges of the prior segregated school system continued to exist and that,
based on the State's conduct in creating and maintaining that system, the State
is liable for eliminating segregation and its vestiges in Yonkers and must fund
a remedy to accomplish that goal. Yonkers presented a proposed educational
improvement plan (EIP II) to eradicate these vestiges of segregation. The
October 8, 1997 order of the District Court ordered that EIP II be implemented
and directed that, within 10 days of the entry of the Order, the State make
available to Yonkers $450,000 to support planning activities to prepare the EIP
II budget for 1997-98 and the accompanying capital facilities plan. A final
judgment to implement EIP II was entered on October 14, 1997. On November 7,
1997, the State appealed that judgment to the Second Circuit. The appeal is
pending. Additionally, the Court adopted a requirement that the State pay to
Yonkers approximately $9.85 million as its pro rata share of the funding of EIP
I for the 1996-97 school year. The requirement for State funding of EIP I was
reduced to an order on December 2, 1997 and reduced to a judgment on February
10, 1998. The State appealed that order to the Second Circuit on December 31,
1997 and amended the notice of appeal after entry of the judgment. That appeal
has been consolidated with the appeal of the EIP II appeal, and is also pending.
On June 15, 1998, the District Court issued an opinion setting forth
the formula for the allocation of the costs of EIP I and EIP II between the
State and the City for the school years 1997-98 through 2005-06. That opinion
has not yet been reduced to an order.
REAL PROPERTY CLAIMS
On March 4, 1985 in Oneida Indian Nation of New York, et al. v.
County of Oneida, the United States Supreme Court affirmed a judgment of the
United States Court of Appeals for the Second Circuit holding that the Oneida
Indians have a common-law right of action against Madison and Oneida Counties
for wrongful possession of 872 acres of land illegally sold to the State in
1795. At the same time, however, the Court reversed the Second Circuit by
holding that a third-party claim by the counties against the State for
indemnification was not properly before the federal courts. The case was
remanded to the District Court for an assessment of damages, which action is
still pending. The counties may still seek indemnification in the State courts.
Several other actions involving Indian claims to land in upstate New
York are also pending. Included are Cayuga Indian Nation of New York v. Cuomo,
et al., and Canadian St. Regis Band of Mohawk Indians, et al. v. State of New
York et al., both in the United States District Court for the Northern District
of New York. The Supreme Court's holding in Oneida Indian Nation of New York may
impair or eliminate certain of the State's defenses to these actions but may
enhance others.
AUTHORITIES AND LOCALITIES
PUBLIC AUTHORITIES
The fiscal stability of the State is related in part to the fiscal
stability of its public authorities. For the purposes of this summary, public
authorities refer to public benefit corporations created pursuant to State law,
other than local authorities. Public authorities are not subject to the
constitutional restrictions on the incurrence of debt which apply to the State
itself and may issue bonds and notes within the amounts and restrictions set
forth in legislative authorization. The State's access to the public credit
markets could be impaired and the market price of its outstanding debt may be
materially and adversely affected if any of its public authorities were to
default on their respective obligations. As of December 31, 1997, there were 17
public authorities that had outstanding debt of $100 million or more, and the
aggregate outstanding debt, including refunding bonds, of all State authorities
was $84 billion, only a portion of which constitutes State-supported or
State-related debt.
The State has numerous public authorities with various responsibilities,
including those which finance, construct and/or operate revenue producing public
facilities. Public authorities generally pay their operating expenses and debt
service costs from revenues generated by the projects they finance or operate,
such as tolls charged for the use of highways, bridges or tunnels, charges for
public power, electric and gas utility services, rentals charged for housing
units, and charges for occupancy at medical care facilities. Also, there are
statutory arrangements providing for State local assistance payments otherwise
payable to localities to be made under certain circumstances to public
authorities. Although the State has no obligation to provide additional
assistance to localities whose local assistance payments have been paid to
public authorities under these arrangements, the affected localities may seek
additional State assistance if local assistance payments are diverted. Some
authorities also receive moneys from State appropriations to pay for the
operating costs of certain of their programs. As described below, the MTA
receives the bulk of this money in order to provide transit and commuter
services.
Beginning in 1998, the Long Island Power Authority (LIPA) assumed
responsibility for the provision of electric utility services previously
provided by Long Island Lighting Company for Nassau, Suffolk and a portion of
Queen Counties, as part of an estimated $7 billion financing plan. As of the
date of this AIS, LIPA has issued over $5 billion in bonds secured solely by
ratepayer charges. LIPA's debt is not considered either State-supported or
State-related debt.
METROPOLITAN TRANSPORTATION AUTHORITY
The MTA oversees the operation of subway and bus lines in New York City by
its affiliates, the New York City Transit Authority and the Manhattan and Bronx
Surface Transit Operating Authority (collectively, the "TA"). The MTA operates
certain commuter rail and bus services in the New York Metropolitan area through
MTA's subsidiaries, the Long Island Rail Road Company, the Metro-North Commuter
Railroad Company, and the Metropolitan Suburban Bus Authority. In addition, the
Staten Island Rapid Transit Operating 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
intrastate toll bridges and tunnels. Because fare revenues are not sufficient to
finance the mass transit portion of these operations, the MTA has depended on,
and will continue to depend on, operating support from the State, local
governments and TBTA, 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 Metropolitan Transportation Region served by the
MTA and a special one-quarter of 1 percent regional sales and use tax--that
provide revenues for mass transit purposes, including assistance to the MTA.
Since 1987, State law also has required that the proceeds of a one-quarter of 1
percent mortgage recording tax paid on certain mortgages in the Metropolitan
Transportation Region be deposited in a special MTA fund for operating or
capital expenses. 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 1998-99 fiscal year, State assistance to the MTA is projected
to total approximately $1.3 billion, an increase of $133 million over the
1997-98 fiscal year.
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 the $12.17 billion MTA capital plan for the 1995 through 1999
calendar years (the "1995-99 Capital Program"). In July 1997, the Capital
Program Review Board ("CPRB") approved the 1995-99 Capital Program (subsequently
amended in August 1997), which supersedes the overlapping portion of the MTA's
1992-96 Capital Program. The 1995-99 Capital Program 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 $5.2 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 all the necessary governmental actions for
future capital programs will be taken, that funding sources currently identified
will not be decreased or eliminated, or that the 1995-99 Capital Program, or
parts thereof, will not be delayed or reduced. Should funding levels fall below
current projections, the MTA would have to revise its 1995-99 Capital Program
accordingly. If the 1995-99 Capital Program is delayed or reduced, ridership and
fare revenues may decline, which could, among other things, impair the MTA's
ability to meet its operating expenses without additional assistance.
THE CITY OF NEW YORK
The fiscal health of the State may also be affected by the fiscal health
of New York City (the "City"), which continues to receive significant financial
assistance from the State. State aid contributes to the City's ability to
balance its budget and to meet its cash requirements. The State may also be
affected by the ability of the City and certain entities issuing debt for the
benefit of the City to market their securities successfully in the public credit
markets.
The City has achieved balanced operating results for each of its fiscal
years since 1981 as measured by the GAAP standards in force at that time. The
City prepares a four-year financial plan ("Financial Plan") annually and updates
it periodically, and prepares a comprehensive annual financial report describing
its most recent fiscal year each October.
THE CITY OF NEW YORK
FISCAL OVERSIGHT
In response to the City's fiscal crisis in 1975, the State took action to
assist the City in returning to fiscal stability. Among those actions, the State
established the Municipal Assistance Corporation for the City of New York to
provide financing assistance to the City; the New York State Financial Control
Board (the "Control Board") to oversee the City's financial affairs; and the
Office of the State Deputy Comptroller for the City of New York ("OSDC") to
assist the Control Board in exercising its powers and responsibilities. A
"control period" existed from 1975 to 1986 during which the City was subject to
certain statutorily-prescribed fiscal controls. The Control Board terminated the
Control Period in 1986 when certain statutory conditions were met. State law
requires the Control Board to reimpose a control period upon the occurrence, or
"substantial likelihood and imminence" of the occurrence, of certain events,
including (but not limited to) a City operating budget deficit of more than $100
million of impaired access to the public credit markets.
Currently, the City and its Covered Organizations (i.e., those which
received or may receive moneys from the City directly, indirectly or
contingently) operate under the Financial Plan. The City's Financial Plan
summarizes its capital, revenue and expense projections and outlines proposed
gap-closing programs for years with projected budget gaps. The City's
projections set forth in the Financial Plan are based on various assumptions and
contingencies, some of which are uncertain and may not materialize. Unforeseen
developments and changes in major assumptions could significantly affect the
city's ability to balance its budget as required by State law and to meet its
annual cash flow and financing requirements.
To successfully implement its Financial Plan, the City and certain
entities issuing debt for the benefit of the city must market their securities
successfully. The City issues securities to finance, refinance and rehabilitate
infrastructure and other capital needs, as well as for seasonal financing needs.
In 1997, the State created the New York City Transitional Finance Authority
("TFA") to finance a portion of the City's capital program because the City was
approaching its State Constitutional general debt limit. Without the additional
financing capacity of the TFA, projected contracts for City capital projects
would have exceeded the City's debt limit during City fiscal year 1997-98.
Despite this additional financing mechanism, the City currently projects that,
if no further action is taken, it will reach its debt limit in City fiscal year
1999-2000. On June 2, 1997, an action was commenced seeking a declaratory
judgment declaring the legislation establishing the TFA to be unconstitutional.
On November 25, 1997 the State Supreme Court found the legislation establishing
the TFA to be constitutional and granted the defendants' motion for summary
judgment. The plaintiffs have appealed the decision. Future developments
concerning the City or entities issuing debt for the benefit of the City, and
public discussion of such developments, as well as prevailing market conditions
and securities credit ratings, may affect the ability or cost to sell securities
issued by the City or such entities and may also affect the market for their
outstanding securities.
MONITORING AGENCIES
The staffs of the Control Board, OSDC and the City Comptroller issue
periodic reports on the City's Financial Plans. The reports analyze the City's
forecasts of revenues and expenditures, cash flow, and debt service
requirements, as well as evaluate compliance by the City and its Covered
Organizations with the Financial Plan. According to recent staff reports, while
economic growth in New York City has been slower than in other regions of the
country, a surge in Wall Street profitability resulted in increased tax revenues
and generated a substantial surplus for the City in City fiscal year 1996-97.
Recent staff reports also indicate that the City projects a substantial surplus
for City fiscal year 1997-98. Although several sectors of the City's economy
have expanded recently, especially tourism and business and professional
services, City tax revenues remain heavily dependent on the continued
profitability of the securities industries and the course of the national
economy. These reports have also indicated that recent City budgets have been
balanced in part through the use of non-recurring resources and that the City's
Financial Plan tends to rely on actions outside its direct control. These
reports have indicated that the City has not yet brought its long-term
expenditure growth in line with recurring revenue growth and that the City is
likely to continue to face substantial gaps between forecast revenues and
expenditures in future years that must be closed with reduced expenditures
and/or increased revenues. In addition to these monitoring agencies, the
Independent Budget Office ("IBO") has been established pursuant to the City
Charter to provide analysis to elected officials and the public on relevant
fiscal and budgetary issues affecting the City.
OTHER LOCALITIES
Certain localities outside New York City have experienced financial
problems and have requested and received additional State assistance during the
last several State fiscal years. The cities of Yonkers and Troy continue to
operate under State-ordered control agencies. The potential impact on the State
of any future requests by localities for additional oversight or financial
assistance is not included in the projections of the State's receipts and
disbursements for the State's 1998-99 fiscal year.
Eighteen municipalities received extraordinary assistance during the 1996
legislative session through $50 million in special appropriations targeted for
distressed cities, and twenty-eight municipalities received more than $32
million in targeted unrestricted aid in the 1997-98 budget. Both of these
emergency aid packages were largely continued through the 1998-99 budget. The
State also dispersed an additional $21 million among all cities, towns and
villages after enacting a 3.9 percent increase in General Purpose State Aid in
1997-98 and continued this increase in 1998-99.
The 1998-99 budget includes an additional $29.4 million in unrestricted
aid targeted to 57 municipalities across the State. Other assistance for
municipalities with special needs totals more than $25.6 million. Twelve upstate
cities will receive $24.2 million in one-time assistance from a cash flow
acceleration of State aid.
The appropriation and allocation of general purpose local government aid
among localities, including New York City, is currently the subject of
investigation by a State commission. While the distribution of general purpose
local government aid was originally based on a statutory formula, in recent
years both the total amount appropriated and the amounts appropriated to
localities have been determined by the Legislature. A State commission was
established to study the distribution and amounts of general purpose local
government aid and recommend a new formula by June 30, 1999, which may change
the way aid is allocated.
Municipalities and school districts have engaged in substantial short-term
and long-term borrowings. In 1996, the total indebtedness of all localities in
the State other than New York City was approximately $20.0 billion. A small
portion (approximately $77.2 million) of that indebtedness represented borrowing
to finance budgetary deficits and was issued pursuant to State enabling
legislation. State law requires the Comptroller to review and make
recommendations concerning the budgets of those local government units other
than New York City that are authorized by State law to issue debt to finance
deficits during the period that such deficit financing is outstanding.
Twenty-one localities had outstanding indebtedness for deficit financing at the
close of their fiscal year ending in 1996.
Like the State, local governments must respond to changing political,
economic and financial influences over which they have little or no control.
Such changes may adversely affect the financial condition of certain local
governments. For example, the federal government may reduce (or in some cases
eliminate) federal funding of some local programs which, in turn, may require
local governments to fund these expenditures from their own resources. It is
also possible that the State, New York City, or any of their respective public
authorities may suffer serious financial difficulties that could jeopardize
local access to the public credit markets, which may adversely affect the
marketability of notes and bonds issued by localities within the State.
Localities may also face unanticipated problems resulting from certain pending
litigation, judicial decisions and long-range economic trends. Other large-scale
potential problems, such as declining urban populations, increasing
expenditures, and the loss of skilled manufacturing jobs, may also adversely
affect localities and necessitate State assistance.
<PAGE>
APPENDIX B
MUNICIPAL BOND, MUNICIPAL NOTE, BOND, NOTE AND COMMERCIAL PAPER RATINGS
S&P
Municipal Bond and 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 and 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 and 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 characteristics 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 midrange ranking; and the
modifier 3 indicates a ranking in the lower end of a rating category.
Municipal Note, Note 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:
1 Leading market positions in well-established industries.
2 High rates of return on funds employed.
3 Conservative capitalization structure with moderate reliance on
debt and ample asset protection.
4 Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
5 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 IBCA, INC. ("FITCH")
Municipal Bond and 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 foreseeable
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.
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")
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
AA but may vary slightly from time to time because of economic
AA- conditions.
A+ Protections factors are average but adequate. However, risk
A factors are more variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered sufficient
BBB for prudent investment. Considerable variability in risk during
BBB- economic cycles.
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.
- ---------------------------------------------------------------------------
DREYFUS PREMIER LIMITED TERM MASSACHUSETTS 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, 1999
- ----------------------------------------------------------------------------
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 Massachusetts Municipal
("Massachusetts Municipal Fund") and the Dreyfus Premier Limited Term
Municipal Fund ("Municipal Fund") (individually, the "Fund", collectively,
the "Funds"), each dated November 1, 1999, 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 that is registered with the Securities and Exchange Commission
("SEC"). 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. -- Call 516-794-5452
TABLE OF CONTENTS
Page
Description of the Funds.................................................B-2
Management of the Funds.................................................B-18
Management Arrangements.................................................B-25
Purchase of Shares......................................................B-28
Distribution and Service Plans..........................................B-34
Redemption of Shares....................................................B-37
Shareholder Services....................................................B-41
Additional Information About Purchases, Exchanges and Redemptions.......B-46
Determination of Net Asset Value........................................B-47
Dividends, Other Distributions and Taxes................................B-48
Portfolio Transactions................................................. B-54
Performance Information.................................................B-56
Information About the Funds/Trust.......................................B-60
Transfer and Dividend Disbursing Agent,
Custodian, Counsel and Independent Auditors.............................B-61
Financial Statements....................................................B-62
Appendix A..............................................................B-63
Appendix B..............................................................B-66
<PAGE>
DESCRIPTION OF THE FUNDS
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.
Prior to March 31, 1997 the Massachusetts Municipal Fund's name was Premier
Limited Term Massachusetts Municipal Fund and Municipal Fund's name was
Premier Limited Term Municipal Fund. The Company is authorized to issue an
unlimited number of shares of beneficial interest, each without par value.
The Trustees have authorized shares of the Funds to be issued in four
classes: Class A, Class B, Class C and Class R.
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
General Investment Objective and Policies for Massachusetts Municipal
Fund. The Massachusetts Municipal Fund seeks to maximize current income
exempt from Federal income taxes and Massachusetts personal income taxes
consistent with what is believed to be the prudent risk of capital. The
Massachusetts Municipal Fund pursues its objective by investing in debt
obligations of the Commonwealth of Massachusetts, 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 taxes purposes and is exempt from
Massachusetts personal income taxes ("Massachusetts Municipal Obligations"),
and which are of "investment-grade" quality and generally of intermediate
maturities.
Under normal market conditions, the Massachusetts Municipal Fund
attempts to invest 100%, and will invest a minimum of 80%, of its total
assets in Massachusetts Municipal Obligations. Massachusetts 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
Massachusetts Municipal Obligations, and a "defensive" investment posture is
warranted, the Massachusetts Municipal Fund may temporarily invest more than
20% of its total assets in money market instruments which produce income
exempt from Federal taxes, but not Massachusetts personal income taxes, 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 Massachusetts Municipal Fund's
monies available for investment exceed the Massachusetts Municipal
Obligations available for purchase to meet the Massachusetts Municipal Fund's
rating, maturity and other investment criteria. Under normal market
conditions, the Massachusetts Municipal Fund may invest up to 20% of its
total assets in municipal obligations having maturity and quality
characteristics comparable to those for Massachusetts Municipal Obligations,
but which produce income exempt from Federal taxes, but not from
Massachusetts personal income taxes. The Massachusetts Municipal Fund's
policy of investing a minimum of 80% of its total assets in Massachusetts
Municipal Obligations is a fundamental policy of the Fund.
General Investment Objective and Policies for Municipal Fund. The
Municipal Fund seeks to maximize current income exempt from Federal income
taxes consistent with the prudent risk of capital. The Municipal 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").
Under normal market conditions, the Municipal Fund attempts to invest
100%, and will invest a minimum of 80%, of its total assets in Municipal
Obligations. However, the Municipal 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 Municipal Fund,
Dreyfus seeks to take advantage of market developments, yield disparities and
variations in the creditworthiness of issuers. The Municipal Fund's policy of
investing a minimum of 80% of its total assets in Municipal Obligations is a
fundamental policy of the Fund.
General Information Regarding Both Funds. Each Fund is classified as
"non-diversified," as defined under the Investment Company Act of 1940 ("1940
Act"), and therefore, each Fund could invest all of its assets in the
obligations of a single issuer or relatively few issuers. 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
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.
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 that 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 Municipal Fund 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. The Massachusetts Municipal 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 Funds 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 year 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.
Description of Municipal Obligations. "Municipal Obligations", when
referred to below, shall mean Municipal Obligations with respect to the
Municipal Fund and Massachusetts Municipal Obligation with respect to the
Massachusetts Municipal Fund. 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 Obligations or 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 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 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.
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.
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.
Other Instruments. 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.
Quality of Massachusetts Municipal Obligations and Municipal
Obligations. The Massachusetts Municipal Fund invests only in Massachusetts
Municipal Obligations and the Municipal 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 & 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.
Massachusetts Municipal Obligations and 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 Massachusetts Municipal Obligations and Municipal
Obligations and the rating systems appears in Appendix B.
Because many issuers of Massachusetts Municipal Obligations and
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.
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 ("NAV") 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.
Portfolio Securities. The average distribution of investments (at
value) in Municipal Obligations by ratings for each Fund for the fiscal year
ended June 30, 1999, computed on a monthly basis, was as follows:
Fitch IBCA, Inc "Moody's" "S&P" Municipal
("Fitch") or or Fund
AAA Aaa AAA 67.6%
AA Aa AA 19.8
A A A 7.8
BBB Baa BBB 2.3
F-1, F-1+ MIG1, VMIG, P-1 SP-1+/SP-1,A-1 2.4
Not Rated Not Rated Not Rated 0.11
---
100.0
Massachusetts
Fitch or Moody's or S&P Municipal Fund
AAA Aaa AAA 74.8%
AA Aa AA 12.5
A A A 3.0
BBB Baa BBB 5.5
F-1, F-1+ MIG1, VMIG, P-1 A-1 4.2
100.0
1 Included in the Not Rated category are securities comprising 0.1% of the
value of the Municipal 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 (0.1%).
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.
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.
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. 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 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.
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.
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 in the case of the Massachusetts
Municipal Fund state personal) income taxes, a Fund will invest in taxable
obligations only if and when Dreyfus believes 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. Under such
circumstances, a Fund may invest in 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.
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 1940 Act. As a shareholder of another investment company, each
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.
Investment Techniques
In connection with its investment objective and policies, each Fund may
employ, among others, the following investment techniques:
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 Funds 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 a Fund remain 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 NAV. 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.
Each 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 the 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 each 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.
Investments in Municipal Bond Index and Interest Rate Futures Contracts
and Options on Municipal Bond Index and Interest Rate Futures Contracts. The
Fund may investment in municipal bond index futures contracts and interest rate
futures contracts and purchase and sell options on these 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 and Interest Rate Futures Contracts. 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 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 Obligation, 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 underlying instrument or 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 or interest rate futures contract as a hedging device. Successful use of
such 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 underlying instrument of municipal bond index and movements in
the price of the Municipal Obligations 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 or interest rate 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 and
interest rate 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 Obligations will, in fact, correlate
with the price movements in the municipal bond index or interest rate 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 Obligations 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 Obligations 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 or interest rate 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 or interest rate
futures contracts and options on interest rate futures contracts may be
materially limited by the requirements of the Code, applicable to a regulated
investment company. See "Dividends, Other Distributions and Taxes" below.
Any income earned by the Funds from transactions in 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
Options on Municipal Bond Index or Interest Rate Futures Contracts. A
Fund may purchase put and call options on municipal bond index or 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.
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.
The Funds 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.
Options on municipal bond index or 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 such
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 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 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.
Any income earned by the Funds from transactions in 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 there- after, 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.
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.
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 B 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.
Special Factors Affecting the Fund
Investing in Massachusetts Municipal Obligations. You should review the
information in "Appendix A", which provides a brief summary of special
investment considerations and risk factors relating to investing in
Massachusetts Municipal Obligations.
Certain Investments. 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, N.A. ("Mellon Bank"), an
affiliate of Dreyfus, has a leading relationship.
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.
Fundamental. The following limitations have been adopted by each Fund.
Each Fund may not change any of these fundamental investment limitations
without the consent of: (a) 67% or more of the shares present at a meeting of
shareholders duly called if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy; or (b) more than 50%
of the outstanding shares of the Fund, whichever is less. Each Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of a Fund's total assets at the time of such purchase to be invested in
the securities of one or more issuers conducting their principal activities
in the same industry. (For purposes of this limitation, U.S. Government
securities and state or municipal governments and their political
subdivisions are not considered members of any industry. In addition, this
limitation does not apply to investments of domestic banks, including U.S.
branches of foreign banks and foreign branches of U.S. banks.)
2. Borrow money or issue senior securities as defined in the 1940
Act, except that (a) a Fund may borrow money in an amount not exceeding
one-third of the Fund's total assets at the time of such borrowing, and (b) a
Fund may issue multiple classes of shares. The purchase or sale of futures
contracts and related options shall not be considered to involve the
borrowing of money or issuance of senior securities.
3. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this restriction, debt instruments and repurchase agreements
shall not be treated as loans.
4. Underwrite securities issued by any other person, except to the
extent 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.
Nonfundamental. Each Fund has adopted the following additional
non-fundamental restrictions. These non-fundamental restrictions may be
changed without shareholder approval, in compliance with applicable law and
regulatory policy.
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 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. 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 (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.
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 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 FUNDS
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 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 its statutory and regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations, could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or the Fund. If Mellon Bank or Dreyfus were prohibited from
serving the Fund in any of its present capacities, the Board of Trustees
would seek an alternative provider(s) of such services.
Trustees and Officers of the Trust
The Trust's Board is responsible for the management and supervision of
the Funds. The Board approves all significant agreements between the Trust,
on behalf of the Funds, and those companies that furnish services to the
Funds. These companies are as follows:
The Dreyfus Corporation..............................Investment Adviser
Premier Mutual Fund Services, Inc...........................Distributor
Dreyfus Transfer, Inc....................................Transfer Agent
Mellon Bank......................................Custodian for the Fund
The Trust has a Board composed of nine Trustees. 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") and
the Dreyfus High Yield Strategies Fund.
Trustees of the Trust
o+JOSEPH S. DIMARTINO. Chairman of the Board 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 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 packager and distributor;
Century Business Services, Inc. (formerly, International Alliance
Services, Inc.), a provider of various outservicing functions for small
and medium sized companies; and Career Blazers, Inc. (formerly Staffing
Resources, Inc.) a temporary placement agency. For more than five years
prior to January 1995, he was President, a director and, until August
24, 1994, Chief Operating Officer of Dreyfus and Executive Vice
President and a director of Dreyfus Service Corporation, a wholly-owned
subsidiary of Dreyfus. From August 1994 to December 31, 1994, he was a
director of Mellon Bank Corporation. Age: 56 years old. Address: 200
Park Avenue, New York, New York 10166.
o+JAMES M. FITZGIBBONS. Trustee of the Trust; Director, Lumber Mutual
Insurance Company; Director, Barrett Resources, Inc.; Chairman of the
Board, Davidson Cotton Company; former Chairman of the Board and CEO of
Fieldcrest Cannon, Inc. Age: 65 years old. Address: 40 Norfolk Road,
Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Trustee of the Trust; Of Counsel, Reed, Smith, Shaw &
McClay (law firm). Age: 71 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Trustee of the Trust; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; former Chairman of the Board
and Director, Rexene Corporation. Age: 77 years old. Address: Way
Hollow Road and Woodland Road, Sewickley, Pennsylvania 15143.
o+KENNETH A. HIMMEL. Trustee of the Trust; President & CEO, The Palladium
Company; President and CEO, Himmel and Company, Inc.; CEO, American
Food Management; former Director, The Boston Company, Inc. ("TBC"), and
Boston Safe Deposit and Trust Company, each an affiliate of Dreyfus.
Age: 53 years old. Address: 625 Madison Avenue, 9th Floor, New York,
New York 10022.
o+STEPHEN J. LOCKWOOD. Trustee of the Trust; Chairman and CEO, LDG
Reinsurance Corporation; Vice Chairman, HCCH. Age: 52 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; Member of Advisory Committee, Decedents Estates Laws of
Pennsylvania. Age: 68 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
Health Care, Inc.; Director, Massachusetts Electric Company; Director,
the Hyams Foundation, Inc. Age: 50 years old. Address: 25 Braddock
Park, Boston, Massachusetts 02116-5816.
o+BENAREE PRATT WILEY. Trustee of the Trust; President and CEO of The
Partnership, an organization dedicated to increasing the representation
of African Americans in positions of leadership, influence and
decision- making in Boston, MA; Trustee, Boston College; Trustee, WGBH
Educational Foundation; Trustee, Children's Hospital; Director, The
Greater Boston Chamber of Commerce; Director, The First Albany
Companies, Inc.; from April 1995 to March 1998, Director, TBC. Age: 53
years old. Address: 334 Boylston Street, Suite 400, Boston,
Massachusetts.
- -----------------------------
* "Interested person" of the Trust, as defined in 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
Officers of the Trust
#MARGARET W. CHAMBERS. Vice President and Secretary of the Trust. Senior
Vice President and General Counsel of Funds Distributor, Inc. From
August 1996 to March 1998, she was Vice President and Assistant General
Counsel for Loomis, Sayles & Company, L.P. From January 1986 to July
1996, she was an associate with the law firm of Ropes & Gray. Age: 40
years old.
#MARIE E. CONNOLLY. President and Treasurer of the Trust. President, Chief
Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which
is Boston Institutional Group, Inc. Age: 42 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. Age: 30 years old.
#JOHN P. COVINO. Vice President and Assistant Treasurer of the Trust. Vice
President and Treasury Group Manager of Treasury Servicing and
Administration of Funds Distributor, Inc. since December 1998. From
December 1995 to November 1998, he was employed by Fidelity Investments
where he held multiple positions in their Institutional Brokerage
Group. Prior to joining Fidelity, he was employed by SunGard Brokerage
Systems where he was responsible for the technology and development of
the accounting product group. Age: 36 years old.
#FREDRICK C. DEY. Vice President, Assistant Treasurer and Assistant
Secretary of the Trust. Vice President of New Business Development of
Funds Distributor, Inc. Age: 37 years old.
#CHRISTOPHER J. KELLEY. Vice President and Assistant Secretary of the
Trust. Vice President and Senior Associate General Counsel of Funds
Distributor, Inc. From April 1994 to July 1996, he was Assistant
Counsel at Forum Financial Group. Age: 34 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the Trust.
Manager of Treasury Services Administration of Funds Distributor, Inc.
From July 1994 to November 1995, she was a Fund Accountant for
Investors Bank & Trust Company. Age: 27 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Trust. Vice
President of the Distributor and Funds Distributor, Inc. Age: 35 years
old.
#STEPHANIE D. PIERCE. Vice President, Assistant Treasurer and Assistant
Secretary of the Trust. Vice President of the Distributor and Funds
Distributor, Inc. From April 1997 to March 1998, she was employed as a
Relationship Manager with Citibank, N.A. From August 1995 to April
1997, she was an Assistant Vice President with Hudson Valley Bank, and
from September 1990 to August 1995, she was a Second Vice President
with Chase Manhattan Bank. Age: 31 years old.
#GEORGE A. RIO. Vice President and Assistant Treasurer of the Trust.
Executive Vice President and Client Service Director of Funds
Distributor, Inc. From June 1995 to March 1998, he was Senior Vice
President and Senior Key Account Manager for Putnam Mutual Funds. From
May 1994 to June 1995, he was Director of Business Development for
First Data Corporation. Age: 44 years old.
#JOSEPH F. TOWER, III. Vice President and Assistant Treasurer of the Trust.
Senior Vice President, Treasurer, Chief Financial Officer and a
director of the Distributor and Funds Distributor, Inc. Age: 37 years
old.
#ELBA VASQUEZ. Vice President and Assistant Secretary of the Trust.
Assistant Vice President of Funds Distributor, Inc. From March 1990 to
May 1996, she was employed by U.S. Trust Company of New York, where she
held various sales and marketing positions. Age: 37 years old.
#KAREN JACOPPO-WOOD. Vice President and Assistant Secretary of the Trust.
Vice President and Senior Counsel of Funds Distributor, Inc. since
February 1997. From June 1994 to January 1996, she was manager of SEC
Registration at Scudder, Stevens & Clark, Inc. Age: 32 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. In addition, 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" of the Trust (as defined
in the 1940 Act) $40,000 per annum, plus $5,000 per joint Dreyfus/Laurel
Funds Board meeting attended, $2,000 for separate committee meetings attended
which are not held in conjunction with a regularly scheduled Board meeting
and $500 for Board meetings and separate committee meetings attended that are
conducted by telephone. The Dreyfus/Laurel Funds also reimburse each
Director/Trustee who is not an "interested person" of the Trust (as defined
in the 1940 Act) for travel and out-of-pocket expenses. The Chairman of the
Board receives an additional 25% of such compensation (with the exception of
reimbursable amounts). In the event that there is a joint committee meeting
of the Dreyfus/Laurel Funds and the Dreyfus High Yield Strategies Fund, the
$2,000 fee will be allocated between the Dreyfus/Laurel Funds and the Dreyfus
High Yield Strategies Fund.
In addition, the Trust currently has three Emeritus Board members who
are entitled to receive an annual retainer and a per meeting fee of one-half
the amount paid to them as Board members.
The aggregate amount of fees and expenses received by each current
Trustee from the Trust for the fiscal year ended June 30, 1999, and from all
other funds in the Dreyfus Family of Funds for which such person was a Board
member (the number of which is set forth in parentheses next to each Board
member's total compensation)* during the year ended December 31, 1998, were as
follows:
Total Compensation
Aggregate From the Trust and
Name of Board Compensation Fund Complex Paid
Member From the Trust# to Board Member
Joseph S. DiMartino** $24,154 $ 619,660 (187)
James M. Fitzgibbons $20,666 $ 60,010 (31)
J. Tomlinson Fort*** none none (31)
Arthur L. Goeschel $22,333 $ 61,010 (31)
Kenneth A. Himmel $18,333 $ 50,260 (31)
Stephen J. Lockwood $20,000 $ 51,010 (31)
John J. Sciullo $21,666 $ 59,010 (31)
Roslyn M. Watson $22,333 $ 61,010 (31)
Benaree Pratt Wiley $20,000 $ 49,628 (31)****
- ----------------------------
# Amounts required to be paid by the Trust directly to the non-interested
Trustees, that would be applied to offset a portion of the management
fee payable to Dreyfus, are in fact paid directly by Dreyfus to the
non-interested Trustees. Amount does not include reimbursed expenses
for attending Board meetings, which amounted to $2,795.30 for the Trust.
* Represents the number of separate portfolios comprising the investment
companies in the Fund complex, including the Trust, for which the Board
member served.
** Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds
on January 1, 1999.
*** J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board
member of the Trust and the funds in the Dreyfus/Laurel Funds and
separately by the Dreyfus High Yield Strategies Fund. For the fiscal
year ended June 30, 1999, the aggregate amount of fees received by J.
Tomlinson Fort from Dreyfus for serving as a Board member of the Trust
was $21,666. For the year ended December 31, 1998, the aggregate
amount of fees received by Mr. Fort for serving as a Board member of
all funds in the Dreyfus/Laurel Funds (including the Trust) and Dreyfus
High Yield Strategies Fund (for which payment is made directly by the
fund) was $59,010. In addition, Dreyfus reimbursed Mr. Fort a total of
$ 1,117.68 or expenses attributable to the Trust's Board meetings which
is not included in the $2,795.30 amount in note # above.
**** Represents payment for the period from April 23, 1998 (the date she was
elected as a Board member) through December 31, 1998.
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 4,
1999.
Principal Shareholders. As of October 4, 1999, the following
shareholders owned beneficially or of record 5% or more of the outstanding
Class A shares of the Massachusetts Municipal Fund: PaineWebber for the
Benefit of Joseph R. White, P.O. Box 572, Waltham, MA 02254-0572; 7.34%; and
Duncan M. McFarland, 299 Clapboardtree Street, Westwood, MA 02090-2907;
5.81%.
As of October 4, 1999, the following shareholders owned beneficially or
of record 5% or more of the outstanding Class B shares of the Massachusetts
Municipal Fund: NFSC FEBO #E40-000248, Beatrice M. Cowell, P.O. Box 156,
Otis, MA 01253; 47.86%; MLPF & S For The Sole Benefit Of Its Customers, 4800
Deer Lake Drive. East, Floor 3, Jacksonville, FL 32246-6484; 22.84%; Wexford
Clearing Services Corp., FBO Kathryn S. Grosberg, 614 Queen Anne Rd.,
Harwick, MA 02645-1961; 10.70%; Everen Securities, Inc., Elena Hammack
JTWROS, 111 East Kilbourn Avenue, Milwaukee, WI 53202; 9.36%; and Robert L.
Nash Custodian, Kaily K. Nash UTMA MA, 445 S. Main St., Bradford, MA
01835-7253; 5.55%.
As of October 4, 1999, the following shareholders owned beneficially or of
record 5% or more of the outstanding Class C shares of the Massachusetts
Municipal Fund: PaineWebber for the Benefit of Anthony Conklin Jr., 11 Sherry
Circle, Amherst, MA 01002-3022; 36.98%; NFSC FEBO #E1K-004758, Robert F. Dow, 3
Dawes St., Newburyport, MA 01950; 29.75%; PaineWebber for the Benefit of Thomas
A. Merrill, 35 Kenwood St., Dorchester, MA 02124-2211; 9.31%; Raymond M. Cote,
60 Rowley St., Swansea, MA 02777-4943; 7.44%; and PaineWebber for the Benefit of
Michael Moore & Gail Moore JTWROS, 162 Oak Crest Dr., Farmingham, MA 01701-8916;
6.45%.
As of October 4, 1999, the following shareholders owned beneficially or
of record 5% or more of the outstanding Class R shares of the Massachusetts
Municipal Fund: MAC & Co. 10263701617, P.O. Box 534005, Pittsburgh, PA
15253; 6.17%.
As of October 4, 1999, the following shareholders owned beneficially or
of record 5% or more of the outstanding Class A Shares of the Municipal Fund:
C. John Easton & Flo Ann Easton JT WROS, 4975 Oldbridge Drive, Columbus, OH
43220-2841; 5.17%.
As of October 4, 1999, the following shareholders owned beneficially or
of record 5% or more of the outstanding Class B shares of the Municipal Fund:
MLPF & S For The Sole Benefit Of Its Customers, 4800 Deer Lake Drive, East,
Floor 3, Jacksonville, FL 32246-6484; 34.00%; James J. Castranova, 950 N.
Kings Road, Apt. 355, West Hollywood, CA 90069-6211; 9.59%; and Katherine G.
Savidge, 4619 Groveland Ave., Royal Oak, MI 48073-1528; 9.43%.
As of October 4, 1999, the following shareholders owned beneficially or
of record 5% or more of the outstanding Class C shares of the Municipal Fund:
BT Alex Brown Incorporated, FBO 231-36967-14, P.O. Box 1346, Baltimore, MD
21203; 53.91%; Dean Witter For The Benefit Of Albert T. Nassi Trustee, P.O.
Box 250, Church Street Station, New York, NY 10008-0250; 14.55%; and
PaineWebber For The Benefit Of Theresa J. Schaffer Trustee, Theresa J.
Schaffer Revocable Trust, UAD 5/19/92, 49 Tartan Lakes Drive, Westmont, IL
60559-6163; 7.05%.
A shareholder who beneficially owns, directly or indirectly, more than
25% of the Fund's voting securities may be deemed a "control person" (as
defined in the 1940 Act) of the Fund.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the sections in the Funds' Prospectuses entitled "Expenses" and
"Management"
Dreyfus is a wholly-owned subsidiary of Mellon Financial Corporation
("Mellon"). Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal 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 25 largest bank holding companies in the United States based
on total assets.
Management Agreement. Dreyfus serves as the investment manager for the
Funds pursuant to an Investment Management Agreement with the Trust dated
April 4, 1994 transferred to Dreyfus as of October 17, 1994 (the "Investment
Management Agreement"), which was last approved by the Trust's Board of
Trustees on February 4, 1999 to continue until April 4, 2000. 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 will continue from year to year as
to each Fund provided that a majority of the Trustees who are not "interested
persons" of the Trust and either a majority of all Trustees or a majority (as
defined in the 1940 Act) of the shareholders of the respective Fund
respective approve its continuance. The Trust may terminate the Investment
Management Agreement with respect to each Fund upon the vote of a majority of
the Board of Trustees or upon the vote of a majority of the respective Fund's
outstanding voting securities on 60 days' written notice to Dreyfus. Dreyfus
may terminate the Investment Management Agreement upon 60 days' written
notice to the Trust. The Investment Management Agreement will terminate
immediately and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment
Officer and a director; Thomas F. Eggers, Vice Chairman-Institutional and a
director; Lawrence S. Kash, Vice Chairman and a director; Ronald P. O'Hanley
III, Vice Chairman; J. David Officer, Vice Chairman and a director; William
T. Sandalls, Jr., Executive Vice President; Mark N. Jacobs, Vice President,
General Counsel and Secretary; Diane P. Durnin, Vice President-Product
Development; Patrice M. Kozlowski, Vice President- Corporate Communications;
Mary Beth Leibig, Vice President-Human Resources; Andrew S. Wasser, Vice
President-Information Systems; Theodore A. Schachar, Vice President; Wendy
Strutt, Vice President; Richard Terres, Vice President; William H. Maresca,
Controller; James Bitetto, Assistant Secretary; Steven F. Newman, Assistant
Secretary and Mandell L. Berman, Burton Borgelt, Steven G. Elliott, Martin C.
McGuinn, Richard W. Sabo, and Richard F. Syron, directors.
Under Dreyfus' personal securities trading policy ("the Policy"),
Dreyfus employees must preclear personal transactions in securities not
exempt under the Policy. In addition, Dreyfus employees must report their
personal securities transactions and holdings, which are reviewed for
compliance with the Policy. In that regard, Dreyfus' portfolio managers and
other investment personnel also are subject to the oversight of Mellon's
Investment Ethics Committee. Dreyfus portfolio managers and other investment
personnel who comply with the Policy's preclearance and disclosure
procedures, and the requirements of the Committee, may be permitted to
purchase, sell or hold securities which also may be or are held in fund(s)
they manage or for which they otherwise provide investment advice.
Expenses. Under the Investment Management Agreement, the Funds have
agreed to pay Dreyfus a "unitary fee" at the annual rate of 0.50 of 1% of the
value of the Funds' average daily net assets, computed daily and paid
monthly. Under the unitary fee structure, Dreyfus pays all of the Funds'
expenses, except: (i) brokerage fees, (ii) taxes, interest and extraordinary
expenses (which are expected to be minimal), and (iii) Rule 12b-1 fees, as
applicable. 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. 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. Dreyfus may waive all or a portion of its fees
payable by a Fund from time to time.
For the last three years, each Fund had the following management fees:
1999 1998 1997
Municipal Fund $435,019 $263,445 $196,627
Massachusetts Municipal Fund $402,864 $291,477 $225,861
The Distributor. Premier Mutual Fund Services, Inc. (the
"Distributor"), located at 60 State Street, Boston, Massachusetts 02109,
serves as each Fund's distributor on a best efforts basis pursuant to an
agreement which is renewable annually. Dreyfus may pay the Distributor for
shareholder services from Dreyfus' own assets, including past profits but not
including the management fee paid by a Fund. The Distributor may use part or
all of such payments to pay certain banks, securities brokers or dealers and
other financial institutions ("Agents") for these services. The Distributor
also acts as sub-administrator for the Funds and as distributor for the other
funds in the Dreyfus Family of Funds.
For the fiscal year ended June 30, 1999, the Distributor retained
$3,888 from for the Municipal Fund and $1,524 from the Massachusetts
Municipal Fund from sales loads on the Funds' Class A shares. For the fiscal
year ended June 30, 1999, the Distributor retained $5,368 from the Municipal
Fund and $1,822 from the Massachusetts Municipal Fund from the contingent
deferred sales charge ("CDSC") on each Fund's Class B shares. For the fiscal
year ended June 30, 1999, the Distributor retained $326 and $256 from the
CDSC on Class C shares for the Municipal Fund and the Massachusetts Municipal
Fund, respectively.
For the fiscal year ended June 30, 1998, the Distributor retained no
commissions for the Municipal Fund and the Massachusetts Municipal Fund from
sales loads on the Funds' Class A shares. For the fiscal year ended June 30,
1998, the Distributor retained $3,143 from the Municipal Fund and $900 from
the Massachusetts Municipal Fund from the CDSC on each Fund's Class B
shares. For the fiscal year ended June 30, 1998, the Distributor retained
$313 and $75 from the CDSC on Class C shares for the Municipal Fund and the
Massachusetts Municipal Fund, respectively.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the sections in the Funds' Prospectuses entitled "Account Policies,"
"Services for Fund Investors," and "Instructions for Regular Accounts."
General. Class A, Class B and Class C shares may be purchased only by
clients of Agents, except that full-time or part-time employees of Dreyfus or
any of its affiliates or subsidiaries, directors of Dreyfus, Board members of
a fund advised by Dreyfus, including members of the Trust's Board, or the
spouse or minor child of any of the foregoing may purchase Class A shares
directly through the Distributor. Subsequent purchases may be sent directly
to the Transfer Agent or your Agent.
Class R shares are sold primarily to bank trust departments and other
financial service providers (including Mellon Bank and its affiliates) acting
on behalf of customers having a qualified trust or investment account or
relationship at such institution, or to customers who have received and hold
shares of the Fund distributed to them by virtue of such an account or
relationship. In addition, holders of Class R shares of a Fund who have held
their shares since April 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. Each 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 the respective Fund's 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
respective Fund's Account Application. Each Fund reserves the right to vary
the initial and subsequent investment minimum requirements at any time.
Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See
"Dividends, Other Distributions and Taxes" and the respective 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. An investment portfolio's NAV refers to the
worth of one share. The NAV for shares of each Class of each 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 each Fund are offered on a
continuous basis. For purposes of determining NAV for each Fund, bonds are
valued by an independent pricing service approved by the Trust's Board of
Trustees at fair value as determined by the pricing service. See
"Determination of Net Asset Value." 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 as of the close of business of trading on the floor
of the New York Stock Exchange ("NYSE") (currently 4 p.m., New York Time) on
each day the NYSE is open for business. 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 in proper form by the
Transfer Agent or other entity authorized to receive orders on behalf of the
Fund before the close of trading on the floor of the NYSE 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 NYSE on any business day and transmitted to
the Distributor or its designee by the close of its business day (normally
5:15 p.m., New York time) will be based on the public offering price per
share determined as of the close of trading on the floor of the NYSE on that
day. Otherwise, the orders will be based on the next determined public
offering price. It is the dealers' responsibility to transmit orders so that
they will be received by the Distributor or its designee before the close of
its business day. 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 for Class A shares of each
Fund is the NAV of that Class, plus a sales load as shown below:
Total Sales Load
As a % of As a % of Dealers'
Offering Net Asset Reallowance
Amount of Transaction Price Value as a % of
Per Share Per Share Offering Price
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
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 Fund's Prospectus at a price based upon the
NAV of the Class A shares on June 30, 1999.
Municipal Massachusetts
Fund Municipal Fund
Net Asset Value per share $12.03 $12.03
Per Share Sales Charge - 3.00%
of offering price (3.10% of
net asset value per share) $ 0.37 $ 0.37
Per Share Offering Price to
the Public $12.40 $12.40
Holders of Class A accounts of a Fund as of December 28, 1994 may
continue to purchase Class A shares of that Fund at NAV. However, investments
by such holders in other funds advised by Dreyfus will be subject to the
applicable front-end sales load.
With respect to each Fund, 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.
Pursuant to an agreement with the Distributor, Dreyfus Service Corporation
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 below under
"Redemption of Shares-Contingent Deferred Sales Charge-Class B Shares" (other
than the amount of the CDSC and time periods) and "Redemption of
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 of Dreyfus or any of its
affiliates or subsidiaries, directors of Dreyfus, and Board members of a fund
advised by Dreyfus, including members of the Trust's Board, or the spouse or
minor child of any of the foregoing.
Class A shares may be purchased at NAV through certain broker-dealers
and other financial institutions which have entered into an agreement with
the Distributor, which includes a requirement that such shares be sold for
the benefit of clients participating in a "wrap account" or a similar program
under which such clients pay a fee to such broker-dealer or other financial
institution.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, through a broker-dealer or other financial institution with
the proceeds from the redemption of shares of a registered open-end
management investment company not managed by Dreyfus or its affiliates. The
purchase of Class A shares of a Fund must be made within 60 days of such
redemption and the shareholder must have either (i) paid an initial sales
charge or a CDSC 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(6)(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.
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 in each Fund's Prospectus.
Approximately six years after the date of purchase, Class B shares
automatically will convert to Class A shares, based on the relative NAVs for
shares of each such Class. Class B shares that have been acquired through
the reinvestment of dividends and 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
distributions.
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 Shares."
Class B and C Shares. Pursuant to an agreement with the Distributor,
Dreyfus Service Corporation compensates certain Agents for selling Class B
and Class C shares at the time of purchase from its own assets. The proceeds
of the CDSC and the distribution fee, in part, are used to defray these
expenses.
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 above, 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 through the 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. 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 that is an ACH member
may be so designated. 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 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 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 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 Shares - TeleTransfer Privilege."
Each 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 by either Fund.
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, a 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 applicable 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 NAVs of the
shares purchased and securities exchanged. Securities accepted by a Fund
will be valued in the same manner as the Fund values its assets. Any
interest earned on the securities following their delivery to a Fund and
priors 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
1-800-554-4611.
DISTRIBUTION AND SERVICE PLANS
The following information supplements and should be read in conjunction
with the section in the Funds' Prospectuses entitled "Your Investment."
Class A, Class B and Class C shares are subject to annual fees for
distribution and shareholder services.
The 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.
Distribution Plan--Class A shares. With respect to the Class A shares
of each Fund, the Trust has adopted a Distribution Plan pursuant to the Rule
(the "Class A Plan"), whereby Class A shares of a Fund may spend annually up
to 0.25% of the average of its net assets to compensate Dreyfus Service
Corporation, an affiliate of Dreyfus, for shareholder servicing activities
and the Distributor for shareholder servicing activities and expenses
primarily intended to result in the sale of Class A shares of the Fund. The
Class A Plan allows the Distributor to make payments from the Rule 12b-1 fees
it collects from a Fund to compensate Agents that have entered into Selling
Agreements ("Agreements") with 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. The Trust's Board of Trustees believes that there is a
reasonable likelihood that the Class A Plan will benefit each Fund and the
holders of its 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 at a meeting held on
February 4, 1999. 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 for Class A shares, the 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 a fee at the annual rate of 0.25% of the value of
the average daily net assets of Class B and Class C shares for the provision
of certain services to the holders of Class B and Class C 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 to its clients any compensation payable to
it by the Fund and any other compensation payable by its clients in
connection with the investment of their assets in Class B and Class C
shares. The Distributor may pay one or more Agents in respect of services
for these Classes of 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. 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") pursuant to which the Fund pays the
Distributor for distributing the Fund's Class B and Class C shares at an
aggregate annual rate of 0.50% of the value of the average daily net assets
of Class B and Class C shares. The Trust's Board of Trustees believes that
there is a reasonable likelihood that the Distribution and Service Plan (the
"Plans") will benefit the Fund 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 Class
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. Each 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 February 4, 1999. 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 Class C shares.
An Agent entitled to receive compensation for selling and servicing a
Fund's shares may receive different compensation with respect to one Class of
shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under each plan described above are payable without
regard to actual expenses incurred. Each Fund and the Distributor may
suspend or reduce payments under any of the plans at any time, and payments
are subject to the continuation of the Fund's plans and the Agreements
described above. From time to time, the Agents, the Distributor and each
Fund may voluntarily agree to reduce the maximum fees payable under the plans.
For the fiscal year ended June 30, 1999, the distribution fees were as
follows:
Distribution Fees: Class A* Class B Class C
Massachusetts Municipal Fund $41,468+ $4,571++ $1,492++
Municipal Fund $67,052+ $12,225++ $4,179++
For the fiscal year ended June 30, 1999, the service fees were as
follows:
Service Fees: Class B Class C
Massachusetts Municipal Fund $2,286+++ $746+++
Municipal Fund $6,112++++ $2090++++
Class R shares bear no service or distribution fee.
- ----------------
* Distribution and servicing combined.
+ Fee represents $2,126 paid to the Distributor and $39,342 paid to
Dreyfus Service Corporation for the Massachusetts Municipal Fund and
$13,529 paid to the Distributor and $53,523 paid to Dreyfus Service
Corporation for the Municipal Fund.
++ Fee represents amount paid to the Distributor.
+++ Fee represents $280 and $24 paid to the Distributor and $2,006 and
$722 paid to Dreyfus Service Corporation for the Massachusetts
Municipal Fund for Class B and Class C shares, respectively.
++++ Fee represents $336 and $536 paid to the Distributor and $5,776 and
$1,554 paid to Dreyfus Service Corporation for the Municipal Fund for
Class B and Class C shares, respectively.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Account Policies,"
"Services For Fund Investors," and "Instructions for Regular Accounts."
General. 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 Fund's then-current NAV.
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 Fund shares through the Selected Dealer. Other redemption procedures
may be in effect for clients of certain Agents and institutions. Each Fund
makes available to certain large institutions the ability to issue redemption
instructions through compatible computer facilities. Each 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. Each 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 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 Touch(R) 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. Each 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.
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 designated. Redemption proceeds
will be on deposit in the your account at an ACH member bank ordinarily two
business days after receipt of the redemption request. Investors should be
aware that if they have selected the TeleTransfer Privilege, any request for
a wire redemption will be effected as a TeleTransfer transaction through the
ACH system unless more prompt transmittal specifically is requested. 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. See "Purchase of Shares-- TeleTransfer Privilege."
Redemption Through a Selected Dealer. Customers of Selected Dealers,
may make redemption requests to their 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
"Purchase of 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 Fund 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 Fund 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 if such
shares were subject to a CDSC, your 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.
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.
Redemption Commitment. The Trust has committed itself to pay in cash
all redemption requests by any shareholder of record of a 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 Trust's Trustees 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 such
event, the securities would be valued in the same manner as each Fund's
portfolio is valued. If the recipient sold such securities, brokerage
charges might be incurred.
Suspension of Redemptions. The right to redeem Fund shares 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 the Fund's
investments or determination of its NAV is not reasonably practicable, or (c)
for such other periods as the SEC, by order, may permit to protect a Fund's
shareholders.
Contingent Deferred Sales Charge - Class B shares. A CDSC is paid to
Dreyfus Service Corporation 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 a 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
Purchase Payment Amount Invested or
Was Made Redemption 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 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.
For purposes of determining the applicable CDSC payable with respect to
redemption of Class B shares of a Fund where such shares were acquired
through exchange of Class B shares of another fund advised by Dreyfus, the
year since purchase payment was made is based on the date of purchase of the
original Class B shares of the fund exchanged.
Contingent Deferred Sales Charge - Class C shares. A CDSC of .75% is
paid to Dreyfus Service Corporation on any redemption of Class C shares
within one year of the date of purchase. The basis for calculating the
payment of any such CDSC will be the method used in calculating the CDSC for
Class B shares. See "Contingent Deferred Sales Charge - Class B shares" above.
Waiver of CDSC. The CDSC applicable to Class B and Class C shares will
be waived in connection with (a) redemptions made within one year after the
death or disability, as defined in Section 72(m)(7) of the Code, of the
shareholder, (b) redemptions as a result of a combination of any investment
company with the Funds by merger, acquisition of assets or otherwise and (c)
redemptions pursuant to the Automatic Withdrawal Plan, as described under
"Shareholder Services-Automatic Withdrawal Plan" below. If the Trust's Board
of Trustees determines to discontinue the waiver of the CDSC, the disclosure
in the Funds' Prospectuses 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 relevant 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.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the sections in each Fund's Prospectus entitled "Accounts Policies" and
"Services for Fund Investors."
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 below.
You should consult your Agent in this regard.
Fund Exchanges. Shares of any Class of a Fund may be exchanged for
shares of the same Class of another fund in the Dreyfus Premier Family of
Funds or shares 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 NAV 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. Any such exchange is subject
to confirmation of a shareholder's holdings through a check of appropriate
records.
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. 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 the investor checks the relevant "No" box
on the Account Application, indicating that the investor specifically refuses
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 Touch(R) 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.
By using the Telephone Exchange Privilege, the investor authorizes the
Transfer Agent to act on telephonic instructions (including over The Dreyfus
Touch(R) automated telephone system) from any person representing himself or
herself to be the investor or a representative of the investor's Agent, and
reasonably believed by the Transfer Agent to be genuine. Telephone exchanges
may be subject to limitations as to the amount involved or the number of
telephone exchanges permitted. Shares issued in certificate form are not
eligible for telephone exchange. 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
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to regularly purchase (on a semi-monthly, monthly,
quarterly or annual basis), in exchange for shares of the Fund, shares of
same Class of certain other funds in the Dreyfus Premier Family of Funds or
shares of certain other funds in the Dreyfus Family of Funds of which the
investor is a shareholder. The amount the investor designates, 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 the investor has selected. This
Privilege is available only for existing accounts. Shares will be exchanged
on the basis of relative NAV 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.
The right to exercise this Privilege may be modified or canceled by
each 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 or Dreyfus Premier Limited Term Massachusetts
Municipal Fund (as applicable), P.O. Box 6587, Providence, Rhode Island
02940-6587. Each Fund may charge a service fee for the use of this
Privilege. No such fee currently is contemplated. 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 a Dreyfus Auto- Exchange Authorization Form, please
call toll free 1-800-554-4611.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of a fund being acquired
may legally be sold. Shares may be exchanged only between accounts having
identical names and other identifying designations. 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 and, therefore, an exchanging
shareholder may realize a taxable gain or loss.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-554-4611. The Funds reserve 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.
Dreyfus-Automatic Asset Builder(R). 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. 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 the applicable Fund, P.O. Box 6581, Providence, Rhode Island 02940-6587
and the notification will be effective three business days following
receipt. Each Fund may modify or terminate this Privilege at any time or
charge a service fee. No such fee currently is contemplated.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits 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 other
distributions, the investor's shares will be reduced and eventually may be
depleted. An Automatic Withdrawal Plan may be established by filing an
Automatic Withdrawal Plan application with the Transfer Agent or by oral
request from any of the authorized signatories on the account by calling
1-800-554-4611. Automatic Withdrawal may be terminated at any time by the
investor, the Fund or the Transfer Agent. Shares for which certificates have
been issued may not be redeemed through the Automatic Withdrawal Plan.
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.
Dreyfus Dividend Options. Dreyfus Dividend Sweep allows investors to
automatically invest their dividends or dividends and other distributions, if
any, from a Fund in shares of the same Class of certain other funds in the
Dreyfus Premier Family of Funds or shares of certain other funds in the
Dreyfus Family of Funds of which the investor is a shareholder. Shares of
the same class of other funds purchased pursuant to this Privilege will be
purchased on the basis of relative 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 CDSC and the applicable
CDSC, if any, will be imposed upon redemption of such shares.
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 Massachusetts Municipal Fund, or 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 Dreyfus Dividend Sweep. Each may modify or
terminate these Privileges at any time or charge a service fee. No such fee
currently is contemplated.
Dreyfus Government Direct Deposit Privilege. Dreyfus Government Direct
Deposit Privilege enables you to purchase 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. To enroll in Dreyfus Government Direct Deposit,
you must file with the Transfer Agent a completed Direct Deposit Sign-Up Form
for each type of payment that you desire to include in this Privilege. The
appropriate form may be obtained from your Agent or 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
respective Fund may terminate your participation upon 30 days' notice to you.
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. Purchases pursuant to a Letter of Intent will be made at the
then-current NAV plus the applicable sales load in effect at the time such
Letter of Intent was executed.
ADDITIONAL INFORMATION ABOUT PURCHASES,
EXCHANGES AND REDEMPTIONS
The Funds are intended to be long-term investment vehicles and are not
designed to provide investors with a means of speculation on short-term
market movements. A pattern of frequent purchases and exchanges can be
disruptive to efficient portfolio management and, consequently, can be
detrimental to a Fund's performance and its shareholders. Accordingly, if a
Fund's management determines that an investor is engaged in excessive
trading, the Fund, with or without prior notice, may temporarily or
permanently terminate the availability of Fund Exchanges, or reject in whole
or part any purchase or exchange request, with respect to such investor's
account. Such investors also may be barred from purchasing other funds in
the Dreyfus Family of Funds. Generally, an investor who makes more than four
exchanges out of a Fund during any calendar year or who makes exchanges that
appear to coincide with an active market-timing strategy may be deemed to be
engaged in excessive trading. Accounts under common ownership or control
will be considered as one account for purposes of determining a pattern of
excessive trading. In addition, a Fund may refuse or restrict purchase or
exchange requests by any person or group if, in the judgment of the Fund's
management, the Fund would be unable to invest the money effectively in
accordance with its investment objective and policies or could otherwise be
adversely affected or if the Fund receives or anticipates receiving
simultaneous orders that may significantly affect the Fund (e.g., amounts
equal to 1% or more of the Fund's total assets). If an exchange request is
refused, a Fund will take no other action with respect to the shares until it
receives further instructions from the investor. A Fund may delay forwarding
redemption proceeds for up to seven days if the investor redeeming shares is
engaged in excessive trading or if the amount of the redemption request
otherwise would be disruptive to efficient portfolio management or would
adversely affect the Fund. A Fund's policy on excessive trading applies to
investors who invest in the Fund directly or through financial
intermediaries, but does not apply to the Dreyfus Auto-Exchange Privilege, or
to any automatic investment or withdrawal privilege described herein.
During times of drastic economic or market conditions, a Fund may
suspend Fund Exchanges temporarily without notice and treat exchange requests
based on their separate components - redemption orders with a simultaneous
request to purchase the other fund's shares. In such a case, the redemption
request would be processed at the Fund's next determined NAV but the purchase
order would be effective only at the NAV next determined after the fund being
purchased receives the proceeds of the redemption, which may result in the
purchase being delayed.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Funds' Prospectuses entitled "Account Policies."
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.
NYSE Closings. The holidays (as observed) on which the NYSE is
currently scheduled to be closed are: New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Funds' Prospectuses entitled "Distributions and
Taxes."
General. 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. Neither Fund will
make distributions from net realized capital gains unless all capital loss
carryovers, if any, have been utilized or have expired. All expenses are
accrued daily and deducted before declaration of dividends to investors.
Shares purchased on a day on which a Fund calculates its NAV will begin to
accrue dividends on that day, and redemption orders effected on any
particular day will receive dividends declared only through the business day
prior to the day of redemption. Dividends paid by each Class are calculated
at the same time and in the same manner and are in the same amount, except
that the expenses attributable solely to a particular Class will be borne
exclusively by that Class. Class B and C shares will receive lower per share
dividends than Class A shares which will receive lower per share dividends
than Class R shares, because of the higher expenses borne by the relevant
Class.
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.
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 or her 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.
It is expected that the Funds will qualify for treatment as a
"regulated investment company" ("RIC") 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. To qualify for treatment as a 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"), and (3) must meet certain asset diversification and
other requirements.
The term "regulated investment company" does not imply the supervision
of management or investment practices or policies by any government agency.
Because each Fund will distribute exempt-interest dividends, interest
on indebtedness incurred by a shareholder to purchase or carry Fund shares is
not deductible for Federal income tax purposes. If a shareholder receives an
exempt-interest dividend with respect to shares of a Fund and if such shares
are held by the shareholder for six months or less, then any loss on the
redemption or exchange of such shares will, to the extent of such
exempt-interest dividends, be disallowed. In addition, the Code may require
a shareholder, if he or she receives exempt-interest dividends, to treat as
taxable income a portion of certain otherwise non-taxable social security and
railroad retirement benefit payments. Furthermore, that portion of an
exempt-interest dividend paid by a Fund which represents income from private
activity bonds may not retain its tax-exempt status in the hands of a
shareholder who is a "substantial user" of a facility financed by such bonds,
or a "related person" thereof. Moreover, as noted in the Funds' Prospectuses,
some or all of a Fund's dividends may be a specific preference item, or a
component of an adjustment item, for purposes of the Federal individual and
corporate alternative minimum taxes. In addition, the receipt of Fund
dividends and distributions may affect a foreign corporate shareholder's
Federal "branch profits" tax liability and a Subchapter S corporation
shareholder's Federal "excess net passive income" tax liability.
Shareholders should consult their own tax advisers as to whether they are (1)
substantial users with respect to a facility or related to such users within
the meaning of the Code or (2) subject to a Federal alternative minimum tax,
any applicable state alternative minimum tax, the Federal branch profits tax,
or the Federal excess net passive income tax.
Dividends derived 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.
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.
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 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, or (2) 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.
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.
A portion of the dividends paid by a Fund, whether received in cash or
reinvested in additional Fund shares, may be eligible for the dividends-
received deduction allowed to corporations. The eligible portion may not
exceed the aggregate dividends received by a Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
alternative minimum tax.
Dividends and interest received by a Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between
certain countries and the United States may reduce or eliminate these foreign
taxes, however, and many foreign countries do not impose taxes on capital
gains in respect of investments by foreign investors.
Gains from the sale or other disposition of foreign currencies (except
certain gains therefrom that may be excluded by future regulations), and
gains from options, futures and forward contracts derived by the Fund with
respect to its business of investing in securities or foreign currencies,
will qualify as permissible income under the Income Requirement.
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 discussed above. 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 nonresident
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 - Dividends. Dividends (other than exempt-
interest dividends) distributed to a foreign shareholder whose ownership of
Fund shares is not effectively connected with a U.S. trade or business
carried on by the foreign shareholder ("effectively connected") generally
will be subject to a U.S. federal withholding tax of 30% (or lower treaty
rate). If a foreign shareholder's ownership of Fund shares is effectively
connected, however, then all distributions to that shareholder will not be
subject to such withholding and instead 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.
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
nonresident 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.
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 US. withholding tax. However, such distributions may be subject to backup
withholding, unless the foreign investor certifies his non-U.S. residency
status.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of the Funds, that they own at the time of their death. Certain
credits against that tax and relief under applicable tax treaties may be
available.
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. Investors are urged to consult their tax
advisers with specific reference to their own tax situations.
PORTFOLIO TRANSACTIONS
All portfolio transactions of a Fund are placed on behalf of each 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 a 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. Each Fund 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 each Fund 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 Company's procedures adopted in
accordance with Rule 17e-1 under the 1940 Act.
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.
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 Dreyfus in carrying out its obligation to the Fund.
The receipt of such research services does not reduce the normal independent
research activities of Dreyfus; however, it enables it to avoid the
additional expenses which might otherwise be incurred if it were to attempt
to develop comparable information through its own staff.
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 June 30, 1999, 1998 and 1997.
The aggregate amount of transactions during the fiscal year ended June
30, 1999 in newly issued debt instruments in fixed price public offerings
directed to an underwriter in consideration of, among other things, research
services provided was $4,445,000 and $4,000,000 for the Massachusetts
Municipal Fund and Municipal Fund, respectively.
Portfolio Turnover. While securities are purchased for the Funds on
the basis of potential for current income and not for short-term trading
profits, a Fund's portfolio turnover rate may exceed 100%. A portfolio
turnover rate of 100% would occur, for example, if all the securities held by
a Fund were replaced once in a period of one year. A higher rate of
portfolio turnover involves correspondingly greater brokerage commissions and
other expenses that must be borne directly by the Funds and, thus, indirectly
by their shareholders. In addition, a higher 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 Fund's 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 its appropriate to
make changes in the Funds' assets. The portfolio turnover rate for the Fund
is calculated by dividing the lesser of the Fund's annual sales or purchases
of portfolio securities (exclusive of purchases and sales of securities whose
maturities at the time of acquisition were one year or less) by the monthly
average value of securities in the Fund during the year. Portfolio turnover
may vary from year to year as well as within a year. The portfolio turnover
rates for the fiscal years ended June 30, 1998 and 1999 for the Municipal
Fund were 14.62% and 28.19%, respectively. The portfolio turnover rates for
the fiscal years ended June 30, 1998 and 1999 for the Massachusetts Municipal
Fund were 6.63% and 16.35%, 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 Massachusetts Municipal Fund's current yield for the 30-day period
ended June 30, 1999 was 3.89%, 3.51%, 3.46% and 4.26%, 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, 1999 was 3.81%, 3.42%, 3.41% and
4.18% 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, 1999 was 6.85%, 6.18%, 6.09% and 7.50% 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, 1999 was 6.31%,
5.66%, 5.65% and 6.92% for its Class A, Class B, Class C and Class R shares,
respectively. Current yield is computed pursuant to a formula which
operates, with respect to each Class, as follows: the amount of the Fund's
expenses with respect to such Class accrued for the 30-day period (net of
reimbursements) is subtracted from the amount of the dividends and interest
earned (computed in accordance with regulatory requirements) by the Fund with
respect to such Class during the period. That result is then divided by the
product of: (a) the average daily number of shares outstanding during the
period that were entitled to receive dividends, and (b) the maximum offering
price per share in the case of Class A or the net asset value per share in
the case of Class B, Class C and Class R on the last day of the period less
any undistributed earned income per share reasonably expected to be declared
as a dividend shortly thereafter. The quotient is then added to 1, and that
sum is raised to the 6th power, after which 1 is subtracted. The current
yield is then arrived at by multiplying the result by 2.
- --------
* Examples assume a Federal marginal tax rate of 39.6% for the Municipal
Fund and a Federal marginal tax rate of 39.6% and a Massachusetts marginal
tax rate of 5.95% (combined effective rate of 43.19% for the Massachusetts
Municipal Fund].
The Massachusetts Municipal Fund's average annual total returns for
Class A shares for the 1, 5 and 10 year periods ended June 30, 1999 were -
1.43%, 4.59% and 5.96%, respectively. The average annual total returns for
Class B shares for the 1 year period ended June 30, 1999 and for the period
December 28, 1994 (inception of Class B) through June 30, 1999 were -1.84%
and 5.12%, respectively. The average annual total returns for Class C shares
for the 1 year period ended June 30, 1999 and for the period December 28,
1994 (inception of Class C) through June 30, 1999 were 0.44% and 5.35%,
respectively. The average annual total returns for Class R shares for the 1
and 5 year periods ended June 30, 1999 and for the period February 1, 1993
(inception of Class R) through June 30, 1998 were 1.93%, 5.49% and 5.23%,
respectively.
The Municipal Fund's average annual total returns for Class A shares
for the 1, 5 and 10 year periods ended June 30, 1999 were -1.27%, 4.71% and
6.00%, respectively. The average annual total returns for Class B shares for
the 1 year period ended June 30, 1999 and for the period December 28, 1994
(inception of Class B) through June 30, 1999 were -1.68% and 5.31%,
respectively. The average annual total returns for Class C shares for the 1
year period ended June 30, 1999 and for the period December 28, 1994
(inception of Class C) through June 30, 1999 were 0.61% and 5.59%,
respectively. The average annual total returns for Class R for the 1 and 5
year periods ended June 30, 1999 and for the period February 1, 1993
(inception of Class R) through June 30, 1999 were 2.02%, 5.59% and 5.37%,
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. 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 Massachusetts Municipal Fund's total return for the period
September 24, 1985 (commencement of operations) through June 30, 1999 for
Class A was 158.06%. Without giving effect to the applicable front-end sales
load, the total return for Class A was 166.06%. The Massachusetts 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, 1999 was 25.27% and
26.51%, respectively. Without giving effect to the applicable CDSC, the
total return for Class B and Class C was 26.27% and 26.51%, 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, 1999 was 38.67%.
The Municipal Fund's total return for Class A shares for the period
October 1, 1985 (commencement of operations) through June 30, 1999 was
177.75%. Without giving effect to the applicable front-end sales load, the
total return for Class A was 186.36%. The Municipal Fund's total return for
Class B and Class C for the period December 28, 1994 (inception date of Class
B and Class C) to June 30, 1999 was 26.29% and 27.83%, respectively. Without
giving effect to the applicable CDSC, the total return for Class B and Class
C was 27.29% and 27.83%, respectively. The Municipal Fund's total return for
Class R shares for the period February 1, 1993 (inception of Class R) to June
30, 1999 was 39.80%.
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.
The Funds may also advertise the yield and tax-equivalent yield on a
Class of shares. 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.
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 materials for the Fund may refer to
Morningstar ratings and related analyses supporting the rating.
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.
From time to time, advertising materials may refer to studies performed
by Dreyfus or its affiliates, such as "The Dreyfus Tax Informed Investing
Study" or "The Dreyfus Gender Investment Comparison Study (1996-1997)" or
other such studies.
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/TRUST
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Fund shares are without par value, have no preemptive or subscription rights,
and are freely transferable.
The Trust is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for
certain matters under the 1940 Act and for other purposes. A shareholder of
one portfolio is not deemed to be a shareholder of any other portfolio. For
certain matters shareholders vote together as a group; as to others they vote
separately by portfolio. The Trustees have authority to create an unlimited
number of shares of beneficial interest, without par value, in separate
series. The Trustees have authority to create additional series at any time
in the future without shareholder approval.
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 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.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an
investment company, such as the Trust, will not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each series affected by such matter. Rule 18f-2
further provides that a series shall be deemed to be affected by a matter
unless it is clear that the interests of each series in the matter are
identical or that the matter does not affect any interest of such series. The
Rule exempts the selection of independent accountants and the election of
Trustees from the separate voting requirements of the Rule.
The Funds will send annual and semi-annual financial statements to all
of its shareholders.
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
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. Under a transfer agency agreement with the Trust, the
Transfer Agent arranges for the maintenance of shareholder account records
for the Trust, 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 Trust
during the month, and is reimbursed for certain out-of-pocket expenses.
Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as the custodian of the Fund's
investments. Under a custody agreement with the Trust, Mellon Bank holds the
Fund's portfolio securities and keeps all necessary accounts and records.
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 SAI.
KPMG LLP, 757 Third Avenue, New York, NY 10017, was appointed by the
Trustees to serve as the Funds' independent auditors for the year ending June
30, 2000, providing audit services including (1) examination of the annual
financial statements (2) assistance, review and consultation in connection
with SEC filings (3) and review of the annual Federal income tax return filed
on behalf of each Fund.
FINANCIAL STATEMENTS
Each Fund's financial statements for the fiscal year ended June 30,
1999, including notes to the financial statements and supplementary
information, and the Independent Auditors' Report, are included in its Annual
Report to shareholders. A copy of each Annual Report accompanies this SAI.
The financial statements included in each Annual Report, and the Independent
Auditors' Report thereon, contained therein, and related notes, are
incorporated herein by reference.
<PAGE>
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
recovery following a slowdown that began in mid-1988. Massachusetts had
benefited from an annual job growth rate of approximately 2% since the early
1980's, but by 1989 employment started to decline. Between 1988 and 1992,
total employment in Massachusetts declined 10.7%. With the economic recovery
that began in 1993, however, employment levels have increased. Since 1994,
total employment levels have increased at yearly rates greater than or equal
to 2.0%. In 1995, 1996 and 1997, total employment increased by 2.5%, 2.0%
and 2.7%, respectively. Employment levels increased in all sectors,
including 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 (4.0% compared to 4.9% in 1997) and the employment
population ratio in Massachusetts in 1996 and 1997 was slightly above the
national average (66.4% compared to 63.2% for 1996 and 66.2% compared with
63.8% for 1997).
Massachusetts ended each of the fiscal years 1994 to 1998 with a
positive closing fund balance in its budgeted operating funds, and expects to
do so again at the close of fiscal 1999.
In recent years, health 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. However, the rate of increase has abated
in recent years, due to a number of savings and cost-cutting initiatives,
such as managed care and utilization review. During fiscal years 1994, 1995,
1996, 1997 and 1998, Medicaid expenditures were $3.313 billion, $3.398
billion, $3.416 billion, $3.456 billion, and $3.666 billion, respectively.
The average annual growth rate from fiscal 1994 to fiscal 1998 was 2.1%. It
is estimated that in fiscal 1999, Medicaid expenditures will be $3.892.7
billion, an increase of 6.2% from fiscal 1998.
Massachusetts' pension costs have risen 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 rate of 3.54%
from $908.9 million in fiscal 1994 to $1.07 billion in fiscal 1998. The
pension costs in 1999 are estimated to be $990.8 billion.
Payments for debt service on Massachusetts general obligation bonds and
notes have risen at an average annual rate of 1.11% from $1.15 billion in
fiscal 1994 to $1.21 billion in fiscal 1998. State law 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
April 1, 1999 the State had approximately $15.5 billion of long-term general
obligation debt outstanding and short-term direct obligations of the
Commonwealth totaled $464.2 million.
Certain independent authorities and agencies within the State are
statutorily authorized to use 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 22, to
constrain levels of property taxation and to limit the charges and fees
imposed on cities and towns by 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 22 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 22 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. Propositions
22 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 22 on local programs and services. In fiscal 1999, approximately
21.2% of Massachusetts' budgeted expenditures were allocated to Local Aid.
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 effects, if any, such factors would have on
Massachusetts' Municipal Obligations cannot be predicted.
<PAGE>
APPENDIX B
MUNICIPAL BOND, MUNICIPAL NOTE, BOND, NOTE AND COMMERCIAL PAPER RATINGS
S&P
Municipal Bond and 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 and 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 and 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 characteristics 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 midrange ranking; and
the modifier 3 indicates a ranking in the lower end of a rating
category.
Municipal Note, Note 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:
1 Leading market positions in well-established industries.
2 High rates of return on funds employed.
3 Conservative capitalization structure with moderate reliance on
debt and ample asset protection.
4 Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
5 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 IBCA, INC. ("FITCH")
Municipal Bond and 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 foreseeable 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.
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")
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
A factors are more variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered sufficient for
BBB prudent investment. Considerable variability in risk during economic
BBB- cycles.
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 23. Exhibits
--------
A(1) 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.
A(2) 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.
A(3) 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.
A(4) 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.
A(5) 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.
A(6) 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.
A(7) Amendment No. 6 to the Third Amended and Restated Master
Trust Agreement dated August 30, 1996, incorporated by
reference to the Registration Statement on Form N-14, filed
on June 12, 1998.
A(8) Amendment No. 7 to the Third Amended and Restated Master
Trust Agreement dated February 27, 1997, incorporated by
reference to the Registration Statement on Form N-14, filed
on June 12, 1998.
B(1) By-Laws of the Trust, incorporated by reference to the
Registration Statement on Form N-14, filed on June 12, 1998.
B(2) Amendment No. 1 to By-Laws of the Trust, incorporated by
reference to the Registration Statement on Form N-14, filed
on June 12, 1998.
D(1) 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.
D(2) 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.
E 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.
F Not Applicable.
G(1) 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.
G(2) 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.
G(3) 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.
H Not applicable.
I(1) Opinion of counsel is incorporated by reference to the
Registration Statement and to Post-Effective Amendment Number
34 filed on December 28, 1994.
I(2) Consent of counsel. Filed herewith.
J(1) Consent of Coopers & Lybrand L.L.P. is incorporated by
reference to Post-Effective Amendment No 36.
J(2) Consent of KPMG LLP. Filed herewith.
M(1) 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.
M(2) 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.
O 18f-3 Plan, incorporated by reference to Post-Effective
Amendment No. 45, filed on October 30, 1996.
Other Exhibits
______________
(a) Not Applicable
Item 24. Persons Controlled by or under Common Control with
Registrant
--------------------------------------------------
Not applicable.
Item 25. 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.
<TABLE>
ITEM 26 Business and Other Connections of Investment Adviser (continued)
Officers and Directors of Investment Adviser
Name and Position
With Dreyfus Other Businesses Position Held Dates
<S> <C> <C> <C>
Christopher M. Condron Franklin Portfolio Associates, LLC* Director 1/97 - Present
Chairman of the Board and
Chief Executive Officer TBCAM Holdings, Inc.* Director 10/97 - Present
President 10/97 - 6/98
Chairman 10/97 - 6/98
The Boston Company Director 1/98 - Present
Asset Management, LLC* Chairman 1/98 - 6/98
President 1/98 - 6/98
The Boston Company President 9/95 - 1/98
Asset Management, Inc.* Chairman 4/95 - 1/98
Franklin Portfolio Holdings, Inc.* Director 1/97 - Present
Certus Asset Advisors Corp.** Director 6/95 -Present
Mellon Capital Management Director 5/95 -Present
Corporation***
Mellon Bond Associates, LLP+ Executive Committee 1/98 - Present
Member
Mellon Bond Associates+ Trustee 5/95 -1/98
Mellon Equity Associates, LLP+ Executive Committee 1/98 - Present
Member
Mellon Equity Associates+ Trustee 5/95 - 1/98
Boston Safe Advisors, Inc. * Director 5/95 - Present
President 5/95 - Present
Mellon Bank, N.A. + Director 1/99 - Present
Chief Operating Officer 3/98 - Present
President 3/98 - Present
Vice Chairman 11/94 - 3/98
Mellon Bank Corporation+ Chief Operating Officer 1/99 - Present
President 1/99 - Present
Director 1/98 - Present
Vice Chairman 11/94 - 1/99
Christopher M. Condron The Boston Company, Inc.* Vice Chairman 1/94 - Present
Chairman and Chief Executive Director 5/93 - Present
Officer
(Continued) Laurel Capital Advisors, LLP+ Exec. Committee 1/98 - 8/98
Member
Laurel Capital Advisors+ Trustee 10/93 - 1/98
Boston Safe Deposit and Trust Director 5/93 -Present
Company*
The Boston Company Financial President 6/89 - Present
Strategies, Inc. * Director 6/89 - Present
Mandell L. Berman Self-Employed Real Estate Consultant, 11/74 - Present
Director 29100 Northwestern Highway Residential Builder and
Suite 370 Private Investor
Southfield, MI 48034
Burton C. Borgelt DeVlieg Bullard, Inc. Director 1/93 - Present
Director 1 Gorham Island
Westport, CT 06880
Mellon Bank Corporation+ Director 6/91 - Present
Mellon Bank, N.A. + Director 6/91 - Present
Dentsply International, Inc. Director 2/81 - Present
570 West College Avenue
York, PA
Quill Corporation Director 3/93 - Present
Lincolnshire, IL
Stephen E. Canter Dreyfus Investment Chairman of the Board 1/97 - Present
President, Chief Operating Advisors, Inc.++ Director 5/95 - Present
Officer, Chief Investment President 5/95 - Present
Officer, and Director
Newton Management Limited Director 2/99 - Present
London, England
Mellon Bond Associates, LLP+ Executive Committee 1/99 - Present
Member
Mellon Equity Associates, LLP+ Executive Committee 1/99 - Present
Member
Franklin Portfolio Associates, LLC* Director 2/99 - Present
Franklin Portfolio Holdings, Inc.* Director 2/99 - Present
The Boston Company Asset Director 2/99 - Present
Management, LLC*
TBCAM Holdings, Inc.* Director 2/99 - Present
Mellon Capital Management Director 1/99 - Present
Corporation***
Stephen E. Canter Founders Asset Management, LLC**** Member, Board of 12/97 - Present
President, Chief Operating Managers
Officer, Chief Investment Acting Chief Executive 7/98 - 12/98
Officer, and Director Officer
(Continued)
The Dreyfus Trust Company+++ Director 6/95 - Present
Chairman 1/99 - Present
President 1/99 - Present
Chief Executive Officer 1/99 - Present
Thomas F. Eggers Dreyfus Service Corporation++ Executive Vice President 4/96 - Present
Vice Chairman - Institutional Director 9/96 - Present
and Director
Founders Asset Management, LLC**** Member, Board of Managers 2/99 - Present
Dreyfus Service Organization++ Director 3/99 - Present
Dreyfus Insurance Agency of Director 3/99 - Present
Massachusetts, Inc. +++
Dreyfus Brokerage Services, Inc. Director 11/97 - 6/98
401 North Maple Avenue
Beverly Hills, CA.
Steven G. Elliott Mellon Bank Corporation+ Senior Vice Chairman 1/99 - Present
Director Chief Financial Officer 1/90 - Present
Vice Chairman 6/92 - 1/99
Treasurer 1/90 - 5/98
Mellon Bank, N.A.+ Senior Vice Chairman 3/98 - Present
Vice Chairman 6/92 - 3/98
Chief Financial Officer 1/90 - Present
Mellon EFT Services Corporation Director 10/98 - Present
Mellon Bank Center, 8th Floor
1735 Market Street
Philadelphia, PA 19103
Mellon Financial Services Director 1/96 - Present
Corporation #1 Vice President 1/96 - Present
Mellon Bank Center, 8th Floor
1735 Market Street
Philadelphia, PA 19103
Boston Group Holdings, Inc.* Vice President 5/93 - Present
APT Holdings Corporation Treasurer 12/87 - Present
Pike Creek Operations Center
4500 New Linden Hill Road
Wilmington, DE 19808
Allomon Corporation Director 12/87 - Present
Two Mellon Bank Center
Pittsburgh, PA 15259
Collection Services Corporation Controller 10/90 - 2/99
500 Grant Street Director 9/88 - 2/99
Pittsburgh, PA 15258 Vice President 9/88 - 2/99
Treasurer 9/88 - 2/99
Steven G. Elliott Mellon Financial Company+ Principal Exec. Officer 1/88 - Present
Director (Continued) Chief Financial Officer 8/87 - Present
Mellon Overseas Investments Director 8/87 - Present
Corporation+ President 8/87 - Present
Director 4/88 - Present
Chairman 7/89 - 11/97
Mellon International Investment President 4/88 - 11/97
Corporation+ Chief Executive Officer 4/88 - 11/97
Director 9/89 - 8/97
Mellon Financial Services Treasurer 12/87 - Present
Corporation +
Mellon Financial Markets, Inc.+ Director 1/99 - Present
Mellon Financial Services Director 1/99 - Present
Corporation #17
Fort Lee, NJ
Mellon Mortgage Company Director 1/99 - Present
Houston, TX
Mellon Ventures, Inc. + Director 1/99 - Present
Lawrence S. Kash Dreyfus Investment Director 4/97 - Present
Vice Chairman Advisors, Inc.++
And Director
Dreyfus Brokerage Services, Inc. Chairman 11/97 - 2/99
401 North Maple Ave. Chief Executive Officer 11/97 - 2/98
Beverly Hills, CA
Dreyfus Service Corporation++ Director 1/95 - 2/99
President 9/96 - 3/99
Dreyfus Precious Metals, Inc.+++ Director 3/96 - 12/98
President 10/96 - 12/98
Dreyfus Service Director 12/94 - 3/99
Organization, Inc.++ President 1/97 - 3/99
Seven Six Seven Agency, Inc. ++ Director 1/97 - 4/99
Dreyfus Insurance Agency of Chairman 5/97 - 3/99
Massachusetts, Inc.++++ President 5/97 - 3/99
Director 5/97 - 3/99
The Dreyfus Trust Company+++ Chairman 1/97 - 1/99
President 2/97 - 1/99
Chief Executive Officer 2/97 - 1/99
Director 12/94 - Present
The Dreyfus Consumer Credit Chairman 5/97 - 6/99
Corporation++ President 5/97 - 6/99
Director 12/94 - 6/99
Founders Asset Management, LLC**** Member, Board of Managers 12/97 - Present
Lawrence S. Kash The Boston Company Advisors, Chairman 12/95 - Present
Vice Chairman Inc. Chief Executive Officer 12/95 - Present
And Director (Continued) Wilmington, DE President 12/95 - Present
The Boston Company, Inc.* Director 5/93 - Present
President 5/93 - Present
Mellon Bank, N.A.+ Executive Vice President
6/92 - Present
Laurel Capital Advisors, LLP+ Chairman 1/98 - 8/98
Executive Committee 1/98 - 8/98
Member
Chief Executive Officer 1/98 - 8/98
President 1/98 - 8/98
Laurel Capital Advisors, Inc. + Trustee 12/91 - 1/98
Chairman 9/93 - 1/98
President and CEO 12/91 - 1/98
Boston Group Holdings, Inc.* Director 5/93 - Present
President 5/93 - Present
Martin G. McGuinn Mellon Bank Corporation+ Chairman 1/99 - Present
Director Chief Executive Officer 1/99 - Present
Director 1/98 - Present
Vice Chairman 1/90 - 1/99
Mellon Bank, N. A. + Chairman 3/98 - Present
Chief Executive Officer 3/98 - Present
Director 1/98 - Present
Vice Chairman 1/90 - 3/98
Mellon Leasing Corporation+ Vice Chairman 12/96 - Present
Mellon Bank (DE) National Director 4/89 - 12/98
Association
Wilmington, DE
Mellon Bank (MD) National Director 1/96 - 4/98
Association
Rockville, Maryland
Mellon Financial Vice President 9/86 - 10/97
Corporation (MD)
Rockville, Maryland
J. David Officer Dreyfus Service Corporation++ Executive Vice President 5/98 - Present
Vice Chairman Director 3/99 - Present
And Director
Dreyfus Service Organization++ Director 3/99 - Present
Dreyfus Insurance Agency of Director 5/98 - Present
Massachusetts, Inc.++++
Dreyfus Brokerage Services, Inc. Chairman 3/99 - Present
401 North Maple Avenue
Beverly Hills, CA
Seven Six Seven Agency, Inc.++ Director 10/98 - Present
Mellon Residential Funding Corp. + Director 4/97 - Present
J. David Officer Mellon Trust of Florida, N.A. Director 8/97 - Present
Vice Chairman and 2875 Northeast 191st Street
Director (Continued) North Miami Beach, FL 33180
Mellon Bank, NA+ Executive Vice President 7/96 - Present
The Boston Company, Inc.* Vice Chairman 1/97 - Present
Director 7/96 - Present
Mellon Preferred Capital Director 11/96 - Present
Corporation*
RECO, Inc.* President 11/96 - Present
Director 11/96 - Present
The Boston Company Financial President 8/96 - Present
Services, Inc.* Director 8/96 - Present
Boston Safe Deposit and Trust Director 7/96 - Present
Company* President 7/96 - 1/99
Mellon Trust of New York Director 6/96 - Present
1301 Avenue of the Americas
New York, NY 10019
Mellon Trust of California Director 6/96 - Present
400 South Hope Street
Suite 400
Los Angeles, CA 90071
Mellon Bank, N.A.+ Executive Vice President 2/94 - Present
Mellon United National Bank Director 3/98 - Present
1399 SW 1st Ave., Suite 400
Miami, Florida
Boston Group Holdings, Inc.* Director 12/97 - Present
Dreyfus Financial Services Corp. + Director 9/96 - Present
Dreyfus Investment Services Director 4/96 - Present
Corporation+
Richard W. Sabo Founders Asset Management LLC**** President 12/98 - Present
Director Chief Executive Officer 12/98 - Present
Prudential Securities
New York, NY Senior Vice President 07/91 - 11/98
Regional Director 07/91 - 11/98
Richard F. Syron Thermo Electron President 6/99 - Present
Director 81 Wyman Street Chief Executive Officer 6/99 - Present
Waltham, MA 02454-9046
American Stock Exchange Chairman 4/94 -6/99
86 Trinity Place Chief Executive Officer 4/94 - 6/99
New York, NY 10006
Ronald P. O'Hanley Franklin Portfolio Holdings, Inc.* Director 3/97 - Present
Vice Chairman
TBCAM Holdings, Inc.* Chairman 6/98 - Present
Director 10/97 - Present
Ronald P. O'Hanley The Boston Company Asset Chairman 6/98 - Present
Vice Chairman Management, LLC* Director 1/98 - 6/98
(Continued)
The Boston Company Asset Director 2/97 - 12/97
Management, Inc. *
Boston Safe Advisors, Inc. * Chairman 6/97 - Present
Director 2/97 - Present
Pareto Partners Partner Representative 5/97 - Present
271 Regent Street
London, England W1R 8PP
Mellon Capital Management Director 5/97 -Present
Corporation***
Certus Asset Advisors Corp.** Director 2/97 - Present
Mellon Bond Associates+ Trustee 2/97 - Present
Chairman 2/97 - Present
Mellon Equity Associates+ Trustee 2/97 - Present
Chairman 2/97 - Present
Mellon-France Corporation+ Director 3/97 - Present
Laurel Capital Advisors+ Trustee 3/97 - Present
Mark N. Jacobs Dreyfus Investment Director 4/97 - Present
General Counsel, Advisors, Inc.++ Secretary 10/77 - 7/98
Vice President, and
Secretary The Dreyfus Trust Company+++ Director 3/96 - Present
The TruePenny Corporation++ President 10/98 - Present
Director 3/96 - Present
Dreyfus Service Director 3/97 - 3/99
Organization, Inc.++
William H. Maresca The Dreyfus Trust Company+++ Chief Financial Officer 3/99 - Present
Controller Treasurer 9/98 - Present
Director 3/97 - Present
Dreyfus Service Corporation++ Chief Financial Officer 12/98 - Present
Dreyfus Consumer Credit Corp. ++ Treasurer 10/98 -Present
Dreyfus Investment Treasurer 10/98 - Present
Advisors, Inc. ++
Dreyfus-Lincoln, Inc. Vice President 10/98 - Present
4500 New Linden Hill Road
Wilmington, DE 19808
The TruePenny Corporation++ Vice President 10/98 - Present
Dreyfus Precious Metals, Inc. +++ Treasurer 10/98 - 12/98
The Trotwood Corporation++ Vice President 10/98 - Present
Trotwood Hunters Corporation++ Vice President 10/98 - Present
William H. Maresca Trotwood Hunters Site A Corp. ++ Vice President 10/98 - Present
Controller (Continued)
Dreyfus Transfer, Inc. Chief Financial Officer 5/98 - Present
One American Express Plaza,
Providence, RI 02903
Dreyfus Service Treasurer 3/99 - Present
Organization, Inc.++ Assistant Treasurer 3/93 - 3/99
Dreyfus Insurance Agency of
Massachusetts, Inc.++++ Assistant Treasurer 5/98 - Present
William T. Sandalls, Jr. Dreyfus Transfer, Inc. Chairman 2/97 - Present
Executive Vice President One American Express Plaza,
Providence, RI 02903
Dreyfus Service Corporation++ Director 1/96 - Present
Executive Vice President 2/97 - Present
Chief Financial Officer 2/97-12/98
Dreyfus Investment Director 1/96 - Present
Advisors, Inc.++ Treasurer 1/96 - 10/98
Dreyfus-Lincoln, Inc. Director 12/96 - Present
4500 New Linden Hill Road President 1/97 - Present
Wilmington, DE 19808
Seven Six Seven Agency, Inc.++ Director 1/96 - 10/98
Treasurer 10/96 - 10/98
The Dreyfus Consumer Director 1/96 - Present
Credit Corp.++ Vice President 1/96 - Present
Treasurer 1/97 - 10/98
The Dreyfus Trust Company +++ Director 1/96 - Present
Dreyfus Service Organization, Treasurer 10/96- 3/99
Inc.++
Dreyfus Insurance Agency of Director 5/97 - 3/99
Massachusetts, Inc.++++ Treasurer 5/97- 3/99
Executive Vice President 5/97 - 3/99
Diane P. Durnin Dreyfus Service Corporation++ Senior Vice President - 5/95 - 3/99
Vice President - Product Marketing and
Development Advertising Division
Patrice M. Kozlowski None
Vice President - Corporate
Communications
Mary Beth Leibig None
Vice President -
Human Resources
Theodore A. Schachar Dreyfus Service Corporation++ Vice President -Tax 10/96 - Present
Vice President - Tax
The Dreyfus Consumer Credit Chairman 6/99 - Present
Corporation ++ President 6/99 - Present
Dreyfus Investment Advisors, Inc.++ Vice President - Tax 10/96 - Present
Dreyfus Precious Metals, Inc. +++ Vice President - Tax 10/96 - 12/98
Dreyfus Service Organization, Inc.++ Vice President - Tax 10/96 - Present
Wendy Strutt None
Vice President
Richard Terres None
Vice President
Andrew S. Wasser Mellon Bank Corporation+ Vice President 1/95 - Present
Vice-President -
Information Systems
James Bitetto The TruePenny Corporation++ Secretary 9/98 - Present
Assistant Secretary
Dreyfus Service Corporation++ Assistant Secretary 8/98 - Present
Dreyfus Investment Assistant Secretary 7/98 - Present
Advisors, Inc.++
Dreyfus Service Assistant Secretary 7/98 - Present
Organization, Inc.++
Steven F. Newman Dreyfus Transfer, Inc. Vice President 2/97 - Present
Assistant Secretary One American Express Plaza Director 2/97 - Present
Providence, RI 02903 Secretary 2/97 - Present
Dreyfus Service Secretary 7/98 - Present
Organization, Inc.++ Assistant Secretary 5/98 - 7/98
- ------------------------------------
* The address of the business so indicated is One Boston Place, Boston, Massachusetts, 02108.
** The address of the business so indicated is One Bush Street, Suite 450, San Francisco, California 94104.
*** The address of the business so indicated is 595 Market Street, Suite 3000, San Francisco, California 94105.
**** The address of the business so indicated is 2930 East Third Avenue,Denver, Colorado 80206.
+ The address of the business so indicated is One Mellon Bank Center, Pittsburgh, Pennsylvania 15258.
++ The address of the business so indicated is 200 Park Avenue, New York, New York 10166.
+++ 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 53 State Street, Boston, Massachusetts 02109
**** The address of the business so indicated is 2930 East Third Avenue,Denver, Colorado 80206.
</TABLE>
Item 27. 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 Funds
24) Dreyfus Growth and Income Fund, Inc.
25) Dreyfus Growth and Value Funds, Inc.
26) Dreyfus Growth Opportunity Fund, Inc.
27) Dreyfus Debt and Equity Funds
28) Dreyfus Index Funds, Inc.
29) Dreyfus Institutional Money Market Fund
30) Dreyfus Institutional Preferred Money Market Fund
31) Dreyfus Institutional Short Term Treasury Fund
32) Dreyfus Insured Municipal Bond Fund, Inc.
33) Dreyfus Intermediate Municipal Bond Fund, Inc.
34) Dreyfus International Funds, Inc.
35) Dreyfus Investment Grade Bond Funds, Inc.
36) Dreyfus Investment Portfolios
37) The Dreyfus/Laurel Funds, Inc.
38) The Dreyfus/Laurel Funds Trust
39) Dreyfus LifeTime Portfolios, Inc.
40) Dreyfus Liquid Assets, Inc.
41) Dreyfus Massachusetts Intermediate Municipal Bond Fund
42) Dreyfus Massachusetts Municipal Money Market Fund
43) Dreyfus Massachusetts Tax Exempt Bond Fund
44) Dreyfus MidCap Index Fund 46) Dreyfus Money Market Instruments, Inc.
45) Dreyfus Municipal Bond Fund, Inc.
46) Dreyfus Municipal Cash Management Plus
47) Dreyfus Municipal Money Market Fund, Inc.
48) Dreyfus New Jersey Intermediate Municipal Bond Fund
49) Dreyfus New Jersey Municipal Bond Fund, Inc.
50) Dreyfus New Jersey Municipal Money Market Fund, Inc.
51) Dreyfus New Leaders Fund, Inc.
52) Dreyfus New York Insured Tax Exempt Bond Fund
53) Dreyfus New York Municipal Cash Management
54) Dreyfus New York Tax Exempt Bond Fund, Inc.
55) Dreyfus New York Tax Exempt Intermediate Bond Fund
56) Dreyfus New York Tax Exempt Money Market Fund
57) Dreyfus U.S. Treasury Intermediate Term Fund
58) Dreyfus U.S. Treasury Long Term Fund
59) Dreyfus 100% U.S. Treasury Money Market Fund
60) Dreyfus U.S. Treasury Short Term Fund
61) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
62) Dreyfus Pennsylvania Municipal Money Market Fund
63) Dreyfus Premier California Municipal Bond Fund
64) Dreyfus Premier Equity Funds, Inc.
65) Dreyfus Premier International Funds, Inc.
66) Dreyfus Premier GNMA Fund
67) Dreyfus Premier Worldwide Growth Fund, Inc.
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 Equity Funds
72) Dreyfus Short-Intermediate Government Fund
73) Dreyfus Short-Intermediate Municipal Bond Fund
74) The Dreyfus Socially Responsible Growth Fund, Inc.
75) Dreyfus Stock Index Fund, Inc.
76) Dreyfus Tax Exempt Cash Management
77) The Dreyfus Third Century Fund, Inc.
78) Dreyfus Treasury Cash Management
79) Dreyfus Treasury Prime Cash Management
80) Dreyfus Variable Investment Fund
81) Dreyfus Worldwide Dollar Money Market Fund, Inc.
82) Founders Funds, 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 Funds, 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 Chief Treasurer
Compliance Officer
Joseph F. Tower, III+ Director, Senior Vice President, Vice President
Treasurer and Chief Financial and Assistant
Officer Treasurer
Mary A. Nelson+ Vice President Vice President
and Assistant
Treasurer
Jean M. O'Leary+ Assistant Vice President, None
Assistant Secretary and
Assistant Clerk
William J. Nutt+ Chairman of the Board None
Stephanie D. Pierce++ Vice President Vice President,
Assistant Secretary
and Assistant
Treasurer
Patrick W. McKeon+ Vice President None
Joseph A. Vignone+ Vice President None
________________________________
+ Principal business address is 60 State Street, Boston, Massachusetts 02109.
++ Principal business address is 200 Park Avenue, New York, New York 10166.
Item 28. Location of Accounts and Records
_______ ________________________________
1. Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
2. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02940-9671
3. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 29. Management Services
_______ ___________________
Not Applicable
Item 30. 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 Registration Statement under Rule
485(b) under the Securities Act 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 27th day
of October, 1999.
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 10/27/99
- ---------------------------
Marie E. Connolly
/s/Joseph S. DiMartino* Trustee, Chairman of the Board 10/27/99
- ---------------------------
Joseph S. DiMartino
/s/James M. Fitzgibbons* Trustee 10/27/99
- ---------------------------
James M. Fitzgibbons
/s/Kenneth A. Himmel* Trustee 10/27/99
- ---------------------------
Kenneth A. Himmel
/s/Stephen J. Lockwood* Trustee 10/27/99
- ---------------------------
Stephen J. Lockwood
/s/Roslyn M. Watson* Trustee 10/27/99
- ---------------------------
Roslyn M. Watson
/s/J. Tomlinson Fort* Trustee 10/27/99
- ---------------------------
J. Tomlinson Fort
/s/Arthur L. Goeschel* Trustee 10/27/99
- ---------------------------
Arthur L. Goeschel
/s/John Sciullo* Trustee 10/27/99
- ---------------------------
John Sciullo
/s/Benaree Pratt Wiley* Trustee 10/27/99
- ---------------------------
Benaree Pratt Wiley
*By: /s/Stephanie D. Pierce
---------------------------
Stephanie D. Pierce
Attorney-in-Fact
Exhibit Index
______________
Consent of Independent Auditors
Consent of Counsel
Other Exhibits
Not Applicable
INDEPENDENT AUDITORS' CONSENT
To the Board of Trustees and Shareholders of
The Dreyfus/Laurel Tax-Free Municipal Funds:
We consent to the use of our report dated August 11, 1999, with respect The
Dreyfus/Laurel Tax-Free Municipal Funds as listed below, incorporated herein by
reference and to the references to our Firm under the headings "Financial
Highlights" in the Prospectus and "Transfer and Dividend Disbursing Agent,
Custodian, Counsel and Independent Auditors" in the Statement of Additional
Information.
FUNDS
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 Massachusetts Municipal Fund
Dreyfus Premier Limited Term Municipal Fund
New York, New York
October 22, 1999
/s/ KPMG LLP
