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. 51 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 50 [ 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)
----
on (date) pursuant to paragraph (b)
----
X 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 ____%.
--------------------------------------------------------
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
--------------------------------------------------------
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 Bank
Corporation, a broad-based financial services company with a bank at its core.
With more than $389 billion of assets under management, and $1.9 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
________, 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 ___%.
--------------------------------------------------------
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.
--------------------------------------------------------
<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 Bank
Corporation, a broad-based financial services company with a bank at its core.
With more than $389 billion of assets under management, and $1.9 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
________, 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 ___%.
--------------------------------------------------------
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 Bank
Corporation, a broad-based financial services company with a bank at its core.
With more than $389 billion of assets under management, and $1.9 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
________, 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 16>
<PAGE 17>
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 ____%.
- --------------------------------------------------------------------------------
<TABLE>
Average annual total return AS OF 12/31/98
Since
Inception date 1 Year 5 Years 10 Years inception
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <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 Bank
Corporation, a broad-based financial services company with a bank at its core.
With more than $389 billion of assets under management and $1.9 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 ________, 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>
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.
YEAR ENDED JUNE 30,
CLASS B 1999 1998 1997 1996(1)
- ---------------------------------------------------------------------------------------------------------------------------------
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.
4
<PAGE 4>
YEAR ENDED JUNE 30,
CLASS C 1999 1998 1997 1996 1995(1)
- ---------------------------------------------------------------------------------------------------------------------------------
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.
YEAR ENDED JUNE 30,
CLASS R 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------
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).
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 accont 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, 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 p11]
<PAGE>
[Application p12]
<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.
<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
* 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 ____%.
- --------------------------------------------------------------------------------
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.
<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.
** "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 Bank
Corporation, a broad-based financial services company with a bank at its core.
With more than $389 billion of assets under management and $1.9 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 ________, 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.
4
<PAGE 4>
YEAR ENDED JUNE 30,
CLASS C 1999 1998 1997 1996 1995(1)
- ---------------------------------------------------------------------------------------------------------------------------------
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
The Fund 5
</TABLE>
<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
Sales charge Sales charge
deducted as a % as a % of your
Your investment of offering price net investment
- --------------------------------------------------------------------------------
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).
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
WITHDRAWAL PLAN
For making regular withdrawals 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 (formerly, the
Dreyfus/Laurel California Tax-Free Money 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 B-2
Management of the Fund B-14
Management Arrangements B-20
Purchase of Shares B-22
Redemption of Fund Shares B-24
Shareholder Services B-29
Performance Information B-35
Determination of Net Asset Value B-34
Dividends, Other Distributions and Taxes B-37
Portfolio Transactions B-40
Information About the Fund/Trust B-42
Transfer and Dividend Disbursing Agent,
Custodian, Counsel and Independent Auditors B-44
Financial Statements B-44
Appendix A - Risk Factors - Investing in
California Municipal Obligations B-45
Appendix B - Information about Securities Ratings B-53
DESCRIPTION OF THE FUND
The following information supplements and should be read in conjunction
with the sections of the Fund's Prospectus entitled "Goal/Approach" and
"Main Risks."
The Trust is an open-end management investment company organized as an
unincorporated business trust under the laws of the Commonwealth of
Massachusetts by an Agreement and Declaration of Trust dated March 28, 1983,
amended and restated December 9, 1992, and subsequently further amended. On
March 31, 1994, the Trust changed its name from "The Boston Company Tax-Free
Municipal Funds" to "The Laurel Tax-Free Municipal Funds." The Trust's name
was then changed to "The Dreyfus/Laurel Tax-Free Municipal Funds" effective
October 17, 1994. On November 20, 1995, the Fund's "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").
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. The Fund will limit its investments to securities that present
minimal credit risk, as determined by Dreyfus.
Because many issuers of California Municipal Obligations may choose not
to have their obligations rated, it is possible that a large portion of the
Fund's portfolio may consist of unrated obligations. Unrated obligations are
not necessarily of lower quality than rated obligations, but to the extent
the Fund invests in unrated obligations, the Fund will be more reliant on
Dreyfus' judgment, analysis and experience than would be the case if the
Fund invested only in rated obligations. The Fund invests only in
securities that have remaining maturities of thirteen months or less at the
date of purchase. Floating rate or variable rate obligations (described
below) which are payable on demand under conditions established by the SEC
may have a stated maturity in excess of thirteen months; these securities
will be deemed to have remaining maturities of thirteen months or less. The
Fund maintains a dollar-weighted average portfolio maturity of 90 days or
less. The Fund seeks to maintain a constant net asset value of $1.00 per
share, although there is no assurance it can do so on a continuing basis,
using the amortized cost method of 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.
Certain Portfolio Securities
Description of Municipal Obligations. For purposes of this Statement
of Additional Information, the term "Municipal Obligations" and "California
Municipal Obligations" shall mean debt obligations issued by the State of
California, its political subdivisions, municipalities and public
authorities and municipal obligations issued by other government entities
if, in the opinion of counsel to the respective issuers, the
interest from such obligations is exempt from Federal and California
personal income taxes. "Municipal Obligations" and "California Municipal
Obligations" include the following:
Municipal Bonds. Municipal Bonds, which generally have a maturity of
more than one year when issued, have two principal classifications: General
Obligation Bonds and Revenue Bonds. A Private Activity Bond is a particular
kind of Revenue Bond. The classification of General Obligation Bonds,
Revenue Bonds and Private Activity Bonds are discussed below.
1. General Obligation Bonds. The proceeds of these obligations are
used to finance a wide range of public projects, including construction or
improvement of schools, highways and roads, and water and sewer systems.
General Obligation Bonds are secured by the issuer's pledge of its faith,
credit and taxing power for the payment of principal and interest.
2. Revenue Bonds. Revenue Bonds are issued to finance a wide variety
of capital projects including: electric, gas, water and sewer systems;
highways, bridges and tunnels; port and airport facilities; colleges and
universities; and hospitals. The principal security for a Revenue Bond is
generally the net revenues derived from a particular facility, group of
facilities or, in some cases, the proceeds of a special excise or other
specific revenue source. Although the principal security behind these bonds
may vary, many provide additional security in the form of a debt service
reserve fund whose money may be used to make principal and interest payments
on the issuer's obligations. Some authorities provide further security in
the form of a state's ability (without obligation) to make up deficiencies
in the debt service reserve fund.
3. Private Activity Bonds. Private Activity Bonds, which are
considered Municipal Bonds if the interest paid thereon is exempt from
Federal income tax, are issued by or on behalf of public authorities to
raise money to finance various privately operated facilities for business
and manufacturing, housing, sports and pollution control. These bonds are
also used to finance public facilities such as airports, mass transit
systems, ports and parking. The payment of the principal and interest on
such bonds is dependent solely on the ability of the facility's user to meet
its financial obligations and the pledge, if any, of real and personal
property so financed as security for such payment. As 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 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 personal income tax, 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. Since the Fund is
concentrated in securities issued by California or entities within
California, an investment in the Fund may involve greater risk than
investments in certain other types of money market funds. These risks
result from certain amendments to the California Constitution and other
statutes that limit the taxing and spending authority of California
governmental entities, as well as from the general financial condition of
the State of California. A severe recession from 1990 through fiscal 1994
reduced revenues and increased expenditures for social welfare programs,
resulting in a period of budget imbalance. During this period, expenditures
exceeded revenues in four out of six years, and the State accumulated and
sustained a budget deficit in its budget reserve, the Special Fund for
Economic Uncertainties, approaching $2.8 billion at its peak at June 30,
1993. By the 1993-94 fiscal year, the accumulated budget deficit was so
large that it was impractical to budget to retire it in one year, so a two-
year program was implemented, using the issuance of revenue anticipation
warrants to carry a portion of the deficit over the end of the fiscal year.
When the economy failed to recover sufficiently, a second two-year plan was
implemented in 1994-95, again using cross-fiscal year revenue anticipation
warrants to partly finance the deficit into the 1995-96 fiscal year. As a
consequence of the accumulated budget deficits, the State's cash resources
available to pay its ongoing obligations were significantly reduced causing
the State to rely increasingly on external debt markets to meet its cash
needs. Future budget problems or a deterioration in California's general
financial condition may have the effect of impairing the ability of the
issuers of California Municipal Obligations to pay interest on, or repay the
principal of, such California Municipal Obligations. As a result of the
deterioration in the State's budget and cash situation between October 1991
and July 1994, the rating on the State's general obligation bonds was
reduced by S&P from AAA to A, by Moody's from Aaa to A1 and by Fitch from
AAA to A. These and other factors may have the effect of impairing the
ability of the issuers of California Municipal Obligations to pay interest
on, or repay principal of, such Municipal Obligations. Investors should
consider carefully the special risks inherent in the Fund's investment in
California Municipal Obligations, which are discussed in more detail in
Appendix A to this Statement of Additional Information.
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. The following are fundamental investment
restrictions of the Fund. The Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of such purchase to be
invested in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities and state or municipal governments and their political
subdivisions are not considered members of any industry. In addition, this
limitation does not apply to investments of domestic banks, including U.S.
branches of foreign banks and foreign branches of U.S. banks.)
2. Borrow money or issue senior securities as defined in the 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.
The following are non-fundamental investment restrictions of the Fund:
1. The Fund will not purchase or retain the securities of any issuer
if the officers, directors or Trustees of the Trust, its advisers, or
managers owning beneficially more than one half of one percent of the
securities of each issuer together own beneficially more than five percent
of such securities.
2. The Fund will not purchase 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 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.
Under the 1940 Act, a fundamental policy may not be changed without the
vote of a majority of the outstanding voting securities of the Fund, as
defined in the 1940 Act. "Majority" means the lesser of (1) 67% or more of
the shares present at the Fund's meeting, if the holders of more than 50% of
the outstanding shares of the Fund are present or represented by proxy, or
(2) more than 50% of the outstanding shares of the Fund. Non-fundamental
investment restrictions may be changed, without shareholder approval, by
vote of a majority of the Trust's Board of Trustees at any time.
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
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, N.A. ("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
Noel Group, Inc., a venture capital company (for which from February
1995 until November 1997, he was Chairman of the Board); 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) a temporary placement agency. Mr. DiMartino is a Board
member of 99 funds in the Dreyfus Family of Funds. 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 Corporation. Age: 55 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. Age: 64 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 & CEO, Himmel and Company; CEO, American Food
Management; former Director, The Boston Company, Inc. ("TBC"), an
affiliate of Dreyfus, and Boston Safe Deposit and Trust Company; 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. 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: 67 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: 49 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: 39
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. 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: 35 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, Mr. Kelley 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 and Client Development Manager
of 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. 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, The
Dreyfus/Laurel Funds, Inc. and Dreyfus High Yield Strategies Fund.
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. Effective July 1, 1998, 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. The
compensation structure described in this paragraph is referred to
hereinafter as the "Current Compensation Structure."
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 pursuant to the Current
Compensation Structure.
Prior to July 1, 1998, the Dreyfus/Laurel Funds paid each
Director/Trustee who was not an "interested person" of the Trust (as defined
in the 1940 Act) $27,000 per annum (and an additional $25,000 for the
Chairman of the Board of Directors/Trustees of the Dreyfus/Laurel Funds) and
$1,000 per joint Dreyfus/Laurel Funds Board meeting attended, plus $750 per
joint Dreyfus/Laurel Funds Audit Committee meeting attended, and reimbursed
each such Director/Trustee for travel and out-of-pocket expenses (the
"Former Compensation Structure").
The aggregate amount of fees and expenses received by each current
Trustee from the Trust for the fiscal year ended December 31, 1998, 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) for the year ended December 31, 1998,
pursuant to the Former Compensation Structure for the period from January 1,
1998 through June 30, 1998 and the Current Compensation Structure for the
period from July 1, 1998 through December 31, 1998, were as follows:
Aggregate Total Compensation
Name of Board Compensation From the Trust
Member From the Fund Complex Paid
Trust# to Board Member
Joseph S. DiMartino** $ $ 619,660 (187)*
James M. Fitzgibbons $ $ 60,010 (31)
J. Tomlinson Fort*** none none (31)
Arthur L. Goeschel $ $ 61,010 (31)
Kenneth A. Himmel $ $ 50,260 (31)
Stephen J. Lockwood $ $ 51,010 (31)
John J. Sciullo $ $ 59,010 (31)
Roslyn M. Watson $ $ 61,010 (31)
Benaree Pratt Wiley**** $ $ 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 $[ ] 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. The Dreyfus Family of Funds consists of 163 mutual fund
portfolios.
** Mr. DiMartino became Chairman of the Board 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 December 31,
1998, the aggregate amount of fees received by J. Tomlinson Fort from
Dreyfus for serving as a Board member of the Trust was
______________________. 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
______________________. In addition, Dreyfus reimbursed Mr. Fort a total of
$__________________ for expenses attributable to the Trust's Board meetings
which is not included in the $__________________ amount in note # above.
****Payments to Ms. Wiley were 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 2,
1999.
Principal Shareholders. As of October 2, 1999, the following
companies/individuals owned beneficially or of record 5% or more of the
outstanding Fund shares:
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.
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 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 January 28, 1999 to continue until April 4, 2000.
Dreyfus is a wholly-owned subsidiary of Mellon Bank. Pursuant to the
Investment Management Agreement, Dreyfus provides, or arranges for one or
more third parties to provide, investment advisory, administrative, custody,
fund accounting and transfer agency services to the Fund. As investment
manager, Dreyfus manages the Fund by making investment decisions based on
the Fund's investment objective, policies and restrictions.
Dreyfus is a wholly-owned subsidiary of Mellon Bank 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.
The Investment Management Agreement will continue from year to year as
to the Fund provided that a majority of the Trustees who are not interested
persons of the Fund and either a majority of all Trustees or a majority of
the shareholders of the Fund approve its continuance. 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 Fund. 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
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; 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 set forth in the Fund's
Prospectus, applied to the average daily net assets of the Fund's investment
portfolio, less the accrued fees and expenses (including counsel fees) of
the non-interested Trustees of the Trust. Dreyfus may waive all or a
portion of its fees payable by a Fund from time to time.
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 distributor for the other funds in the Dreyfus
Family of Funds. Dreyfus may pay the Distributor for shareholder services
from Dreyfus' own assets, including past profits but not including the
management fee paid by the Fund. The Distributor may use part or all of
such payments to pay Agents in respect of these services.
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: Investors may purchase Fund shares without a sales charge if
purchased directly from the Distributor; investors may be charged a fee if
they 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.
Investors 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 the investor's
Account Application. For subsequent investments, the investor's 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, investors should call the telephone number listed
on the cover of this Statement of Additional Information.
Wire payments may be made if the investor's 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 the investor's name. The wire must include the
investor's Fund account number (for new accounts, the investor's Taxpayer
Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable. If the initial purchase of
Fund shares is by wire, investors should call 1-800-645-6561 after
completing the wire payment to obtain the Fund account number. Investors
should their 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. Investors may obtain
further information about remitting funds in this manner from the investor's
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 the investor's 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. Investors must direct
the institution to transmit immediately available funds through the ACH
System to Boston Safe Deposit and Trust Company with instructions to credit
the investor's Fund account. The instructions must specify the investor's
Fund account registration and Fund account number preceded by the digits
"4540."
Federal regulations require that investors 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 ("NAV"). An investment portfolio's NAV refers
to the worth of one share. The NAV for Fund shares, which are offered on a
continuous basis, is calculated on the basis of amortized cost, which
involves initially valuing a portfolio instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value
of the instrument. The Fund intends to maintain a constant NAV of $1.00,
although there is no assurance that this can be done on a continuing basis.
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 Fund before 4 p.m.,
Eastern time, on each day that the New York Stock Exchange is open (a
"business day") are effective on, and will receive the price next
determined, that business day. The NAV of the Fund is calculated two times
each business day, at 12 noon and 4 p.m., Eastern time. Investment, exchange
or redemption requests received after 4 p.m., Eastern time are effective on,
and receive the first share price determined, the next business day.
TeleTransfer Privilege. Investors may purchase Fund shares by
telephone through the 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 the investor's Fund account. Only a bank
account maintained in a domestic financial institution that is an Automated
Clearing House ("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." 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.
Share Certificates. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.
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: Investors 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, the Fund will redeem the
shares at the next determined NAV as described below.
Investors will be charged $5.00 when they redeem all shares in their
account or their account is otherwise closed out (unless the investor has
held Fund shares since November 20, 1995). The fee will be deducted from the
investor's 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 an
investor has purchased Fund shares by check or by the Dreyfus TeleTransfer
Privilege and subsequently submits 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 the investor's
shares were purchased by wire payment, or if investors otherwise have a
sufficient collected balance in their account to cover the redemption
request. Prior to the time any redemption is effective, dividends on such
shares will accrue and be payable, and investors will be entitled to
exercise all other rights of beneficial ownership. Fund shares will not be
redeemed until the Transfer Agent has received an investor's Account
Application.
The Fund reserves the right to redeem an investor's account at its
option upon not less than 45 days' written notice if the net asset value of
the investor's account is $10,000 or less ($500 or less in the case of Fund
shareholders as of November 20, 1995) and remains at or below such amount
during the notice period. The $5.00 account close-out fee would be charged
in such case.
Procedures. Investors 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 the investor specifically refuses 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. Investors also may
redeem shares through the Wire Redemption Privilege, or 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. Other redemption
procedures may be in effect for clients of certain Agents and institutions.
The Fund makes available to certain large institutions the ability to issue
redemption instructions through compatible computer facilities. The Fund
reserves the right to refuse any request made by wire or telephone,
including requests made shortly after a change of address, and may limit the
amount involved or the number of such requests. The Fund may modify or
terminate any redemption Privilege at any time or charge a service fee upon
notice to shareholders. No such fee currently is contemplated. Shares for
which certificates have been issued are not eligible for the Check
Redemption, Wire Redemption, Telephone Redemption or Dreyfus TeleTransfer
Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including
over The Dreyfus Touchr automated telephone system) from any person
representing himself or herself to be an investor, or a representative of an
investor's 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, investors may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, investors
should consider using the other redemption procedures described herein. Use
of these other redemption procedures may result in an investor's 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 their 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, investors
should call the telephone number listed under "General Information."
Redemption requests must be signed by each shareholder, including each owner
of a joint account, and each signature must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which signature
guarantees in proper form generally will be accepted from domestic banks,
brokers, dealers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations, as well
as from participants in the New York Stock Exchange Medallion Signature
Program, the Securities Transfer Agents Medallion Program ("STAMP"), and the
Stock Exchanges Medallion Program.
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. Investors may write Redemption Checks
("Checks") drawn on a Fund account. The Fund provides Checks automatically
upon opening an account, unless the investor specifically refuses the Check
Redemption Privilege by checking the applicable "No" box on the Account
Application. Checks will be sent only to the registered owner(s) of the
account and only to the address of record. The Check Redemption Privilege
may be established for an existing account by a separate signed Shareholder
Services Form. The Account Application or Shareholder Services Form must be
manually signed by the registered owner(s). Checks are drawn on the
investor's account and may be made payable to the order of any person in an
amount of $1,000 or more. An investor (other than one who has held Fund
shares since November 20, 1995), will be charged $2.00 for each check
redemption. When a Check is presented to the Transfer Agent for payment,
the Transfer Agent, as the investor's agent, will cause the Fund to redeem a
sufficient number of shares in the investor's account to cover the amount of
the Check and the $2.00 charge. 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.
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. Holders of
jointly registered Fund or bank accounts may have redemption proceeds of
only up to $250,000 wired within any 30-day period. 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.
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 "Stock Certificates; Signatures."]
Telephone Redemption Privilege. Investors may request by telephone that
redemption proceeds (maximum $150,000 per day) be paid by check and mailed
to their address. Investors 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. Investors may request by telephone
that redemption proceeds (minimum $1000 per day) be transferred between the
investor's Fund account and the investor's bank account. Only a bank
account maintained in a domestic financial institution which is an Automated
Clearing House ("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 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. Investors who have selected the Dreyfus
TeleTransfer Privilege may request a Dreyfus TeleTransfer redemption of Fund
shares by calling 1-800-645-6561 or, if calling from overseas, 516-794-5452.
See "Purchase of Shares--Dreyfus TeleTransfer Privilege."
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 90day 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 "Shareholder Services."
Fund Exchanges. An investor may purchase, in exchange for shares of the
Fund, shares of certain other eligible funds managed or administered by
Dreyfus, to the extent such shares are offered for sale in 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 Touchr 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
Touchr automated telephone system) from any person representing himself or
herself to be the investor or a representative of the investor's Agent, and
reasonably believed by the Transfer Agent to be genuine. Telephone
exchanges may be subject to limitations as to the amount involved or the
number of telephone exchanges permitted. Shares issued in certificate form
are not eligible for telephone exchange. 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.
Shares will be exchanged at the next determined NAV; however, a sales
load may be charged with respect to exchanges into funds sold with a sales
load. Investors exchanging into a fund that charges sales load may qualify
for share prices which do not include the sales load or which reflect
reduced sales load, if the shares of the fund from the investor is
exchanging were: (a) purchased with sales load, (b) acquired by a previous
exchange from shares purchased with a sales load, or (c) acquired through
reinvestment of dividends or other distributions paid with respect to the
foregoing categories of shares. To qualify, at the time of the exchange the
investor must notify the Transfer Agent or the investor's Agent must notify
the Distributor. Any such qualification is subject to confirmation of the
investor's holdings through a check of appropriate records. 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.
[This Privilege is available to shareholders resident in any state in
which shares of the fund being acquired may legally be sold. Shares may be
exchanged only between accounts having identical names and other identifying
designations.]
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 certain other
funds managed or administered by Dreyfus 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. Shares held under IRAs and
other retirement plans are eligible for this Privilege. Exchanges of IRA
shares may be made between IRA accounts and from regular accounts to IRA
accounts, but not from IRA accounts to regular accounts. With respect to
all other retirement accounts, exchanges may be made only among those
accounts.
The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. Investors may modify or cancel their exercise
of this Privilege at any time by mailing written notification to the Dreyfus
Family of Funds, P.O. Box 6587, Providence, Rhode Island 02940-6587. The
Fund may charge a service fee for the use of this Privilege. No such fee
currently is contemplated. 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 1-800-645-6561.
Fund Exchanges and the Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations. 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 (other than a tax-exempt Retirement Plan) may realize
a taxable gain or loss.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchange service or the
Auto-Exchange Privilege may be modified or terminated at any time upon
notice to shareholders.
Dreyfus-Automatic Asset Builderr. Dreyfus Automatic Asset Builder
permits investors to purchase Fund shares (minimum of $100 and maximum of
$150,000 per transaction) at regular intervals selected by the investor.
Fund shares are purchased by transferring funds from the bank account
designated by the investor. 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, investors must file an
authorization form with the Transfer Agent. Investors may obtain the
necessary authorization form by calling 1-800-645-6561. Investors may
cancel their participation in this Privilege or change the amount of
purchase at any time by mailing written notification to the Dreyfus Family
of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671 and the
notification will be effective three business days following receipt. The
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-
645-6561. 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.
Particular Retirement Plans, including Dreyfus-sponsored Retirement
Plans, may permit certain participants to establish an automatic withdrawal
plan from such Retirement Plans. Participants should consult their
Retirement Plan sponsor and tax adviser for details. Such a withdrawal plan
is different from the Automatic Withdrawal Plan. [The Automatic Withdrawal
Plan may be ended at any time by the shareholder, the Fund or the Transfer
Agent. Shares for which certificates have been issued may not be redeemed
through the Automatic Withdrawal Plan.]
Dreyfus Dividend Options. Dreyfus Dividend Sweep allows investors to
invest on the payment date their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of certain other funds in the
Dreyfus Family of Funds of which the investor is a shareholder. Shares of
the other funds purchased pursuant to this Privilege will be purchased on
the basis of relative NAV per share as follows:
A. Dividends and other distributions paid by a fund may be
invested without imposition of a sales load in shares of other
funds that are offered without a sales load.
B. Dividends and other distributions paid by a fund which does
not charge a sales load may be invested in shares of other funds
sold with a sales load, and the applicable sales load will be
deducted.
C. Dividends and other distributions paid by a fund which
charges a sales load may be invested in shares of other funds sold
with a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered Shares
exceeds the maximum sales load charged by the fund from which
dividends or other distributions are being swept, without giving
effect to any reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be
invested in shares of other funds that impose a contingent
deferred sales charge ("CDSC") and the applicable CDSC, if any,
will be imposed upon redemption of such shares.
Dividend ACH permits investors to transfer electronically dividends or
dividends and capital gain distributions, if any, from the Fund to a
designated bank account. Only an account maintained at a domestic financial
institution which is an ACH member may be so designated. Banks may charge a
fee for this service.
For more information concerning these Privileges, or to request a
Dividend Options Form, investors should call toll free 1-800-645-6561.
Investors may cancel these Privileges 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 these privileges is
effective three business days following receipt. These privileges are
available only for existing accounts and may not be used to open new
accounts. Minimum subsequent investments do not apply for Dividend Sweep.
The Fund may modify or terminate these privileges at any time or charge a
service fee. No such fee currently is contemplated. Shares held under
Keogh Plans, IRAs or other retirement plans are not eligible for Dividend
Sweep.
Government Direct Deposit Privilege. Government Direct Deposit
Privilege enables investors 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 an investor's Fund account.
Investors may deposit as much of such payments as they elect. To enroll in
Government Direct Deposit, investors must file with the Transfer Agent a
completed Direct Deposit Sign-Up Form for each type of payment that they
desire to include in this Privilege. The appropriate form may be obtained
from the investor's Agent or by calling 1-800-645-6561. Death or legal
incapacity will terminate the investor's participation in this Privilege.
Investors may elect at any time to terminate their participation by
notifying in writing the appropriate Federal agency. Further, the Fund may
terminate participation upon 30 days' notice to investors.
Dreyfus Payroll Savings Plan. Dreyfus Payroll Savings Plan permits
investors to purchase Fund shares (minimum $100 per transaction)
automatically on a regular basis. Depending upon the investor's employer's
direct deposit program, investors may have part or all of their paycheck
transferred to their existing Dreyfus account electronically through the ACH
system at each pay period. To establish a Dreyfus Payroll Savings Plan
account, investors must file an authorization form with their employer's
payroll department. The investor's employer must complete the reverse side
of the form and return it to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. Investors may obtain the necessary
authorization form by calling 1-800-645-6561. Investors may change the
amount of purchase or cancel the authorization only by written notification
to their employer. It is the sole responsibility of the investor's
employer, not the Distributor, the investor's Agent, Dreyfus, the Fund, the
Transfer Agent or any other person, to arrange for transactions under the
Dreyfus Payroll Savings Plan. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs or other retirement plans
are not eligible for this Privilege.
Small Account Fee. To offset the relatively higher costs of servicing
smaller accounts, the Fund will charge regular accounts with balances below
$2,000 an annual fee of $12. The valuation of accounts and the deductions
are expected to take place 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, and will not apply to IRA accounts or to
accounts participating in automatic investment programs or opened through a
securities dealer, bank or other financial institution, or to other
fiduciary accounts.
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 Directors 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
shares of a Fund 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 shares of a Fund 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 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.
The following are the current and effective yields for the Fund for the
seven-day period ended [ ]:
Current Yield Effective Yield
From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market share,
etc.) and its presence in the defined contribution plan market.
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 The Dreyfus Corporation 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 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 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
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "The Fund."
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
Mellon Bank, which is located at One Mellon Bank Center, Pittsburgh, PA
15258, serves as the Fund's custodian. Dreyfus Transfer, Inc., a wholly-
owned subsidiary of Dreyfus, 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. 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.
___________________________________, has passed upon the legality of the
shares offered by the Prospectus and this Statement of Additional
Information.
____________________________________, was appointed by the Board
of Trustees to serve as the Fund's independent auditors for the year ending June
30, 1999, providing audit services including (1) examination of the annual
financial statements, (2) assistance, review and consultation in connection with
the SEC and (3) review of the annual Federal income tax return filed on behalf
of the Fund.
FINANCIAL STATEMENTS
The financial statements of the Fund 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.
APPENDIX A
INVESTING IN CALIFORNIA MUNICIPAL OBLIGATIONS
Certain California (the "State") constitutional amendments, legislative
measures, executive orders, civil actions and voter initiatives, as well as
the general financial condition of the State, could adversely affect the
ability of issuers of California Municipal Obligations to pay interest and
principal on such obligations. The following information constitutes only a
brief summary, does not purport to be a complete description, and is based
on information drawn from official statements relating to securities
offerings of the State of California and various local agencies, available
as of the date of this Statement of Additional Information. While the Fund
has not independently verified such information, it has no reason to believe
that such information is not correct in all material respects.
Recent Developments. From mid-1990 to late 1993, the State suffered a
recession with the worst economic, fiscal and budget conditions since the
1930s. Construction, manufacturing (especially aerospace), exports and
financial services, among others, were all severely affected. Job losses
were the worst of any post-war recession. Unemployment reached 10.1% in
January 1994, but fell sharply to 7.7% in October and November 1994. The
recession seriously affected State tax revenues, which basically mirror
economic conditions. It also caused increased expenditures for health and
welfare programs. The State has also been facing a structural imbalance in
its budget with the largest programs supported by the General Fund (K-12
schools and community colleges, health and welfare, and corrections) growing
at rates higher than the growth rates for the principal revenue sources of
the General Fund. As a result, the State experienced recurring budget
deficits in the late 1980s and early 1990s.
The accumulated budget deficits over the past several years, together
with expenditures for school funding which have not been reflected in the
budget, and reduction of available internal borrowable funds, have combined
to significantly deplete the State's cash resources to pay its ongoing
expenses. In order to meet its cash needs, the State has had to rely for
several years on a series of external borrowings, including borrowings past
the end of a fiscal year. Such borrowings are expected to continue in
future fiscal years. To meet its cash flow needs in the 1994-95 fiscal year
the State issued, in July and August 1994, $4.0 billion of revenue
anticipation warrants which matured on April 25, 1996, and $3.0 billion of
revenue anticipation notes which matured on June 28, 1995. The State issued
$3.0 billion of revenue anticipation notes for the 1996-97 fiscal year on
August 7, 1996, which matured on June 30, 1997.
As a result of the deterioration in the State's budget and cash
situation, the rating agencies reduced the State's credit ratings. Between
October 1991 and July 1994, the rating on the State's general obligation
bonds was reduced by S&P from "AAA" to "A," by Moody's from "Aaa" to "A1"
and by Fitch from "AAA" to "A."
According to the State's Department of Finance, recovery from the
recession in California began in 1994. The State's financial condition
improved markedly during the 1995-96 and 1996-97 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 two fiscal
years.
The State economy grew strongly during the 1995-96 and 1996-97 fiscal
years, and as a result, the General Fund took in substantially greater tax
revenues (around $2.2 billion in 1995-96 and $1.6 billion in 1996-97) 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.
The accumulated budget deficit from the recession years was eliminated. In
the Governor's 1998-99 Budget Proposal, released January 9, 1998, the
Department of Finance reported that the State's budget reserve (the SFEU)
totaled $461 million as of June 30, 1997.
On December 6, 1994, Orange County, California (the "County"), together
with its pooled investment funds (the "County Funds"), filed for protection
under Chapter 9 of the Federal Bankruptcy Code, after reports that the
County Funds had suffered significant market losses in their investments,
causing a liquidity crisis for the County Funds and the County. More than
180 other public entities, most of which, but not all, are located in the
County, were also depositors in the County Funds. As of mid-January 1995,
following a restructuring of most of the County Funds' assets to increase
their liquidity and reduce their exposure to interest rate increases, the
County estimated the County Funds' loss at about $1.69 billion, or about 23%
of their initial deposits of approximately $7.5 billion. Many of the
entities which deposited monies in the County Funds, including the County,
are facing cash flow difficulties because of the bankruptcy filing and may
be required to reduce programs or capital projects. This also may effect
their ability to meet their outstanding obligations.
The State has no existing obligation with respect to any outstanding
obligations or securities of the County or any of the other participating
entities. However, in the event the County is unable to maintain county
administered State programs because of insufficient resources, it may be
necessary for the State to intervene, but the State cannot presently predict
what, if any, action may occur.
State Finances. State moneys are segregated into the General Fund and
approximately 800 Special Funds including Bond, Trust and Pension Funds.
The General Fund consists of the revenues received into the State Treasury
and earnings from State investments, which are not required by law to be
credited to any other fund. The General Fund is the principal operating
fund for the majority of governmental activities and is the depository of
most major State revenue sources.
The SFEU is funded with General Fund revenues and was established to
protect the State from unforeseen reduced levels of revenues and/or
unanticipated expenditure increases. Amounts in the SFEU may be transferred
by the Controller as necessary to meet cash needs of the General Fund. The
Controller is required to return moneys so transferred without payment of
interest as soon as there are sufficient moneys in the General Fund. For
budgeting and accounting purposes, any appropriation made from the SFEU is
deemed an appropriation from the General Fund. For year-end reporting
purposes, the Controller is required to add the balance in the SFEU to the
balance in the General Fund so as to show the total monies then available
for General Fund purposes. In the Governor's budget for Fiscal Year 1998-
99, released on January 9, 1998, the Department of Finance projects the SFEU
will have a lance of about $929 million on June 30, 1998.
Inter-fund borrowing has been used for many years to meet temporary
imbalances of receipts and disbursements in the General Fund. As of June
30, 1997, the General Fund had outstanding loans from the SFEU and Special
Funds in the amount of $1.19 billion.
State Appropriations Limits. Prior to 1997, revenues of the State
government experienced significant growth primarily as a result of inflation
and continuous expansion of the tax base of the State. In 1998, State
voters approved an amendment to the State Constitution known as Proposition
13, which added article XIIIA to the State Constitution reducing ad valorem
local property taxes by more than 50%. In addition, Article XIIIA provides
that additional taxes may be levied by cities, counties and special
districts only upon approval of not less than a two-thirds vote of the
"qualified electors" of such district, and requires not less than a two-
thirds vote of each of the two houses of the State Legislature to enact any
changes in State taxes for the purpose of increasing revenues, whether by
increased rate or changes in methods of computation.
Primarily as a result of the reductions in local property tax revenues
received by local governments following the passage of Proposition 13, the
Legislature undertook to provide assistance to such governments by
substantially increasing expenditures from the General Fund for that purpose
beginning in the 1978-79 fiscal year. In recent years, in addition to such
increased expenditures, the indexing of personal income tax rates (to adjust
such rates for the effects of inflation), the elimination of certain
inheritance and gift taxes and the increase of exemption levels for certain
other such taxes had a moderating impact on the growth in State revenues.
In addition, the State has increased expenditures by providing a variety of
tax credits, including renters' and senior citizens' credits and energy
credits.
The State is subject to an annual "appropriations limit" imposed by
Article XIIIB of the State Constitution adopted in 1979. Article XIIIB
prohibits the State from spending "appropriations subject to limitation" in
excess of the appropriations limit imposed. "Appropriations subject to
limitations" are authorizations to spend "proceeds of taxes," which consist
of tax revenues, and certain other funds, including proceeds from regulatory
licenses, user charges or other fees to the extent that such proceeds exceed
"the cost reasonably borne by such entity in providing the regulation,
product or service." One of the exclusions from these limitations is "debt
service" (defined as "appropriations required to pay the cost of interest
and redemption charges, including the funding of any reserve or sinking fund
required in connection therewith, on indebtedness existing or legally
authorized as of January 1, 1979 or on bonded indebtedness thereafter
approved" by the voters). In addition, appropriations required to comply
with mandates of courts or the Federal government and, pursuant to
Proposition 111 enacted in June 1990, appropriations for qualified capital
outlay projects and appropriations of revenues derived from any increase in
gasoline taxes and motor vehicle weight fees above January 1, 1990 levels
are not included as appropriations subject to limitation. In addition, a
number of recent initiatives were structured or proposed to create new tax
revenues dedicated to certain specific uses, with such new taxes expressly
exempted from the Article XIIIB limits (e.g., increased cigarette and
tobacco taxes enacted by Proposition 99 in 1988). The appropriations limit
also may be exceeded in cases of emergency. However, unless the emergency
arises from civil disturbance or natural disaster declared by the Governor,
and the appropriations are approved by two-thirds of the Legislature, the
appropriations limit for the next three years must be reduced by the amount
of the excess.
The State's appropriations limit in each year is based on the limit for
the prior year, adjusted annually for changes in California per capita
personal income and changes in population, and adjusted, when applicable,
for any transfer of financial responsibility of providing services to or
from another unit of government. The measurement of change in population is
a blended average of statewide overall population growth, and change in
attendance at local school and community college ("K-14") districts. As
amended by Proposition 111, the appropriations limit is tested over
consecutive two-year periods. Any excess of the aggregate "proceeds of
taxes" received over such two-year periods above the combined appropriations
limits for those two years is divided equally between transfers to
K-14 districts and refunds to taxpayers.
As originally enacted in 1979, the State's appropriations limit was
based on its 1978-79 fiscal year authorizations to expend proceeds of taxes
and was adjusted annually to reflect changes in cost of living and
population (using different definitions, which were modified by Proposition
111). Commencing with the 1991-92 fiscal year, the State's appropriations
limit is adjusted annually based on the actual 1986-87 limit, and as if
Proposition 111 had been in effect. The State Legislature has enacted
legislation to implement Article XIIIB which defines certain terms used in
Article XIIIB and sets forth the methods for determining the State's
appropriations limit. Government Code Section 7912 requires an estimate of
the State's appropriations limit to be included in the Governor's Budget,
and thereafter to be subject to the budget process and established in the
Budget Act.
The limit for the 1993-94 fiscal year was $36.60 billion, and the
appropriations subject to limitation were $6.55 billion under the limit.
The limit for the 1994-95 fiscal year was $37.55 billion, and the
appropriations subject to limitations were $5.93 billion under the limit.
The limit for the 1995-96 fiscal year was $39.31 billion, and the
appropriations subject to limitations were estimated to be $5.12 billion
under the limit. The limit for the 1996-97 fiscal year was $42.00 billion,
and the appropriations subject to limitations were $6.90 billion under the
limit.
In November 1988, State voters approved Proposition 98, which changed
State funding of public education below the university level and the
operation of the State's appropriations limit, primarily by guaranteeing K-
14 schools a minimum share of General Fund revenues. Under Proposition 98
(as modified by Proposition 111, which was enacted in June 1990), K-14
schools are guaranteed the greater of (a) 40.3% of General Fund revenues
("Test 1"), (b) the amount appropriated to K-14 schools in the prior year,
adjusted for changes in the cost of living (measured as in Article XIIIB by
reference to California per capita personal income) and enrollment ("Test
2"), or (c) a third test, which would replace the second test in any year
when the percentage growth in per capita General Fund revenues from the
prior year plus .5% is less than the percentage growth in California per
capita personal income ("Test 3"). Under "Test 3," schools would receive
the amount appropriated in the prior year adjusted for changes in enrollment
and per capita General Fund revenues, plus an additional small adjustment
factor. If "Test 3" is used in any year, the difference between "Test 3"
and "Test 2" would become a "credit" to schools which would be the basis of
payments in future years when per capita General Fund revenue growth exceeds
per capita personal income growth.
Proposition 98 permits the Legislature by two-thirds vote of both
houses, with the Governor's concurrence, to suspend the K-14 schools'
minimum funding formula for a one-year period. In the fall of 1989, the
Legislature and the Governor utilized this provision to avoid having 40.3%
of revenues generated by a special supplemental sales tax enacted for
earthquake relief go to K-14 schools. Proposition 98 also contains
provisions transferring certain State tax revenues in excess of the Article
XIIIB limit to K-14 schools.
During the recent recession, 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 Trenchers' 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 owned, 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 and thereafter have resulted or
will result in retroactive increased 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 increase by about 22% from
the level in place from 1991-92 through 1993-94, and is estimated at about
$5,150 per ADA (average daily attendance) in 1997-98. 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. There are also new initiatives for reading skills and
to upgrade technology in high schools.
On November 5, 1996, voters approved Proposition 218, entitled the
"Right to Vote on Taxes Act," which incorporates new Articles XIIIC and
XIIID 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
Sources of Tax Revenue. The California personal income tax, which in
1996-97 contributed about 47% of General Fund revenues, is closely modeled
after the Federal income tax law. It is imposed on net taxable income
(gross income less exclusions and deductions). The tax is progressive with
rates ranging from 1% to 9.3%. Personal, dependent, and other credits are
allowed against the gross tax liability. In addition, taxpayers may be
subject to an alternative minim tax ("AMT") which is much like the Federal
AMT.
The personal income tax is adjusted annually by the change in the
consumer price index to prevent taxpayers from being pushed into higher tax
brackets without a real increase in income.
The sales tax is imposed upon retailers for the privilege of selling
tangible personal property in California. Most retail sales and leases are
subject to the tax. However, exemptions have been provided for certain
essentials such as food for home consumption, prescription drugs, gas,
electricity and water. Sales tax accounted for about 34% of General Fund
revenue in 1996-97. Bank and corporation tax revenues comprised about 13%
of General Fund revenue in 1996-97. In 1989, Proposition 99 added a 25
cents per pack excise tax on cigarettes, and a new equivalent excise tax on
other tobacco products. Legislation enacted in 1993 added an additional 2
cents per pack for the purpose of funding breast cancer research.
General Financial Condition of the State. On January 9, 1997, the
Governor released his proposed budget from the 1997-98 fiscal year (the
`Proposed Budget"). The Proposed Budget estimated General Fund revenues and
transfers of about $50.7 billion, and proposed expenditures of $50.3
billion. In may 1997, the Department of Finance increased its revenue
estimate for the upcoming fiscal year by $1.3 billion in response to the
continued strong growth in the State's economy.
In May 1997, action was taken by the California Supreme Court in an
ongoing lawsuit, PERS v. Wilson, which made final a judgment against the
State requiring an immediate payment from the General Fund to the Public
Employees Retirement Fund ("PERF") to make up certain deferrals in annual
retirement fund contributions which had been legislated in earlier years for
budget savings, and which the courts found to be unconstitutional. On July
30, 1997, following a direction from the Governor, the Controller
transferred $1.228 billion from the General Fund to the PERF in satisfaction
of the judgment, representing the principal amount of the improperly
deferred payments from 1995-96 and 1996-97.
In late 1997, the plaintiffs filed a claim with the State Board of
Control for payment of interest under the Court rulings in an amount of $308
million. The Department of Finance has recommended approval of this claim.
If approved by the Board of Control, the claim would become part of a claims
bill to be paid in the 1998-99 fiscal year.
Fiscal Year 1997-98 Budget Act. The Legislature passed the 1997-98
Budget Bill on August 11, 1997, along with numerous related bills to
implement its provisions. On August 18, 1997, the Governor signed the
Budget Act, but vetoed approximately $314 million of specific spending
items, primarily in health and welfare and education areas from both the
General Fund and Special Funds. Most of this spending (approximately $200
million) was restored in later legislation passed before the end of the
Legislation Session.
The Budget Act anticipated General Fund revenues and transfer of $52.5
billion (a 6.8% increase over the final 1996-97 amount), and expenditures of
$52.8 billion (an 8.0% increase from the 1996-97 levels). The budget Act
also included Special Fund expenditures of $14.4 billion (as against
estimated Special Fund revenues of $14.0 billion), and $2.1 billion of
expenditures from various Bond Funds. Following enactment of the Budget
Act, the State implemented its normal annual cash flow borrowing program,
issuing $3.0 billion of notes which mature on June 30, 1998.
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 exceed 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.
2. The Budget Act reflected the $1.228 billion pension case judgment
payment, 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% ($121
million and $107 million, respectively), and there was no increase
in student fees.
4. Because of the effect of the payment, most other State programs
were continued at 1996-97 levels, adjusted for caseload changes.
1; 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.
1; 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.
1; The Budget Act contained no tax increases, and no tax reductions. The
Renters Tax Credit was suspended for another year, saving
approximately $500 million.
The Department of Finance released updated estimates for the 1997-98
fiscal year on January 9, 1998 as part of the Governor's 1998-99 fiscal year
Budget Proposal. Total revenues and transfer are projected at $52.9
billion, up approximately $350 million from the Budget Act projection.
Expenditures for the fiscal year are expected to rise approximately $200
million above the original Budget Act, to $53.0 billion. The balance in the
budget reserve, the SFEU, is projected to be $329 million at June 30, 1998,
compared to $461 million at June 30, 1997.
Proposed 1998-99 Fiscal Year Budget. On January 9, 1998, the Governor
released his Budget Proposal for the 1998-99 fiscal year (the "Governor's
Budget"). The Governor's budget projects total General Fund revenues and
transfers of $55.4 billion, a $2.5 billion increase (4.7%) over revised 1997-
98 revenues. This revenue increase takes into account reduced revenues of
approximately $600 million from the 1997 tax cut package, but also assumes
approximately $500 million additional revenues primarily associated with
capital gains realizations. The Governor's Budget notes, however, the
capital gains activity and the resultant revenues derived from it are very
hard to predict.
Total General Fund expenditures for 1998-99 are recommended at $55.4
billion, an increase of $2.4 billion (4.5%) above the revised 1997-98 level.
The Governor's Budget includes funds to pay the interest claim relating to
the court decision on pension fund payments, PERS v. Wilson. The Governor's
Budget projects that the State will carry out its normal intra-year cash
flow external borrowing in 1998-99, in an estimated amount of $3.0 billion.
The Governor's Budget projects that the budget reserve, the SEFU, will be
$296 million at June 30, 1999, slightly lower than the projected level at
June 30, 1998.
The Governor's Budget projects Special Fund revenues of $14.7 billion,
and Special Fund Expenditures of $15.2 billion, in the 1998-99 fiscal year.
A total of $3.2 billion of bond fund expenditures are also proposed.
The revenue and expenditure assumptions set forth above have been based
upon certain estimates of the performance of the California and national
economies in calendar years 1997 and 1998. In the Governor's Budget
released on January 9, 1998, the Department of Finance projects that the
California economy will continue to show robust growth through 1998,
although at a slower pace than in 1997. The economic expansion is marked by
strong growth in high technology manufacturing and services, including
computer software electronic manufacturing and motion picture/television
production; growth is also strong in other business services, both
nonresidential and residential construction and local education. The Asian
economic crisis developing in late 1997 is expected to have some dampening
effects on the State's economy, as exports to the region will be reduced
further (declines had appeared already in the first half of 1997) and the
trade deficit will increase.
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. ("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 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 (formerly, the
Dreyfus/Laurel Massachusetts Tax-Free Money 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 B-2
Management of the Fund B-13
Management Arrangements B-19
Purchase of Shares B-21
Redemption of Fund Shares B-24
Shareholder Services B-28
Performance Information B-35
Determination of Net Asset Value B-34
Dividends, Other Distributions and Taxes B-36
Portfolio Transactions B-40
Information About the Fund/Trust B-42
Transfer and Dividend Disbursing Agent,
Custodian, Counsel and Independent Auditors B-43
Financial Statements B-44
Appendix A - Risk Factors - Investing in
Massachusetts Municipal Obligations B-45
Appendix B - Information about Securities Ratings B-48
DESCRIPTION OF THE FUND
The following information supplements and should be read in conjunction
with the sections of the Fund's Prospectus entitled "Goal/Approach" and
"Main Risks."
The Trust is an open-end management investment company organized as an
unincorporated business trust under the laws of the Commonwealth of
Massachusetts by an Agreement and Declaration of Trust dated March 28, 1983,
amended and restated December 9, 1992, and subsequently further amended. On
March 31, 1994, the Trust changed its name from "The Boston Company Tax-Free
Municipal Funds" to "The Laurel Tax-Free Municipal Funds." The Trust's name
was then changed to "The Dreyfus/Laurel Tax-Free Municipal Funds" effective
October 17, 1994. On May 8, 1996, the Fund's "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").
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. The Fund will limit its investments to
securities that present minimal credit risk, as determined by Dreyfus.
Because many issuers of Massachusetts Municipal Obligations may choose
not to have their obligations rated, it is possible that a large portion of
the Fund's portfolio may consist of unrated obligations, and to the extent
the Fund invests in unrated obligations, the Fund will be more reliant on
Dreyfus' 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 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 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. For purposes of this Statement
of Additional Information, the term "Municipal Obligations" and
"Massachusetts Municipal Obligations" shall mean debt obligations
issued by the Commonwealth of Massachusetts, its political subdivisions,
municipalities and public authorities and municipal obligations issued by
other government entities if, in the opinion of counsel to the respective
issuers, the interest from such obligations is exempt from Federal and
Massachusetts personal income taxes. "Municipal Obligations" and
"Massachusetts Municipal Obligations" include the following:
Municipal Bonds. Municipal Bonds, which generally have a maturity of
more than one year when issued, have two principal classifications: General
Obligation Bonds and Revenue Bonds. A Private Activity Bond is a particular
kind of Revenue Bond. The classification of General Obligation Bonds,
Revenue Bonds and Private Activity Bonds are discussed below.
1. General Obligation Bonds. The proceeds of these obligations are
used to finance a wide range of public projects, including construction or
improvement of schools, highways and roads, and water and sewer systems.
General Obligation Bonds are secured by the issuer's pledge of its faith,
credit and taxing power for the payment of principal and interest.
2. Revenue Bonds. Revenue Bonds are issued to finance a wide variety
of capital projects including: electric, gas, water and sewer systems;
highways, bridges and tunnels; port and airport facilities; colleges and
universities; and hospitals. The principal security for a Revenue Bond is
generally the net revenues derived from a particular facility, group of
facilities or, in some cases, the proceeds of a special excise or other
specific revenue source. Although the principal security behind these bonds
may vary, many provide additional security in the form of a debt service
reserve fund whose money may be used to make principal and interest payments
on the issuer's obligations. Some authorities provide further security in
the form of a state's ability (without obligation) to make up deficiencies
in the debt service reserve fund.
3. Private Activity Bonds. Private Activity Bonds, which are
considered Municipal Bonds if the interest paid thereon is exempt from
Federal income tax, are issued by or on behalf of public authorities to
raise money to finance various privately operated facilities for business
and manufacturing, housing, sports and pollution control. These bonds are
also used to finance public facilities such as airports, mass transit
systems, ports and parking. The payment of the principal and interest on
such bonds is dependent solely on the ability of the facility's user to meet
its financial obligations and the pledge, if any, of real and personal
property so financed as security for such payment. As 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 will purchase Municipal Obligations on a when-
issued basis only with the intention of actually acquiring the securities,
the Fund may sell these securities before the settlement date if it is
deemed advisable as a matter of investment strategy.
Municipal Obligations purchased on a when-issued basis and the
securities held in the Fund's portfolio are subject to changes in market
value based upon the public's perception of the creditworthiness of the
issuer and changes, real or anticipated, in the level of interest rates
(which will generally result in similar changes in value, i.e., both
experiencing appreciation when interest rates decline and depreciation when
interest rates rise). Therefore, to the extent the Fund remains
substantially fully invested at the same time that it has purchased
securities on a when-issued basis, there will be a greater possibility of
fluctuation in the Fund's net asset value. Purchasing Municipal Obligations
on a when-issued basis can involve a risk that the yields available in the
market when the delivery takes place may actually be higher than those
obtained in the transaction.
A separate account of the Fund consisting of cash or liquid debt
securities equal to the amount of the when-issued commitments will be
established with the Fund's custodian. When the time comes to pay for when-
issued securities, the Fund will meet its obligations from then-available
cash flow, sale of securities held in the separate account, sale of other
securities or, although it would not normally expect to do so, from the sale
of the when-issued securities themselves (which may have a value greater or
lesser than the Fund's payment obligations). Sale of securities to meet
such obligations carries with it a greater potential for the realization of
capital gains, which are not exempt from Federal income tax.
Purchase of Securities with Stand-by Commitments. Pursuant to an
exemptive order issued by the SEC under the 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.
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.
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.
Taxable Investments. The Fund anticipates being as fully invested as
practicable in Municipal Obligations. Because the Fund's purpose is to
provide income exempt from Federal and state personal income tax, the Fund
will invest in taxable obligations only if and when 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. Since the Fund is
concentrated in securities issued by Massachusetts or entities within
Massachusetts, an investment in the Fund may involve greater risks than
investments in certain other types of money market funds. Massachusetts
economic and fiscal difficulties of recent years appear to have abated.
While the Commonwealth's expenditures for state programs and services in
each of the fiscal years 1987 through 1991 exceeded each year's current
revenues, Massachusetts ended each of the fiscal years 1991 through 1996
with a positive fiscal balance in its general operating funds. A return of
persistent serious financial difficulties could adversely affect the market
values and marketability of, or result in default in Payment on outstanding
Massachusetts Municipal Obligations. Investors should consider carefully
the special risks inherent in the Fund's investment in Massachusetts
Municipal Obligations, which are discussed in more detail in Appendix A to
this Statement of Additional Information.
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 the determination, the Trustees will consider, among other things,
the benefits to shareholders and/or the opportunity to reduce costs and
achieve operational efficiencies. Although the Fund believes that the
Trustees will not approve an arrangement that is likely to result in higher
costs, no assurance is given that costs will be materially reduced if this
option is implemented.
Investment Restrictions. The following are fundamental investment
restrictions of the Fund. The Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of such purchase to be
invested in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities and state or municipal governments and their political
subdivisions are not considered members of any industry. In addition, this
limitation does not apply to investments of domestic banks, including U.S.
branches of foreign banks and foreign branches of U.S. banks.)
2. Borrow money or issue senior securities as defined in the 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.
The following are non-fundamental investment restrictions of the Fund:
1. The Fund will not purchase or retain the securities of any issuer
if the officers, directors or Trustees of the Trust, its advisers, or
managers owning beneficially more than one half of one percent of the
securities of each issuer together own beneficially more than five percent
of such securities.
2. The Fund will not purchase 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 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.
Under the 1940 Act, a fundamental policy may not be changed without the
vote of a majority of the outstanding voting securities of the Fund, as
defined in the 1940 Act. "Majority" means the lesser of (1) 67% or more of
the shares present at the Fund's meeting, if the holders of more than 50% of
the outstanding shares of the Fund are present or represented by proxy, or
(2) more than 50% of the outstanding shares of the Fund. Non-fundamental
investment restrictions may be changed, without shareholder approval, by
vote of a majority of the Trust's Board of Trustees at any time.
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
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, N.A. ("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
Noel Group, Inc., a venture capital company (for which from February
1995 until November 1997, he was Chairman of the Board); 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) a temporary placement agency. Mr. DiMartino is a Board
member of 99 funds in the Dreyfus Family of Funds. 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 Corporation. Age: 55 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. Age: 64 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
Companyl President & CEO, Himmel and Company; CEO, American Food
Management; former Director, The Boston Company, Inc. ("TBC"), an
affiliate of Dreyfus, and Boston Safe Deposit and Trust Company; 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. 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: 67 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: 49 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: 39
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. 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: 35 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, Mr. Kelley 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 and Client Development Manager
of 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. 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, The
Dreyfus/Laurel Funds, Inc. and Dreyfus High Yield Strategies Fund.
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. Effective July 1, 1998, 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. The
compensation structure described in this paragraph is referred to
hereinafter as the "Current Compensation Structure."
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 pursuant to the Current
Compensation Structure.
Prior to July 1, 1998, the Dreyfus/Laurel Funds paid each
Director/Trustee who was not an "interested person" of the Trust (as defined
in the 1940 Act) $27,000 per annum (and an additional $25,000 for the
Chairman of the Board of Directors/Trustees of the Dreyfus/Laurel Funds) and
$1,000 per joint Dreyfus/Laurel Funds Board meeting attended, plus $750 per
joint Dreyfus/Laurel Funds Audit Committee meeting attended, and reimbursed
each such Director/Trustee for travel and out-of-pocket expenses (the
"Former Compensation Structure").
The aggregate amount of fees and expenses received by each current
Trustee from the Trust for the fiscal year ended December 31, 1998, 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) for the year ended December 31, 1998,
pursuant to the Former Compensation Structure for the period from January 1,
1998 through June 30, 1998 and the Current Compensation Structure for the
period from July 1, 1998 through 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** $ $ 619,660 (187)*
James M. Fitzgibbons $ $ 60,010 (31)
J. Tomlinson Fort*** none none (31)
Arthur L. Goeschel $ $ 61,010 (31)
Kenneth A. Himmel $ $ 50,260 (31)
Stephen J. Lockwood $ $ 51,010 (31)
John J. Sciullo $ $ 59,010 (31)
Roslyn M. Watson $ $ 61,010 (31)
Benaree Pratt Wiley**** $ $ 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 $[ ]
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. The Dreyfus Family of Funds consists of 163
mutual fund portfolios.
** Mr. DiMartino became Chairman of the Board 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 December 31, 1998, the aggregate amount of fees received by J.
Tomlinson Fort from Dreyfus for serving as a Board member of the Trust
was ______________________. 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 ______________________. In addition,
Dreyfus reimbursed Mr. Fort a total of $__________________ for
expenses attributable to the Trust's Board meetings which is not included
in the $__________________ amount in note # above.
**** Payments to Ms. Wiley were 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 2,
1999.
Principal Shareholders. As of October 2, 1999, the following
companies/individuals owned beneficially or of record 5% or more of the
outstanding Fund shares:
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.
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 Bank 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.
Dreyfus serves as the investment manager for the Fund pursuant to an
Investment Management Agreement (the "Investment Management Agreement") with
the Trust dated May 8, 1996, which was last approved by the Trust's Board of
Trustees on January 28, 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 Fund. As
investment manager, Dreyfus manages the Fund by making investment decisions
based on the Fund's investment objective, policies and restrictions.
The 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 of the shareholders of the
Fund approve its continuance. The Trust may terminate the 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 Management
Agreement upon 60 days' written notice to the Trust. The 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
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; 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 .45 of 1% of the Fund's average
daily net assets, less the accrued fees and expenses (including counsel
fees) of the non-interested Trustees of the Trust. Dreyfus may waive all or
a portion of its fees payable by the Fund from time to time. The Investment
Management Agreement provides that certain redemption, exchange and account
closeout charges are payable directly by the Fund's shareholders to the
Fund's Transfer Agent (although the Fund will waive such fees if the closing
balance in the shareholders account on the business day immediately
preceding the effective date of the transaction is $50,000 or more) and the
fee payable by the Fund to Dreyfus is not reduced by the amount of charges
payable to the Transfer Agent.
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 distributor for the other funds in the Dreyfus
Family of Funds. The Distributor is also the Fund's sub-administrator and,
pursuant to a Sub-Administration Agreement with Dreyfus, provides various
administrative and corporate secretarial services to the Fund.
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: Investors may purchase Fund shares without a sales charge if
purchased directly from the Distributor; investors may be charged a fee if
they 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.
Investors 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 the investor's
Account Application. For subsequent investments, the investor's 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, investors should call the telephone number listed
on the cover of this Statement of Additional Information.
Wire payments may be made if the investor's 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 the investor's name. The wire must include the
investor's Fund account number (for new accounts, the investor's Taxpayer
Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable. If the initial purchase of
Fund shares is by wire, investors should call 1-800-645-6561 after
completing the wire payment to obtain the Fund account number. Investors
should their 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. Investors may obtain
further information about remitting funds in this manner from the investor's
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 the investor's 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. Investors must direct
the institution to transmit immediately available funds through the ACH
System to Boston Safe Deposit and Trust Company with instructions to credit
the investor's Fund account. The instructions must specify the investor's
Fund account registration and Fund account number preceded by the digits
"4540."
Federal regulations require that investors 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 ("NAV"). An investment portfolio's NAV refers
to the worth of one share. The NAV for Fund shares, which are offered on a
continuous basis, is calculated on the basis of amortized cost, which
involves initially valuing a portfolio instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value
of the instrument. The Fund intends to maintain a constant NAV of $1.00,
although there is no assurance that this can be done on a continuing basis.
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 Fund before 4 p.m.,
Eastern time, on each day that the New York Stock Exchange is open (a
"business day") are effective on, and will receive the price next
determined, that business day. The NAV of the Fund is calculated two times
each business day, at 12 noon and 4 p.m., Eastern time. Investment, exchange
or redemption requests received after 4 p.m., Eastern time are effective on,
and receive the first share price determined, the next business day.
TeleTransfer Privilege. Investors may purchase Fund shares by
telephone through the 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 the investor's Fund account. Only a bank
account maintained in a domestic financial institution that is an Automated
Clearing House ("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." 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.
Share Certificates. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.
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: Investors 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, the Fund will redeem the
shares at the next determined NAV as described below.
Investors will be charged $5.00 when they redeem all shares in their
account or their account is otherwise closed out (unless the investor has
held Fund shares since May 8, 1996). The fee will be deducted from the
investor's 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 an
investor has purchased Fund shares by check or by the Dreyfus TeleTransfer
Privilege and subsequently submits 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 the investor's
shares were purchased by wire payment, or if investors otherwise have a
sufficient collected balance in their account to cover the redemption
request. Prior to the time any redemption is effective, dividends on such
shares will accrue and be payable, and investors will be entitled to
exercise all other rights of beneficial ownership. Fund shares will not be
redeemed until the Transfer Agent has received an investor's Account
Application.
The Fund reserves the right to redeem an investor's account at its
option upon not less than 45 days' written notice if the net asset value of
the investor's account is $10,000 or less ($500 or less in the case of Fund
shareholders as of May 8, 1996) and remains at or below such amount during
the notice period. The $5.00 account close-out fee would be charged in such
case.
Procedures. Investors 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 the investor specifically refuses 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. Investors also may
redeem shares through the Wire Redemption Privilege, or 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. Other redemption
procedures may be in effect for clients of certain Agents and institutions.
The Fund makes available to certain large institutions the ability to issue
redemption instructions through compatible computer facilities. The Fund
reserves the right to refuse any request made by wire or telephone,
including requests made shortly after a change of address, and may limit the
amount involved or the number of such requests. The Fund may modify or
terminate any redemption Privilege at any time or charge a service fee upon
notice to shareholders. No such fee currently is contemplated. Shares for
which certificates have been issued are not eligible for the Check
Redemption, Wire Redemption, Telephone Redemption or Dreyfus TeleTransfer
Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including
over The Dreyfus Touchr automated telephone system) from any person
representing himself or herself to be an investor, or a representative of an
investor's 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, investors may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, investors
should consider using the other redemption procedures described herein. Use
of these other redemption procedures may result in an investor's 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, investors should
call the telephone number listed under "General Information." Redemption
requests must be signed by each shareholder, including each owner of a joint
account, and each signature must be guaranteed. The Transfer Agent has
adopted standards and procedures pursuant to which signature guarantees in
proper form generally will be accepted from domestic banks, brokers,
dealers, credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations, as well as from
participants in the New York Stock Exchange Medallion Signature Program, the
Securities Transfer Agents Medallion Program ("STAMP"), and the Stock
Exchanges Medallion Program.
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. Investors may write Redemption Checks
("Checks") drawn on a Fund account. The Fund provides Checks automatically
upon opening an account, unless the investor specifically refuses the Check
Redemption Privilege by checking the applicable "No" box on the Account
Application. Checks will be sent only to the registered owner(s) of the
account and only to the address of record. The Check Redemption Privilege
may be established for an existing account by a separate signed Shareholder
Services Form. The Account Application or Shareholder Services Form must be
manually signed by the registered owner(s). Checks are drawn on the
investor's account and may be made payable to the order of any person in an
amount of $1,000 or more. When a Check is presented to the Transfer Agent
for payment, the Transfer Agent, as the investor's agent, will cause the
Fund to redeem a sufficient number of shares in the investor's account to
cover the amount of the Check and the $2.00 charge. The fee will be waived
if the closing balance in the shareholder's account on the business day
immediately preceding the effective date of the transaction is $50,000 or
more and for shareholders who have held Fund shares since May 8, 1996.
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.
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. Holders of jointly
registered Fund or bank accounts may have redemption proceeds of only up to
$250,000 wired within any 30-day period. 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. 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 "Stock Certificates; Signatures."]
Telephone Redemption Privilege. Investors may request by telephone that
redemption proceeds (maximum $150,000 per day) be paid by check and mailed
to their address. Investors 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. Investors may request by telephone
that redemption proceeds (minimum $1000 per day) be transferred between the
investor's Fund account and the investor's bank account. Only a bank
account maintained in a domestic financial institution which is an Automated
Clearing House ("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 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. Investors who have selected the Dreyfus TeleTransfer
Privilege may request a Dreyfus TeleTransfer redemption of Fund shares by
calling 1-800-645-6561 or, if calling from overseas, 516-794-5452. See
"Purchase of Shares--Dreyfus TeleTransfer Privilege."
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 90day 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 "Shareholder Services."
Fund Exchanges. An investor may purchase, in exchange for shares of the
Fund, shares of certain other eligible funds managed or administered by
Dreyfus, to the extent such shares are offered for sale in 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 Touchr 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
Touchr automated telephone system) from any person representing himself or
herself to be the investor or a representative of the investor's Agent, and
reasonably believed by the Transfer Agent to be genuine. Telephone
exchanges may be subject to limitations as to the amount involved or the
number of telephone exchanges permitted. Shares issued in certificate form
are not eligible for telephone exchange. 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.
Shares will be exchanged at the next determined NAV; however, a sales
load may be charged with respect to exchanges into funds sold with a sales
load. Investors exchanging into a fund that charges sales load may qualify
for share prices which do not include the sales load or which reflect
reduced sales load, if the shares of the fund from the investor is
exchanging were: (a) purchased with sales load, (b) acquired by a previous
exchange from shares purchased with a sales load, or (c) acquired through
reinvestment of dividends or other distributions paid with respect to the
foregoing categories of shares. To qualify, at the time of the exchange the
investor must notify the Transfer Agent or the investor's Agent must notify
the Distributor. Any such qualification is subject to confirmation of the
investor's holdings through a check of appropriate records. 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.
[This Privilege is available to shareholders resident in any state in
which shares of the fund being acquired may legally be sold. Shares may be
exchanged only between accounts having identical names and other identifying
designations.]
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 certain other
funds managed or administered by Dreyfus 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. Shares held under IRAs and
other retirement plans are eligible for this Privilege. Exchanges of IRA
shares may be made between IRA accounts and from regular accounts to IRA
accounts, but not from IRA accounts to regular accounts. With respect to
all other retirement accounts, exchanges may be made only among those
accounts.
The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. Investors may modify or cancel their exercise
of this Privilege at any time by mailing written notification to the Dreyfus
Family of Funds, P.O. Box 6587, Providence, Rhode Island 02940-6587. The
Fund may charge a service fee for the use of this Privilege. No such fee
currently is contemplated. 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 1-800-645-6561.
Fund Exchanges and the Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations. 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 (other than a tax-exempt Retirement Plan) may realize
a taxable gain or loss.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchange service or the
Auto-Exchange Privilege may be modified or terminated at any time upon
notice to shareholders.
Dreyfus-Automatic Asset Builderr. Dreyfus Automatic Asset Builder
permits investors to purchase Fund shares (minimum of $100 and maximum of
$150,000 per transaction) at regular intervals selected by the investor.
Fund shares are purchased by transferring funds from the bank account
designated by the investor. 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, investors must file an
authorization form with the Transfer Agent. Investors may obtain the
necessary authorization form by calling 1-800-645-6561. Investors may
cancel their participation in this Privilege or change the amount of
purchase at any time by mailing written notification to the Dreyfus Family
of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671 and the
notification will be effective three business days following receipt. The
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-
800-645-6561. 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.
Particular Retirement Plans, including Dreyfus-sponsored Retirement
Plans, may permit certain participants to establish an automatic withdrawal
plan from such Retirement Plans. Participants should consult their
Retirement Plan sponsor and tax adviser for details. Such a withdrawal plan
is different from the Automatic Withdrawal Plan. [The Automatic Withdrawal
Plan may be ended at any time by the shareholder, the Fund or the Transfer
Agent. Shares for which certificates have been issued may not be redeemed
through the Automatic Withdrawal Plan.]
Dreyfus Dividend Options. Dreyfus Dividend Sweep allows investors to
invest on the payment date their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of certain other funds in the
Dreyfus Family of Funds of which the investor is a shareholder. Shares of
the other funds purchased pursuant to this Privilege will be purchased on
the basis of relative NAV per share as follows:
A. Dividends and other distributions paid by a fund may be
invested without imposition of a sales load in shares of other
funds that are offered without a sales load.
B. Dividends and other distributions paid by a fund which does
not charge a sales load may be invested in shares of other funds
sold with a sales load, and the applicable sales load will be
deducted.
C. Dividends and other distributions paid by a fund which
charges a sales load may be invested in shares of other funds sold
with a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered Shares
exceeds the maximum sales load charged by the fund from which
dividends or other distributions are being swept, without giving
effect to any reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be
invested in shares of other funds that impose a contingent
deferred sales charge ("CDSC") and the applicable CDSC, if any,
will be imposed upon redemption of such shares.
Dividend ACH permits investors to transfer electronically dividends or
dividends and capital gain distributions, if any, from the Fund to a
designated bank account. Only an account maintained at a domestic financial
institution which is an ACH member may be so designated. Banks may charge a
fee for this service.
For more information concerning these Privileges, or to request a
Dividend Options Form, investors should call toll free 1-800-645-6561.
Investors may cancel these Privileges 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 these privileges is
effective three business days following receipt. These privileges are
available only for existing accounts and may not be used to open new
accounts. Minimum subsequent investments do not apply for Dividend Sweep.
The Fund may modify or terminate these privileges at any time or charge a
service fee. No such fee currently is contemplated. Shares held under
Keogh Plans, IRAs or other retirement plans are not eligible for Dividend
Sweep.
Government Direct Deposit Privilege. Government Direct Deposit
Privilege enables investors 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 an investor's Fund account.
Investors may deposit as much of such payments as they elect. To enroll in
Government Direct Deposit, investors must file with the Transfer Agent a
completed Direct Deposit Sign-Up Form for each type of payment that they
desire to include in this Privilege. The appropriate form may be obtained
from the investor's Agent or by calling 1-800-645-6561. Death or legal
incapacity will terminate the investor's participation in this Privilege.
Investors may elect at any time to terminate their participation by
notifying in writing the appropriate Federal agency. Further, the Fund may
terminate participation upon 30 days' notice to investors.
Dreyfus Payroll Savings Plan. Dreyfus Payroll Savings Plan permits
investors to purchase Fund shares (minimum $100 per transaction)
automatically on a regular basis. Depending upon the investor's employer's
direct deposit program, investors may have part or all of their paycheck
transferred to their existing Dreyfus account electronically through the ACH
system at each pay period. To establish a Dreyfus Payroll Savings Plan
account, investors must file an authorization form with their employer's
payroll department. The investor's employer must complete the reverse side
of the form and return it to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. Investors may obtain the necessary
authorization form by calling 1-800-645-6561. Investors may change the
amount of purchase or cancel the authorization only by written notification
to their employer. It is the sole responsibility of the investor's
employer, not the Distributor, the investor's Agent, Dreyfus, the Fund, the
Transfer Agent or any other person, to arrange for transactions under the
Dreyfus Payroll Savings Plan. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs or other retirement plans
are not eligible for this Privilege.
Small Account Fee. To offset the relatively higher costs of servicing
smaller accounts, the Fund will charge regular accounts with balances below
$2,000 an annual fee of $12. The valuation of accounts and the deductions
are expected to take place 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, and will not apply to IRA accounts or to
accounts participating in automatic investment programs or opened through a
securities dealer, bank or other financial institution, or to other
fiduciary accounts.
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 Directors 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
shares of a Fund 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 shares of a Fund 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 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.
The following are the current and effective yields for the Fund for the
seven-day period ended October 31, 1999:
Current Yield Effective Yield
From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market share,
etc.) and its presence in the defined contribution plan market.
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 The Dreyfus Corporation 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 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 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.]
The aggregate amount of transactions ended June 30, 1997, 1998 and 1999
in securities effected on an agency basis through a broker-dealer for
research was $_____________, and the commissions and concessions related to
such transactions was $_______.
INFORMATION ABOUT THE FUND/TRUST
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "The Fund."
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
Mellon Bank, which is located at One Mellon Bank Center, Pittsburgh, PA
15258, serves as the Fund's custodian. Dreyfus Transfer, Inc., a wholly-
owned subsidiary of Dreyfus, 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. 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.
___________________________________, has passed upon the legality of the
shares offered by the Prospectus and this Statement of Additional
Information.
____________________________________, was appointed by the Board
of Trustees to serve as the Fund's independent auditors for the year ending June
30, 1999, providing audit services including (1) examination of the annual
financial statements, (2) assistance, review and consultation in connection with
the SEC and (3) review of the annual Federal income tax return filed on behalf
of the Fund.
FINANCIAL STATEMENTS
The financial statements of the Fund 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.
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).
While the Commonwealth's expenditures for State programs and services
in each of the fiscal years 1987 through 1991 exceeded each year's current
revenues, Massachusetts ended each of the fiscal years 1991 to 1997 with a
positive closing fund balance in its budgeted operating funds, and expects
to do so again at the close of fiscal 1998.
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 year 1994, 1995,
1996 and 1997, Medicaid expenditures were $3.313 billion, $3.398 billion,
$3.416 billion and $3.456 billion, respectively. The average annual growth
rate from fiscal 1993 to fiscal 1997 was 2.3%. It is estimated that in
fiscal 1998, Medicaid expenditures will be $3.62 billion, an increase of
4.7% from fiscal 1997. This amount includes $38.5 million in outpatient
medical services recently transferred to Medicaid in fiscal 1998.
Massachusetts' pension costs have risen dramatically as the State has
appropriated funds to address in part the unfunded liabilities that had
accumulated over several decades. Total pension costs increased at an
average rate of 7.6% from $751.5 million in fiscal 1992 to $1.005 billion in
fiscal 1996. The pension costs in 1997 were $1.069 billion and are
estimated to be $1.069 billion in fiscal 1998.
Payments for debt service on Massachusetts general obligation bonds and
notes have risen at an average annual rate of 10.27% from $649.8 million in
fiscal 1989 to $1.184 billion in fiscal 1996. Debt service payments were
$898.3 million in fiscal 1992, $1.14 billion in fiscal 1993, $1.15 billion
in fiscal 1994, $1.23 billion in fiscal 1995 and $1.18 billion in fiscal
1996. In 1990, legislation was enacted which generally imposes a 10% limit
on the total appropriations in any fiscal year that may be expended for
payment of interest and principal on general obligation debt. As of April
1, 1998, the State had approximately $14.075 billion of long-term general
obligation debt outstanding and short-term direct obligations of the
Commonwealth totalled $451.5 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 1/2, 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 2 1/2, limits
the property taxes which a Massachusetts city or town may assess in any
fiscal year to the lesser of (i) 2.5% of the full and fair cash value of
real estate and personal property therein and (ii) 2.5% over the previous
year's levy limit plus any growth in the tax base from certain new
construction and parcel subdivisions. In addition, Proposition 2 1/2 limits
any increase in the charges and fees assessed by certain governmental
entities, including county governments, on cities and towns to the sum of
(i) 2.5% of the total charges and fees imposed in the preceding fiscal year,
and (ii) any increase in charges for services customarily provided locally
or services obtained by the city or town at its option. The law contains
certain override provisions which require voter approval at a general or
special election. Proposition 2 1/2 also limits any annual increase in the
total assessments on cities and towns by any county, district, authority,
the Commonwealth, or any other governmental entity except regional school
districts and regional water and sewer districts whose budgets are approved
by 2/3 of their member cities and towns. During the 1980s, Massachusetts
increased payments to the cities, towns and regional school districts
("Local Aid") to mitigate the impact of Proposition 2 1/2 on local programs and
services. In fiscal 1998, approximately 20.6% of Massachusetts' budget was
allocated to Local Aid. Direct Local Aid dropped from a high of $2.961
billion in fiscal 1989 to $2.727 billion in fiscal 1994, but increased to
$3.246 billion in fiscal 1996 and $3.558 billion in fiscal 1997. Recent
increases are largely a result of comprehensive education reform legislation
enacted in 1993 that requires annual increase in state expenditures for
education funding, subject to annual legislative appropriations, above a
fiscal 1993 base of approximately $1.288 billion. Increases of $175 million
above the base for fiscal 1994 to $881 million for fiscal 1997 have been
fully funded. The fiscal 1998 budget has also fully funded the requirement
imposed by this legislation. Additional increases are called for in future
years.
Many factors affect the financial condition of the Commonwealth and its
cities, towns and public bodies, such as social, environmental, and economic
conditions, many of which are not within the control of such entities. As
is the case with most urban States, the continuation of many of
Massachusetts' programs, particularly its human services programs, is in
significant part dependent upon continuing Federal reimbursements which have
been steadily declining. The loss of grants to Massachusetts and its cities
and towns could further slow economic development. To the extent that such
factors may exist, they could have an adverse effect on economic conditions
in Massachusetts, although what effects, if any, such factors would have on
Massachusetts' Municipal Obligations cannot be predicted.
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. ("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 (formerly, the
Dreyfus/Laurel New York Tax-Free Money 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 B-2
Management Arrangements B-19
Purchase of Shares B-21
Redemption of Fund Shares B-24
Shareholder Services B-28
Performance Information B-35
Determination of Net Asset Value B-34
Dividends, Other Distributions and Taxes B-36
Portfolio Transactions B-40
Information About the Fund/Trust B-42
Transfer and Dividend Disbursing Agent,
Custodian, Counsel and Independent Auditors B-43
Financial Statements B-44
Appendix A - Risk Factors - Investing in
New York Municipal Obligations B-45
Appendix B - Information about Securities Ratings B-59
DESCRIPTION OF THE FUND
The following information supplements and should be read in conjunction
with the sections of the Fund's Prospectus entitled "Goal/Approach" and
"Main Risks."
The Trust is an open-end management investment company organized as an
unincorporated business trust under the laws of the Commonwealth of
Massachusetts by an Agreement and Declaration of Trust dated March 28, 1983,
amended and restated December 9, 1992, and subsequently further amended. On
March 31, 1994, the Trust changed its name from "The Boston Company Tax-Free
Municipal Funds" to "The Laurel Tax-Free Municipal Funds." The Trust's name
was then changed to "The Dreyfus/Laurel Tax-Free Municipal Funds" effective
October 17, 1994. On December 8, 1995, the Fund's "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").
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. The Fund will limit its investments to securities that present
minimal credit risk, as determined by Dreyfus.
Because many issuers of New York Municipal Obligations may choose not
to have their obligations rated, it is possible that a large portion of the
Fund's portfolio may consist of unrated obligations. Unrated obligations are
not necessarily of lower quality than rated obligations, but to the extent
the Fund invests in unrated obligations, the Fund will be more reliant on
Dreyfus' judgment, analysis and experience than would be the case if the
Fund invested only in rated obligations. The Fund invests only in securities
that have remaining maturities of thirteen months or less at the date of
purchase. Floating rate or variable rate obligations (described below) which
are payable on demand under conditions established by the SEC may have a
stated maturity in excess of thirteen months; these securities will be
deemed to have remaining maturities of thirteen months or less. The Fund
maintains a dollar-weighted average portfolio maturity of 90 days or less.
The Fund seeks to maintain a constant net asset value of $1.00 per share,
although there is no assurance it can do so on a continuing basis, using the
amortized cost method 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.
Certain Portfolio Securities
Description of Municipal Obligations. For purposes of this Statement
of Additional Information, the term "Municipal Obligations" and "New York
Municipal Obligations" shall mean debt obligations issued by the State of
New York, its political subdivisions, municipalities and public
authorities and municipal obligations issued by other government entities
if, in the opinion of counsel to the respective issuers, the
interest from such obligations is exempt from Federal and New York personal
income taxes. "Municipal Obligations" and "New York Municipal Obligations"
include the following:
Municipal Bonds. Municipal Bonds, which generally have a maturity of
more than one year when issued, have two principal classifications: General
Obligation Bonds and Revenue Bonds. A Private Activity Bond is a particular
kind of Revenue Bond. The classification of General Obligation Bonds,
Revenue Bonds and Private Activity Bonds are discussed below.
1. General Obligation Bonds. The proceeds of these obligations are
used to finance a wide range of public projects, including construction or
improvement of schools, highways and roads, and water and sewer systems.
General Obligation Bonds are secured by the issuer's pledge of its faith,
credit and taxing power for the payment of principal and interest.
2. Revenue Bonds. Revenue Bonds are issued to finance a wide variety
of capital projects including: electric, gas, water and sewer systems;
highways, bridges and tunnels; port and airport facilities; colleges and
universities; and hospitals. The principal security for a Revenue Bond is
generally the net revenues derived from a particular facility, group of
facilities or, in some cases, the proceeds of a special excise or other
specific revenue source. Although the principal security behind these bonds
may vary, many provide additional security in the form of a debt service
reserve fund whose money may be used to make principal and interest payments
on the issuer's obligations. Some authorities provide further security in
the form of a state's ability (without obligation) to make up deficiencies
in the debt service reserve fund.
3. Private Activity Bonds. Private Activity Bonds, which are
considered Municipal Bonds if the interest paid thereon is exempt from
Federal income tax, are issued by or on behalf of public authorities to
raise money to finance various privately operated facilities for business
and manufacturing, housing, sports and pollution control. These bonds are
also used to finance public facilities such as airports, mass transit
systems, ports and parking. The payment of the principal and interest on
such bonds is dependent solely on the ability of the facility's user to meet
its financial obligations and the pledge, if any, of real and personal
property so financed as security for such payment. As 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 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 tax, 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. Since the Fund is
concentrated in securities issued by New York or entities within New York,
an investment in the Fund may involve greater risks than investments in
certain other types of money market funds. These risks result from the
financial condition of New York State, certain of its public bodies and
municipalities, and New York City. Beginning in early 1975, New York State,
New York City and other State entities faced serious financial difficulties
which jeopardized the credit standing and impaired the borrowing abilities
of such entities and contributed to high interest rates on, and lower market
prices for, debt obligations issued by them. A recurrence of such financial
difficulties or a failure of certain financial recovery programs could
result in defaults or declines in the market values of various New York
Municipal Obligations in which the Fund may invest. If there should be a
default or other financial crisis relating to New York State, New York City,
a State or City agency, or a State municipality, the market value and
marketability of outstanding New York Municipal Obligations in the Fund's
portfolio and the interest income to the Fund could be adversely affected.
Moreover, the national recession and the significant slowdown in the New
York and regional economies in the early 1990s added substantial uncertainty
to estimates of the State's tax revenues, which, in part, caused the State
to incur cash-basis operating deficits in the General Fund and issue deficit
notes during the fiscal periods 1989 through 1992. The State's financial
operations have improved, however, during recent fiscal years. For its
fiscal years 1993 through 1997, the State recorded balanced budgets on a
cash basis, with positive fund balances in the General Fund. New York State
ended its 1996-97 fiscal year on March 31, 1997 in balance on a cash basis,
with a cash surplus in the General Fund of approximately $1.4 billion. There
can be no assurance that New York will not face substantial potential budget
gaps in future years. Investors should consider carefully the special risks
inherent in the Fund's investment in New York Municipal Obligations, which
are discussed in more detail in Appendix A to this Statement of Additional
Information.
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. The following are fundamental investment
restrictions of the Fund. The Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of such purchase to be
invested in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities and state or municipal governments and their political
subdivisions are not considered members of any industry. In addition, this
limitation does not apply to investments of domestic banks, including U.S.
branches of foreign banks and foreign branches of U.S. banks.)
2. Borrow money or issue senior securities as defined in the 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.
The following are non-fundamental investment restrictions of the Fund:
1. The Fund will not purchase or retain the securities of any issuer
if the officers, directors or Trustees of the Trust, its advisers, or
managers owning beneficially more than one half of one percent of the
securities of each issuer together own beneficially more than five percent
of such securities.
2. The Fund will not purchase 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 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.
Under the 1940 Act, a fundamental policy may not be changed without the
vote of a majority of the outstanding voting securities of the Fund, as
defined in the 1940 Act. "Majority" means the lesser of (1) 67% or more of
the shares present at the Fund's meeting, if the holders of more than 50% of
the outstanding shares of the Fund are present or represented by proxy, or
(2) more than 50% of the outstanding shares of the Fund. Non-fundamental
investment restrictions may be changed, without shareholder approval, by
vote of a majority of the Trust's Board of Trustees at any time.
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
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, N.A. ("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
Noel Group, Inc., a venture capital company (for which from February
1995 until November 1997, he was Chairman of the Board); 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) a temporary placement agency. Mr. DiMartino is a Board
member of 99 funds in the Dreyfus Family of Funds. 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 Corporation. Age: 55 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. Age: 64 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
Companyl President & CEO, Himmel and Company; CEO, American Food
Management; former Director, The Boston Company, Inc. ("TBC"), an
affiliate of Dreyfus, and Boston Safe Deposit and Trust Company; 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. 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: 67 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: 49 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: 39
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. 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: 35 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, Mr. Kelley 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 and Client Development Manager
of 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. 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, The
Dreyfus/Laurel Funds, Inc. and Dreyfus High Yield Strategies Fund.
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. Effective July 1, 1998, 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. The
compensation structure described in this paragraph is referred to
hereinafter as the "Current Compensation Structure."
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 pursuant to the Current
Compensation Structure.
Prior to July 1, 1998, the Dreyfus/Laurel Funds paid each
Director/Trustee who was not an "interested person" of the Trust (as defined
in the 1940 Act) $27,000 per annum (and an additional $25,000 for the
Chairman of the Board of Directors/Trustees of the Dreyfus/Laurel Funds) and
$1,000 per joint Dreyfus/Laurel Funds Board meeting attended, plus $750 per
joint Dreyfus/Laurel Funds Audit Committee meeting attended, and reimbursed
each such Director/Trustee for travel and out-of-pocket expenses (the
"Former Compensation Structure").
The aggregate amount of fees and expenses received by each current
Trustee from the Trust for the fiscal year ended December 31, 1998, 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) for the year ended December 31, 1998,
pursuant to the Former Compensation Structure for the period from January 1,
1998 through June 30, 1998 and the Current Compensation Structure for the
period from July 1, 1998 through December 31, 1998, were as follows:
Aggregate Total Compensation
Compensation From the Trust and
Name of Board From the Fund Complex Paid
Member Trust# to Board Member
Joseph S. DiMartino** $ $ 619,660 (187)*
James M. Fitzgibbons $ $ 60,010 (31)
J. Tomlinson Fort*** none none (31)
Arthur L. Goeschel $ $ 61,010 (31)
Kenneth A. Himmel $ $ 50,260 (31)
Stephen J. Lockwood $ $ 51,010 (31)
John J. Sciullo $ $ 59,010 (31)
Roslyn M. Watson $ $ 61,010 (31)
Benaree Pratt Wiley**** $ $ 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 $[ ] 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. The Dreyfus Family of Funds consists of 163 mutual fund
portfolios.
** Mr. DiMartino became Chairman of the Board 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 December 31, 1998, the aggregate amount of fees received by J.
Tomlinson Fort from Dreyfus for serving as a Board member of the Trust was
______________________. 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 ______________________. In addition, Dreyfus reimbursed Mr.
Fort a total of $__________________ for expenses attributable to the
Trust's Board meetings which is not included in the $__________________
amount in note # above.
**** Payments to Ms. Wiley were 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 2,
1999.
Principal Shareholders. As of October 2, 1999, the following
companies/individuals owned beneficially or of record 5% or more of the
outstanding Fund shares:
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.
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 Bank 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.
Dreyfus serves as the investment manager for the Fund pursuant to an
Investment Management Agreement (the "Investment Management Agreement") with
the Trust dated December 8, 1995, which was last approved by the Trust's
Board of Trustees on January 28, 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
Fund. As investment manager, Dreyfus manages the Fund by making investment
decisions based on the Fund's investment objective, policies and
restrictions.
The 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 of the shareholders of the
Fund approve its continuance. The Trust may terminate the 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 Management
Agreement upon 60 days' written notice to the Trust. The 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
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; 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 .45 of 1% of the Fund's average
daily net assets, less the accrued fees and expenses (including counsel
fees) of the non-interested Trustees of the Trust. Dreyfus may waive all or
a portion of its fees payable by the Fund from time to time. The Investment
Management Agreement provides that certain redemption, exchange and account
closeout charges are payable directly by the Fund's shareholders to the
Fund's Transfer Agent (although the Fund will waive such fees if the closing
balance in the shareholders account on the business day immediately
preceding the effective date of the transaction is $50,000 or more) and the
fee payable by the Fund to Dreyfus is not reduced by the amount of charges
payable to the Transfer Agent.
For the last three fiscal years, the Fund has had the following
expenses:
For the Fiscal Year Ended June 30,
1999 19981 19972
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 distributor for the other funds in the Dreyfus
Family of Funds. The Distributor is also the Fund's sub-administrator and,
pursuant to a Sub-Administration Agreement with Dreyfus, provides various
administrative and corporate secretarial services to the Fund.
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: Investors may purchase Fund shares without a sales charge if
purchased directly from the Distributor; investors may be charged a fee if
they 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.
Investors 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 the investor's
Account Application. For subsequent investments, the investor's 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, investors should call the telephone number listed
on the cover of this Statement of Additional Information.
Wire payments may be made if the investor's 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 the investor's name. The wire must include the investor's
Fund account number (for new accounts, the investor's Taxpayer
Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable. If the initial purchase of
Fund shares is by wire, investors should call 1-800-645-6561 after
completing the wire payment to obtain the Fund account number. Investors
should their 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. Investors may obtain
further information about remitting funds in this manner from the investor's
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 the investor's 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. Investors must direct
the institution to transmit immediately available funds through the ACH
System to Boston Safe Deposit and Trust Company with instructions to credit
the investor's Fund account. The instructions must specify the investor's
Fund account registration and Fund account number preceded by the digits
"4540."
Federal regulations require that investors 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 ("NAV"). An investment portfolio's NAV refers
to the worth of one share. The NAV for Fund shares, which are offered on a
continuous basis, is calculated on the basis of amortized cost, which
involves initially valuing a portfolio instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value
of the instrument. The Fund intends to maintain a constant NAV of $1.00,
although there is no assurance that this can be done on a continuing basis.
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 Fund before 4 p.m.,
Eastern time, on each day that the New York Stock Exchange is open (a
"business day") are effective on, and will receive the price next
determined, that business day. The NAV of the Fund is calculated two times
each business day, at 12 noon and 4 p.m., Eastern time. Investment, exchange
or redemption requests received after 4 p.m., Eastern time are effective on,
and receive the first share price determined, the next business day.
TeleTransfer Privilege. Investors may purchase Fund shares by
telephone through the 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 the investor's Fund account. Only a bank
account maintained in a domestic financial institution that is an Automated
Clearing House ("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." 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.
Share Certificates. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.
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. Investors 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, the Fund will redeem the
shares at the next determined NAV as described below.
Investors will be charged $5.00 when they redeem all shares in their
account or their account is otherwise closed out (unless the investor has
held Fund shares since December 8, 1995). The fee will be deducted from the
investor's 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 an
investor has purchased Fund shares by check or by the Dreyfus TeleTransfer
Privilege and subsequently submits 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 the investor's
shares were purchased by wire payment, or if investors otherwise have a
sufficient collected balance in their account to cover the redemption
request. Prior to the time any redemption is effective, dividends on such
shares will accrue and be payable, and investors will be entitled to
exercise all other rights of beneficial ownership. Fund shares will not be
redeemed until the Transfer Agent has received an investor's Account
Application.
The Fund reserves the right to redeem an investor's account at its
option upon not less than 45 days' written notice if the net asset value of
the investor's account is $10,000 or less ($500 or less in the case of Fund
shareholders as of December 8, 1995) and remains at or below such amount
during the notice period. The $5.00 account close-out fee would be charged
in such case.
Procedures. Investors 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 the investor specifically refuses 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. Investors also may
redeem shares through the Wire Redemption Privilege, or 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. Other redemption
procedures may be in effect for clients of certain Agents and institutions.
The Fund makes available to certain large institutions the ability to issue
redemption instructions through compatible computer facilities. The Fund
reserves the right to refuse any request made by wire or telephone,
including requests made shortly after a change of address, and may limit the
amount involved or the number of such requests. The Fund may modify or
terminate any redemption Privilege at any time or charge a service fee upon
notice to shareholders. No such fee currently is contemplated. Shares for
which certificates have been issued are not eligible for the Check
Redemption, Wire Redemption, Telephone Redemption or Dreyfus TeleTransfer
Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including
over The Dreyfus Touchr automated telephone system) from any person
representing himself or herself to be an investor, or a representative of an
investor's 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, investors may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, investors
should consider using the other redemption procedures described herein. Use
of these other redemption procedures may result in an investor's redemption
request being processed at a later time than it would have been if telephone
redemption had been used.
Check Redemption Privilege. Investors may write Redemption Checks
("Checks") drawn on a Fund account. The Fund provides Checks automatically
upon opening an account, unless the investor specifically refuses the Check
Redemption Privilege by checking the applicable "No" box on the Account
Application. Checks will be sent only to the registered owner(s) of the
account and only to the address of record. The Check Redemption Privilege
may be established for an existing account by a separate signed Shareholder
Services Form. The Account Application or Shareholder Services Form must be
manually signed by the registered owner(s). Checks are drawn on the
investor's account and may be made payable to the order of any person in an
amount of $1,000 or more. When a Check is presented to the Transfer Agent
for payment, the Transfer Agent, as the investor's agent, will cause the
Fund to redeem a sufficient number of shares in the investor's account to
cover the amount of the Check and the $2.00 charge. The fee will be waived
if the closing balance in the shareholder's account on the business day
immediately preceding the effective date of the transaction is $50,000 or
more and for shareholders who have held Fund shares since December 8, 1995.
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.
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.]
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, investors should
call the telephone number listed under "General Information." Redemption
requests must be signed by each shareholder, including each owner of a joint
account, and each signature must be guaranteed. The Transfer Agent has
adopted standards and procedures pursuant to which signature guarantees in
proper form generally will be accepted from domestic banks, brokers,
dealers, credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations, as well as from
participants in the New York Stock Exchange Medallion Signature Program, the
Securities Transfer Agents Medallion Program ("STAMP"), and the Stock
Exchanges Medallion Program.
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.
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. Holders of
jointly registered Fund or bank accounts may have redemption proceeds of
only up to $250,000 wired within any 30-day period. 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.
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 "Stock Certificates; Signatures."]
Telephone Redemption Privilege. Investors may request by telephone that
redemption proceeds (maximum $150,000 per day) be paid by check and mailed
to their address. Investors 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. Investors may request by telephone
that redemption proceeds (minimum $1000 per day) be transferred between the
investor's Fund account and the investor's bank account. Only a bank
account maintained in a domestic financial institution which is an Automated
Clearing House ("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. Investors who have selected the Dreyfus
TeleTransfer Privilege may request a Dreyfus TeleTransfer redemption of Fund
shares by calling 1-800-645-6561 or, if calling from overseas, 516-794-5452.
See "Purchase of Shares--Dreyfus TeleTransfer Privilege."
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 90day 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 "Shareholder Services."
Fund Exchanges. An investor may purchase, in exchange for shares of the
Fund, shares of certain other eligible funds managed or administered by
Dreyfus, to the extent such shares are offered for sale in 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 Touchr 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
Touchr automated telephone system) from any person representing himself or
herself to be the investor or a representative of the investor's Agent, and
reasonably believed by the Transfer Agent to be genuine. Telephone
exchanges may be subject to limitations as to the amount involved or the
number of telephone exchanges permitted. Shares issued in certificate form
are not eligible for telephone exchange. 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.
Shares will be exchanged at the next determined NAV; however, a sales
load may be charged with respect to exchanges into funds sold with a sales
load. Investors exchanging into a fund that charges sales load may qualify
for share prices which do not include the sales load or which reflect
reduced sales load, if the shares of the fund from the investor is
exchanging were: (a) purchased with sales load, (b) acquired by a previous
exchange from shares purchased with a sales load, or (c) acquired through
reinvestment of dividends or other distributions paid with respect to the
foregoing categories of shares. To qualify, at the time of the exchange the
investor must notify the Transfer Agent or the investor's Agent must notify
the Distributor. Any such qualification is subject to confirmation of the
investor's holdings through a check of appropriate records. 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.
[This Privilege is available to shareholders resident in any state in
which shares of the fund being acquired may legally be sold. Shares may be
exchanged only between accounts having identical names and other identifying
designations.]
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 certain other
funds managed or administered by Dreyfus 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. Shares held under IRAs and
other retirement plans are eligible for this Privilege. Exchanges of IRA
shares may be made between IRA accounts and from regular accounts to IRA
accounts, but not from IRA accounts to regular accounts. With respect to
all other retirement accounts, exchanges may be made only among those
accounts.
The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. Investors may modify or cancel their exercise
of this Privilege at any time by mailing written notification to the Dreyfus
Family of Funds, P.O. Box 6587, Providence, Rhode Island 02940-6587. The
Fund may charge a service fee for the use of this Privilege. No such fee
currently is contemplated. 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 1-800-645-6561.
Fund Exchanges and the Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations. 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 (other than a tax-exempt Retirement Plan) may realize
a taxable gain or loss.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchange service or the
Auto-Exchange Privilege may be modified or terminated at any time upon
notice to shareholders.
Dreyfus-Automatic Asset Builderr. Dreyfus Automatic Asset Builder
permits investors to purchase Fund shares (minimum of $100 and maximum of
$150,000 per transaction) at regular intervals selected by the investor.
Fund shares are purchased by transferring funds from the bank account
designated by the investor. 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, investors must file an
authorization form with the Transfer Agent. Investors may obtain the
necessary authorization form by calling 1-800-645-6561. Investors may
cancel their participation in this Privilege or change the amount of
purchase at any time by mailing written notification to the Dreyfus Family
of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671 and the
notification will be effective three business days following receipt. The
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-
645-6561. 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.
Particular Retirement Plans, including Dreyfus-sponsored Retirement
Plans, may permit certain participants to establish an automatic withdrawal
plan from such Retirement Plans. Participants should consult their
Retirement Plan sponsor and tax adviser for details. Such a withdrawal plan
is different from the Automatic Withdrawal Plan. [The Automatic Withdrawal
Plan may be ended at any time by the shareholder, the Fund or the Transfer
Agent. Shares for which certificates have been issued may not be redeemed
through the Automatic Withdrawal Plan.]
Dreyfus Dividend Options. Dreyfus Dividend Sweep allows investors to
invest on the payment date their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of certain other funds in the
Dreyfus Family of Funds of which the investor is a shareholder. Shares of
the other funds purchased pursuant to this Privilege will be purchased on
the basis of relative NAV per share as follows:
A. Dividends and other distributions paid by a fund may be
invested without imposition of a sales load in shares of other
funds that are offered without a sales load.
B. Dividends and other distributions paid by a fund which does
not charge a sales load may be invested in shares of other funds
sold with a sales load, and the applicable sales load will be
deducted.
C. Dividends and other distributions paid by a fund which
charges a sales load may be invested in shares of other funds sold
with a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered Shares
exceeds the maximum sales load charged by the fund from which
dividends or other distributions are being swept, without giving
effect to any reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be
invested in shares of other funds that impose a contingent
deferred sales charge ("CDSC") and the applicable CDSC, if any,
will be imposed upon redemption of such shares.
Dividend ACH permits investors to transfer electronically dividends or
dividends and capital gain distributions, if any, from the Fund to a
designated bank account. Only an account maintained at a domestic financial
institution which is an ACH member may be so designated. Banks may charge a
fee for this service.
For more information concerning these Privileges, or to request a
Dividend Options Form, investors should call toll free 1-800-645-6561.
Investors may cancel these Privileges 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 these privileges is
effective three business days following receipt. These privileges are
available only for existing accounts and may not be used to open new
accounts. Minimum subsequent investments do not apply for Dividend Sweep.
The Fund may modify or terminate these privileges at any time or charge a
service fee. No such fee currently is contemplated. Shares held under
Keogh Plans, IRAs or other retirement plans are not eligible for Dividend
Sweep.
Government Direct Deposit Privilege. Government Direct Deposit
Privilege enables investors 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 an investor's Fund account.
Investors may deposit as much of such payments as they elect. To enroll in
Government Direct Deposit, investors must file with the Transfer Agent a
completed Direct Deposit Sign-Up Form for each type of payment that they
desire to include in this Privilege. The appropriate form may be obtained
from the investor's Agent or by calling 1-800-645-6561. Death or legal
incapacity will terminate the investor's participation in this Privilege.
Investors may elect at any time to terminate their participation by
notifying in writing the appropriate Federal agency. Further, the Fund may
terminate participation upon 30 days' notice to investors.
Dreyfus Payroll Savings Plan. Dreyfus Payroll Savings Plan permits
investors to purchase Fund shares (minimum $100 per transaction)
automatically on a regular basis. Depending upon the investor's employer's
direct deposit program, investors may have part or all of their paycheck
transferred to their existing Dreyfus account electronically through the ACH
system at each pay period. To establish a Dreyfus Payroll Savings Plan
account, investors must file an authorization form with their employer's
payroll department. The investor's employer must complete the reverse side
of the form and return it to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. Investors may obtain the necessary
authorization form by calling 1-800-645-6561. Investors may change the
amount of purchase or cancel the authorization only by written notification
to their employer. It is the sole responsibility of the investor's
employer, not the Distributor, the investor's Agent, Dreyfus, the Fund, the
Transfer Agent or any other person, to arrange for transactions under the
Dreyfus Payroll Savings Plan. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs or other retirement plans
are not eligible for this Privilege.
Small Account Fee. To offset the relatively higher costs of servicing
smaller accounts, the Fund will charge regular accounts with balances below
$2,000 an annual fee of $12. The valuation of accounts and the deductions
are expected to take place 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, and will not apply to IRA accounts or to
accounts participating in automatic investment programs or opened through a
securities dealer, bank or other financial institution, or to other
fiduciary accounts.
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 Directors 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
shares of a Fund 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 shares of a Fund 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 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.
The following are the current and effective yields for the Fund for the
seven-day period ended [October 31, 1999]:
Current Yield Effective Yield
From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market share,
etc.) and its presence in the defined contribution plan market.
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 The Dreyfus Corporation 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 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 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 their its 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.]
The aggregate amount of transactions ended June 30, 1997, 1998 and 1999
in securities effected on an agency basis through a broker-dealer for
research was $_____________, and the commissions and concessions related to
such transactions was $_______.
INFORMATION ABOUT THE FUND/TRUST
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "The Fund."
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
Mellon Bank, which is located at One Mellon Bank Center, Pittsburgh, PA
15258, serves as the Fund's custodian. Dreyfus Transfer, Inc., a wholly-
owned subsidiary of Dreyfus, 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. 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.
___________________________________, has passed upon the legality of the
shares offered by the Prospectus and this Statement of Additional
Information.
______________________________________________, was appointed by the Board
of Trustees to serve as the Fund's independent auditors for the year ending June
30, 1999, providing audit services including (1) examination of the annual
financial statements, (2) assistance, review and consultation in connection with
the SEC and (3) review of the annual Federal income tax return filed on behalf
of the Fund.
FINANCIAL STATEMENTS
The financial statements of the Fund 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.
APPENDIX A
INVESTING IN NEW YORK MUNICIPAL OBLIGATIONS
RISK FACTORS--INVESTING IN NEW YORK MUNICIPAL OBLIGATIONS
The financial condition of New York State (the "State") and certain of
its public bodies (the "Agencies") and municipalities, particularly New York
City (the "City"), could affect the market values and marketability of New
York Municipal Obligations which may be held by the Fund. The following
information constitutes only a brief summary, does not purport to be a
complete description, and is based on information drawn from official
statements relating to securities offerings of the State, the City and the
Municipal Assistance Corporation for the City of New York ("MAC") available
as of the date of this Statement of Additional Information. While the Fund
has not independently verified such information, it has no reason to believe
that such information is not correct in all material respects.
The State's budget for the 1997-98 fiscal year was enacted by the
Legislature on August 4, 1997, more than four months after the start of the
fiscal year on April 1. Prior to adoption of the budget, the Legislature
enacted appropriations for disbursements considered to be necessary for
State operations and other purposes, including all necessary appropriations
for debt service.
For 1997-98, total revenues in the General Fund are projected at $33.37
billion, total expenditures are projected at $34.66 billion, and net
operating sources and uses are projected to contribute $331 million. For
all government funds, total revenues are projected at $67.48 billion, total
expenditures are projected at $68.24 billion, and financing uses are
projected to exceed financing sources by $220 million.
After adjustments for comparability between fiscal years, the adopted
1997-98 budget projects an increase in General Fund disbursements of $1.7
billion or 5.2% over 1996-97 levels. The average annual growth rate over
the last three fiscal years has been 1.2%. Adjusted State Funds (excluding
Federal grants) disbursements are projected to increase by 5.4% from the
1996-97 fiscal year. All Governmental Funds disbursements are projected to
increase by 7.0% over the prior fiscal year, after adjustments for
comparability.
The State revised the cash-basis 1997-98 State Financial plan on
January 20, 1998, in conjunction with the release of the Executive Budget
for the 1998-99 fiscal year. The changes reflect actual results through
December 1997, as well as modified economic and spending projections for the
balance of the current fiscal year.
The 1997-98 General Fund Financial Plan continues to be balanced, with
a projected cash surplus of $1.83 billion, an increase of $1.3 billion over
the surplus estimate of $530 million in the October 1997 update. The
increase in the surplus results primarily from higher-than-expected tax
receipts, which are forecast to exceed the October estimate by $1.28
billion.
In order to make the surplus available to help finance 1998-99
requirements, the State plans to accelerate $1.18 billion in income tax
refund payments into 1997-98, or provide reserves for such payments. The
balance in the refund reserve on March 31, 1998 is projected to be $1.647
billion.
Personal income tax collections for 1997-98 are now projected at $18.50
billion, or $363 million less than projected in October after accounting for
the refund reserve transaction. Business tax receipts are projected at $4.98
billion, an increase of $158 million. User tax collections are estimated at
$7.06 billion, or $52 million higher than the prior update, and reflected a
projected loss of $20 million in sales tax receipts from an additional week
of sales tax exemption for clothing and footwear costing less than $500,
which was authorized and implemented in January 1998. Other tax receipts
are projected to increase by $103 million over the prior update and total
$1.09 billion for the fiscal year. Miscellaneous receipts and transfers
from other funds are projected to reach $3.57 billion, or $153 million
higher than the mid-year update.
The State projects that disbursements will increase by $565 million
over the mid-year update, with nearly the entire increase attributable to
one-time disbursements of $561 million that pre-pay expenditures previously
scheduled for 1998-99. In the absence of these accelerated payments,
projected General Fund spending in the current year would have remained
essentially unchanged from the mid-year update. The Governor is proposing
legislation to use a portion of the current year surplus to transfer $425
million to pay for capital projects authorized under the Community
Enhancement Facilities Assistance Program (CEFAP) that were previously
planned to be financed with bond proceeds in 1998-99 and thereafter, and
$136 million in costs for an additional Medicaid payment originally schedule
for 1998-99.
The 1997-98 State Financial Plan is projected to be balanced on a cash
basis. The Financial Plan projections include a reserve for future needs of
$530 million. As compared to the Governor's Executive Budget as amended in
February 1997, the State's adopted budget for 1997-98 increases General Fund
spending by $1.7 billion, primarily from increases for local assistance
($1.3 billion). Resources used to fund these additional expenditures
include increased revenues projected for the 1997-98 fiscal year, increased
resources produced in the 1996-97 fiscal year that will be utilized in 1997-
98, reestimates of social service, fringe benefit and other spending, and
certain non-recurring resources. Total non-recurring resources included in
the 1997-98 Financial Plan are projected by State Division of the Budget
("DOB") to be $270 million, or 0.7% of total General Fund receipts.
The 1997-98 adopted budget includes multi-year tax reductions,
including a State funded property and local income tax reduction program,
estate tax relief, utility gross receipts tax reductions, permanent
reductions in the State sales tax on clothing, and elimination of
assessments on medical providers. These reductions are intended to reduce
the overall level of State and local taxes in New York and to improve the
State's competitive position vis-a-vis other states. The various elements
of the State and local tax and assessment reductions have little or no
impact on the 1997-98 Financial Plan, and do not begin to materially affect
the outyear projections until the State's 1999-2000 fiscal year.
The 1997-98 Financial Plan also includes: a projected General Fund
reserve of $465 million; a projected balance of $400 million in the Tax
Stabilization Reserve Fund; and a projected $65 million balance in the
Contingency Reserve Fund.
The State Financial Plan was based upon forecasts of national and State
economic activity. Economic forecasts have frequently failed to predict
accurately the timing and magnitude of changes in the national and the State
economies. Many uncertainties exist in forecasts of both the national and
State economies, including consumer attitudes toward spending, Federal
financial and monetary policies, the availability of credit and the
condition of the world economy, which could have an adverse effect on the
State. There can be no assurance that the State economy will not experience
worse-than-predicted results, with corresponding material and adverse
effects on the State's projections of receipts and disbursements.
The Governor presented his 1998-99 Executive Budget to the Legislature
on January 20, 1998. The Executive Budget contains financial projections
for the State's 1997-98 through 2000-01 fiscal years, detailed estimates of
receipts and a proposed Capital Program and Financing Plan for the 1997-98
through 2002-03 fiscal years. It is expected that the Governor will prepare
amendments to his Executive Budget as permitted under law and that these
amendments will be reflected in a revised Financial Plan to be released on
or before February 19, 1998.
The 1998-99 Financial Plan is projected to be balanced on a cash basis
in the General Fund. Total General Fund receipts, including transfers from
other funds, are projected to be $36.22 billion, an increase of $1.02
billion over projected receipts in the current fiscal year. Total General
Fund disbursements, including transfers to other funds, are projected to be
$36.18 billion, an increase of $1.02 billion over the projected expenditures
(including prepayments) for the current fiscal year. As compared to the
1997-98 State Financial Plan, the Executive Budget proposes year-to-year
growth in General Fund spending of 2.89%. State Funds spending (i.e.,
General Fund plus other dedicated funds, with the exception of federal aid)
is projected to grow by 8.5%. Spending from All Governmental Funds
(excluding transfers) is proposed to increase by 7.6% from the prior fiscal
year.
There can be no assurance that the State will not face substantial
potential budget gaps in future years resulting from a significant disparity
between tax revenues projected from a lower recurring receipts base and the
spending required to maintain State programs at current levels. To address
any potential budgetary imbalance, the State may need to take significant
actions to align recurring receipts and disbursements in future fiscal
years.
On June 6, 1990, Moody's changed its ratings on all the State's
outstanding general obligation bonds from A1 to A. On March 26, 1990 and
January 13, 1992, S&P changed its ratings on all of the State's outstanding
general obligation bonds from AA to A and from A to A, respectively. In
February 1991, Moody's lowered its rating on the City's general obligation
bonds from A to Baa1 and in July 1995, S&P lowered its rating on such bonds
from A- to BBB+. Ratings reflect only the respective views of such
organizations, and their concerns about the financial condition of New York
State and City, the debt load of the State and City and any economic
uncertainties about the region. There is no assurance that a particular
rating will continue for any given period of time or that any such rating
will not be revised downward or withdrawn entirely if, in the judgment of
the agency originally establishing the rating, circumstances so warrant.
(1) The State, Agencies and Other Municipalities. During the mid-
1970s, some of the Agencies and municipalities (in particular, the City)
faced extraordinary financial difficulties, which affected the State's own
financial condition. These events, including a default on short-term notes
issued by the New York State Urban Development Corporation ("UDC") in
February 1975, which default was cured shortly thereafter, and a
continuation of the financial difficulties of the City, created substantial
investor resistance to securities issued by the State and by some of its
municipalities and Agencies. For a time, in late 1975 and early 1976, these
difficulties resulted in a virtual closing of public credit markets for
State and many State related securities.
In response to the financial problems confronting it, the State
developed and implemented programs for its 1977 fiscal year that included
the adoption of a balanced budget on a cash basis (a deficit of $92 million
that actually resulted was financed by issuing notes that were paid during
the first quarter of the State's 1978 fiscal year). In addition,
legislation was enacted limiting the occurrence of additional so-called
"moral obligation" and certain other Agency debt, which legislation does
not, however, apply to MAC debt.
GAAP-Basis Results--1996-97 Fiscal Year. The State completed its 196-
97 fiscal year with a combined Governmental Funds operating surplus of $2.1
billion, which included an operating surplus in the General Fund of $1.9
billion, in Capital Projects Funds of $98 million and in the Special Revenue
Funds of $65 million, offset in part by an operating deficit of $37 million
in the Debt Service Funds.
GAAP-Basis Results--1995-96 Fiscal Year. The State completed its 1995-
96 fiscal year with a combined Governmental Funds operating surplus of $432
million, which included an operating surplus in the General Fund of $380
million, in the Capital Projects Funds of $276 million and in the Debt
Service Funds of $185 million. There was an operating deficit of $409
million in the Special Revenue Funds.
GAAP-Basis Results--1994-95 Fiscal Year. The State's Combined Balance
Sheet as of March 31, 1995 showed an accumulated deficit in its combined
Governmental Funds of $1.666 billion reflecting liabilities of $14.778
billion and assets of $13.112 billion. This accumulated Governmental Funds
deficit includes a $3.308 billion accumulated deficit in the General Fund,
as well as accumulated surpluses in the Special Revenue and Debt Service
Fund types of $877 million and $1.753 billion, respectively, and a $988
million accumulated deficit in the Capital Projects Fund type.
The State completed its 1994-95 fiscal year with a combined
Governmental Funds operating deficit of $1.791 billion, which included
operating deficits in the General Fund of $1.426 billion, in the Capital
Projects Funds of $366 million, and in the Debt Service Funds of $38
million. There was an operating surplus in the Special Revenue Funds of $39
million.
State Financial Plan--Cash-Basis Results--General Fund. The General
Fund is the principal operating fund of the State and is used to account for
all financial transactions, except those required to be accounted for in
another fund. It is the State's largest fund and receives almost all State
taxes and other resources not dedicated to particular purposes. General
Fund moneys are also transferred to other funds, primarily to support
certain capital projects and debt service payments in other fund types.
In the State's 1997-98 fiscal year, the General Fund is expected to
account for approximately 48% of total Governmental Funds disbursements and
71% of total State Funds disbursements. The General Fund is projected to be
balanced on a cash basis for the 1997-98 fiscal year. Total receipts and
transfers from other funds are projected to be $35.20 billion, an increase
of $2.16 billion from the prior fiscal year. Total General Fund
disbursements and transfers to other funds are projected to be $35.17
billion, an increase of $2.23 billion from the total in the prior 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 $1.4 billion. The cash surplus was derived primarily from higher-
than-expected revenues and lower-than-expected spending for social
services programs. The Governor in his Executive Budget applied $1.05
billion of the cash surplus amount to finance the 1997-98 Financial Plan,
and the additional $373 million is available for use in financing the 1997-
98 Financial Plan when enacted by the State Legislature.
The General Fund closing fund balance was $433 million. Of that
amount, $317 million was in the Tax Stabilization Reserve Fund ("TSRF"),
after a required deposit of $15 million and an additional deposit of $65
million in 1996-97. The TSRF can be used in the event of any future General
Fund deficit, as provided under the State Constitution and State Finance
Law. In addition, $41 million remains on deposit in the Contingency Reserve
Fund ("CRF"). This fund assists the State in financing any extraordinary
litigation costs during the fiscal year. The remaining $75 million reflects
amounts on deposit in the Community Projects Fund. This fund was created to
fund certain legislative initiatives. The General Fund closing fund balance
does not include $1.86 billion in the tax refund reserve account, of which
$521 million was made available as a result of the Local Government
Assistance Corporation ("LGAC") financing program as was required to be on
deposit as of March 31, 1997.
General Fund receipts and transfers from other funds for the 1996-97
fiscal year totaled $33.04 billion, and increase of 0.7% from the previous
fiscal year (excluding deposits into the tax refund reserve account).
General Fund disbursements and transfers to other funds totaled $32.90
billion for the 1996-97 fiscal year, an increase of 0.7% from the 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. Of that
amount, $65 million was deposited into the TSRF, and $380 million was used
to reduce 1996-97 Financial Plan liabilities by accelerating 1996-97
payments, deferring 1995-96 revenues, and making a deposit to the tax refund
reserve account.
The General Fund closing fund balance was $287 million, an increase of
$129 million from 1994-95 levels. The $129 million change in fund balance
is attributable to the $65 million voluntary deposit to the TSRF, a $15
million required deposit to the TSRF, a $40 million deposit to the CRF, and
a $9 million deposit to the Revenue Accumulation Fund. The closing fund
balance includes $237 million on deposit in the TSRF, to be used in the
event of any future General Fund deficit as provided under the State
Constitution and State Finance Law. In addition, $41 million is on deposit
in the CRF. The CRF was established in State fiscal year 1993-94 to assist
the State in financing the costs of extraordinary litigation. The remaining
$9 million reflects amounts on deposit in the Revenue Accumulation Fund.
This fund was created to hold certain tax receipts temporarily before their
deposit to other accounts. In addition, $678 million was on deposit in the
tax refund reserve account, of which $521 million was necessary to complete
the restructuring of the State's cash flow under the LGAC program.
General Fund receipts totaled $32.81 billion, a decrease of 1.1% from
1994-95 levels. This decrease reflects the impact of tax reductions enacted
and effective in both 1994 and 1995. General Fund disbursements totaled
$32.68 billion for the 1995-96 fiscal year, a decrease of 2.2% from 1994-95
levels.
The State ended its 1994-95 fiscal year with the General Fund in
balance. The $241 million decline in the fund balance reflects the planned
use of $264 million from the CRF, partially offset by the required deposit
of $23 million to the TSRF. In addition, $278 million was on deposit in the
tax refund reserve account, $250 million of which was deposited to continue
the process of restructuring the State's cash flow as part of the LGAC
program. The closing fund balance of $158 million reflects $157 million in
the TSRF and $1 million in the CRF.
General Fund receipts totaled $33.16 billion, an increase of 2.9% from
1993-94 levels. General Fund disbursements totaled $33.40 billion for the
1994-95 fiscal year, an increase of 4.7% from the previous fiscal year.
Cash-Basis Results--Other Governmental Funds. Activity in the three
other governmental funds has remained relatively stable over the last three
fiscal years ended March 31, 1997, with Federally-funded programs comprising
approximately two-thirds of these funds. The most significant change in the
structure of these funds has been the redirection 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").
The Special Revenue Funds are used to account for the proceeds of
specific revenue sources such as federal agents that are legally restricted,
either by the legislative or outside parties, to expenditures for specified
purposes. Disbursements from Special Revenue Funds increased from $24.38
billion to $26.02 billion over the last three years, primarily as a result
of increased costs for the federal share of Medicaid. Other activity
reflected dedication of taxes to a new fund for mass transportation, new
lottery games, and new fees for criminal justice programs. Although
activity in this fund type is expected to comprise approximately 42% of
total governmental funds receipts in the 1997-98 fiscal year, three-quarters
of that activity relates to federally-funded programs. Projected receipts
in this fund type for the 1997-98 fiscal year total $28.22 billion, an
increase of $2.51 billion (9.7%) over the prior year. Projected
disbursements in this fund type total $28.45 billion, an increase of $2.43
billion (9.3%) over 1996-97 levels. Disbursements from federal funds,
primarily the federal share of Medicaid and other social services programs,
are projected to total $21.19 billion in the 1997-98 fiscal year. Remaining
projected spending of $7.26 billion primarily reflects aid to SUNY supported
by tuition and dormitory fees, education aid funded from lottery receipts,
operating aid payments to the MTA funded from the proceeds of dedicated
transportation taxes, and costs of a variety of self-supporting programs
which deliver services financed by user fees.
The Capital Projects Funds are used to finance the acquisition,
construction or rehabilitation of major state capital facilities and to aid
local government units and Agencies in financing capital construction.
Disbursements in the Capital Projects Funds declined from $3.62 billion to
$3.54 billion over the last three years, as spending for miscellaneous
capital programs decreased, partially offset by increases for mental
hygiene, health and environmental programs. The composition of this fund
type's receipts also changed as the dedicated transportation taxes began to
be deposited, general obligation bond proceeds declined substantially,
federal grants remained stable, and reimbursements from public authority
bonds (primarily transportation related) increased. The increase in the
negative fund balance in 1994-95 resulted from delays in reimbursements
caused by delays in the timing of public authority bond sales.
In the 1997-98 fiscal year, activity in these funds is expected to
comprise 5% of total governmental receipts.
Total receipts in this fund type for the 1997-98 fiscal year are
projected at $3.30 billion. Bond and note proceeds are expected to provide
$605 million in other financing sources. Disbursements from this fund type
are projected to be $3.70 billion, an increase of $154 million (4.3%) over
prior-year levels. The Dedicated Highway and Bridge Trust Fund is the
single largest dedicated fund, comprising an estimated $982 million (27%) of
the activity in this fund type. Total spending for capital projects will be
financed through a combination of sources: federal grants (29%), public
authority bond proceeds (31%), general obligation bond proceeds (15%), and pay-
as-you-go revenues (25%).
The Debt Service Funds are used to account for the payment of principal
of, and interest on, long-term debt of the State and to meet commitments
under lease-purchase and other contractual-obligation financing
arrangements.
Activity in the Debt Service Funds reflected increased use of bonds
during the three-year period for improvements to the State's capital
facilities and the continued implementation of the LGAC fiscal reform
program. The increases were moderated by the refunding savings achieved by
the State over the last several years using strict present value savings
criteria. The growth in LGAC debt service was offset by reduced short-term
borrowing costs reflected in the General Fund. This fund type is expected
to comprise 4% of total governmental fund receipts and 4.7% of total
government disbursements in the 1997-98 fiscal year. Receipts in these
funds in excess of debt service requirements may be transferred to the
General Fund and Special Revenue Funds, pursuant to law.
The Debt Service fund type consists of the General Debt Service Fund,
which is supported primarily by tax receipts transferred from the General
Fund, and other funds established to accumulate moneys for the payment of
debt service. In the 1997-998 fiscal year, total disbursements in this fund
type are projected at $3.17 billion, an increase of $641 million or 25.3%,
most of which is explained by increases in the General Fund transfer as
discussed earlier. The projected transfer from the General Fund of $2.07
billion is expected to finance 65% of these payments.
The remaining payments are expected to be financed by pledged revenues,
including $2.03 billion in taxes and $601 million in dedicated fees and
other miscellaneous receipts. After required impoundment for debt service,
$3.77 billion is expected to be transferred to the General Fund and other
funds in support of State operations. The largest transfer-$1.86 billion-is
made to the Special Revenue fund type in support of operations of the mental
hygiene agencies. Another $1.47 billion in excess sales taxes is expected
to be transferred to the General Fund, following payments of projected debt
service on LGAC bonds.
State Borrowing Plan. The State anticipates that its capital programs
will be financed, in part, through borrowings by the State and public
authorities in the 1997-98 fiscal year. The State expects to issue $605
million in general obligation bonds (including $140 million for purposes of
redeeming outstanding BANs) and $140 million in general obligation
commercial paper. The Legislature has also authorized the issuance of $83
million in COPs during the State's 1997-98 fiscal year for equipment
purchases, and approximately $1.8 billion in borrowing by public authorities
pursuant to lease purchase and contractual obligation financing for capital
programs of the state. The projection of the State regarding its borrowings
for the 1997-98 fiscal year may change if circumstances require.
State Agencies. The fiscal stability of the State is related, at least
in part, to the fiscal stability of its localities and various of its
Agencies. Various Agencies have issued bonds secured, in part, by
nonbinding statutory provisions for State appropriations to maintain various
debt service reserve funds established for such bonds (commonly referred to
as "moral obligation" provisions).
At September 30, 1996, there were 17 Agencies that had outstanding debt
of $100 million or more. The aggregate outstanding debt, including
refunding bonds, of these 17 Agencies was $75.4 billion as of September 30,
1996. As of March 31, 1997, aggregate Agency debt outstanding as State-
supported debt was $32.8 billion and as State-related was $37.1 billion.
Debt service on the outstanding Agency obligations normally is paid out of
revenues generated by the Agencies' projects or programs, but in recent
years the State has provided special financial assistance, in some cases on
a recurring basis, to certain Agencies for operating and other expenses and
for debt service pursuant to moral obligation indebtedness provisions or
otherwise. Additional assistance is expected to continue to be required in
future years.
Several Agencies have experienced financial difficulties in the past.
Certain Agencies continue to experience financial difficulties requiring
financial assistance from the State. Failure of the State to appropriate
necessary amounts or to take other action to permit certain Agencies to meet
their obligations could result in a default by one or more of such Agencies.
If a default were to occur, it would likely have a significant effect on the
marketability of obligations of the State and the Agencies. These Agencies
are discussed below.
The New York State Housing Finance Agency ("HFA") provides financing
for multifamily housing, State University construction, hospital and nursing
home development, and other programs. In general, HFA depends upon
mortgagors in the housing programs it finances to generate sufficient funds
from rental income, subsidies and other payments to meet their respective
mortgage repayment obligations to HFA, which provide the principal source of
funds for the payment of debt service on HFA bonds, as well as to meet
operating and maintenance costs of the projects financed. From January 1,
1976 through March 31, 1987, the State was called upon to appropriate a
total of $162.8 million to make up deficiencies in the debt service reserve
funds of HFA pursuant to moral obligation provisions. The State has not
been called upon to make such payments since the 1986-87 fiscal year.
UDC has experienced, and expects to continue to experience, financial
difficulties with the housing programs it had undertaken prior to 1975,
because a substantial number of these housing program mortgagors are unable
to make full payments on their mortgage loans. Through a subsidiary, UDC is
currently attempting to increase its rate of collection by accelerating its
program of foreclosures and by entering into settlement agreements. UDC has
been, and will remain, dependent upon the State for appropriations to meet
its operating expenses. The State also has appropriated money to assist in
the curing of a default by UDC on notes which did not contain the State's
moral obligation provision.
The MTA oversees New York City's subway and bus lines by its
affiliates, the New York City Transit Authority and the Manhattan and Bronx
Surface Transit Operating Authority (collectively, the "TA"). Through MTA's
subsidiaries, the Long Island Rail Road Company, the MetroNorth Commuter
Railroad Company and the Metropolitan Suburban Bus Authority, the MTA
operates certain commuter rail and bus lines in the New York metropolitan
area. In addition, the Staten Island Rapid Transit Authority, an MTA
subsidiary, operates a rapid transit line on Staten Island. Through its
affiliated agency, the Triborough Bridge and Tunnel Authority (the "TBTA"),
the MTA operates certain toll bridges and tunnels. Because fare revenues
are not sufficient to finance the mass transit portion of these operations,
the MTA has depended and will continue to depend for operating support upon
a system of State, local government and TBTA support and, to the extent
available, Federal operating assistance, including loans, grants and
subsidies. If current revenue projections are not realized and/or operating
expenses exceed current projections, the TA or commuter railroads may be
required to seek additional State assistance, raise fares or take other
actions.
Since 1980, the State has enacted several taxesincluding a surcharge on
the profits of banks, insurance corporations and general business
corporations doing business in the 12county region (the "Metropolitan
Transportation Region") served by the MTA and a special .25% regional sales
and use taxthat provide additional revenues for mass transit purposes,
including assistance to the MTA. In addition, since 1987, State law has
required that the proceeds of .25% mortgage recording tax paid on certain
mortgages in the Metropolitan Transportation Region be deposited in a
special MTA fund for operating or capital expenses. Further, in 1993, the
State dedicated a portion of certain additional State petroleum business tax
receipts to fund operating or capital assistance to the MTA. For the 1997-
98 State fiscal year, total State assistance to the MTA is estimated at
approximately $1.2 billion, an increase of $76 million over the 1996-97
fiscal year.
In 1981, the State Legislature authorized procedures for the adoption,
approval and amendment of a fiveyear plan for the capital program designed
to upgrade the performance of the MTA's transportation systems and to
supplement, replace and rehabilitate facilities and equipment, and also
granted certain additional bonding authorization therefor.
State legislation accompanying the 1996-97 adopted State budget
authorized the MTA, TBTA and TA to issue an aggregate of $6.5 billion in
bonds to finance a portion of the $2.17 billion MTA capital plan for the
1995 through 1999 calendar years (the "1995-99 Capital Program"). In July
1997, the Capital Program Review Board approved the 1995-99 Capital Program,
which supersedes the overlapping portion of the MTA's 1992-96 Capital
Program. This is the fourth capital plan since the Legislature authorized
procedures for the adoption, approval and amendment of MTA capital programs
and is designed to upgrade the performance of the MTA's transportation
systems by investing in new rolling stock, maintaining replacement schedules
for existing assets and bringing the MTA system into a state of good repair.
The 1995-99 Capital Program assumes the issuance of an estimated $5.1
billion in bonds under this $6.5 billion aggregate bonding authority. The
remainder of the plan is projected to be financed through assistance from
the State, the Federal government, and the City of New York, and from
various other revenues generated from actions taken by the MTA.
There can be no assurance that such governmental actions will be taken,
that sources currently identified will not be decreased or eliminated, or
that the 1995-1999 Capital Program will not be delayed or reduced. If the
MTA capital program is delayed or reduced because of funding shortfalls or
other factors, ridership and fare revenues may decline, which could, among
other things, impair the MTA's ability to meet its operating expenses
without additional State assistance.
The cities, towns, villages and school districts of the State are
political subdivisions of the State with the powers granted by the State
Constitution and statutes. As the sovereign, the State retains broad powers
and responsibilities with respect to the government, finances and welfare of
these political subdivisions, especially in education and social services.
In recent years the State has been called upon to provide added financial
assistance to certain localities.
Other Localities. Certain localities in addition to the City could
have financial problems leading to requests for additional State assistance
during the last several State fiscal years. The potential impact on the
State of such actions by localities is not included in the projections of
the State receipts and disbursements in the State's 1997-98 fiscal year.
Fiscal difficulties experienced by the City of Yonkers resulted in the re-
establishment of the Financial Control Board for the City of Yonkers by
the State in 1984. That Board is charged with oversight of the fiscal
affairs of Yonkers. Future actions taken by the State to assist Yonkers
could result in increased State expenditures for extraordinary local
assistance.
Beginning in 1990, the City of Troy experienced a series of budgetary
deficits that resulted in the establishment of a Supervisory Board for the
City of Troy in 1994. The Supervisory Board's powers were increased in
1995, when Troy MAC was created to help Troy avoid default on certain
obligations. The legislation creating Troy MAC prohibits the City of Troy
from seeking federal bankruptcy protection while Troy MAC bonds are
outstanding.
Eighteen municipalities received extraordinary assistance during the
1996 legislative session through $50 million in special appropriations
targeted for distressed cities, and that was largely continued in 1997. Twenty-
eight municipalities are scheduled to share the more than $32 million
in targeted unrestricted aid allocated in the 1997-98 budget.
Municipalities and school districts have engaged in substantial short-
term and long-term borrowings. In 1995, the total indebtedness of all
localities in the State, other than the City, was approximately $19 billion.
A small portion (approximately $102.3 million) of this indebtedness
represented borrowing to finance budgetary deficits and was issued pursuant
to enabling State legislation. State law requires the Comptroller to review
and make recommendations concerning the budgets of those local government
units other than the City authorized by State law to issue debt to finance
deficits during the period that such deficit financing is outstanding.
Eighteen localities had outstanding indebtedness for deficit financing at
the close of their fiscal year ending in 1995.
From time to time, Federal expenditure reductions could reduce, or in
some cases eliminate, Federal funding of some local programs and accordingly
might impose substantial increased expenditure requirements on affected
localities to increase local revenues to sustain those expenditures. If the
State, the City or any of the Agencies were to suffer serious financial
difficulties jeopardizing their respective access to the public credit
markets, the marketability of notes and bonds issued by localities within
the State could be adversely affected. Localities also face anticipated and
potential problems resulting from certain pending litigation, judicial
decisions and long-range economic trends. Long-range, potential problems of
declining urban population, increasing expenditures and other economic
trends could adversely affect localities and require increasing State
assistance in the future.
Certain litigation pending against the State or its officers or
employees could have a substantial or long-term adverse effect on State
finances. Among the more significant of these litigations are those that
involve: (i) the validity and fairness of agreements and treaties by which
various Indian tribes transferred title to the State of approximately six
million acres of land in central New York; (ii) certain aspects of the
State's Medicaid rates and regulations, including reimbursements to
providers of mandatory and optional Medicaid services; (iii) contamination
in the Love Canal area of Niagara Falls; (iv) a challenge to the State's
practice of reimbursing certain Office of Mental Health patient care
expenses with clients' Social Security benefits; (v) a challenge to the
methods by which the State reimburses localities for the administrative
costs of food stamp programs; (vi) a challenge to the State's possession of
certain funds taken pursuant to the State's Abandoned Property law; (vii)
alleged responsibility of State officials to assist in remedying racial
segregation in the City of Yonkers; (viii) an action, in which the State is
a third party defendant, for injunctive or other appropriate relief,
concerning liability for the maintenance of stone groins constructed along
certain areas of Long Island's shoreline; (ix) actions challenging the
constitutionality of legislation enacted during the 1990 legislative session
which changed the actuarial funding methods for determining contributions to
State employee retirement systems; (x) an action against State and City
officials alleging that the present level of shelter allowance for public
assistance recipients is inadequate under statutory standards to maintain
proper housing; (xi) an action challenging legislation enacted in 1990 which
had the effect of deferring certain employer contributions to the State
Teachers' Retirement System and reducing State aid to school districts by a
like amount; (xii) a challenge to the constitutionality of financing
programs of the Thruway Authority authorized by Chapters 166 and 410 of the
Laws of 1991 (described below in this Part); (xiii) a challenge to the
constitutionality of financing programs of the Metropolitan Transportation
Authority and the Thruway Authority authorized by Chapter 56 of the Laws of
1993 (described below in this Part); (xiv) challenges to the delay by the
State Department of Social Services in making two one-week Medicaid payments
to the service providers; (xv) challenges by commercial insurers, employee
welfare benefit plans, and health maintenance organizations to provisions of
Section 2807-c of the Public Health Law which impose 13%, 11% and 9%
surcharges on inpatient hospital bills and a bad debt and charity care
allowance on all hospital bills paid by such entities; (xvi) challenges to
the promulgation of the State's proposed procedure to determine the
eligibility for and nature of home care services for Medicaid recipients;
(xvii) a challenge to State implementation of a program which reduces
Medicaid benefits to certain home-relief recipients; and (xviii) challenges
to the rationality and retroactive application of State regulations
recelebrating nursing home Medicaid rates.
(2) New York City. In the mid 1970s, the City had large accumulated
past deficits and until recently was not able to generate sufficient tax and
other ongoing revenues to cover expenses in each fiscal year. However, the
City has achieved balanced operating results for each of its fiscal years
since 1981 as reported in accordance with the then-applicable GAAP
standards. The City's ability to maintain balanced operating results in
future years is subject to numerous contingencies and future developments.
In 1975, the City became unable to market its securities and entered a
period of extraordinary financial difficulties. In response to this crisis,
the State created MAC to provide financing assistance to the City and also
enacted the New York State Financial Emergency Act for the City of New York
(the "Emergency Act") which, among other things, created the Financial
Control Board (the "Control Board") to oversee the City's financial affairs
and facilitate its return to the public credit markets. The State also
established the Office of the State Deputy Comptroller ("OSDC") to assist
the Control Board in exercising its powers and responsibilities. On June
30, 1986, the Control Board's powers of approval over the City Financial
Plan were suspended pursuant to the Emergency Act. However, the Control
Board, MAC and OSDC continue to exercise various monitoring functions
relating to the City's financial condition. The City prepares and operates
under a four-year financial plan which is submitted annually to the Control
Board for review and which the City periodically updates.
The City's independently audited operating results for each of its
fiscal years from 1981 through 1995 show a General Fund surplus reported in
accordance with GAAP. The City has eliminated the cumulative deficit in its
net General Fund position.
During the 1990 and 1991 fiscal years, as a result of a slowing
economy, the City has experienced significant shortfalls in almost all of
its major tax sources and increases in social services costs, and was
required to take actions to close substantial budget gaps in order to
maintain balanced budgets in accordance with the Financial Plan.
According to a recent OSDC economic report, the City's economy was slow
to recover from the recession and was expected to have experienced a weak
employment situation, and moderate wage and income growth, during the 1995-
96 period. Also, Financial Plan reports of OSDC, the Control Board, and the
City Comptroller have variously indicated that many of the City's balanced
budgets have been accomplished, in part, through the use of non-recurring
resource, tax and fee increases, personnel reductions and additional State
assistance; that the City has not yet brought its long-term expenditures in
line with recurring revenues; that the City's proposed gap-closing programs,
if implemented, would narrow future budget gaps; that these programs tend to
rely heavily on actions outside the direct control of the City; and that the
City is therefore likely to continue to face future projected budget gaps
requiring the City to reduce expenditures and/or increase revenues.
According to the most recent staff reports of OSDC, the Control Board and
the City Comptroller during the four-year period covered by the current
Financial Plan, the City is relying on obtaining substantial resources from
initiatives needing approval and cooperation of its municipal labor unions,
Covered Organizations, and City Council, as well as the State and Federal
governments, among others, and there can be no assurance that such approval
can be obtained.
The City requires certain amounts of financing for seasonal and capital
spending purposes. The City issued $1.75 billion of notes for seasonal
financing purposes during the 1994 fiscal year. The City's capital financing
program projects long-term financing requirements of approximately $17
billion for the City's fiscal years 1995 through 1998 for the construction
and rehabilitation of the City's infrastructure and other fixed assets. The
major capital requirement include expenditures for the City's water supply
system, and waste disposal systems, roads, bridges, mass transit, schools
and housing. In addition, the City and the Municipal Water Finance
Authority issued about $1.8 billion in refunding bonds in the 1994 fiscal
year.
State Economic and Demographic Trends. The State historically has been
one of the wealthiest states in the nation. For decades, however, the State
has grown more slowly than the nation as a whole, gradually eroding its
relative economic position. Statewide, urban centers have experienced
significant changes involving migration of the more affluent to the suburbs
and an influx of generally less affluent residents. Regionally, the older
Northeast cities have suffered because of the relative success that the
South and the West have had in attracting people and business. The City has
also had to face greater competition as other major cities have developed
financial and business capabilities which make them less dependent on the
specialized services traditionally available almost exclusively in the City.
During the 1982-83 recession, overall economic activity in the State
declined less than that of the nation as a whole. However, in the calendar
years 1984 through 1991, the State's rate of economic expansion was somewhat
slower than that of the nation. In the 1990-91 recession, the economy of
the State, and that of the rest of the Northeast, was more heavily damaged
than that of the nation as a whole and has been slower to recover. The
total employment growth rate in the State has been below the national
average since 1984. The unemployment rate in the State dipped below the
national rate in the second half of 1981 and remained lower until 1991;
since then, it has been higher. According to data published by the U.S.
Bureau of Economic Analysis, during the past ten years, total personal
income in the State rose slightly faster than the national average only from
1986 through 1988.
At the state level, moderate growth is projected to continue in 1998
and 1999 for employment, wages, and personal income, although the growth
rates will lessen gradually during the course of the two years. Personal
income is estimated to grow by 5.4% in 1997, fueled in part by a continued
large increase in financial sector bonus payment, and is projected to grow
4.7% in 1998 and 4.4% in 1998. Increase in bonus payments at year-end 1998
are projected to be modest, a substantial change from the rate of increase
of the law few years. Overall employment growth is expected to continue at
a modest reflecting the slowing growth in the national economy, continued
spending restraint in government, and restructuring in the health care,
social service, and banking sectors.
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
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 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
Fund (formerly, Premier Limited Term Massachusetts Municipal Fund)
("Massachusetts Municipal Fund") and the Dreyfus Premier Limited Term
Municipal Fund ("Municipal Fund") (formerly Premier Limited Term,
respectively) (collectively, the "Funds"), 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-24
Purchase of Shares B-26
Distribution Plans and Shareholder Servicing Plans B-32
Redemption of Fund Shares B-35
Shareholder Services B-40
Determination of Net Asset Value B-46
Dividends, Other Distributions and Taxes B-46
Portfolio Transactions B-52
Performance Information B-54
Information About the Funds/Trust B-58
Transfer and Dividend Disbursing Agent,
Custodian, Counsel and Independent Auditors B-60
Financial Statements B-60
Appendix A - Risk Factors -
Investing in Massachusetts Municipal Obligations B-61
Appe
ndix B - Information About Securities Ratings B-64
DESCRIPTION OF THE FUNDS
The following information supplements and should be read in conjunction
with the sections of each Fund's Prospectus entitled "Goal/Approach" and
"Main Risks."
The Trust is an open-end management investment company organized as an
unincorporated business trust under the laws of the Commonwealth of
Massachusetts by an Agreement and Declaration of Trust dated March 28, 1983,
amended and restated December 9, 1992, and subsequently further amended. On
March 31, 1994, the Trust changed its name from "The Boston Company Tax-Free
Municipal Funds" to "The Laurel Tax-Free Municipal Funds." The Trust's name
was then changed to "The Dreyfus/Laurel Tax-Free Municipal Funds" effective
October 17, 1994. 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 Dreyfus Premier Limited
Term Massachusetts Municipal Fund: The Fund seeks to maximize current income
exempt from Federal income taxes and state personal income taxes for
resident shareholders of Massachusetts, consistent with what is believed to
be the prudent risk of capital. The Fund pursues its objective by investing
in debt obligations 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 state
personal income taxes for residents of Massachusetts ("Massachusetts
Municipal Obligations"), and which are of "investment-grade" quality and
generally of intermediate maturities.
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. 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 Fund may temporarily invest
more than 20% of its total assets in money market instruments having
maturity and quality characteristics comparable to those (discussed below)
for Massachusetts Municipal Obligations, but which produce income exempt
from Federal, but not the state 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 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.
General Investment Objective and Policies for Dreyfus Premier Limited
Term Municipal Fund. The Fund seeks to maximize current income exempt from
Federal income taxes consistent with the prudent risk of capital. The Fund
seeks to achieve its objective by investing in debt obligations issued by
states, cities, counties, municipalities, municipal agencies and regional
districts which are of "investment-grade" quality and generally of
intermediate maturities the interest from which is, in the opinion of
counsel to the respective issuers, exempt from Federal income taxes
("Municipal Obligations").
Under normal market conditions, the Fund attempts to invest 100%, and
will invest a minimum of 80%, of its total assets in Municipal Obligations.
However, the Fund has the ability under certain conditions to invest 20% of
its total assets in taxable obligations (including obligations the interest
on which is included in the calculation of the alternative minimum tax for
individuals) and may, for defensive purposes under abnormal market
conditions, temporarily invest more than 20% of its total assets in taxable
obligations. In managing the Fund, Dreyfus seeks to take advantage of market
developments, yield disparities and variations in the creditworthiness of
issuers. The Fund's policy of investing a minimum of 80% of its total assets
in Municipal Obligations is a fundamental policy of the Fund.
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 Funds may invest without limit in Municipal Obligations which are
repayable out of revenue streams generated from economically related
projects or facilities or whose issuers are located in the same state.
Sizable investments in these obligations could increase risk to the Funds
should any of the related projects or facilities experience financial
difficulties.
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. For purposes of this SAI, the
term "Municipal Obligations" shall mean debt obligations issued by states,
cities, counties, municipalities, municipal agencies and regional districts,
the interest from which is, in the opinion of counsel to the respective
issuers, exempt from Federal income taxes. The term "Massachusetts
Municipal Obligations" shall mean, with respect to the Massachusetts
Municipal Fund, debt obligations issued by the Commonwealth of
Massachusetts, its political subdivisions, municipalities and public
authorities and municipal obligations issued by other governmental entities
if, in the opinion of counsel to the respective issuers, the interest from
such obligations is excluded from gross income for Federal income tax
purposes and is exempt from Federal and Massachusetts personal income taxes.
"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 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 Municipal Obligations. The Funds invest only in Municipal
Obligations rated at the time of purchase within the four highest quality
ratings of Moody's Investors Service, Inc. ("Moody's") (currently at least
Baa or above for bonds, at least MIG 3 or above for notes and at least Prime-
2 or above for commercial paper) or Standard & Poor's Ratings Group ("S&P")
(at least BBB or above for bonds, at least SP-2 or above for notes and at
least A-2 or above for commercial paper) or, if not rated by Moody's or S&P,
of comparable quality to the above ratings as determined by Dreyfus.
Municipal Obligations rated within the four highest ratings are considered
to be of investment-grade quality, although bonds rated in the lowest of
these four categories (Baa by Moody's or BBB by S&P) have some speculative
characteristics and involve greater risks and potentially higher yields than
higher rated bonds. A discussion of the categories of Municipal Obligations
and the rating systems appears in Appendix B.
Because many issuers of Municipal Obligations may choose not to have
their obligations rated, it is possible that a large portion of a Fund's
bond portfolio may consist of unrated obligations. Unrated obligations are
not necessarily of lower quality than rated obligations, but to the extent
the Funds invest in unrated obligations, the Funds will be more reliant on
Dreyfus' judgment, analysis and experience than would be the case if the
Funds invested only in rated obligations.
Price and Portfolio Maturity. The Funds generally invest in Municipal
Obligations having intermediate-term maturities, that can be expected to pay
higher yields and experience greater fluctuations in value than bonds with
short-term maturities. The average weighted maturity of the Municipal
Obligations in each Fund's individual portfolio is not expected to exceed
ten years. There is no limit on the maturity of any individual security. The
market value of the Municipal Obligations in a Fund's portfolio and,
accordingly, a Fund's net asset value typically will vary inversely with
changes in interest rates, declining when interest rates rise and rising
when interest rates decline. Under normal market conditions, the longer the
average maturity of a Fund's holdings, the greater its expected yield and
price volatility.
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:
Moody's Investors Standard & Poor's
Fitch IBCA, Inc. Service, Inc. Rating Group Municipal
("Fitch") or ("Moody's") or ("S&P") 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 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, VMIG1, 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.
Taxable Obligations. The taxable instruments in which each Fund is
permitted to invest under certain circumstances include US. Government
Securities and short-term, high quality money market instruments.
Investment Techniques
In connection with its investment objective and policies, each Fund may
employ, among others, the following investment techniques:
When-Issued Securities. Each 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 each 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 Funds' portfolios 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 Funds remain
substantially fully invested at the same time that they have purchased
securities on a when-issued basis, there will be a greater possibility of
fluctuation in the Funds' 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.
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 its when-issued commitments. When the time comes to pay for
when-issued securities, each 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.
Municipal Bond Index Futures Contracts. A municipal bond index futures
contract is an agreement pursuant to which two parties agree to take or make
delivery of an amount of cash equal to a specific dollar amount times the
difference between the value of the index at the close of the last trading
day of the contract and the price at which the index contract was
originally written. No physical delivery of the underlying municipal bonds
in the index is made. Municipal bond index futures contracts based on an
index of 40 tax-exempt, long-term municipal bonds with an original issue
size of at least $50 million and a rating of A- or higher by S&P or A or
higher by Moody's began trading mid-1985.
The purpose of the acquisition or sale of a municipal bond index
futures contract by a Fund, as the holder of long-term municipal securities,
is to protect the Fund from fluctuations in interest rates on tax-exempt
securities without actually buying or selling long-term municipal
securities.
Unlike the purchase or sale of a Municipal 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 index fluctuates, making the long and short positions in
the futures contract more or less valuable, a process known as marking-to-
market. At any time prior to the expiration of the contract, a Fund may
elect to close the position by taking an opposite position, which will
operate to terminate the Fund's existing position in the futures contract.
There are several risks in connection with the use of a municipal bond
index futures contract as a hedging device. Successful use of municipal bond
index futures contracts by the Funds is subject to Dreyfus' ability to
predict correctly movements in the direction of interest rates. Such
predictions involve skills and techniques which may be different from those
involved in the management of a long-term municipal bond portfolio. In
addition, there can be no assurance that there will be a correlation between
movements in the price of the municipal bond index and movements in the
price of the Municipal 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 futures contracts, in such
respects as interest rate levels, maturities and creditworthiness of
issuers. A decision of whether, when and how to hedge involves the exercise
of skill and judgment and even a well-conceived hedge may be unsuccessful to
some degree because of market behavior or unexpected trends in interest
rates.
Although the Funds intend to purchase or sell municipal bond index
futures contracts only if there is an active market for such contracts,
there is no assurance that a liquid market will exist for the contracts at
any particular time. Most domestic futures exchanges and boards of trade
limit the amount of fluctuation permitted in futures contract prices during
a single trading day. The daily limit establishes the maximum amount the
price of a futures contract may vary either up or down from the previous
day's settlement price at the end of a trading session. Once the daily limit
has been reached in a particular contract, no trades may be made that day at
a price beyond that limit. The daily limit governs only price movement
during a particular trading day and, therefore, does not limit potential
losses because the limit may prevent the liquidation of unfavorable
positions. It is possible that futures contract prices could move to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting
some futures traders to substantial losses. In such event, it will not be
possible to close a futures position and, in the event of adverse price
movements, the Funds would be required to make daily cash payments of
variation margin. In such circumstances, an increase in the value of the
portion of the portfolio being hedged, if any, may partially or completely
offset losses on the futures contract. As described above, however, there
is no guarantee that the price of Municipal Obligations will, in fact,
correlate with the price movements in the municipal bond index futures
contract and thus provide an offset to losses on a futures contract.
If a Fund has hedged against the possibility of an increase in interest
rates adversely affecting the value of the Municipal 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 futures contracts, an
amount of cash and U.S. government securities or other high grade debt
securities equal to the market value of the futures contracts will be
deposited in a segregated account with the Funds' custodian (and/or such
other persons as appropriate) to collateralize the positions and thereby
insure that the use of such futures contracts is not leveraged. In
addition, the ability of the Funds to trade in municipal bond index futures
contracts and options on interest rate futures contracts may be materially
limited by the requirements of the 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 Interest Rate Futures Contracts. A Fund may purchase put
and call options on interest rate futures contracts which are traded on a
domestic exchange or board of trade as a hedge against changes in interest
rates, and may enter into closing transactions with respect to such options
to terminate existing positions. A Fund will sell put and call options on
interest rate futures contracts only as part of closing sale transactions to
terminate its options positions. There is no guarantee that such closing
transactions can be effected.
An interest rate futures contract provides for the future purchase or
sale of specified interest rate sensitive debt securities such as United
States Treasury bills, bonds and notes, obligations of the Government
National Mortgage Association and bank certificates of deposit. Although
most interest rate futures contracts require the delivery of the underlying
securities, some settle in cash. Each contract designates the price, date,
time and place of delivery. Entering into a futures contract to deliver the
index or instrument underlying the contract is referred to as entering into
a "short" position in the futures contract, whereas entering into a futures
contract to take delivery of the index or instrument is referred to as
entering into a "long" position in the futures contract.
A put or call on a municipal bond index or interest rate futures
contract gives the purchaser the right, in return for the premium paid, to
assume a short or long position, respectively, in the underlying futures
contract as a specified exercise price at any time prior to the expiration
date of the option. The Funds may purchase put and call options on both
municipal bond index and interest rate futures contracts. The Funds will
sell options on these futures contracts only as part of closing purchase
transactions to terminate its options position, although no assurance can be
given that closing transactions can be effected.
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 interest rate futures contracts, as contrasted with the
direct investment in such contracts, gives the purchaser the right, in
return for the premium paid, to assume a position in interest rate futures
contracts at a specified exercise price at any time prior to the expiration
date of the options. Upon exercise of an option, the delivery of the
futures position by the writer of the option to the holder of the option
will be accompanied by delivery of the accumulated balance in the writer's
futures contract margin account, which represents the amount by which the
market price of the futures contract exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of the option on the
futures contract. The potential loss related to the purchase of an option
on interest rate futures contracts is limited to the premium paid for the
option (plus transaction costs). Because the value of the option is fixed at
the point of sale, there are no daily cash payments to reflect changes in
the value of the underlying contract; however, the value of the option does
change daily and that change would be reflected in the net asset value of a
Fund.
There are several risks relating to options on interest rate futures
contracts. The ability to establish and close out positions on such options
will be subject to the existence of a liquid market. In addition, a Fund's
purchase of put or call options will be based upon predictions as to
anticipated interest rate trends by Dreyfus, which could prove to be
inaccurate. Even if Dreyfus' expectations are correct there may be an
imperfect correlation between the change in the value of the options and of
a Fund's portfolio securities.
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, US. 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 colIateralize 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.
Tender Option Bonds. Each Fund may invest up to 10% of the value of
its assets in tender option bonds. A tender option bond is a Municipal
Obligation (generally held pursuant to a custodial arrangement) having a
relatively long maturity and bearing interest at a fixed rate substantially
higher than prevailing short-term tax-exempt rates, that has been coupled
with the agreement of a third party, such as a bank, broker-dealer or other
financial institution, pursuant to which such institution grants the
security holders the option, at periodic intervals, to tender their
securities to the institution and receive the face value thereof. As
consideration for providing the option, the financial institution receives
periodic fees equal to the difference between the Municipal Obligation's
fixed coupon rate and the rate, as determined by a remarketing or similar
agent at or near the commencement of such period, that would cause the
securities, coupled with the tender option, to trade at par on the date of
such determination. Thus, after payment of this fee, the security holder
effectively holds a demand obligation that bears interest at the prevailing
short-term tax-exempt rate. Dreyfus, on behalf of each Fund, will consider
on an ongoing basis the creditworthiness of the issuer of the underlying
Municipal Obligation, of any custodian and the third-party provider of the
tender option. In certain instances and for certain tender option bonds,
the option may be terminable in the event of a default in payment of
principal or interest on the underlying Municipal Obligations and for other
reasons. No Fund will invest more than 15% of the value of its net assets
in illiquid securities, which would include tender option bonds for which
the required notice to exercise the tender feature is more than seven days
if there is no secondary market available for these obligations.
Use of Ratings as Investment Criteria. The ratings of nationally
recognized statistical rating organizations ("NRSROs") such as S&P and
Moody's represent the opinions of these agencies as to the quality of
Municipal Obligations which they rate. It should be emphasized, however,
that such ratings are relative and subjective and are not absolute standards
of quality. These ratings will be used by the Funds as initial criteria for
the selection of portfolio securities, but the Funds will also rely upon the
independent advice of Dreyfus to evaluate potential investments. Among the
factors which will be considered are the long-term ability of the issuer to
pay principal and interest and general economic trends. Further information
concerning the ratings of the NRSROs and their significance is contained in
Appendix 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.
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.
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.
Portfolio Turnover. While securities are purchased for the Funds on the
basis of potential for current income and not for short-term trading
profits, the Funds' turnover rate may exceed 100%. A portfolio turnover rate
of 100% would occur, for example, if all the securities held by the Funds
were replaced once in a period of one year. A higher rate of portfolio
turnover (100% or greater) involves correspondingly greater brokerage
commissions and other expenses that must be borne directly by the Funds and,
thus, indirectly by its shareholders. In addition, a high rate of portfolio
turnover may result in the realization of larger amounts of short-term
and/or long-term capital gains that, when distributed to the Funds'
shareholders, are taxable to them at the then-current rate. Nevertheless,
securities transactions for the Funds will be based only upon investment
considerations and will not be limited by any other considerations when
Dreyfus deems it appropriate to make changes in the Funds' assets.
Special Factors Affecting the Massachusetts Municipal Fund. Because
the Dreyfus Premier Limited Term Massachusetts Municipal Fund concentrates
in the obligations of Massachusetts issuers, it is more susceptible to
factors adversely affecting such issuers than mutual funds that do not
concentrate in the obligations of issuers of a single state. Massachusetts
economic and fiscal difficulties of recent years appear to have abated.
While the Commonwealth's expenditures for state programs and services in
each of the fiscal years 1987 through 1991 exceeded each current year's
revenues, Massachusetts ended each of the fiscal years 1991 through 1996
with a positive fiscal balance in its general operating funds. A return of
persistent serious financial difficulties could adversely affect the market
values and marketability of, or result in default in payment on, outstanding
Massachusetts Municipal Obligations. Investors should consider carefully the
special risks inherent in the Fund's investment in Massachusetts Municipal
Obligations, which are discussed in more detail in Appendix A.
Master/Feeder Option. The Trust may in the future seek to achieve a
Fund's investment objective by investing all of the Fund's net investable
assets in another investment company having the same investment objective
and substantially the same investment policies and restrictions as those
applicable to the Fund. Shareholders of a Fund will be given at least 30
days' prior notice of any such investment. Such investment would be made
only if the Trust's Board of Trustees determines it to be in the best
interest of a Fund and its shareholders. In making that determination, the
Trust's Board of Trustees will consider, among other things, the benefits to
shareholders and/or the opportunity to reduce costs and achieve operational
efficiency. Although the Funds believe that the Board of Trustees will not
approve an arrangement that is likely to result in higher costs, no
assurance is given that risks will be materially reduced if this option is
implemented.
Investment Restrictions. The following are fundamental investment
restrictions of each Fund. No Fund may:
1. Purchase any securities which would cause more than 25% of the
value of a Fund's total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities and state or municipal governments and their political
subdivisions are not considered members of any industry. In addition, this
limitation does not apply to investments of domestic banks, including U.S.
branches of foreign banks and foreign branches of U.S. banks.)
2. Borrow money or issue senior securities as defined in the
Investment Company Act of 1940 (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.
The following are non-fundamental investment restrictions of each Fund
of the Trust:
1. The Trust will not purchase or retain the securities of any issuer
if the officers, directors or Trustees of the Trust, its advisers, or
managers owning beneficially more than one half of one percent of the
securities of each issuer together own beneficially more than 5% of such
securities.
2. The Fund will not purchase securities of issuers (other than
securities issued or guaranteed by domestic or foreign governments or
political subdivisions thereof), including their predecessors, that have
been in operation for less than three years, if by reason thereof the value
of the Fund's investment in securities would exceed 5% of the Fund's total
assets. For purposes of this limitation, sponsors, general partners,
guarantors and originators of underlying assets may be treated as the issuer
of a security.
3. 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.
Each of the foregoing restrictions applies to each Fund unless
otherwise indicated. Under the 1940 Act, a fundamental policy may not be
changed without the vote of a majority of the outstanding voting securities
of a Fund, as defined in the 1940 Act. "Majority" means the lesser of (1)
67% or more of the shares present at a Fund's meeting, if the holders of
more than 50% of the outstanding shares of a Fund are present or represented
by proxy, or (2) more than 50% of the outstanding shares of the Fund. Non-
fundamental investments restrictions may be changed by vote of a majority of
the Trust's Board of Trustees at any time.
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
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, N.A. ("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
Noel Group, Inc., a venture capital company (for which from February
1995 until November 1997, he was Chairman of the Board); 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) a temporary placement agency. Mr. DiMartino is a Board
member of 99 funds in the Dreyfus Family of Funds. 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 Corporation. Age: 55 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. Age: 64 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
Companyl President & CEO, Himmel and Company; CEO, American Food
Management; former Director, The Boston Company, Inc. ("TBC"), an
affiliate of Dreyfus, and Boston Safe Deposit and Trust Company; 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. 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: 67 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: 49 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: 39
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. 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: 35 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, Mr. Kelley 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 and Client Development Manager
of 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. 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, The
Dreyfus/Laurel Funds, Inc. and Dreyfus High Yield Strategies Fund.
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. Effective July 1, 1998, 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. The
compensation structure described in this paragraph is referred to
hereinafter as the "Current Compensation Structure."
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 pursuant to the Current
Compensation Structure.
Prior to July 1, 1998, the Dreyfus/Laurel Funds paid each
Director/Trustee who was not an "interested person" of the Trust (as defined
in the 1940 Act) $27,000 per annum (and an additional $25,000 for the
Chairman of the Board of Directors/Trustees of the Dreyfus/Laurel Funds) and
$1,000 per joint Dreyfus/Laurel Funds Board meeting attended, plus $750 per
joint Dreyfus/Laurel Funds Audit Committee meeting attended, and reimbursed
each such Director/Trustee for travel and out-of-pocket expenses (the
"Former Compensation Structure").
The aggregate amount of fees and expenses received by each current
Trustee from the Trust for the fiscal year ended December 31, 1998, 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) for the year ended December 31, 1998,
pursuant to the Former Compensation Structure for the period from January 1,
1998 through June 30, 1998 and the Current Compensation Structure for the
period from July 1, 1998 through December 31, 1998, were as follows:
Aggregate Total Compensation
Name of Board Compensation From the Trust and
Member From the Fund Complex Paid
Trust# to Board Member
Joseph S. DiMartino** $ $ 619,660 (187)*
James M. Fitzgibbons $ $ 60,010 (31)
J. Tomlinson Fort*** none none (31)
Arthur L. Goeschel $ $ 61,010 (31)
Kenneth A. Himmel $ $ 50,260 (31)
Stephen J. Lockwood $ $ 51,010 (31)
John J. Sciullo $ $ 59,010 (31)
Roslyn M. Watson $ $ 61,010 (31)
Benaree Pratt Wiley**** $ $ 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 $[ ] 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. The Dreyfus Family of Funds consists of 163 mutual fund
portfolios.
** Mr. DiMartino became Chairman of the Board 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 December 31,1998, the aggregate amount of fees received by J.
Tomlinson Fort from Dreyfus for serving as a Board member of the Trust was
______________________. 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 ______________________. In addition, Dreyfus reimbursed Mr.
Fort a total of $__________________ for expenses attributable to the
Trust's Board meetings which is not included in the $__________________
amount in note # above.
**** Payments to Ms. Wiley were 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 2,
1999.
Principal Shareholders. As of October 2, 1999, the following
companies/individuals owned beneficially or of record 5% or more of the
outstanding Class A shares of the Massachusetts Municipal Fund:
As of October 2, 1999, the following companies/individuals owned
beneficially or of record 5% or more of the outstanding Class B shares of
the Massachusetts Municipal Fund:
As of October 2, 1999, the following companies/individuals owned
beneficially or of record 5% or more of the outstanding Class C shares of
the Massachusetts Municipal Fund:
As of October 2, 1999, the following companies/individuals owned
beneficially or of record 5% or more of the outstanding Class R shares of
the Massachusetts Municipal Fund:
As of October 2, 1999, the following companies/individuals owned
beneficially or of record 5% or more of the outstanding Class A Shares of
the Municipal Fund:
As of October 2, 1999, the following companies/individuals owned
beneficially or of record 5% or more of the outstanding Class B shares of
the Municipal Fund:
As of October 2, 1999, the following companies/individuals owned
beneficially or of record 5% or more of the outstanding Class C shares of
the Municipal Fund:
As of October 2, 1999, the following companies/individuals owned
beneficially or of record 5% or more of the outstanding Class R shares of
the Municipal Fund:
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the sections in the Funds' Prospectuses entitled "Expenses" and
"Management"
Management Agreement. Dreyfus is a wholly-owned subsidiary of Mellon
Bank, N.A. ("Mellon Bank"), which is in turn a wholly-owned subsidiary of
Mellon Bank 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.
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
January 28, 1999 and to continue until April 4, 2000. Dreyfus is a wholly-
owned subsidiary of Mellon Bank. Pursuant to the Investment Management
Agreement, Dreyfus provides, or arranges for one or more third parties to
provide, investment advisory, administrative, custody, fund accounting and
transfer agency services to the 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 Fund and either a majority of all Trustees or a majority of
the shareholders of the Fund approve its continuance. Each Fund may
terminate the Investment Management Agreement upon the vote of a majority of
the Board of Trustees or upon the vote of a majority of the outstanding
voting securities of the Fund on 60 days' written notice to Dreyfus.
Dreyfus may terminate the Investment Management Agreement upon 60 days'
written notice to the Fund. The Investment Management Agreement will
terminate immediately and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, Chief Operating Officer and a director; Stephen E.
Canter, Vice Chairman, Chief Investment Officer and a director; Lawrence S.
Kash, Vice Chairman-Distribution and a director; J. David Officer, Vice
Chairman and a director; Ronald P. O'Hanley III, Vice Chairman; William T.
Sandalls, Jr., Executive Vice President; Mark N. Jacobs, Vice President,
General Counsel and Secretary; Patrice M. Kozlowski, Vice President-
Corporate Communications; Mary Beth Leibig, Vice President-Human Resources;
Andrew S. Wasser, Vice President-Information Systems; 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, Frank V. Cahouet 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 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, Dreyfus
pays all of the Funds' expenses, except: (i) brokerage commissions, (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.
The following table shows the fees paid by each Fund to Dreyfus,
including any fee waivers or expense reimbursements, during the fiscal years
ended June 30, 1997, 1998 and 1999:
1999 1998 1997
Fees Fees Fees
Paid Paid Paid
Municipal Fund $435,019 $263,445 $196,627
Massachusetts Municipal Fund 402,864 291,477 225,861
The Distributor. The Distributor serves as the Funds' distributor
pursuant to an agreement which is renewable annually. The Distributor also
acts as distributor for the other funds in the Dreyfus Premier Family of
Funds, funds in the Dreyfus Family of Funds, and for certain other
investment companies.
For the fiscal year ended June 30, 1999, 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, 1999, the Distributor retained $_____ from the Municipal Fund and
$____ 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 $____and $___ from the CDSC on
Class C shares for the Municipal Fund and the Massachusetts Municipal Fund,
respectively.
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.
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," "Instructions for Regular Accounts."
General: Class A shares, Class B shares and Class C shares may be
purchased only by clients of Agents, except that full-time or part-time
employees or directors of Dreyfus or any of its affiliates or subsidiaries,
Board members of a fund advised by Dreyfus, including members of the
Company's Board, or the spouse or minor child of any of the foregoing may
purchase Class A shares directly through the Distributor.
Class R shares are sold primarily to banks acting on behalf of
customers having a qualified trust or investment account or relationship at
such institution, or to customers who have received and hold shares of a
Fund distributed to them by virtue of such an account or relationship. In
addition, holders of Class R shares of a Fund who have held their shares
since April 4, 1994, may continue to purchase Class R shares of the Fund,
whether or not they otherwise would be eligible to do so. Institutions
effecting transactions in Class R shares for the accounts of their clients
may charge their clients direct fees in connection with such transactions.
When purchasing Fund shares, you must specify which Class is being
purchased. Stock certificates are issued only upon your written request. No
certificates are issued for fractional shares. The Funds reserve the right
to reject any purchase order.
Agents may receive different levels of compensation for selling
different Classes of shares. Management understands that some Agents may
impose certain conditions on their clients which are different from those
described in this Prospectus, and, to the extent permitted by applicable
regulatory authority may charge their clients direct fees which would be in
addition to any amounts which might be received under the Distribution and
Service Plans. Each Agent has agreed to transmit to its clients a schedule
of such fees. You should consult your Agent in this regard.
The minimum initial investment is $1,000. Subsequent investments must
be at least $100. The initial investment must be accompanied by the Fund's
Account Application.
Investors may purchase Fund shares by check or wire, or through the
TeleTransfer Privilege described below. Checks should be made payable to
"The Dreyfus Family of Funds." Payments which are mailed should be sent
Dreyfus Premier Limited Term Massachusetts Municipal Fund, or Dreyfus
Premier Municipal Fund, P.O. Box 6587, Providence, Rhode Island 02940-
6587.1f you are opening a new account, please include your Account
Application indicating which Class of shares is being purchased. For
subsequent investments, your Fund account number should appear on the check
and an investment slip should be enclosed. Neither initial nor subsequent
investments should be made by third party check.
Wire payments may be made if your bank account is in a commercial bank
that is a member of the Federal Reserve System or any other bank having a
correspondent bank in New York City. Immediately available funds may be
transmitted by wire to Boston Safe Deposit & Trust Company, together with a
Fund's DDA#, the name of the fund, and applicable Class, for purchase of
Fund shares in your name. The wire must include your Fund account number
(for new accounts, your Taxpayer Identification Number ("TIN") should be
included instead), account registration and dealer number, if applicable. If
your initial purchase of Fund shares is by wire, you should call 1-800- 554-
4611 after completing your the wire payment in order to obtain your Fund
account number. Please include your Fund account number on the Funds'
Account Application and promptly mail the Account Application to the Funds,
as no redemptions will be permitted until the Account Application is
received. You may obtain further information about remitting funds in this
manner from your bank. All payments should be made in US. dollars and, to
avoid fees and delays, should be drawn only on US. banks. A charge will be
imposed if any check used for investment in your account does not clear. The
Funds makes available to certain large institutions the ability to issue
purchase instructions through compatible computer facilities.
Fund shares also may be purchased through Dreyfus-Automatic Asset
Builderr and the Government Direct Deposit Privilege described under
"Shareholder Services." These services enable you to make regularly
scheduled investments and may provide you with a convenient way to invest
for long-term financial goals. You should be aware, however, that periodic
investment plans do not guarantee a profit and will not protect an investor
against loss in a declining market.
Subsequent investments also may be made by electronic transfer of funds
from an account maintained in a bank or other domestic financial institution
that is an Automated Clearing House ("ACH") member. You must direct the
institution to transmit immediately available funds through the ACH System
to Boston Safe Deposit and Trust Company with instructions to credit your
Fund account.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Other Distributions and
Taxes" and the Funds' Account Application for further information concerning
this requirement. Failure to furnish a certified TIN to the Funds could
subject you to a $50 penalty imposed by the Internal Revenue Service (the
"IRS").
Net Asset Value Per Share ("NAV")-An investment portfolio's NAV refers
to the worth of one share. The NAV for shares of each Class of the Funds is
computed by adding, with respect to such Class of shares, the value of the
Funds' investments, cash, and other assets attributable to that Class,
deducting liabilities of the Class and dividing the result by the number of
shares of that Class outstanding. Shares of each Class of the Funds offered
on a continuous basis. For purposes of determining NAV for the Funds, bonds
are valued by an independent pricing service approved by the Company's Board
of Trustees at fair value as determined by the pricing service. See
"Determination of Net Asset Value." Options and financial futures on
municipal and U.S. treasury securities are valued at the last sales price on
the securities exchange on which such securities are primarily traded or at
the last sales price on the national securities market on each business day.
Investments not listed on an exchange or the national securities market, or
securities for which there were no transactions, are valued at the average
of the most recent bid and asked prices. Bid price is used when no asked
price is available.
NAV is determined on each day that the NYSE is open (a "business day"),
as of the close of business of the regular session of the NYSE (usually 4
p.m. Eastern Time). For purposes of determining NAV, options and futures
contracts will be valued 15 minutes after the close of trading on the floor
of the NYSE. Orders received by the Transfer Agent or other agent in proper
form before such close of business are effective on, and will receive the
public offering price determined on, that day. Except in the case of certain
orders transmitted by dealers as described in the following paragraph,
orders received after such close of business are effective on, and receive
the share price determined on, the next business day.
Orders for the purchase of Fund shares received by dealers by the close
of trading on the floor of the NYSE on a business day and transmitted to the
Distributor or its designee by the close of its business day (normally 5:15
p.m., New York time) will be based on the public offering price per share
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, the orders will be based on the next determined public offering
price. It is the dealers' responsibility to transmit orders so that they
will be received by the 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 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.
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'Reallowance
Offering Price Net Asset Value as a % of
Amount of Transaction Per Share Per Share Offering Price
Less than $100,000 3.00 3.10 2.75
$100,00 to $999,999 2.75 2.80 2.50
$250,000 to $999,999 2.25 2.30 2.00
$500,000 to $999,999 2.00 2.00 1.75
$1 million or more 0.00 0.00 0.00
Set forth below is an example of the method of computing the offering
price of the Class A shares. The example assumes a purchase of Class A
shares aggregating less than $100,000 subject to the schedule of sales
charges set forth in the relevant Prospectus at a price based upon the 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 - 3.0%
of offering price (3.1% of
net asset value per share) $0.37 $0.37
Per Share Offering Price to
the Public $12.40 $12.40
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. The Distributor may pay Agents an amount up to 1 % of the NAV of
Class A shares purchased by their clients that are subject to a CDSC. The
terms contained in the sections of each Fund's Prospectus entitled "Your
Investment - Selling Shares." Letter of Intent and Right of Accumulation
apply to such purchases of Class A shares.
Full-time employees of NASD member firms and full-time employees of
other financial institutions which have entered into an agreement with the
Distributor pertaining to the sale of Fund shares (or which otherwise have a
brokerage related or clearing arrangement with an NASD member firm or
financial institution with respect to the sale of such shares) may purchase
Class A shares for themselves directly or pursuant to an employee benefit
plan or other program, or for their spouses or minor children, at NAV,
provided that they have furnished the Distributor with such information as
it may request from time to time in order to verify eligibility for this
Privilege. This privilege also applies to full-time employees of financial
institutions affiliated with NASD member firms whose full-time employees are
eligible to purchase Class A shares at NAV. In addition, Class A shares are
offered at NAV to full-time or part-time employees or directors of Dreyfus
or any of its affiliates or subsidiaries, Board members of a fund advised by
Dreyfus, including members of the Trust's Board, or the spouse or minor
child of any of the foregoing.
Holders of Class A accounts of the Funds as of December 28, 1994 may
continue to purchase Class A shares of the Funds at NAV. However,
investments by such holders in other funds advised by Dreyfus will be
subject to the applicable front-end sales load.
Class A shares may be purchased at NAV through certain broker-dealers
and other financial institutions which have entered into an agreement with
the Distributor, which includes a requirement that such shares be sold for
the benefit of clients participating in a "wrap account" or a similar
program under which such clients pay a fee to such broker-dealer or other
financial institution.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, through a broker-dealer or other financial institution with
the proceeds from the redemption of shares of a registered open-end
management investment company not managed by Dreyfus or its affiliates. The
purchase of Class A shares of a Fund must be made within 60 days of such
redemption and the shareholder must have either (i) paid an initial sales
charge or a contingent deferred sales charge or (ii) been obligated to pay
at any time during the holding period, but did not actually pay on
redemption, a deferred sales charge with respect to such redeemed shares.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, by (i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United States,
(ii) a State, county or city or instrumentality thereof, (iii) a charitable
organization (as defined in Section 501(c)(3) of the Code) investing $50,000
or more in Fund shares, and (iv) a charitable remainder trust (as defined in
Section 501(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. Dealers receive a
larger percentage of the sales load from the Distributor than they receive
for selling most other funds.
Class B shares. The public offering price for Class B shares is the
NAV of that Class. No initial sales charge is imposed at the time of
purchase. A CDSC is imposed, however, on certain redemptions of Class B
shares as described under "How to Redeem Fund Shares." The Distributor
compensates certain Agents for selling Class B shares at the time of
purchase from the Distributor's own assets. The proceeds of the CDSC and the
distribution fee, in part, are used to defray these expenses.
Class C shares. The public offering price for Class C shares is the
NAV of that Class. No initial sales charge is imposed at the time of
purchase. A CDSC is imposed, however, on redemptions of Class C shares made
within the first year of purchase. See "Class B shares" above and "How to
Redeem Fund Shares."
Class R shares. The public offering price for Class R shares is the
NAV of that Class.
Right of Accumulation- Class A shares. Reduced sales loads apply to
any purchase of Class A shares, shares of other funds in the Dreyfus Premier
Family of Funds, shares of certain other funds advised by Dreyfus which are
sold with a sales load and shares acquired by a previous exchange of such
shares (hereinafter referred to as "Eligible Funds"), by you and any related
"purchaser" as defined in the SAI, where the aggregate investment, including
such purchase, is $100,000 or more. If, for example, you previously
purchased and still hold Class A shares, or shares of any other Eligible
Fund or combination thereof, with an aggregate current market value of
$80,000 and subsequently purchase Class A shares or shares of an Eligible
Fund having a current value of $40,000, the sales load applicable to the
subsequent purchase would be reduced to 2.75% of the offering price. All
present holdings of Eligible Funds may be combined to determine the current
offering price of the aggregate investment in ascertaining the sales load
applicable to each subsequent purchase.
To qualify for reduced sales loads, at the time of purchase you or your
Agent must notify the Distributor if orders are made by wire, or the
Transfer Agent if orders are made by mail. The reduced sales load is subject
to confirmation of your holdings through a check of appropriate records.
TeleTransfer Privilege. You may purchase shares of either Fund 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 Automated Clearing
House ("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." 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.
Share Certificates. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.
DISTRIBUTION PLANS AND SHAREHOLDER SERVICING 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 Securities and Exchange Commission ("SEC") has adopted Rule 12b-1
under the 1940 Act ("Rule") regulating the circumstances under which
investment companies such as the Trust may, directly or indirectly, bear the
expenses of distributing their shares. The Rule defines distribution
expenses to include expenditures for "any activity which is primarily
intended to result in the sale of fund shares." The Rule, among other
things, provides that an investment company may bear such expenses only
pursuant to a plan adopted in accordance with the Rule.
Distribution Plan--Class A shares. Under the current Distribution Plan
for Class A ("Class A Plan"), Class A shares of a Fund may spend annually up
to 0.25 of 1% of the average net asset value of the Class for costs and
expenses incurred in connection with the distribution of, and shareholder
servicing with respect to, Class A shares.
The Class A Plan provides that a report of the amounts expended under
the Class A Plan, and the purposes for which such expenditures were
incurred, must be made to the Trust's Trustees for their review at least
quarterly. In addition, the Class A Plan provides that it may not be
amended to increase materially the costs which a Fund may bear for
distribution pursuant to the Class A Plan without approval of a Fund's
shareholders, and that other material amendments of the Class A Plan must be
approved by the vote of a majority of the Trustees and of the Trustees who
are not "interested persons" of the Trust (as defined in the 1940 Act) and
who do not have any direct or indirect financial interest in the operation
of the Plan, cast in person at a meeting called for the purpose of
considering such amendments. The Class A Plan is subject to annual approval
by the entire Board of Trustees and by the Trustees who are neither
interested persons nor have any direct or indirect financial interest in the
operation of the Class A Plan, by vote cast in person at a meeting called
for the purpose of voting on the Class A Plan. The Class A Plan was so
approved by the Trustees at a meeting held on January 28, 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, the Trust's Board of Trustees has adopted
a Service Plan (the "Service Plan") under the Rule for Class B and Class C
shares, pursuant to which the Fund pays the Distributor and Dreyfus Service
Corporation for the provision of certain services to the holders of Class B
and Class C shares. The Trust's Board of Trustees has also adopted a
Distribution Plan pursuant to the Rule with respect to Class B and Class C
shares (the "Distribution Plan"). The Trust's Board of Trustees believes
that there is a reasonable likelihood that the Distribution and Service
Plans (the "Plans") will benefit the Funds and the holders of Class B and
Class C shares.
A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the
Trustees for their review. In addition, each Plan provides that it may not
be amended to increase materially the cost which holders of Class B or 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 January 28, 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.
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 for the Massachusetts Municipal Fund and $13,529 paid to the
Distributor and $53,523 paid to Dreyfus 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 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 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 "Your Investment -
Selling Shares," "Account Policies," "Services For Fund Investors," and
"Instructions for Regular Accounts."
General: You may request redemption of your shares at any time.
Redemption requests should be transmitted to the Transfer Agent as described
below. When a request is received in proper form, the Funds will redeem the
shares at the next determined NAV as described below. If you hold Fund
shares of more than one Class, any request for redemption must specify the
Class of shares being redeemed. If you fail to specify the Class of shares
to be redeemed or if you own fewer shares of the Class than specified to be
redeemed, the redemption request may be delayed until the Transfer Agent
receives further instructions from you or your Agent.
The Funds impose no charges (other than any applicable CDSC) when
shares are redeemed. Agents or other institutions may charge their clients a
fee for effecting redemptions of Fund shares. Any certificates representing
Fund shares being-redeemed must be submitted with the redemption request.
The value of the shares redeemed may be more or less than their original
cost, depending upon the Fund's then-current NAV.
The Funds ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the SEC. However, if you
have purchased Fund shares by check, by the TeleTransfer Privilege or
through Dreyfus-Automatic Asset Builderr and subsequently submit a written
redemption request to the Transfer Agent, the redemption proceeds will be
transmitted to you promptly upon bank clearance of your purchase check,
TeleTransfer purchase or Dreyfus-Automatic Asset Builder order, which may
take up to eight business days or more. In addition, the Funds will reject
requests to redeem shares pursuant to the TeleTransfer Privilege for a
period of eight business days after receipt by the Transfer Agent of the
purchase check, the TeleTransfer purchase or the Dreyfus-Automatic Asset
Builder order against which such redemption is requested. These procedures
will not apply if your shares were purchased by wire payment, or if you
otherwise have a sufficient collected balance in your account to cover the
redemption request. Prior to the time any redemption is effective, dividends
on such shares will accrue and be payable, and you will be entitled to
exercise all other rights of beneficial ownership. Fund shares will not be
redeemed until the Transfer Agent has received your Account Application.
Each Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if the NAV of your account is $500 or
less and remains so during the notice period.
Contingent Deferred Sales Charge - Class B shares. A CDSC payable to
the Distributor is imposed on any redemption of Class B shares which reduces
the current NAV of your Class B shares to an amount which is lower than the
dollar amount of all payments by you for the purchase of Class B shares of a
Fund held by you at the time of redemption. No CDSC will be imposed to the
extent that the NAV of the Class B shares redeemed does not exceed (i) the
current NAV of Class B shares acquired through reinvestment of dividends or
other distributions, plus (ii) increases in the NAV of your Class B shares
above the dollar amount of all your payments for the purchase of Class B
shares held by you at the time of redemption.
If the aggregate value of Class B shares redeemed has declined below
their original cost as a result of a Fund's performance, a CDSC may be
applied to the then-current NAV rather than the purchase price.
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 %
Purchase Payment of Amount
Was Made Invested or
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 die preceding five years; then of amounts representing
the cost of shares purchased five years prior to the redemption; and
finally, of amounts representing the cost of shares held for the longest
period of time within the applicable five-year period.
For example, assume an investor purchased 100 shares at $10 share for a
cost of $1,000. Subsequently, the shareholder acquired five additional
shares through dividend reinvestment. During the second year after the
purchase the investor decided to redeem $500 of his or her investment.
Assuming at the time of the redemption the NAV had appreciated to $12 per
share, the value of the investor's shares would be $1,260 (105 shares at $12
per share). The CDSC would not be applied to the value of the reinvested
dividend shares and the amount which represents appreciation ($260).
Therefore, $240 of the $500 redemption proceeds ($500 minus $260) would be
charged at a rate of 3% (the applicable rate in the second year after
purchase) for a total CDSC of $7.20.
Contingent Deferred Sales Charge - Class C shares. A CDSC of .75%
payable to the Distributor is imposed on any redemption of Class C shares
within one year of the date of purchase. The basis for calculating the
payment of any such CDSC will be the method used in calculating the CDSC for
Class B shares. See "Contingent Deferred Sales Charge - Class B shares"
above.
Waiver of CDSC. The CDSC applicable to Class B and Class C shares will
be waived in connection with (a) redemptions made within one year after the
death or disability, as defined in Section 72(m)(7) of the Code, of the
shareholder, (b) redemptions as a result of a combination of any investment
company with the Funds by merger, acquisition of assets or otherwise, (c)
redemptions pursuant to the Automatic Withdrawal Plan, as described under
"Shareholder Services-Automatic Withdrawal Plan" above, and (d) redemptions
by such shareholders as the SEC or its staff may permit. If the Company's
Board of Trustees determines to discontinue the waiver of the CDSC, the
disclosure in the Funds' prospectus will be revised appropriately. Any Fund
shares subject to a CDSC which were purchased prior to the termination of
such waiver will have the CDSC waived as provided in the Funds' prospectus
at the time of the purchase of such shares.
To qualify for a waiver of the CDSC, at the time of redemption you must
notify the Transfer Agent or your Agent must notify the Distributor. Any
such qualification is subject to confirmation of your entitlement.
Procedures. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or, if you have checked the
appropriate box and supplied the necessary information on the Account
Application or have filed a Shareholder Services Form with the Transfer
Agent, through the TeleTransfer Privilege. If you are a client of a Selected
Dealer, you may redeem shares through the Selected Dealer. Other redemption
procedures may be in effect for clients of certain Agents and institutions.
The Funds makes available to certain large institutions the ability to issue
redemption instructions through compatible computer facilities. The Fund
reserves the right to refuse any request made by telephone, including
requests made shortly after a change of address, and may limit the amount
involved or the number of such requests. The Fund may modify or terminate
any redemption privilege at any time or charge a service fee upon notice to
shareholders. No such fee currently is contemplated. Shares for which
certificates have been issued are not eligible for the TeleTransfer
Privilege.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Funds' Account Application or have filed a
Shareholder Services Form with the Transfer Agent. If you select the
TeleTransfer Privilege or telephone exchange privilege (which is granted
automatically unless you refuse it), you authorize the Transfer Agent to act
on telephone instructions (including over The Dreyfus Touchr Automated
Telephone System) from any person representing himself or herself to be you,
or a representative of your Agent, and reasonably believed by the Transfer
Agent to be genuine. The Funds will require the Transfer Agent to employ
reasonable procedures, such as requiring a form of personal identification,
to confirm that instructions are genuine and, if it does not follow such
procedures, the Funds or the Transfer Agent may be liable for any losses due
to unauthorized or fraudulent instructions. Neither the Funds nor the
Transfer Agent will be liable for following telephone instructions
reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a TeleTransfer redemption or an exchange of Fund shares. In such
cases, you should consider using the other redemption procedures described
herein. Use of these other redemption procedures may result in your
redemption request being processed at a later time than it would have been
if TeleTransfer redemption had been used. During the delay, the Funds' NAV
may fluctuate.
Regular Redemption. Under the regular redemption procedure, you may
redeem your shares by written request mailed to Dreyfus Premier Limited Term
Massachusetts Municipal Fund, or Dreyfus Premier Limited Term Municipal
Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. Redemption
requests must be signed by each shareholder, including each owner of a joint
account, and each signature must be guaranteed. The Transfer Agent has
adopted standards and procedures pursuant to which signature-guarantees in
proper form generally will be accepted from domestic banks, brokers,
dealers, credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations, as well as from
participants in the New York Stock Exchange Medallion Signature Program, the
Securities Transfer Agents Medallion Program ("STAMP"), and the Stock
Exchanges Medallion Program. For more information with respect to signature-
guarantees, please contact your Agent or 1-800-554-4611.
Redemption proceeds of at least $1,000 will be wired to any member bank
of the Federal Reserve System in accordance with a written signature-
guaranteed request.
Dreyfus 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 investor's 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 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. See "Purchase of Shares--Dreyfus TeleTransfer Privilege."
If you have selected the TeleTransfer Privilege, you may request a
TeleTransfer redemption of Fund shares by telephoning 1-800-554-4611 or, if
calling from overseas, 516-794-5452.
Redemption Through a Selected Dealer. If you are a customer of a
Selected Dealer, you may make redemption requests to your Selected Dealer.
If the Selected Dealer transmits the redemption request so that it is
received by the Transfer Agent prior to the close of trading on the floor of
the NYSE (currently 4:00 p.m., New York time), the redemption request will
be effective on that day. If a redemption request is received by the
Transfer Agent after the close of trading on the floor of the NYSE, the
redemption request will be effective on the next business day. It is the
responsibility of the Selected Dealer to transmit a request so that it is
received in a timely manner. The proceeds of the redemption are credited to
your account with the Selected Dealer. See "How to Buy Fund Shares" for a
discussion of additional conditions or fees that may be imposed upon
redemption.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of shares held by shareholders. Repurchase orders received by
dealers by the close of trading on the floor of the NYSE on any business day
and transmitted to the Distributor or its designee prior to the close of its
business day (normally 5:15 p.m., New York time) are effected at the price
determined as of the close of trading on the floor of the NYSE on that day
Otherwise, the shares will be redeemed at the next determined NAV. It is the
responsibility of the Selected Dealer to transmit orders on a timely basis.
The Selected Dealer may charge the shareholder a fee for executing the
order. This repurchase arrangement is discretionary and may be withdrawn at
any time.
Reinvestment Privilege. Upon written request, you may reinvest up to
the number of Class A or Class B shares you have redeemed, within 45 days of
redemption, at the then-prevailing NAV without a sales load, or reinstate
your account for the purpose of exercising the Fund Exchanges. Upon
reinstatement, with respect to Class B shares, or Class A shares of such
shares were subject to a CDSC, the shareholder's account will be credited
with an amount equal to the CDSC previously paid upon redemption of the
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 the Fund, limited in
amount during any 90day 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 Funds' Prospectuses entitled "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 in this
Prospectus. You should consult your Agent in this regard.
Fund Exchanges. Sales of any Class of a Fund may be exchanged for
shares of the respective Class of certain other funds advised or
administered by Dreyfus. Shares of the same Class of such other funds
purchased by exchange will be purchased on the basis of relative net asset
value per share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load, and
the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
E. Shares of funds subject to a CDSC that are exchanged for
shares of another fund will be subject to the higher applicable
CDSC of the two funds, and for purposes of calculating CDSC rates
and conversion periods, if any, will be deemed to have been held
since the date the shares being exchanged were initially
purchased.
To accomplish an exchange under item D above, an investor's Agent must
notify the Transfer Agent of the investor's prior ownership of shares with a
sales load and the investor's account number.
To request an exchange, your Agent acting on your behalf must give
exchange instructions to the Transfer Agent in writing or by telephone.
Before any exchange, you must obtain and should review a copy of the current
prospectus of the fund into which the exchange is being made. Prospectuses
may be obtained by calling 1-800-554-4611. The shares being exchanged must
have a current value of at least $500; furthermore, when establishing a new
account by exchange, the shares being exchanged must have a value of at
least the minimum initial investment required for the fund into which the
exchange is being made. The ability to issue exchange instructions by
telephone is given to all Fund shareholders automatically, unless you check
the relevant "No" box on the Account Application, indicating that you
specifically refuse this privilege. The Telephone Exchange Privilege may be
established for an existing account by written request signed by all
shareholders on the account, by a Separate Shareholder Services Form,
available by calling 1-800-554-4611, or, by oral request from any of the
authorized signatories on the account, also by calling 1-800-554-4611. If
you previously have established the Telephone Exchange Privilege, you may
telephone exchange instructions (including over The Dreyfus Touchr Automated
Telephone System) by calling 1-800-554-4611. If calling from overseas, call 516-
794-5452. See "How to Redeem Fund Shares - Procedures." Upon an exchange
into a new account, the following shareholder services and Privileges, as
applicable and where available, will be automatically carried over to the
fund into which the exchange is made: Telephone Exchange Privilege,
TeleTransfer Privilege and the dividends and distributions payment option
(except for Dividend Sweep) selected by the investor.
Shares will be exchanged at the next determined NAV; however, a sales
load may be charged with respect to exchanges of Class A shares into funds
sold with a sales load. No CDSC will be imposed on Class B or C shares at
the time of an exchange; however, Class B or C shares acquired through an
exchange will be subject to the higher CDSC applicable to the exchanged or
acquired shares. The CDSC applicable on redemption of the acquired Class B
or C shares will be calculated from the date of the initial purchase of the
Class B or C shares exchanged, as the case may be. If you are exchanging
Class A shares into a fund that charges a sales load, you may qualify for
share prices which do not include the sales load or which reflect a reduced
sales load, if the shares of the fund from which you are exchanging were:
(a) purchased with a sales load, (b) acquired by a previous exchange from
shares purchased with a sales load, or (c) acquired through reinvestment of
dividends or other distributions paid with respect to the foregoing
categories of shares. To qualify at the time of the exchange your Agent must
notify the Distributor. Any such qualification is subject to confirmation of
your holdings through a check of appropriate records. No fees currently are
charged shareholders directly in connection with exchanges, although each
Fund reserves the right, upon not less than 60 days' written notice, to
charge shareholders a nominal fee in accordance with rules promulgated by
the SEC. Each Fund reserves the right to reject any exchange request in
Whole or in part. The availability of fund exchanges may be modified or
terminated at any time upon notice to shareholders.
The exchange of shares of one fund for shares of another is treated for
Federal income tax purposes as a sale of the share given in exchange by the
shareholder and, therefore, an exchanging shareholder may realize a taxable
gain or loss.
By using the Telephone Exchange Privilege, the investor authorizes the
Transfer Agent to act on telephonic instructions (including over The Dreyfus
Touchr automated telephone system) from any person representing himself or
herself to be the investor or a representative of the investor's Agent, and
reasonably believed by the Transfer Agent to be genuine. Telephone
exchanges may be subject to limitations as to the amount involved or the
number of telephone exchanges permitted. Shares issued in certificate form
are not eligible for telephone exchange.
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 a Fund, shares of certain other
funds managed or administered by Dreyfus 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 at the then-
current NAV; however, a sales load may be charged with respect to exchanges
of Class A shares into funds sold with a sales load. No CDSC will be imposed
on Class B or C shares at the time of an exchange; however, Class B or C
shares acquired through an exchange will be subject to the higher CDSC
applicable to the exchanged or acquired shares. The CDSC applicable on
redemption of the acquired Class B or C shares will be calculated from the
date of the initial purchase of the Class B or C shares exchanged, as the
case may be. 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 a
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to The Dreyfus Family
of Funds, P.O. Box 6587, Providence, Rhode Island 02940-6587. A 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 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 (other than a tax-exempt Retirement Plan) 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 Builderr. Dreyfus Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000
per transaction) at regular intervals selected by you. Fund shares are
purchased by transferring funds from the bank account designated by you. At
your option, the bank account designated by you will be debited in the
specified amount, and Fund shares will be purchased, once a month, on either
the first or fifteenth day, or twice a month, on both days. Only an account
maintained at a domestic financial institution which is an ACH member may be
so designated. To establish a Dreyfus-Automatic Asset Builder account, you
must file an authorization form with the Transfer Agent. You may obtain the
necessary authorization form by calling 1-800-554-4611. You may cancel your
participation in this Privilege or change the amount of purchase at any time
by mailing written notification to the Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671 and the notification will be
effective three business days following receipt. The 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 share- holder'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
invest on the payment date their dividends or dividends and capital gain
distributions, if any, from a 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.
A sales load may be charged with respect to investments in shares of a
fund sold with a sales load. If you are investing in a fund that charges a
sales load, you may qualify for share prices which do not include the sales
load or which reflect a reduced sales load. If you are investing in a fund
or class that charges a CDSC, the shares purchased will be subject on
redemption to the CDSC, if any, applicable to the purchased shares. See
"Shareholder Services" in the SAI. Dividend ACH permits you to transfer
electronically on the payment date dividends or dividends and other
distributions, if any, from a Fund to a designated bank account. Only an
account maintained at a domestic financial institution which is an ACH
member may be so designated. Banks may charge a fee for this service.
For more information concerning these Privileges, or to request a
Dividend Options Form, please call toll free 1-800-554-4611. You may cancel
these Privileges by mailing written notification to Dreyfus Premier Limited
Term 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 Dividend Sweep. The Funds may modify
or terminate these Privileges at any time or charge a service fee. No such
fee currently is contemplated.
Government Direct Deposit Privilege. Government Direct Deposit
Privilege enables you to purchase Fund shares (minimum of $100 and maximum
of $50,000 per transaction) by having Federal salary, Social Security or
certain veterans', military or other payments from the Federal government
automatically deposited into your Fund account. You may deposit as much of
such payments as you elect. To enroll in Government Direct Deposit, you
must file with the Transfer Agent a completed Direct Deposit Sign-Up Form
for each type of payment that you desire to include in this Privilege. The
appropriate form may be obtained 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, a 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.
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 of 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 the Fund
by Dreyfus. Debt securities purchased and sold by a Fund are generally
traded on a net basis (i.e., without commission) through dealers acting for
their own account and not as brokers, or otherwise involve transactions
directly with the issuer of the instrument. This means that a dealer (the
securities firm or bank dealing with the Fund) makes a market for securities
by offering to buy at one price and sell at a slightly higher price. The
difference between the prices is known as a spread. Other portfolio
transactions may be executed through brokers acting as agent. The Funds
will pay a spread or commissions in connection with such transactions.
Dreyfus uses its best efforts to obtain execution of portfolio transactions
at prices which are advantageous to the Funds and at spreads and commission
rates, if any, which are reasonable in relation to the benefits received.
Dreyfus also places transactions for other accounts that it provides with
investment advice.
Brokers and dealers involved in the execution of portfolio transactions
on behalf of a Fund are selected on the basis of their professional
capability and the value and quality of their services. In selecting brokers
or dealers, Dreyfus will consider various relevant factors, including, but
not limited to, the size and type of the transaction; the nature and
character of the markets for the security to be purchased or sold; the
execution efficiency, settlement capability, and financial condition of the
broker-dealer; the broker-dealer's execution services rendered on a
continuing basis; and the reasonableness of any spreads (or commissions, if
any). Any spread, commission, fee or other remuneration paid to an
affiliated broker-dealer is paid pursuant to the Trust's procedures adopted
in accordance with Rule 17e-1 of the 1940 Act. 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 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 ended June 30, 1997, 1998 and 1999
in securities effected on an agency basis through a broker-dealer for
research for the Municipal Fund was $_____________, and the commissions and
concessions related to such transactions was $_______. The aggregate amount
of transactions ended June 30, 1997, 1998 and 1999 in securities effected on
an agency basis through a broker-dealer for research for the Massachusetts
Municipal Fund was $_____________, and the commissions and concessions
related to such transactions was $_______.
Portfolio Turnover. While securities are purchased for the fund on the
basis of potential for long-term growth of capital and not for short-term
trading profits, the Fund's portfolio turnover rate may exceed 100%. A
portfolio turnover rate of 100% would occur, for example, if all the
securities held by the Fund were replaced once in a period of one year. A
higher rate of portfolio turnover involves correspondingly greater brokerage
commissions and other expenses that must be borne directly by the Fund and,
thus, indirectly by its shareholders. In addition, a 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 Fund 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 Fund's 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, 1997, 1998 and 1999 for the Municipal Fund were
30.50%, 14.62% and 28.19%, respectively. The portfolio turnover rates for
the fiscal years ended June 30, 1997, 1998 and 1999 for the Massachusetts
Municipal Fund were 22.57%, 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 yield1*
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 30day
period (net of reimbursements) is subtracted from the amount of the
dividends and interest earned (computed in accordance with regulatory
requirements) by the Fund with respect to such Class during the period.
That result is then divided by the product of: (a) the average daily number
of shares outstanding during the period that were entitled to receive
dividends, and (b) the maximum offering price per share in the case of Class
A or the net asset value per share in the case of Class B, Class C and Class
R on the last day of the period less any undistributed earned income per
share reasonably expected to be declared as a dividend shortly thereafter.
The quotient is then added to 1, and that sum is raised to the 6th power,
after which 1 is subtracted. The current yield is then arrived at by
multiplying the result by 2.
The 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, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market share,
etc.) and its presence in the defined contribution plan market.
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 The Dreyfus Corporation 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
The following information supplements and should be read in conjunction
with the section in the Funds' Prospectuses entitled "The Fund."
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
Mellon Bank, which is located at One Mellon Bank Center, Pittsburgh, PA
15258, is the Funds' custodian. Dreyfus Transfer, Inc., a wholly-owned
subsidiary of Dreyfus, P.O. Box 9671, Providence, RI 02940-9671, is each
Fund's transfer and dividend disbursing agent. 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. 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.
__________________________, has passed upon the legality of the shares
offered by the Funds' Prospectuses and this SAI.
______________________________________________, 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
the SEC (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.
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).
While the Commonwealth's expenditures for State programs and services
in each of the fiscal years 1987 through 1991 exceeded each year's current
revenues, Massachusetts ended each of the fiscal years 1991 to 1997 with a
positive closing fund balance in its budgeted operating funds, and expected
to close with a portion balance at the close of fiscal 1998.
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 year 1994, 1995,
1996 and 1997, Medicaid expenditures were $3.313 billion, $3.398 billion,
$3.416 billion and $3.456 billion, respectively. The average annual growth
rate from fiscal 1993 to fiscal 1997 was 2.3%. It is estimated that in
fiscal 1998, Medicaid expenditures will be $3.62 billion, an increase of
4.7% from fiscal 1997. This amount includes $38.5 million in outpatient
medical services recently transferred to Medicaid in fiscal 1998.
Massachusetts' pension costs have risen dramatically as the State has
appropriated funds to address in part the unfunded liabilities that had
accumulated over several decades. Total pension costs increased at an
average rate of 7.6% from $751.5 million in fiscal 1992 to $1.005 billion in
fiscal 1996. The pension costs in 1997 were $1.069 billion and are
estimated to be $1.069 billion in fiscal 1998.
Payments for debt service on Massachusetts general obligation bonds and
notes have risen at an average annual rate of 10.27% from $649.8 million in
fiscal 1989 to $1.184 billion in fiscal 1996. Debt service payments were
$898.3 million in fiscal 1992, $1.14 billion in fiscal 1993, $1.15 billion
in fiscal 1994, $1.23 billion in fiscal 1995 and $1.18 billion in fiscal
1996. In 1990, legislation was enacted which generally imposes a 10% limit
on the total appropriations in any fiscal year that may be expended for
payment of interest and principal on general obligation debt. As of April
1, 1998, the State had approximately $14.075 billion of long-term general
obligation debt outstanding and short-term direct obligations of the
Commonwealth totalled $451.5 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 2 1/2, 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 2 1/2 limits
the property taxes which a Massachusetts city or town may assess in any
fiscal year to the lesser of (i) 2.5% of the full and fair cash value of
real estate and personal property therein and (ii) 2.5% over the previous
year's levy limit plus any growth in the tax base from certain new
construction and parcel subdivisions. In addition, Proposition 2 1/2 limits
any increase in the charges and fees assessed by certain governmental
entities, including county governments, on cities and towns to the sum of
(i) 2.5% of the total charges and fees imposed in the preceding fiscal year,
and (ii) any increase in charges for services customarily provided locally
or services obtained by the city or town at its option. The law contains
certain override provisions which require voter approval at a general or
special election. Proposition 2 1/2 also limits any annual increase in the
total assessments on cities and towns by any county, district, authority,
the Commonwealth, or any other governmental entity except regional school
districts and regional water and sewer districts whose budgets are approved
by 2/3 of their member cities and towns. During the 1980s, Massachusetts
increased payments to the cities, towns and regional school districts
("Local Aid") to mitigate the impact of Proposition 2 1/2 on local programs and
services. In fiscal 1998, approximately 20.6% of Massachusetts' budget was
allocated to Local Aid. Direct Local Aid dropped from a high of $2.961
billion in fiscal 1989 to $2.727 billion in fiscal 1994, but increased to
$3.246 billion in fiscal 1996 and $3.558 billion in fiscal 1997. Recent
increases are largely a result of comprehensive education reform legislation
enacted in 1993 that requires annual increases in state expenditures for
education funding, subject to annual legislative appropriations, above a
fiscal 1993 base of approximately $1.288 billion. Increases of $175 million
above the base for fiscal 1994 to $881 million for fiscal 1997 have been
fully funded. The fiscal 1998 budget also fully funded the requirement
imposed by this legislation. Additional increases are called for in future
years.
Many factors affect the financial condition of the Commonwealth and its
cities, towns and public bodies, such as social, environmental, and economic
conditions, many of which are not within the control of such entities. As
is the case with most urban States, the continuation of many of
Massachusetts' programs, particularly its human services programs, is in
significant part dependent upon continuing Federal reimbursements which have
been steadily declining. The loss of grants to Massachusetts and its cities
and towns could further slow economic development. To the extent that such
factors may exist, they could have an adverse effect on economic conditions
in Massachusetts, although what effects, if any, such factors would have on
Massachusetts' Municipal Obligations cannot be predicted.
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
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.
_______________________________
1* 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 12% (combined effective rate of 46.85% for the
Massachusetts Municipal Fund).
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.
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.
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) Powers of Attorney.
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.
Item 26. Business and Other Connections of Investment Adviser
----------------------------------------------------
Investment Adviser -- The Dreyfus Corporation
The Dreyfus Corporation ("Dreyfus") and subsidiary companies
comprise a financial service organization whose business consists primarily
of providing investment management services as the investment adviser,
manager and distributor for sponsored investment companies registered under
the Investment Company Act of 1940 and as an investment adviser to
institutional and individual accounts. Dreyfus also serves as
sub-investment adviser to and/or administrator of other investment
companies. Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus, serves primarily as a registered broker-dealer of shares of
investment companies sponsored by Dreyfus and of other investment companies
for which Dreyfus acts as investment adviser, sub-investment adviser or
administrator. Dreyfus Investment Advisors, Inc., another wholly-owned
subsidiary, provides investment management services to various pension plans,
institutions and individuals.
<TABLE>
<CAPTION>
ITEM 26. Business and Other Connections of Investment Adviser (continued)
Officers and Directors of Investment Adviser
<S> <C> <C> <C>
Name and Position
With Dreyfus Other Businesses Position Held Dates
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
Pareto Partners Partner Representative 11/95 - 5/97
271 Regent Street
London, England W1R 8PP
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 Director 5/93 - Present
Executive 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 2930 East Third Ave. Managers
Officer, Chief Investment Denver, CO 80206 Acting Chief Executive 7/98 - 12/98
Officer, and Director Officer
(Continued)
The Dreyfus Trust Company+++ Director 6/ 95 - 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 2/99 - Present
2930 East Third Avenue Managers
Denver, CO 80206
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
Mellon Financial Company+ Principal Exec. Officer 1/88 - Present
Chief Financial Officer 8/87 - Present
Director 8/87 - Present
President 8/87 - Present
Mellon Overseas Investments Director 4/88 - Present
Corporation+ Chairman 7/89 - 11/97
President 4/88 - 11/97
Chief Executive Officer 4/88 - 11/97
Mellon International Investment Director 9/89 - 8/97
Corporation+
Steven G. Elliott Mellon Financial Services Treasurer 12/87 - Present
Director (Continued) Corporation # 5+
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 - Present
401 North Maple Ave. Chief Executive Officer 11/97 - Present
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 - Present
Organization, Inc.++ President 1/97 - Present
Seven Six Seven Agency, Inc. ++ Director 1/97 - Present
Dreyfus Insurance Agency of Chairman 5/97 - Present
Massachusetts, Inc.++++ President 5/97 - Present
Director 5/97 - Present
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 - Present
Corporation++ President 5/97 - Present
Director 12/94 - Present
Founders Asset Management, LLC Member, Board of 12/97 - Present
2930 East Third Avenue Managers
Denver, CO. 80206
The Boston Company Advisors, Chairman 12/95 - Present
Inc. Chief Executive Officer 12/95 - Present
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
Lawrence S. Kash Laurel Capital Advisors, Inc. + Trustee 12/91 - 1/98
Vice Chairman Chairman 9/93 - 1/98
And Director (Continued) 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 Insurance Agency of Director 5/98 - Present
Massachusetts, Inc.++++
Seven Six Seven Agency, Inc.++ Director 10/98 - Present
Mellon Residential Funding Corp. + Director 4/97 - Present
Mellon Trust of Florida, N.A. Director 8/97 - Present
2875 Northeast 191st Street
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
J. David Officer Mellon Trust of New York Director 6/96 - Present
Vice Chairman and 1301 Avenue of the Americas
Director (Continued) 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 2930 East Third Avenue Chief Executive Officer 12/98 - Present
Denver, CO. 80206
Prudential Securities Senior Vice President 07/91 - 11/98
New York, NY Regional Director 07/91 - 11/98
Richard F. Syron American Stock Exchange Chairman 4/94 - Present
Director 86 Trinity Place Chief Executive Officer 4/94 - Present
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
The Boston Company Asset Chairman 6/98 - Present
Management, LLC* Director 1/98 - 6/98
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
Ronald P. O'Hanley Laurel Capital Advisors+ Trustee 3/97 - Present
Vice Chairman (Continued)
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 - Present
Organization, Inc.++
William H. Maresca The Dreyfus Trust Company+++ Director 3/97 - Present
Controller
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
Trotwood Hunters Site A Corp. ++ Vice President 10/98 - Present
Dreyfus Transfer, Inc. Chief Financial Officer 5/98 - Present
One American Express Plaza,
Providence, RI 02903
Dreyfus Service Assistant Treasurer 3/93 - Present
Organization, Inc.++
Dreyfus Insurance Agency of Assistant Treasurer 5/98 - Present
Massachusetts, Inc.++++
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
William T. Sandalls, Jr. Dreyfus-Lincoln, Inc. Director 12/96 - Present
Executive Vice President 4500 New Linden Hill Road President 1/97 - Present
(Continued) 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
Dreyfus Partnership President 1/97 - 6/97
Management, Inc.++ Director 1/96 - 6/97
Dreyfus Service Organization, Director 1/96 - 6/97
Inc.++ Executive Vice President 1/96 - 6/97
Treasurer 10/96- Present
Dreyfus Insurance Agency of Director 5/97 - Present
Massachusetts, Inc.++++ Treasurer 5/97- Present
Executive Vice President 5/97 - Present
Diane P. Durnin Dreyfus Service Corporation++ Senior Vice President - 5/95 - 3/99
Vice President - Product Marketing and Advertising
Development 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
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 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.
</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
45) Dreyfus Money Market Instruments, Inc.
46) Dreyfus Municipal Bond Fund, Inc.
47) Dreyfus Municipal Cash Management Plus
48) Dreyfus Municipal Money Market Fund, Inc.
49) Dreyfus New Jersey Intermediate Municipal Bond Fund
50) Dreyfus New Jersey Municipal Bond Fund, Inc.
51) Dreyfus New Jersey Municipal Money Market Fund, Inc.
52) Dreyfus New Leaders Fund, Inc.
53) Dreyfus New York Insured Tax Exempt Bond Fund
54) Dreyfus New York Municipal Cash Management
55) Dreyfus New York Tax Exempt Bond Fund, Inc.
56) Dreyfus New York Tax Exempt Intermediate Bond Fund
57) Dreyfus New York Tax Exempt Money Market Fund
58) Dreyfus U.S. Treasury Intermediate Term Fund
59) Dreyfus U.S. Treasury Long Term Fund
60) Dreyfus 100% U.S. Treasury Money Market Fund
61) Dreyfus U.S. Treasury Short Term Fund
62) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
63) Dreyfus Pennsylvania Municipal Money Market Fund
64) Dreyfus Premier California Municipal Bond Fund
65) Dreyfus Premier Equity Funds, Inc.
66) Dreyfus Premier International Funds, Inc.
67) Dreyfus Premier GNMA Fund
68) Dreyfus Premier Worldwide Growth Fund, Inc.
69) Dreyfus Premier Municipal Bond Fund
70) Dreyfus Premier New York Municipal Bond Fund
71) Dreyfus Premier State Municipal Bond Fund
72) Dreyfus Premier Value Equity Funds
73) Dreyfus Short-Intermediate Government Fund
74) Dreyfus Short-Intermediate Municipal Bond Fund
75) The Dreyfus Socially Responsible Growth Fund, Inc.
76) Dreyfus Stock Index Fund, Inc.
77) Dreyfus Tax Exempt Cash Management
78) The Dreyfus Third Century Fund, Inc.
79) Dreyfus Treasury Cash Management
80) Dreyfus Treasury Prime Cash Management
81) Dreyfus Variable Investment Fund
82) Dreyfus Worldwide Dollar Money Market Fund, Inc.
83) Founders Funds, Inc.
84) General California Municipal Bond Fund, Inc.
85) General California Municipal Money Market Fund
86) General Government Securities Money Market Fund, Inc.
87) General Money Market Fund, Inc.
88) General Municipal Bond Fund, Inc.
89) General Municipal Money Market Funds, Inc.
90) General New York Municipal Bond Fund, Inc.
91) 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 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 26th day of August, 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 8/26/99
- ---------------------------
Marie E. Connolly
/s/Joseph S. DiMartino* Trustee, Chairman of the Board 8/26/99
- ---------------------------
Joseph S. DiMartino
/s/James M. Fitzgibbons* Trustee 8/26/99
- ---------------------------
James M. Fitzgibbons
/s/Kenneth A. Himmel* Trustee 8/26/99
- ---------------------------
Kenneth A. Himmel
/s/Stephen J. Lockwood* Trustee 8/26/99
- ---------------------------
Stephen J. Lockwood
/s/Roslyn M. Watson* Trustee 8/26/99
- ---------------------------
Roslyn M. Watson
/s/J. Tomlinson Fort* Trustee 8/26/99
- ---------------------------
J. Tomlinson Fort
/s/Arthur L. Goeschel* Trustee 8/26/99
- ---------------------------
Arthur L. Goeschel
/s/John Sciullo* Trustee 8/26/99
- ---------------------------
John Sciullo
/s/Benaree Pratt Wiley* Trustee 8/26/99
- ---------------------------
Benaree Pratt Wiley
*By: /s/Stephanie D. Pierce
---------------------------
Stephanie D. Pierce
Attorney-in-Fact
Exhibit Index
______________
Not applicable
Other Exhibits
(A) Power of Attorney of Trustees
POWER OF ATTORNEY
The undersigned hereby constitute and appoint Margaret
W. Chambers, Marie E. Connolly, Douglas C. Conroy, Frederick
C. Dey, Christopher J. Kelley, Kathleen K. Morrisey,
Stephanie Pierce, Elba Vasquez, and Karen Jacoppo-Wood, and
each of them, with full power to act without the other, his
or her true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him or her,
and in his or her name, place and stead, in any and all
capacities (until revoked in writing) to sign any and all
amendments to the Registration Statement of each Fund
enumerated on Exhibit A hereto (including post-effective
amendments and amendments thereto), and to file the same,
with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and
every act and thing ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his
or her substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
June 1, 1999
/s/ Joseph S. DiMartino
June 1, 1999
/s/ James M. Fitzgibbons
June 1, 1999
/s/ J. Tomlinson Fort
June 1, 1999
/s/ Arthur L. Goeschel
June 1, 1999
/s/ Kenneth A. Himmel
June 1, 1999
/s/ Stephen J. Lockwood
June 1, 1999
/s/ John J. Sciullo
June 1, 1999
/s/ Roslyn Watson
June 1, 1999
/s/ Benaree Pratt Wiley
EXHIBIT A
The Dreyfus/Laurel Funds, Inc.
The Dreyfus/Laurel Funds Trust
The Dreyfus/Laurel Tax-Free Municipal Funds
Dreyfus High Yield Strategies Fund
