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. 53 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 53 [ X ]
(Check appropriate box or boxes.)
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
(formerly The Laurel Tax-Free Municipal Funds)
___________________________________________________
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6000
Mark N. Jacobs, Esq.
Secretary
The Dreyfus/Laurel Tax-Free
Municipal Funds
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
----
X on November 1, 2000 pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(i)
----
on (date) pursuant to paragraph (a)(i)
----
75 days after filing pursuant to paragraph (a)(ii)
----
on (date) pursuant to paragraph (a)(ii) of Rule 485
----
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
----
The following post-effective amendment to the Registrant's Registration
Statement on Form N-1A relates to the following series of the Registrant:
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, 2000
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
--------------------------------------------------------------------
8 Account Policies
11 Distributions and Taxes
12 Services for Fund Investors
14 Instructions for Regular Accounts
FOR MORE INFORMATION
-------------------------------------------------------------------------------
Back Cover
What every investor should know about the fund
Information for managing your fund account
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
short-term 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 of 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 fluctuate as market conditions and interest rates change,
and as the short-term securities in its portfolio mature and the proceeds are
reinvested in securities with different interest rates. 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 bar chart and table below show some of the risks of investing in the fund.
The bar chart shows the changes in the fund's performance from year to year. The
table shows the fund's average annual total return over time. Of course, past
performance is no guarantee of future results.
--------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
5.70 4.53 2.96 2.37 2.44 3.38 3.09 3.17 2.87 2.60
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q3 '90 +1.42%
WORST QUARTER: Q2 '94 +0.52%
THE FUND'S YEAR-TO-DATE TOTAL RETURN AS OF 9/30/00 WAS 2.33%.
--------------------------------------------------------
Average annual total return AS OF 12/31/99
1 Year 5 Years 10 Years
--------------------------------------------------------
2.60% 3.02% 3.31%
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 table 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.
--------------------------------------------------------
Expense example
1 Year 3 Years 5 Years 10 Years
-----------------------------------------------------------------------------
$47 $148 $258 $579
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 Dreyfus 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 trustees 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 $138
billion in over 160 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus a management fee at the annual rate of 0.45% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a global financial services company with approximately
$2.8 trillion of assets under management, administration or custody, including
approximately $521 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
The fund, Dreyfus and Dreyfus Service Corporation (the fund's distributor) each
has adopted a code of ethics that permits its personnel, subject to such code,
to invest in securities, including securities that may be purchased or held by
the fund. The Dreyfus code of ethics restricts the personal securities
transactions of its employees, and requires portfolio managers and other
investment personnel to comply with the code's preclearance and disclosure
procedures. Its primary purpose is to ensure that personal trading by Dreyfus
employees does not disadvantage any Dreyfus-managed fund.
<PAGE 6>
FINANCIAL HIGHLIGHTS
This table describes the fund's performance for the fiscal periods indicated.
"Total return" shows how much your investment in the fund would have increased
(or decreased) during each period, assuming you had reinvested all dividends and
distributions. These financial highlights have been audited by KPMG LLP, whose
report, along with the fund's financial statements, is included in the annual
report, which is available upon request.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30,
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations:
Investment income -- net .028 .026 .031 .031 .031
Distributions:
Dividends from investment
income -- net (.028) (.026) (.031) (.031) (.031)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 2.85 2.62 3.13 3.11 3.19
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of operating expenses
to average net assets (%) .45 .45 .45 .42 .44
Ratio of interest expense
to average net assets (%) .01 .01 .01 -- --
Ratio of net investment income
to average net assets (%) 2.80 2.58 3.08 3.09 3.36
Decrease reflected in
above expense ratios due to
actions by Dreyfus (%) -- -- -- .03 .07
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 119,486 109,392 100,262 80,580 36,728
</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: a method of valuing a money market fund's 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 to permit the fund to maintain a stable NAV.
<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 against shares recently purchased by check or
TeleTransfer, please note that:
* if you send a written request to sell such shares, the fund may
delay selling the shares for up to eight business days following the
purchase of those shares
* the fund will not honor redemption checks, or process wire,
telephone or TeleTransfer redemption requests for up to eight
business days following the purchase of those shares
--------------------------------------------------------
Limitations on selling shares by phone
Proceeds
sent by Minimum Maximum
--------------------------------------------------------
CHECK NO MINIMUM $250,000 PER DAY
WIRE $5,000 $500,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
TELETRANSFER $1,000 $500,000 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 $10,000 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, 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).
* 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 (not available for IRAs). You can set up this service with
your application or by calling 1-800-645-6561.
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 SHARES WORTH $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 before investing. 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 -- by calling 1-800-645-6561.
Dreyfus Financial Centers
THROUGH A NATIONWIDE NETWORK of Dreyfus Financial Centers, Dreyfus offers a full
array of investment products and services. 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
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
By Telephone
WIRE Have your bank send your investment to Boston Safe Deposit & 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.
WIRE Have your bank send your investment to Boston Safe Deposit & 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.
Via the Internet
COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.
<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
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 certain 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 (for information, call 1-202-942-8090) or, after paying a
duplicating fee, by E-mail request to [email protected], or by writing to the
SEC's Public Reference Section, Washington, DC 20549-0102.
(c) 2000 Dreyfus Service Corporation
307P1100
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, 2000
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
--------------------------------------------------------------------
8 Account Policies
11 Distributions and Taxes
12 Services for Fund Investors
14 Instructions for Regular Accounts
FOR MORE INFORMATION
-------------------------------------------------------------------------------
Back Cover
What every investor should know about the fund
Information for managing your fund account
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
short-term 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 of 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 fluctuate as market conditions and interest rates change,
and as the short-term securities in its portfolio mature, and the proceeds are
reinvested in securities with different interest rates. 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 bar chart and table below show some of the risks of investing in the fund.
The bar chart shows the changes in the fund's performance from year to year. The
table shows the fund's average annual total return over time. 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 2.76
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q2 '95 +0.92%
WORST QUARTER: Q1 '94 +0.44%
THE FUND'S YEAR-TO-DATE TOTAL RETURN AS OF 9/30/00 WAS 2.66%.
--------------------------------------------------------
Average annual total return AS OF 12/31/99
Since
inception
1 Year 5 Years (2/1/93)
-----------------------------------------------------------------------
2.76% 3.13% 2.86%
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 table 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 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.
*** THE 0.01% AMOUNT NOTED IN "OTHER EXPENSES" REFLECTS INTEREST PAYMENTS.
--------------------------------------------------------
Expense example
1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------------------------------
$47 $148 $258 $579
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 Dreyfus 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 trustees 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 $138
billion in over 160 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus a management fee at the annual rate of 0.45% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a global financial services company with approximately
$2.8 trillion of assets under management, administration or custody, including
approximately $521 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
The fund, Dreyfus and Dreyfus Service Corporation (the fund's distributor) each
has adopted a code of ethics that permits its personnel, subject to such code,
to invest in securities, including securities that may be purchased or held by
the fund. The Dreyfus code of ethics restricts the personal securities
transactions of its employees, and requires portfolio managers and other
investment personnel to comply with the code's preclearance and disclosure
procedures. Its primary purpose is to ensure that personal trading by Dreyfus
employees does not disadvantage any Dreyfus-managed fund.
<PAGE 6>
FINANCIAL HIGHLIGHTS
This table describes the fund's performance for the fiscal periods indicated.
"Total return" shows how much your investment in the fund would have increased
(or decreased) during each period, assuming you had reinvested all dividends and
distributions. These financial highlights have been audited by KPMG LLP, whose
report, along with the fund's financial statements, is included in the annual
report, which is available upon request.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30,
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations:
Investment income -- net .032 .027 .031 .031 .033
Distributions:
Dividends from investment
income -- net (.032) (.027) (.031) (.031) (.033)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 3.21 2.76 3.17 3.12 3.31
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of operating expenses
to average net assets (%) .45 .45 .47 .37 .35
Ratio of interest expense
to average net assets (%) .01 -- -- -- --
Ratio of net investment income
to average net assets (%) 3.18 2.71 3.15 3.09 3.24
Decrease reflected in
above expense ratios due to
actions by Dreyfus (%) -- -- -- .09 .02
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 123,027 122,751 111,394 90,264 52,317
</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: a method of valuing a money market 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 to permit the fund to maintain a stable NAV.
<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 against shares recently purchased by check or
TeleTransfer, please note that:
* if you send a written request to sell such shares,
the fund may delay selling the shares for up to
eight business days following the purchase of
those shares
* the fund will not honor redemption checks, or
process wire, telephone or TeleTransfer redemption
requests for up to eight business days following
the purchase of those shares
--------------------------------------------------------
Limitations on selling shares by phone
Proceeds
sent by Minimum Maximum
--------------------------------------------------------
CHECK NO MINIMUM $250,000 PER DAY
WIRE $5,000 $500,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
TELETRANSFER $1,000 $500,000 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 $10,000 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, 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).
* 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 (not available for IRAs). You can set up this service with
your application or by calling 1-800-645-6561.
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 SHARES WORTH $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 before investing. 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 -- by calling 1-800-645-6561.
Dreyfus Financial Centers
THROUGH A NATIONWIDE NETWORK of Dreyfus Financial Centers, Dreyfus offers a full
array of investment products and services. 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
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
By Telephone
WIRE Have your bank send your investment to The Boston Safe Deposit & 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.
WIRE Have your bank send your investment to The Boston Safe Deposit & 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.
Via the Internet
COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.
<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
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 certain 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 (for information, call 1-202-942-8090) or, after paying a
duplicating fee, by E-mail request to [email protected], or by writing to the
SEC's Public Reference Section, Washington, DC 20549-0102.
(c) 2000 Dreyfus Service Corporation
715P1100
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, 2000
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
--------------------------------------------------------------------
8 Account Policies
11 Distributions and Taxes
12 Services for Fund Investors
14 Instructions for Regular Accounts
FOR MORE INFORMATION
-------------------------------------------------------------------------------
Back Cover
What every investor should know about the fund
Information for managing your fund account
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
short-term 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 of 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 fluctuate as market conditions and interest rates change,
and as the short-term securities in its portfolio mature and the proceeds are
reinvested in securities with different interest rates. 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 bar chart and table below show some of the risks of investing in the fund.
The bar chart shows the changes in the fund's performance from year to year. The
table shows the fund's average annual total return over time. Of course, past
performance is no guarantee of future results.
--------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
5.51 4.54 2.96 2.12 2.19 3.42 3.08 3.17 2.94 2.75
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q4 '90 +1.39%
WORST QUARTER: Q3 '94 +0.51%
THE FUND'S YEAR-TO-DATE TOTAL RETURN AS OF 9/30/00 WAS 2.63%.
--------------------------------------------------------
Average annual total return AS OF 12/31/99
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
2.75% 3.07% 3.26%
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 table 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.
--------------------------------------------------------
Expense example
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$46 $144 $252 $567
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 Dreyfus 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 trustees 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 $138
billion in over 160 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus a management fee at the annual rate of 0.45% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a global financial services company with approximately
$2.8 trillion of assets under management, administration or custody, including
approximately $521 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
The fund, Dreyfus and Dreyfus Service Corporation (the fund's distributor) each
has adopted a code of ethics that permits its personnel, subject to such code,
to invest in securities, including securities that may be purchased or held by
the fund. The Dreyfus code of ethics restricts the personal securities
transactions of its employees, and requires portfolio managers and other
investment personnel to comply with the code's preclearance and disclosure
procedures. Its primary purpose is to ensure that personal trading by Dreyfus
employees does not disadvantage any Dreyfus-managed fund.
<PAGE 6>
FINANCIAL HIGHLIGHTS
This table describes the fund's performance for the fiscal periods indicated.
"Total return" shows how much your investment in the fund would have increased
(or decreased) during each period, assuming you had reinvested all dividends and
distributions. These financial highlights have been audited by KPMG LLP, whose
report, along with the fund's financial statements, is included in the annual
report, which is available upon request.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30,
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations:
Investment income -- net .032 .027 .031 .031 .031
Distributions:
Dividends from investment
income -- net (.032) (.027) (.031) (.031) (.031)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 3.20 2.69 3.14 3.11 3.14
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses
to average net assets (%) .45 .45 .45 .41 .43
Ratio of net investment income
to average net assets (%) 3.17 2.65 3.09 3.08 3.43
Decrease reflected in above
expense ratios due to actions
by Dreyfus (%) -- - - .04 .09
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 358,095 314,095 334,488 272,544 156,491
</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: a method of valuing a money market fund's 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 to permit the fund to maintain a stable NAV.
<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 against shares recently purchased by check or
TeleTransfer, please note that:
* if you send a written request to sell such shares, the fund may
delay selling the shares for up to eight business days following the
purchase of those shares
* the fund will not honor redemption checks, or process wire,
telephone or TeleTransfer redemption requests for up to eight
business days following the purchase of those shares
--------------------------------------------------------
Limitations on selling shares by phone
Proceeds
sent by Minimum Maximum
--------------------------------------------------------
CHECK NO MINIMUM $250,000 PER DAY
WIRE $5,000 $500,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
TELETRANSFER $1,000 $500,000 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 $10,000 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, 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).
* 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 (not available for IRAs). You can set up this service with
your application or by calling 1-800-645-6561.
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 SHARES WORTH $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 before investing. 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 -- by calling 1-800-645-6561.
Dreyfus Financial Centers
THROUGH A NATIONWIDE NETWORK of Dreyfus Financial Centers, Dreyfus offers a full
array of investment products and services. 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
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
By Telephone
WIRE Have your bank send your investment to Boston Safe Deposit & 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.
WIRE Have your bank send your investment to Boston Safe Deposit & 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.
Via the Internet
COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.
<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
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 certain 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 (for information, call 1-202-942-8090) or, after paying a
duplicating fee, by E-mail request to [email protected], or by writing to the
SEC's Public Reference Section, Washington, DC 20549-0102.
(c) 2000 Dreyfus Service Corporation
316P1100
Dreyfus Premier Limited Term Massachusetts Municipal Fund
Investing for income that is exempt from federal and Massachusetts state income
taxes
PROSPECTUS November 1, 2000
(reg.tm)
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 2
Expenses 3
Management 4
Financial Highlights 5
Your Investment
--------------------------------------------------------------------------------
Account Policies 7
Distributions and Taxes 9
Services for Fund Investors 10
Instructions for Regular Accounts 11
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 at the time
of purchase, or the unrated equivalent as determined by Dreyfus.
Municipal bonds are typically of two types:
(pound) GENERAL OBLIGATION BONDS, which are secured by the full faith and
credit of the issuer and its taxing power
(pound) REVENUE BONDS, which are payable from the revenues derived
from a specific revenue source, such as charges for water and sewer
service or highway tolls
Concepts to understand
AVERAGE MATURITY: an average of the stated maturities of the bonds held in the
fund, based on their dollar-weighted proportions in the fund.
INVESTMENT GRADE BONDS: independent rating organizations analyze and evaluate a
bond issuer's credit history and ability to repay debts. Based on their
assessment, they assign letter grades that reflect the issuer's
creditworthiness. AAA or Aaa represents the highest credit rating, AA/Aa the
second highest, and so on down to D, for defaulted debt. Bonds rated BBB or Baa
and above are considered investment grade.
MAIN RISKS
Prices of bonds tend to move inversely with changes in interest rates. While a
rise in rates may allow the fund to invest for higher yields, the most immediate
effect is usually a drop in bond prices and, therefore, in the fund's share
price as well. As a result, the value of your investment in the fund could go up
and down, which means that you could lose money. To the extent that the fund
maintains a longer maturity than short-term bond funds, its share price
typically will react more strongly to interest rate movements.
Other risk factors could have an effect on the fund's performance:
(pound) 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
(pound) Massachusetts's economy and revenues underlying its municipal bonds may
decline
(pound) 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 municipal securities must be of investment grade quality when purchased
by the fund, they may subsequently be downgraded.
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.
During such periods, the fund may not achieve its investment objective.
Other potential risks
The fund, at times, may invest in certain derivatives, such as futures and
options, which may cause taxable income. 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.
The Fund
<PAGE 1>
PAST PERFORMANCE
The bar chart and table below show some of the risks of investing in the fund.
The bar chart shows the changes in the fund's Class A performance from year to
year. Sales loads are not reflected in the chart; if they were, the returns
shown would have been lower. The table compares the average annual total returns
of each of the fund' s share classes to those of the Lehman Brothers 10-Year
Municipal Bond Index and the Lehman Brothers 7-Year Municipal Bond Index, each a
broad measure of municipal bond performance. These returns reflect any
applicable sales charges. 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 (%)
5.92 12.39 8.59 10.51 -2.86 12.03 3.85 7.11 5.25 -1.60
90 91 92 93 94 95 96 97 98 99
CLASS A SHARES
BEST QUARTER: Q1 '95 +4.35%
WORST QUARTER: Q1 '94 -3.90%
THE FUND'S CLASS A YEAR-TO-DATE TOTAL RETURN AS OF 9/30/00 WAS 2.08%.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Average annual total return AS OF 12/31/99
Since
Inception date 1 Year 5 Years 10 Years inception
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS A (9/24/85) -4.58% 4.60% 5.67% --
CLASS B (12/28/94) -4.92% 4.59% -- 4.74%
CLASS C (12/28/94) -2.87% 4.78% -- 4.76%
CLASS R (2/1/93) -1.37% 5.49% -- 4.87%
LEHMAN BROTHERS
10-YEAR MUNICIPAL
BOND INDEX -1.25% 7.12% 7.10% 6.11%*
LEHMAN BROTHERS
7-YEAR MUNICIPAL
BOND INDEX -0.14% 6.35% 6.59% 5.56%*
* BASED ON LIFE OF CLASS R. FOR COMPARATIVE PURPOSES, THE VALUE OF EACH 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.
<PAGE 2>
<TABLE>
<CAPTION>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the table below.
Fee table
CLASS A CLASS B CLASS C CLASS R
--------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)
Maximum front-end sales charge on purchases
<S> <C> <C> <C> <C>
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>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A $374 $532 $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 Dreyfus 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.
The Fund
<PAGE 3>
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 $138
billion in over 160 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus a management fee at the annual rate of 0.50% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a global financial services company with approximately
$2.8 trillion of assets under management, administration or custody, including
approximately $521 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
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, which she joined
in May 1991.
The fund, Dreyfus and Dreyfus Service Corporation (the fund's distributor) each
has adopted a code of ethics that permits its personnel, subject to such code,
to invest in securities, including securities that may be purchased or held by
the fund. The Dreyfus code of ethics restricts the personal securities
transactions of its employees, and requires portfolio managers and other
investment personnel to comply with the code's preclearance and disclosure
procedures. Its primary purpose is to ensure that personal trading by Dreyfus
employees does not disadvantage any Dreyfus-managed fund.
<PAGE 4>
<TABLE>
<CAPTION>
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
audited by KPMG LLP, whose report, along with the fund's financial statements,
is included in the annual report, which is available upon request.
YEAR ENDED JUNE 30,
CLASS A 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 12.03 12.34 12.15 11.97 11.91
Investment operations: Investment income -- net .51 .51 .53 .54 .54
Net realized and unrealized gain (loss)
on investments (.14) (.30) .24 .20 .08
Total from investment operations .37 .21 .77 .74 .62
Distributions: Dividends from investment income -- net (.51) (.51) (.53) (.54) (.54)
Dividends from net realized gain on investments -- (.01) (.05) (.02) (.02)
Total distributions (.51) (.52) (.58) (.56) (.56)
Net asset value, end of period 11.89 12.03 12.34 12.15 11.97
Total return (%)* 3.21 1.60 6.41 6.36 5.22
---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .75 .75 .75 .75 .75
Ratio of net investment income to average net assets (%) 4.32 4.10 4.30 4.47 4.44
Portfolio turnover rate (%) 31.89 16.35 6.63 22.57 39.16
--------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 12,581 15,045 16,355 16,093 15,689
* EXCLUSIVE OF SALES CHARGE.
YEAR ENDED JUNE 30,
CLASS B 2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 12.06 12.37 12.18 11.99 11.91
Investment operations: Investment income -- net .45 .44 .47 .48 .48
Net realized and unrealized gain (loss) on investments (.14) (.30) .24 .21 .10
Total from investment operations .31 .14 .71 .69 .58
Distributions: Dividends from investment income -- net (.45) (.44) (.47) (.48) (.48)
Dividends from net realized gain on investments -- (.01) (.05) (.02) (.02)
Total distributions (.45) (.45) (.52) (.50) (.50)
Net asset value, end of period 11.92 12.06 12.37 12.18 11.99
Total return (%)* 2.70 1.09 5.87 5.90 4.87
---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.25 1.25 1.25 1.25 1.25
Ratio of net investment income to average net assets (%) 3.80 3.56 3.78 3.96 3.67
Portfolio turnover rate (%) 31.89 16.35 6.63 22.57 39.16
---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 738 901 637 464 452
* EXCLUSIVE OF SALES CHARGE.
The Fund
<PAGE 5>
FINANCIAL HIGHLIGHTS (CONTINUED)
YEAR ENDED JUNE 30,
CLASS C 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 12.08 12.38 12.15 11.97 11.91
Investment operations: Investment income -- net .46 .44 .46 .49 .48
Net realized and unrealized gain (loss) on investments (.15) (.29) .28 .20 .08
Total from investment operations .31 .15 .74 .69 .56
Distributions: Dividends from investment income -- net (.46) (.44) (.46) (.49) (.48)
Dividends from net realized gain on investments -- (.01) (.05) (.02) (.02)
Total distributions (.46) (.45) (.51) (.51) (.50)
Net asset value, end of period 11.93 12.08 12.38 12.15 11.97
Total return (%)* 2.63 1.18 6.19 5.87 4.68
---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.25 1.25 1.23 1.25 1.25
Ratio of net investment income to average net assets (%) 3.80 3.58 3.64 4.05 3.93
Portfolio turnover rate (%) 31.89 16.35 6.63 22.57 39.16
---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 50 332 282 7 16
* EXCLUSIVE OF SALES CHARGE.
YEAR ENDED JUNE 30,
CLASS R 2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 12.04 12.34 12.16 11.97 11.91
Investment operations: Investment income -- net .54 .54 .56 .57 .57
Net realized and unrealized gain (loss) on investments (.15) (.29) .23 .21 .08
Total from investment operations .39 .25 .79 .78 .65
Distributions: Dividends from investment income -- net (.54) (.54) (.56) (.57) (.57)
Dividends from net realized gain on investments -- (.01) (.05) (.02) (.02)
Total distributions (.54) (.55) (.61) (.59) (.59)
Net asset value, end of period 11.89 12.04 12.34 12.16 11.97
Total return (%) 3.37 1.93 6.58 6.70 5.46
--------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .50 .50 .50 .50 .50
Ratio of net investment income to average net assets (%) 4.58 4.35 4.54 4.73 4.68
Portfolio turnover rate (%) 31.89 16.35 6.63 22.57 39.16
--------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 96,832 70,901 50,959 33,188 25,981
</TABLE>
<PAGE 6>
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.
(pound) 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
(pound) 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
(pound) 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
(pound) 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.
Share class charges
EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay, or may qualify for a reduced, 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
Years since purchase investment or your redemption
was made (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
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 shares you own in this
fund, any other Dreyfus Premier fund, or any other fund that is advised by
Founders Asset Management LLC (Founders), an affiliate of Dreyfus, sold with a
sales load, 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.
The Fund
<PAGE 7>
ACCOUNT POLICIES (CONTINUED)
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 are generally valued based on 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
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 your financial
representative or the SAI for details.
BEFORE SELLING SHARES RECENTLY PURCHASED by check, TeleTransfer or Automatic
Asset Builder, please note that:
(pound) if you send a written request to sell such shares, the fund may delay
sending the proceeds for up to eight business days following the
purchase of those shares
(pound) the fund will not process wire, telephone or TeleTransfer redemption
requests for up to eight business days following the purchase of those
shares
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
(pound) amounts of $10,000 or more on accounts whose address has been changed
within the last 30 days
(pound) 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.
<PAGE 8>
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:
(pound) 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)
(pound) refuse any purchase or exchange request in excess of 1% of the fund's
total assets
(pound) change or discontinue its exchange privilege, or temporarily suspend
this privilege during unusual market conditions
(pound) change its minimum investment amounts
(pound) 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).
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 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.
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.
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.
Your Investment
<PAGE 9>
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
the fund into another Dreyfus fund
or certain Founders-advised funds
(not available for IRAs).
--------------------------------------------------------------------------------
For exchanging shares
DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from the fund into another
Dreyfus fund or certain
Founders-advised funds.
--------------------------------------------------------------------------------
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 amount of any withdrawal does not exceed an
annual rate of 12% of the greater of the account value at the time of the first
withdrawal under the plan, or at the time of the subsequent withdrawal.
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 or Founders-advised 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.
<PAGE 10>
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
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
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.
WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:
* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your account number
* name(s) of investor(s)
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but before your account number insert "4280" for
Class A, "4290" for Class B, "4300" for Class C, or "4930" for Class R.
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate
on your application which automatic service(s) you want. Return your application
with your investment.
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 "Account
Policies -- Selling Shares").
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.
Your Investment
<PAGE 11>
NOTES
<PAGE 12>
<PAGE 13>
NOTES
<PAGE 14>
NOTES
<PAGE 15>
NOTES
<PAGE 16>
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 certain 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 (for information, call 1-202-942-8090) or, after paying a
duplicating fee, by e-mail request to [email protected], or by writing to the
SEC's Public Reference Section, Washington, DC 20549-0102.
(c) 2000 Dreyfus Service Corporation
346P1100
<PAGE>
Dreyfus Premier Limited Term Municipal Fund
Investing for income that is exempt from federal income tax
PROSPECTUS November 1, 2000
(reg.tm)
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 2
Expenses 3
Management 4
Financial Highlights 5
Your Investment
--------------------------------------------------------------------------------
Account Policies 7
Distributions and Taxes 9
Services for Fund Investors 10
Instructions for Regular Accounts 11
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 at the time of purchase, or the unrated equivalent as determined by
Dreyfus.
Municipal bonds are typically of two types:
(pound) GENERAL OBLIGATION BONDS, which are secured by the full faith and
credit of the issuer and its taxing power
(pound) 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 bond funds, its share price
typically will react more strongly to interest rate movements.
Other risk factors could have an effect on the fund's performance:
(pound) 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
(pound) changes in economic, business or political
conditions relating to a particular municipal project, municipality
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 municipal securities must be of investment grade quality when purchased
by the fund, they may subsequently be downgraded.
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. During
such periods, the fund may not achieve its investment objective.
Other potential risks
The fund, at times, may invest in certain derivatives, such as futures and
options, which may cause taxable income. 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.
The Fund
<PAGE 1>
PAST PERFORMANCE
The bar chart and table below show some of the risks of investing in the fund.
The bar chart shows the changes in the fund's Class A performance from year to
year. Sales loads are not reflected in the chart; if they were, the returns
shown would have been lower. The table compares the average annual total returns
of each of the fund' s share classes to those of the Lehman Brothers 10-Year
Municipal Bond Index and the Lehman Brothers 7-Year Municipal Bond Index, each a
broad measure of municipal bond performance. These returns reflect any
appli-cable sales charges. 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
6.12 11.60 8.22 11.25 -3.57 12.73 3.84 7.23 5.43 -1.22
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q1 '95 +4.72%
WORST QUARTER: Q1 '94 -4.18%
THE FUND'S CLASS A YEAR-TO-DATE TOTAL RETURN AS OF 9/30/00 WAS 2.27%.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Average annual total return AS OF 12/31/99
Since
Inception date 1 Year 5 Years 10 Years inception
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS A (10/1/85) -4.22% 4.86% 5.71% --
CLASS B (12/28/94) -4.64% 4.79% -- 4.95%
CLASS C (12/28/94) -2.49% 5.04% -- 5.04%
CLASS R (2/1/93) -1.06% 5.75% -- 5.03%
LEHMAN BROTHERS
10-YEAR MUNICIPAL
BOND INDEX -1.25% 7.12% 7.10% 6.11%*
LEHMAN BROTHERS
7-YEAR MUNICIPAL
BOND INDEX -0.14% 6.35% 6.59% 5.56%*
* BASED ON LIFE OF CLASS R. FOR COMPARATIVE PURPOSES, THE VALUE OF EACH 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.
<PAGE 2>
<TABLE>
<CAPTION>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the table below.
Fee table
CLASS A CLASS B CLASS C CLASS R
---------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)
Maximum front-end sales charge on purchases
<S> <C> <C> <C> <C>
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 FOR CLASS C SHARES DO NOT REFLECT
EXTRAORDINARY EXPENSES INCURRED BY THE FUND DURING THE FISCAL YEAR ENDED JUNE
30, 2000. "OTHER EXPENSES" AND "TOTAL" EXPENSES FOR CLASS C SHARES WOULD HAVE
BEEN .01% AND 1.26%, RESPECTIVELY, IF EXTRAORDINARY EXPENSES WERE REFLECTED.
</TABLE>
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A $374 $532 $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 Dreyfus 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.
The Fund
<PAGE 3>
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 $138
billion in over 160 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus a management fee at the annual rate of 0.50% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a global financial services company with approximately
$2.8 trillion of assets under management, administration or custody, including
approximately $521 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
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 first vice president
of Boston Safe Deposit and Trust Company, an affiliate of Dreyfus, which he
joined in October 1994.
The fund, Dreyfus and Dreyfus Service Corporation (the fund's distributor) each
has adopted a code of ethics that permits its personnel, subject to such code,
to invest in securities, including securities that may be purchased or held by
the fund. The Dreyfus code of ethics restricts the personal securities
transactions of its employees, and requires portfolio managers and other
investment personnel to comply with the code's preclearance and disclosure
procedures. Its primary purpose is to ensure that personal trading by Dreyfus
employees does not disadvantage any Dreyfus-managed fund.
<PAGE 4>
<TABLE>
<CAPTION>
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
audited by KPMG LLP, whose report, along with the fund's financial statements,
is included in the annual report, which is available upon request.
YEAR ENDED JUNE 30,
CLASS A 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 12.03 12.32 12.12 11.89 11.82
Investment operations: Investment income -- net .52 .50 .52 .54 .54
Net realized and unrealized gain (loss) on investments (.09) (.28) .26 .26 .08
Total from investment operations .43 .22 .78 .80 .62
Distributions: Dividends from investment income -- net (.52) (.50) (.52) (.54) (.55)
Dividends from net realized gain on investments -- (.01) (.06) (.03) --
Total distributions (.52) (.51) (.58) (.57) (.55)
Net asset value, end of period 11.94 12.03 12.32 12.12 11.89
Total return (%)* 3.67 1.78 6.52 6.92 5.25
---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .75 .79 .77 .75 .75
Ratio of net investment income to average net assets (%) 4.36 4.06 4.24 4.52 4.53
Portfolio turnover rate (%) 45.65 28.19 14.62 30.50 55.07
---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 22,733 27,084 17,423 17,323 18,751
* EXCLUSIVE OF SALES CHARGE.
YEAR ENDED JUNE 30,
CLASS B 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 12.02 12.31 12.12 11.89 11.82
Investment operations: Investment income -- net .46 .44 .46 .48 .48
Net realized and unrealized gain (loss) on investments (.08) (.28) .25 .26 .07
Total from investment operations .38 .16 .71 .74 .55
Distributions: Dividends from investment income -- net (.46) (.44) (.46) (.48) (.48)
Dividends from net realized gain on investments -- (.01) (.06) (.03) --
Total distributions (.46) (.45) (.52) (.51) (.48)
Net asset value, end of period 11.94 12.02 12.31 12.12 11.89
Total return (%)* 3.24 1.25 5.89 6.38 4.71
---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.25 1.28 1.27 1.25 1.25
Ratio of net investment income to average net assets (%) 3.87 3.55 3.68 4.01 3.98
Portfolio turnover rate (%) 45.65 28.19 14.62 30.50 55.07
---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 3,870 2,779 1,240 551 500
* EXCLUSIVE OF SALES CHARGE.
The Fund
<PAGE 5>
FINANCIAL HIGHLIGHTS (CONTINUED)
YEAR ENDED JUNE 30,
CLASS C 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 12.06 12.34 12.14 11.90 11.82
Investment operations: Investment income -- net .46 .44 .46 .49 .48
Net realized and unrealized gain (loss) on investments (.08) (.27) .26 .27 .08
Total from investment operations .38 .17 .72 .76 .56
Distributions: Dividends from investment income -- net (.46) (.44) (.46) (.49) (.48)
Dividends from net realized gain on investments -- (.01) (.06) (.03) --
Total distributions (.46) (.45) (.52) (.52) (.48)
Net asset value, end of period 11.98 12.06 12.34 12.14 11.90
Total return (%)* 3.25 1.35 6.02 6.50 4.81
---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.26 1.26 1.27 1.27 1.24
Ratio of net investment income to average net assets (%) 3.86 3.58 3.71 4.17 4.00
Portfolio turnover rate (%) 45.65 28.19 14.62 30.50 55.07
---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 613 1,534 209 74 150
* EXCLUSIVE OF SALES CHARGE.
YEAR ENDED JUNE 30,
CLASS R 2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 12.02 12.31 12.12 11.89 11.82
Investment operations: Investment income -- net .55 .53 .55 .57 .57
Net realized and unrealized gain (loss) on investments (.08) (.28) .25 .26 .08
Total from investment operations .47 .25 .80 .83 .65
Distributions: Dividends from investment income -- net (.55) (.53) (.55) (.57) (.58)
Dividends from net realized gain on investments -- (.01) (.06) (.03) --
Total distributions (.55) (.54) (.61) (.60) (.58)
Net asset value, end of period 11.94 12.02 12.31 12.12 11.89
Total return (%) 4.01 2.02 6.69 7.17 5.51
---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .50 .54 .52 .50 .50
Ratio of net investment income to average net assets (%) 4.61 4.32 4.47 4.77 4.77
Portfolio turnover rate (%) 45.65 28.19 14.62 30.50 55.07
---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 68,997 64,575 43,018 25,741 17,870
<PAGE 6>
</TABLE>
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.
(pound) 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
(pound) 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
(pound) 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
(pound) 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.
Share class charges
EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay, or may qualify for a reduced, 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
Years since purchase investment or your redemption
was made (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
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 shares you own in this
fund, any other Dreyfus Premier fund, or any other fund that is advised by
Founders Asset Management LLC (Founders), an affiliate of Dreyfus, sold with a
sales load, 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.
Your Investment
<PAGE 7>
ACCOUNT POLICIES (CONTINUED)
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 are generally valued based on 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
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 your financial
representative or the SAI for details.
BEFORE SELLING SHARES RECENTLY PURCHASED by check, TeleTransfer or Automatic
Asset Builder, please note that:
(pound) if you send a written request to sell such shares, the fund may delay
sending the proceeds for up to eight business days following the
purchase of those shares
(pound) the fund will not process wire, telephone or TeleTransfer redemption
requests for up to eight business days following the purchase of those
shares
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
(pound) amounts of $10,000 or more on accounts whose address has been changed
within the last 30 days
(pound) 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.
<PAGE 8>
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:
(pound) 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)
(pound) refuse any purchase or exchange request in excess of 1% of the fund's
total assets
(pound) change or discontinue its exchange privilege, or temporarily suspend
this privilege during unusual market conditions
(pound) change its minimum investment amounts
(pound) 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).
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 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.
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.
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.
Your Investment
<PAGE 9>
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 the
fund into another Dreyfus fund or certain
Founders-advised funds (not available for IRAs).
--------------------------------------------------------------------------------
For exchanging shares
DREYFUS AUTO- For making regular exchanges from
EXCHANGE PRIVILEGE the fund into another Dreyfus fund
or certain Founders-advised funds.
--------------------------------------------------------------------------------
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 amount of any
withdrawal does not exceed an annual rate of 12%
of the greater of the account value at the time
of the first withdrawal under the plan, or at
the time of the subsequent withdrawal.
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 or Founders-advised 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.
<PAGE 10>
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
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
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.
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.
Automatically
WITH AN INITIAL INVESTMENT Indicate
on your application which automatic service(s) you want. Return your application
with your investment.
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 "Account
Policies--Selling Shares").
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.
Your Investment
<PAGE 11>
NOTES
<PAGE 12>
NOTES
<PAGE 13>
NOTES
<PAGE 14>
NOTES
<PAGE 15>
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 certain 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 (for information, call 1-202-942-8090) or, after paying a
duplicating fee, by e-mail request to [email protected], or by writing to the
SEC's Public Reference Section, Washington, DC 20549-0102.
(c) 2000 Dreyfus Service Corporation
347P1100
<PAGE>
------------------------------------------------------------------------------
DREYFUS BASIC CALIFORNIA MUNICIPAL MONEY MARKET FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
NOVEMBER 1, 2000
------------------------------------------------------------------------------
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of the
Dreyfus BASIC California Municipal Money Market Fund (the "Fund"), dated
November 1, 2000, 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
The financial statements of the Fund for the fiscal year ended June 30,
2000, 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.
TABLE OF CONTENTS
Page
Description of the Fund/Trust....................................B-2
Management of the Fund...........................................B-14
Management Arrangements..........................................B-19
Purchase of Shares...............................................B-21
Redemption of Shares.............................................B-24
Shareholder Services.............................................B-29
Determination of Net Asset Value.................................B-31
Performance Information..........................................B-33
Dividends, Other Distributions and Taxes.........................B-34
Portfolio Transactions...........................................B-38
Information About the Fund/Trust.................................B-40
Counsel and Independent Auditors.................................B-42
Appendix A.......................................................B-43
Appendix B.......................................................B-61
<PAGE>
DESCRIPTION OF THE FUND/TRUST
The Trust is an open-end management investment company organized as an
unincorporated business trust under the laws of the Commonwealth of
Massachusetts by an Agreement and Declaration of Trust dated March 28, 1983,
amended and restated December 9, 1992, and subsequently further amended. On
November 20, 1995, the Fund's "Investor" and "Class R" designations were
eliminated, the Fund became a single class fund, and the Fund's name was changed
from "Dreyfus/Laurel California Tax-Free Money Fund" to "Dreyfus BASIC
California Municipal Money Market Fund."
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
Dreyfus Service Corporation (the "Distributor") is the distributor of the
Fund's shares.
General Investment Objective and Policies. The Fund seeks to provide a
high level of current income exempt from Federal income taxes and State of
California personal income taxes to the extent consistent with the preservation
of capital and the maintenance of liquidity. The Fund seeks to achieve its
objective by investing in debt obligations issued by the State of California,
its political subdivisions, municipalities and public authorities and in
municipal obligations issued by other governmental entities if, in the opinion
of counsel to the respective issuers, the interest from such obligations is
excluded from gross income for Federal and State of California income tax
purposes ("California Municipal Obligations" or "Municipal Obligations").
Under normal market conditions, the Fund attempts to invest 100%, and will
invest a minimum of 80%, of its total assets in California Municipal
Obligations. When, in the opinion of Dreyfus, adverse market conditions exist
for California Municipal Obligations, and a "defensive" investment posture is
warranted, the Fund may temporarily invest more than 20% of its total assets in
money market instruments having maturity and quality characteristics comparable
to those for California Municipal Obligations, but which produce income exempt
from Federal but not State of California personal income taxes for resident
shareholders of California, or more than 20% of its total assets in taxable
obligations (including obligations the interest on which is included in the
calculation of alternative minimum tax for individuals). Periods when a
defensive posture is warranted include those periods when the Fund's monies
available for investment exceed the California Municipal Obligations available
for purchase to meet the Fund's rating, maturity and other investment criteria.
The Fund's policy of investing a minimum of 80% of its total assets in
California Municipal Obligations is a fundamental policy of the Fund.
The Fund pursues its objective by investing in a varied portfolio of high
quality, short-term California Municipal Obligations.
The California Municipal Obligations purchased by the Fund may include:
(1) municipal bonds; (2) municipal notes; (3) municipal commercial paper; and
(4) municipal lease obligations. The Fund will limit its portfolio investments
to securities that, at the time of acquisition, (i) are rated in the two highest
short-term rating categories by at least two nationally recognized statistical
rating organizations (or by one organization if only one organization has rated
the security), (ii) if not rated, are obligations of an issuer whose other
outstanding short-term debt obligations are so rated, or (iii) if not rated, are
of comparable quality, as determined by Dreyfus under procedures established by
the Board of Trustees. The Fund will limit its investments to securities that
present minimal credit risk, as determined by Dreyfus under procedures
established by the Board of Trustees.
Because many issuers of California Municipal Obligations may choose not to
have their obligations rated, it is possible that a large portion of the Fund's
portfolio may consist of unrated obligations. Unrated obligations are not
necessarily of lower quality than rated obligations, but to the extent the Fund
invests in unrated obligations, the Fund will be more reliant on Dreyfus'
judgment, analysis and experience than would be the case if the Fund invested
only in rated obligations. The Fund invests only in securities that have
remaining maturities of thirteen months or less at the date of purchase.
Floating rate or variable rate obligations (described below) which are payable
on demand under conditions established by the SEC may have a stated maturity in
excess of thirteen months; these securities will be deemed to have remaining
maturities of thirteen months or less. The Fund maintains a dollar-weighted
average portfolio maturity of 90 days or less. The Fund seeks to maintain a
constant net asset value ("NAV") of $1.00 per share, although there is no
assurance it can do so on a continuing basis, using the amortized cost method of
valuing its securities pursuant to Rule 2a-7 under the Investment Company Act of
1940, as amended (the "1940 Act"), which Rule includes various maturity, quality
and diversification requirements.
The Fund is classified as a "non-diversified" investment company, as
defined under the 1940 Act. However, the Fund intends to conduct its operations
so that it will qualify under the Internal Revenue Code of 1986, as amended (the
"Code") as a "regulated investment company." To continue to qualify, among other
requirements, the Fund will be required to limit its investments so that, at the
close of each quarter of the taxable year, with respect to at least 50% of its
total assets, not more than 5% of such assets will be invested in the securities
of a single issuer. In addition, not more than 25% of the value of the Fund's
total assets may be invested in the securities of a single issuer at the close
of each quarter of the taxable year. The provisions of the Code place limits on
the extent to which the Fund's portfolio may be non-diversified. Furthermore,
under rules established by the SEC, the Fund may not purchase, with respect to
75% of its total assets, a security if, as a result, more than 5% of its total
assets would be invested in the securities of any issuer. The Fund may invest
more than 5% of its total assets in the securities of one issuer only if the
securities are in the highest short-term rating category or are determined to be
of comparable quality by Dreyfus.
The ability of the Fund to meet its investment objective is subject to the
ability of municipal issuers to meet their payment obligations. In addition, the
Fund's portfolio will be affected by general changes in interest rates which may
result in increases or decreases in the value of Fund holdings. Investors should
recognize that, in periods of declining interest rates, the Fund's yield will
tend to be somewhat higher than prevailing market rates, and in periods of
rising interest rates, the Fund's yield will tend to be somewhat lower. Also,
when interest rates are falling, the influx of new money to the Fund will likely
be invested in portfolio instruments producing lower yields than the balance of
the Fund's portfolio, thereby reducing the Fund's current yield. In periods of
rising interest rates, the opposite can be expected to occur.
The Fund may invest without limit in California Municipal Obligations
which are repayable out of revenue streams generated from economically related
projects or facilities or whose issuers are located in the State of California.
Sizable investments in these obligations could increase risk to the Fund should
any of the related projects or facilities experience financial difficulties. The
Fund is authorized to borrow up to 10% of its total assets for temporary or
emergency purposes and to pledge its assets to the same extent in connection
with such borrowings.
Certain Portfolio Securities
Description of Municipal Obligations. "Municipal
Obligations" and "California Municipal Obligations" include the following:
Municipal Bonds. Municipal Bonds, which generally have a maturity of more
than one year when issued, have two principal classifications: General
Obligation Bonds and Revenue Bonds. A Private Activity Bond is a particular kind
of Revenue Bond. The classification of General Obligation Bonds, Revenue Bonds
and Private Activity Bonds are discussed below.
1. General Obligation Bonds. The proceeds of these obligations are used to
finance a wide range of public projects, including construction or improvement
of schools, highways and roads, and water and sewer systems. General Obligation
Bonds are secured by the issuer's pledge of its faith, credit and taxing power
for the payment of principal and interest.
2. Revenue Bonds. Revenue Bonds are issued to finance a wide variety of
capital projects including: electric, gas, water and sewer systems; highways,
bridges and tunnels; port and airport facilities; colleges and universities; and
hospitals. The principal security for a Revenue Bond is generally the net
revenues derived from a particular facility, group of facilities or, in some
cases, the proceeds of a special excise or other specific revenue source.
Although the principal security behind these bonds may vary, many provide
additional security in the form of a debt service reserve fund whose money may
be used to make principal and interest payments on the issuer's obligations.
Some authorities provide further security in the form of a state's ability
(without obligation) to make up deficiencies in the debt service reserve fund.
3. Private Activity Bonds. Private Activity Bonds, which are considered
Municipal Bonds if the interest paid thereon is exempt from Federal income tax,
are issued by or on behalf of public authorities to raise money to finance
various privately operated facilities for business and manufacturing, housing,
sports and pollution control. These bonds are also used to finance public
facilities such as airports, mass transit systems, ports and parking. The
payment of the principal and interest on such bonds is dependent solely on the
ability of the facility's user to meet its financial obligations and the pledge,
if any, of real and personal property so financed as security for such payment.
As discussed below under "Dividends, Other Distributions and Taxes," interest
income on these bonds may be an item of tax preference subject to the Federal
alternative minimum tax for individuals and corporations.
Municipal Notes. Municipal Notes generally are used to
---------------
provide for short-term capital needs and generally have
maturities of thirteen months or less. Municipal Notes include:
1. Tax Anticipation Notes. Tax Anticipation Notes are issued to finance
working capital needs of municipalities. Generally, they are issued in
anticipation of various seasonal tax revenue, such as income, sales, use and
business taxes, and are payable from these specific future taxes.
2. Revenue Anticipation Notes. Revenue Anticipation Notes are issued in
expectation of receipt of other kinds of revenue, such as federal revenues
available under the Federal Revenue Sharing Programs.
3. Bond Anticipation Notes. Bond Anticipation Notes are issued to provide
interim financing until long-term financing can be arranged. In most cases, the
long-term bonds then provide the money for the repayment of the Notes.
Municipal Commercial Paper. Issues of Municipal Commercial Paper typically
represent short-term, unsecured, negotiable promissory notes. These obligations
are issued by agencies of state and local governments to finance seasonal
working capital needs of municipalities or to provide interim construction
financing and are paid from general revenues of municipalities or are refinanced
with long-term debt. In most cases, Municipal Commercial Paper is backed by
letters of credit, lending agreements, note repurchase agreements or other
credit facility agreements offered by banks or other institutions.
Municipal Lease Obligations. Municipal leases may take the form of a lease
or a certificate of participation in a purchase contract issued by state and
local government authorities to obtain funds to acquire a wide variety of
equipment and facilities such as fire and sanitation vehicles, computer
equipment and other capital assets. A lease obligation does not constitute a
general obligation of the municipality for which the municipality's taxing power
is pledged, although the lease obligation is ordinarily backed by the
municipality's covenant to budget for, appropriate and make payments due under
the lease obligation. Municipal leases have special risks not normally
associated with Municipal Bonds. These obligations frequently contain
"non-appropriation" clauses that provide that the governmental issuer of the
obligation has no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the legislative body on a
yearly or other periodic basis. In addition to the non-appropriation risk,
municipal leases represent a type of financing that has not yet developed the
depth of marketability associated with Municipal Bonds; moreover, although the
obligations will be secured by the leased equipment, the disposition of the
equipment in the event of foreclosure might prove difficult. For purposes of the
10% limitation on the purchase of illiquid securities, the Fund will not
consider the municipal lease obligations or certificates of participation in
municipal lease obligations in which it invests as liquid, unless Dreyfus shall
determine, based upon such factors as the frequency of trades and quotes for the
obligation, the number of dealers willing to purchase or sell the security and
the number of other potential buyers, the willingness of dealers to undertake to
make a market in the security and the nature of marketplace trades, that a
security shall be treated as liquid for purposes of such limitation.
Obligations of issuers of Municipal Obligations are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon
municipalities to levy taxes. There is also the possibility that, as a result of
litigation or other conditions, the power or ability of any issuer to pay, when
due, the principal of and interest on its Municipal Obligations may be
materially affected.
Portfolio Securities. The average distribution of investments (at value)
in Municipal Obligations by ratings for the fiscal year ended June 30, 2000,
computed on a monthly basis, was as follows:
Moody's Standard &
Fitch IBCA, Inc. Investors Service, Poor's Ratings Percentage
("Fitch") or Inc. ("Moody's") or Group ("S&P") Of Value
-------- ----------------- ------------ ---------
F-1+/F-1 VMIG 1/MIG 1, SP-1+/SP-1, 82.7%
P-1 A1+/A1
AAA/AA Aaa/Aa AAA/AA 11.2%
Not Rated Not Rated Not Rated 6.1%
100.0%
---------------
(1) Included in the not rated category are securities comprising 6.1% of the
Fund's market value which, while not rated, have been determined by Dreyfus to
be of comparable quality to securities in the VMIG 1/MIG 1 rating category.
The actual distribution of the Fund's Municipal Obligations by ratings on
any given date will vary. In addition, the distribution of the Fund's
investments by rating as set forth above should not be considered as
representative of the Fund's future portfolio composition.
Use of Ratings as Investment Criteria. The ratings of nationally
recognized statistical rating organizations ("NRSROs") such as S&P, Fitch and
Moody's represent the opinions of these agencies as to the quality of Municipal
Obligations which they rate. It should be emphasized, however, that such ratings
are relative and subjective and are not absolute standards of quality. These
ratings will be used by the Fund as initial criteria for the selection of
portfolio securities, but the Fund will also rely upon the independent advice of
Dreyfus to evaluate potential investments. Among the factors which will be
considered are the short-term and long-term ability of the issuer to pay
principal and interest and general economic trends. Further information
concerning the ratings of the NRSROs and their significance is contained in the
Appendix B to this Statement of Additional Information.
After being purchased by the Fund, the rating of a Municipal Obligation
may be reduced below the minimum rating required for purchase by the Fund or the
issuer of the Municipal Obligation may default on its obligations with respect
to the Municipal Obligation. In that event, the Fund will dispose of the
Municipal Obligation as soon as practicable, consistent with achieving an
orderly disposition of the Municipal Obligation, unless the Trust's Board of
Trustees determines that disposal of the Municipal Obligation would not be in
the best interest of the Fund. In addition, it is possible that a Municipal
Obligation may cease to be rated or an NRSRO might not timely change its rating
of a particular Municipal Obligation to reflect subsequent events. Although
neither event will require the sale of such Municipal Obligation by the Fund,
Dreyfus will consider such event in determining whether the Fund should continue
to hold the Municipal Obligation. In addition, if an NRSRO changes its rating
system, the Fund will attempt to use comparable ratings as standards for its
investments in accordance with its investment objective and policies.
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.
Floating Rate and Variable Rate Obligations. The Fund may purchase
floating rate and variable rate obligations, including participation interests
therein. Floating rate or variable rate obligations provide that the rate of
interest is set as a specific percentage of a designated base rate (such as the
prime rate at a major commercial bank) and that the Fund can demand payment of
the obligation at par plus accrued interest. Variable rate obligations provide
for a specified periodic adjustment in the interest rate, while floating rate
obligations have an interest rate which changes whenever there is a change in
the external interest rate. Frequently such obligations are secured by letters
of credit or other credit support arrangements provided by banks. The quality of
the underlying creditor or of the bank, as the case may be, must, as determined
by Dreyfus under the supervision of the Trustees, be equivalent to the quality
standard prescribed for the Fund. In addition, Dreyfus monitors the earning
power, cash flow and other liquidity ratios of the issuers of such obligations,
as well as the creditworthiness of the institution responsible for paying the
principal amount of the obligations under the demand feature. Changes in the
credit quality of banks and other financial institutions that provide such
credit or liquidity enhancements to the Fund's portfolio securities could cause
losses to the Fund and affect its share price. The Fund is currently permitted
to purchase floating rate and variable rate obligations with demand features in
accordance with requirements established by the SEC, which, among other things,
permit such instruments to be deemed to have remaining maturities of thirteen
months or less, notwithstanding that they may otherwise have a stated maturity
in excess of thirteen months.
The Fund may invest in participation interests purchased from banks in
floating rate or variable rate tax-exempt Municipal Obligations owned by banks.
A participation interest gives the purchaser an undivided interest in the
Municipal Obligation in the proportion that the Fund's participation interest
bears to the total principal amount of the Municipal Obligation, and provides a
demand feature. Each participation is backed by an irrevocable letter of credit
or guarantee of a bank (which may be the bank issuing the participation
interest, a bank issuing a confirming letter of credit to that of the issuing
bank, or a bank serving as agent of the issuing bank with respect to the
possible repurchase of the participation interest) that Dreyfus, under the
supervision of the Trustees, has determined meets the prescribed quality
standards for the Fund. The Fund has the right to sell the instrument back to
the issuing bank or draw on the letter of credit on demand for all or any part
of the Fund's participation interest in the Municipal Obligation, plus accrued
interest. The Fund is currently permitted to invest in participation interests
when the demand provision complies with conditions established by the SEC. Banks
will retain a service and letter of credit fee and a fee for issuing repurchase
commitments in an amount equal to the excess of the interest paid on the
Municipal Obligations over the negotiated yield at which the instruments were
purchased by the Fund.
When-Issued Securities. The Fund may purchase Municipal Obligations on a
when-issued basis (i.e., for delivery beyond the normal settlement date at the
stated price and yield). The payment obligation and the interest rate that will
be received on the Municipal Obligations purchased on a when-issued basis are
each fixed at the time the buyer enters into the commitment. Although the Fund
generally will purchase Municipal Obligations on a when-issued basis only with
the intention of actually acquiring the securities, the Fund may sell these
securities before the settlement date if it is deemed advisable as a matter of
investment strategy.
Municipal Obligations purchased on a when-issued basis and the securities
held in the Fund's portfolio are subject to changes in market value based upon
the public's perception of the creditworthiness of the issuer and changes, real
or anticipated, in the level of interest rates (which will generally result in
similar changes in value, i.e., both experiencing appreciation when interest
rates decline and depreciation when interest rates rise). Therefore, to the
extent the Fund remains substantially fully invested at the same time that it
has purchased securities on a when-issued basis, there will be a greater
possibility of fluctuation in the Fund's net asset value. Purchasing Municipal
Obligations on a when-issued basis can involve a risk that the yields available
in the market when the delivery takes place may actually be higher than those
obtained in the transaction.
The Fund will establish with the Fund's custodian a segregated account
consisting of cash or liquid debt securities in an amount at least equal to the
amount of its when-issued commitments. When the time comes to pay for
when-issued securities, the Fund will meet its obligations from then-available
cash flow, sale of securities held in the segregated account, sale of other
securities or, although it would not normally expect to do so, from the sale of
the when-issued securities themselves (which may have a value greater or lesser
than the Fund's payment obligations). Sale of securities to meet such
obligations carries with it a greater potential for the realization of capital
gains, which are not exempt from Federal income tax.
Purchase of Securities with Stand-by Commitments. Pursuant to an exemptive
order issued by the SEC under the 1940 Act, the Fund may acquire stand-by
commitments with respect to Municipal Obligations held in its portfolio. Under a
stand-by commitment, a broker-dealer, dealer or bank would agree to purchase, at
the Fund's option, a specified Municipal Obligation at a specified price.
Stand-by commitments acquired by the Fund may also be referred to as "put
options." The amount payable to the Fund upon its exercise of a stand-by
commitment normally would be (a) the acquisition cost of the Municipal
Obligation, less any amortized market premium or plus any amortized market or
original issue discount during the period the Fund owned the security, plus (b)
all interest accrued on the security since the last interest payment date during
the period. Absent unusual circumstances, in determining net asset value the
Fund would value the underlying Municipal Obligation at amortized cost.
Accordingly, the amount payable by the broker-dealer, dealer or bank upon
exercise of a stand-by commitment will normally be substantially the same as the
portfolio value of the underlying Municipal Obligation.
The Fund's right to exercise a stand-by commitment is unconditional and
unqualified. Although the Fund could not transfer a stand-by commitment, the
Fund could sell the underlying Municipal Obligation to a third party at any
time. It is expected that stand-by commitments generally will be available to
the Fund without the payment of any direct or indirect consideration. The Fund
may, however, pay for stand-by commitments either separately in cash or by
paying a higher price for portfolio securities which are acquired subject to the
commitment (thus reducing the yield to maturity otherwise available for the same
securities). The total amount paid in either manner for outstanding stand-by
commitments held in the Fund's portfolio will not exceed 0.5 of 1% of the value
of the Fund's total assets calculated immediately after such stand-by commitment
was acquired.
The Fund intends to enter into stand-by commitments only with
broker-dealers, dealers or banks that Dreyfus believes present minimum credit
risks. The Fund's ability to exercise a stand-by commitment will depend on the
ability of the issuing institution to pay for the underlying securities at the
time the commitment is exercised. The credit of each institution issuing a
stand-by commitment to the Fund will be evaluated on an ongoing basis by Dreyfus
in accordance with procedures established by the Trustees.
The Fund intends to acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise their rights thereunder for
trading purposes. The acquisition of a stand-by commitment would not affect the
valuation or maturity of the underlying Municipal Obligation, which will
continue to be valued in accordance with the amortized cost method. Each
stand-by commitment will be valued at zero in determining net asset value.
Should the Fund pay directly or indirectly for a stand-by commitment, its costs
will be reflected as an unrealized loss for the period during which the
commitment is held by the Fund and will be reflected in realized gain or loss
when the commitment is exercised or expires. Stand-by commitments will not
affect the dollar-weighted average maturity of the Fund's portfolio. The Fund
understands that the Internal Revenue Service ("IRS") has issued a revenue
ruling to the effect that a registered investment company will be treated for
Federal income tax purposes as the owner of Municipal Obligations acquired
subject to stand-by commitments and the interest on the Municipal Obligations
will be tax-exempt to the Fund.
Custodial Receipts. The Fund may purchase securities, frequently referred
to as "custodial receipts," representing the right to receive future principal
and interest payments on municipal obligations underlying such receipts. A
number of different arrangements are possible. In a typical custodial receipt
arrangement, an issuer or a third party owner of a municipal obligation deposits
such obligation with a custodian in exchange for two or more classes of
receipts. The class of receipts that the Fund may purchase has the
characteristics of a typical tender option security backed by a conditional
"put," which provides the holder with the equivalent of a short-term variable
rate note. At specified intervals, the interest rate for such securities is
reset by the remarketing agent in order to cause the securities to be sold at
par through a remarketing mechanism. If the remarketing mechanism does not
result in a sale, the conditional put can be exercised. In either event, the
holder is entitled to full principal and accrued interest to the date of the
tender or exercise of the "put." The "put" may be terminable in the event of a
default in payment of principal or interest on the underlying municipal
obligation and for other reasons. Before purchasing such security, Dreyfus is
required to make certain determinations with respect to the likelihood of, and
the ability to monitor, the occurrence of the conditions that would result in
the put not being exercisable. The interest rate for these receipts generally is
expected to be below the coupon rate of the underlying municipal obligations and
generally is at a level comparable to that of a municipal obligation of similar
quality and having a maturity equal to the period between interest rate
readjustments. These custodial receipts are sold in private placements. The Fund
also may purchase directly from issuers, and not in a private placement,
municipal obligations having the characteristics similar to the custodial
receipts in which the Fund may invest.
Other types of tax-exempt instruments that may become available in the
future may be purchased by the Fund as long as Dreyfus believes the quality of
these instruments meets the Fund's quality standards.
Taxable Investments. The Fund anticipates being as fully invested as
practicable in Municipal Obligations. Because the Fund's purpose is to provide
income exempt from Federal and State of California income taxes, the Fund will
invest in taxable obligations only if and when Dreyfus believes it would be in
the best interests of its shareholders to do so. Situations in which the Fund
may invest up to 20% of its total assets in taxable securities include: (a)
pending investment of proceeds of sales of shares of the Fund or of portfolio
securities, (b) pending settlement of purchases of portfolio securities, and (c)
when the Fund is attempting to maintain liquidity for the purpose of meeting
anticipated redemptions. The Fund may temporarily invest more than 20% of its
total assets in taxable securities to maintain a "defensive" posture when, in
the opinion of Dreyfus, it is advisable to do so because of adverse market
conditions affecting the market for Municipal Obligations. The Fund may invest
in only the following kinds of taxable securities maturing in one year or less
from the date of purchase: (1) obligations of the United States Government, its
agencies or instrumentalities; (2) commercial paper rated at the time of
purchase at least Prime-1 by Moody's or A-1+ or A-1 by S&P; (3) certificates of
deposit of domestic banks with total assets of $1 billion or more; and (4)
repurchase agreements (instruments under which the seller of a security agrees
to repurchase the security at a specific time and price) with respect to any
securities that the Fund is permitted to hold.
Repurchase Agreements. The Fund may enter into repurchase agreements with
member banks of the Federal Reserve System or certain non-bank dealers. Under
each repurchase agreement the selling institution will be required to maintain
the value of the securities subject to the agreement at not less than their
repurchase price. If a particular bank or non-bank dealer defaults on its
obligation to repurchase the underlying debt instrument as required by the terms
of a repurchase agreement, the Fund will incur a loss to the extent that the
proceeds it realizes on the sale of the collateral are less than the repurchase
price of the instrument. In addition, should the defaulting bank or non-bank
dealer file for bankruptcy, the Fund could incur certain costs in establishing
that it is entitled to dispose of the collateral and its realization on the
collateral may be delayed or limited. Investments in repurchase agreements are
subject to the policy prohibiting investment of more than 10% of the Fund's
assets in illiquid securities, securities without readily available market
quotations and repurchase agreements maturing in more than seven days.
Other Investment Companies. The Fund may invest in securities issued by
other investment companies to the extent that such investments are consistent
with its investment objective and policies and permissible under the 1940 Act.
As a shareholder of another investment company, the Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to the
advisory and other expenses that the Fund bears directly in connection with its
own operations.
Special Factors Affecting the Fund
Investing in California Municipal Obligations. You should review the
information in "Appendix A," which provides a brief summary of special
investment considerations and risk factors relating to investing in California
Municipal Obligations.
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.
Certain Investments. From time to time, to the extent consistent with its
investment objective, policies and restrictions, the Fund may invest in
securities of companies with which Mellon Bank, N.A. ("Mellon Bank"), an
affiliate of Dreyfus, has a lending relationship.
Investment Restrictions
Fundamental. The following limitations have been adopted by the Fund. The
Fund may not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of shareholders
duly called if the holders of more than 50% of the outstanding shares of the
Fund are present or represented by proxy; or (b) more than 50% of the
outstanding shares of the Fund, whichever is less. The Fund may not:
1. Purchase any securities which would cause more than 25% of the value of
the Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities and
state or municipal governments and their political subdivisions are not
considered members of any industry. In addition, this limitation does not apply
to investments of domestic banks, including U.S. branches of foreign banks and
foreign branches of U.S. banks.)
2. Borrow money or issue senior securities as defined in the 1940 Act,
except that (a) the Fund may borrow money in an amount not exceeding one-third
of the Fund's total assets at the time of such borrowing, and (b) the Fund may
issue multiple classes of shares. The purchase or sale of futures contracts and
related options shall not be considered to involve the borrowing of money or
issuance of senior securities.
3. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this restriction, debt instruments and repurchase agreements shall
not be treated as loans.
4. Underwrite securities issued by any other person, except to the extent
that the purchase of securities and the later disposition of such securities in
accordance with the Fund's investment program may be deemed an underwriting.
5. Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund from
investing in securities or other instruments backed by real estate, including
mortgage loans, or securities of companies that engage in the real estate
business or invest or deal in real estate or interests therein).
6. Purchase or sell commodities, except that the Fund may enter into
futures contracts and related options, forward currency contracts and other
similar instruments.
The Fund may, notwithstanding any other fundamental investment policy or
restriction, invest all of its investable assets in securities of a single
open-end management investment company with substantially the same fundamental
investment objective, policies and restrictions as the Fund.
Nonfundamental. The Fund has adopted the following
additional non-fundamental restrictions. These non-fundamental
restrictions may be changed without shareholder approval, in
compliance with applicable law and regulatory policy.
1. The Fund will not purchase or retain the securities of any issuer if
the officers, directors or Trustees of the Trust, its advisers, or managers
owning beneficially more than one half of one percent of the securities of each
issuer together own beneficially more than five percent of such securities.
2. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate investment
in such classes of securities will exceed 5% of its total assets, except that:
(a) this restriction shall not apply to standby commitments and (b) this
restriction shall not apply to the Fund's transactions in futures contracts and
related options.
3. The Fund will not purchase warrants if at the time of such purchase:
(a) more than 5% of the value of the Fund's net assets would be invested in
warrants or (b) more than 2% of the value of the Fund's assets would be invested
in warrants that are not listed on the New York Stock Exchange ("NYSE") or
American Stock Exchange ("AMEX") (for purposes of this limitation, warrants
acquired by the Fund in units or attached to securities will be deemed to have
no value).
4. The Fund will not invest more than 10% of the value of its net assets
in illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, and other securities which are not readily
marketable. For purposes of this restriction, illiquid securities shall not
include commercial paper issued pursuant to Section 4(2) of the Securities Act
of 1933 and securities which may be resold under Rule 144A under the Securities
Act of 1933, provided that the Board of Trustees, or its delegate, determines
that such securities are liquid based upon the trading markets for the specific
security.
5. The Fund may not invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation or acquisition
of assets and except to the extent otherwise permitted by the 1940 Act.
6. The Fund will not purchase oil, gas or mineral leases (the Fund may,
however, purchase and sell the securities of companies engaged in the
exploration, development, production, refining, transporting and marketing of
oil, gas or minerals).
7. The Fund shall not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amounts to the securities sold
short, and provided that transactions in futures contracts and options are not
deemed to constitute selling securities short.
8. The Fund shall not purchase securities on margin, except that the Fund
may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection with futures
contracts and options on futures contracts shall not constitute purchasing
securities on margin.
9. The Fund shall not purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.
If a percentage restriction is adhered to at the time of an investment, a
later increase or decrease in such percentage resulting from a change in the
values of assets will not constitute a violation of such restriction.
The investment objective, policies, restrictions, practices and procedures
of the Fund, unless otherwise specified, may be changed without shareholder
approval. If the Fund's investment objective, policies, restrictions, practices
or procedures change, shareholders should consider whether the Fund remains an
appropriate investment in light of their then current position and needs.
MANAGEMENT OF THE FUND
Trustees and Officers
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
Dreyfus Service Corporation.......................Distributor
Dreyfus Transfer, Inc..........................Transfer Agent
Mellon Bank........................................Custodian
......The Trust has a Board composed of eight Trustees. The following lists the
Trustees and officers and their positions with the Trust and their present and
principal occupations during the past five years. Each Trustee who is an
"interested person" of the Trust (as defined in the 1940 Act) is indicated by an
asterisk(*). Each of the Trustees also serves as a Director of The
Dreyfus/Laurel Funds, Inc. and as a Trustee of The Dreyfus/Laurel Funds Trust
(collectively, with the Trust, the "Dreyfus/Laurel Funds") and the Dreyfus High
Yield Strategies Fund.
Trustees of the Trust
o+JOSEPH S. DIMARTINO. Chairman of the Board of the Trust. Since January 1995,
Mr. DiMartino has served as Chairman of the Board for various funds in
the Dreyfus Family of Funds. He is also a Director of The Muscular
Dystrophy Association; HealthPlan Services Corporation, a provider of
marketing, administrative and risk management services to health and
other benefit programs; Carlyle Industries, Inc. (formerly, Belding
Heminway Company, Inc.), a button packager and distributor; Century
Business Services, Inc. (formerly, International Alliance Services,
Inc.), a provider of various outsourcing functions for small and medium
sized companies; The Newark Group, a privately held company providing a
national network of paper recovery facilities, paperboard mills and
paperboard converting plants; and QuikCAT.com, Inc., a private company
engaged in the development of high speed movement, routing, storage and
encryption of data across cable, wireless and all other modes of data
transport. For more than five years prior to January 1995, he was
President, a director and, until August, 1994, Chief Operating Officer
of Dreyfus and Executive Vice President and a director of the
Distributor. From August 1994 to December 31, 1994, he was a director
of Mellon Financial Corporation. Age: 57 years old. Address: 200 Park
Avenue, New York, New York 10166.
o+JAMES M. FITZGIBBONS. Trustee of the Trust; Director, Lumber Mutual Insurance
Company; Director, Barrett Resources, Inc.; Chairman of the Board,
Davidson Cotton Company; former Chairman of the Board and CEO of
Fieldcrest Cannon, Inc. Age: 66 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: 72 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: 78 years old. Address: Way
Hollow Road and Woodland Road, Sewickley, Pennsylvania 15143.
o+KENNETH A. HIMMEL. Trustee of the Trust; President and CEO, The Palladium
Company; President and CEO, Himmel and Company, Inc.; CEO, American
Food Management; former Director, The Boston Company, Inc. ("TBC"), and
Boston Safe Deposit and Trust Company, each an affiliate of Dreyfus.
Age: 54 years old. Address: 625 Madison Avenue, New York, New York
10022.
o+STEPHEN J. LOCKWOOD. Trustee of the Trust; Chairman of the Board and CEO, LDG
Reinsurance Corporation; Vice Chairman, HCCH. Age: 53 years old.
Address: 401 Edgewater Place, Wakefield, Massachusetts 01880.
o+ROSLYN M. WATSON. Trustee of the Trust; Principal, Watson Ventures, Inc.;
Director, American Express Centurion Bank; Director, Ontario Hydro
Services Company; Trustee, the Hyams Foundation, Inc. Age: 51 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: 54
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
STEPHEN E. CANTER. President of the Trust; President, Chief Operating Officer,
Chief Investment Officer and director of Dreyfus, and an officer of
other investment companies advised and administered by Dreyfus. Mr.
Canter also is a Director or an Executive Committee Member of the other
investment management subsidiaries of Mellon Financial Corporation,
each of which is an affiliate of Dreyfus. He is 55 years old.
MARK N. JACOBS. Vice President of the Trust; Vice President, Secretary, and
General Counsel to Dreyfus, and an officer of other investment
companies advised and administered by Dreyfus. He is 54 years old.
JOSEPH CONNOLLY. Vice President and Treasurer of the Trust; Director - Mutual
Fund Accounting of Dreyfus, and an officer of other investment companies
advised and administered by Dreyfus. He is 43 years old.
STEVEN F. NEWMAN. Secretary of the Trust; Associate General Counsel and
Assistant Secretary of Dreyfus, and an officer of other investment
companies advised and administered by Dreyfus. He is 51 years old.
JEFF PRUSNOFSKY. Assistant Secretary of the Trust; Associate General Counsel
of Dreyfus, and an officer of other investment companies advised and
administered by Dreyfus. He is 35 years old.
MICHAEL A. ROSENBERG. Assistant Secretary of the Trust; Associate General
Counsel of Dreyfus, and an officer of other investment companies
advised and administered by Dreyfus. He is 41 years old.
MICHAEL CONDON. Assistant Treasurer of the Trust; Senior Treasury Manager of
Dreyfus, and an officer of other investment companies advised and
administered by Dreyfus. He is 39 years old.
GREGORY S. GRUBER. Assistant Treasurer of the Trust; Senior Accounting Manager
- Municipal Bond Funds of Dreyfus, and an officer of other investment
companies advised and administered by Dreyfus. He is 41 years old.
The address of each Trust officer 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. The Dreyfus/Laurel Funds pay each
Director/Trustee who is not an "interested person" of the Trust (as defined in
the 1940 Act) $40,000 per annum, plus $5,000 per joint Dreyfus/Laurel Funds
Board meeting attended, $2,000 for separate committee meetings attended which
are not held in conjunction with a regularly scheduled Board meeting and $500
for Board meetings and separate committee meetings attended that are conducted
by telephone. The Dreyfus/Laurel Funds also reimburse each Director/Trustee who
is not an "interested person" of the Trust (as defined in the 1940 Act) for
travel and out-of-pocket expenses. The Chairman of the Board receives an
additional 25% of such compensation (with the exception of reimbursable
amounts). In the event that there is a joint committee meeting of the
Dreyfus/Laurel Funds and the Dreyfus High Yield Strategies Fund, the $2,000 fee
will be allocated between the Dreyfus/Laurel Funds and the Dreyfus High Yield
Strategies Fund.
In addition, the Trust currently has two Emeritus Board members who are
entitled to receive an annual retainer and a per meeting fee of one-half the
amount paid to them as Board members.
The aggregate amount of fees and expenses received by each current Trustee
from the Trust for the fiscal year ended June 30, 2000, and from all other funds
in the Dreyfus Family of Funds for which such person was a Board member (the
number of which is set forth in parentheses next to each Board member's total
compensation)* during the year ended December 31, 1999, were as follows:
Total
Compensation
Aggregate From the Trust
Name of Board Compensation and Fund Complex Paid
Member From the Trust# To Board Member
Joseph S. DiMartino** $27,083 $ 642,177 (189)
James M. Fitzgibbons $20,000 $ 74,989 (28)
J. Tomlinson Fort*** None None (28)
Arthur L. Goeschel $21,666 $ 80,989 (28)
Kenneth A. Himmel $18,333 $ 62,489 (28)
Stephen J. Lockwood $18,333 $ 68,989 (28)
Roslyn M. Watson $21,666 $ 80,989 (28)
Benaree Pratt Wiley $21,666 $ 80,989 (28)
--------------------------
# 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 $1,775.82 for the Trust.
* Represents the number of separate portfolios comprising the investment
companies in the Fund complex, including the Trust, for which the Board member
served.
** Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999. ***J. Tomlinson Fort is paid directly by Dreyfus for serving as
a Board member of the Trust and the funds in the Dreyfus/Laurel Funds and
separately by the Dreyfus High Yield Strategies Fund. For the fiscal year ended
June 30, 2000, the aggregate amount of fees received by J. Tomlinson Fort from
Dreyfus for serving as a Board member of the Trust was $21,666. For the year
ended December 31, 1999, the aggregate amount of fees received by Mr. Fort for
serving as a Board member of all funds in the Dreyfus/Laurel Funds (including
the Trust) and Dreyfus High Yield Strategies Fund (for which payment is made
directly by the fund) was $80,989. In addition, Dreyfus reimbursed Mr. Fort a
total of $821.35 for expenses attributable to the Trust's Board meetings which
is not included in the $1,775.82 amount in note # above.
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, 2000.
Principal Shareholders. As of October 2, 2000, the following shareholders
owned beneficially or of record 5% or more of the outstanding Fund shares:
Boston & Co., c/o Mellon Bank, P.O. Box 534005, Pittsburgh, PA 15253, 34.43%;
Mathew R. Bargar, 3449 Pacific Avenue, San Francisco, CA 94118-2029, 27.34%; and
Charles R. Michael, 235 Montgomery Street, Suite 969, San Francisco, CA
94104-3002, 7.65%.
A shareholder who beneficially owns, directly or indirectly, more than 25%
of the Fund's voting securities may be deemed a "control person" (as defined in
the 1940 Act) of the Fund.
Management Arrangements
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Expenses" and "Management."
Dreyfus is a wholly-owned subsidiary of Mellon Bank, which is a
wholly-owned subsidiary of Mellon Financial Corporation ("Mellon"). Mellon is a
global multibank financial 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 20
largest bank holding companies in the United States based on total assets.
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Trust (the
"Investment Management Agreement") subject to the overall authority of the
Trust's Board of Trustees in accordance with Massachusetts law. Pursuant to the
Investment Management Agreement, Dreyfus provides, or arranges for one or more
third parties to provide, investment advisory, administrative, custody, fund
accounting and transfer agency services to the Fund. As investment manager,
Dreyfus manages the Fund by making investment decisions based on the Fund's
investment objective, policies and restrictions. The Investment Management
Agreement is subject to review and approval at least annually by the Board of
Trustees.
The Investment Management Agreement will continue from year to year
provided that a majority of the Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Trust and either a majority of all Trustees or a
majority (as defined in the 1940 Act) of the shareholders of the Fund approve
its continuance. The Trust may terminate the Investment Management Agreement
upon the vote of a majority of the Board of Trustees or upon the vote of a
majority of the outstanding voting securities of the Fund on 60 days' written
notice to Dreyfus. Dreyfus may terminate the Investment Management Agreement
upon 60 days' written notice to the Trust. The Investment Management Agreement
will terminate immediately and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment Officer
and a director; Thomas F. Eggers, Vice Chairman- Institutional and a director;
Lawrence S. Kash, Vice Chairman; J. David Officer, Vice Chairman and a director;
Ronald P. O'Hanley III, Vice Chairman; William T. Sandalls, Jr., Executive Vice
President; Stephen R. Byers, Senior Vice President; Patrice M. Kozlowski, Senior
Vice President-Corporate Communications; Mark N. Jacobs, Vice President, General
Counsel and Secretary; Diane P. Durnin, Vice President-Product Development; Mary
Beth Leibig, Vice President-Human Resources; Ray Van Cott, Vice
President-Information Systems; Theodore A. Schachar, Vice President-Tax; Wendy
Strutt, 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 G. McGuinn, Richard W. Sabo and Richard F.
Syron, directors.
Dreyfus' Code of Ethics subjects its employees' personal securities
transactions to various restrictions to ensure that such trading does not
disadvantage any fund advised by Dreyfus. In that regard, portfolio managers and
other investment personnel of Dreyfus must preclear and report their personal
securities transactions and holdings, which are reviewed for compliance with the
Code of Ethics and are also subject to the oversight of Mellon's Investment
Ethics Committee. Portfolio managers and other investment personnel who comply
with the Code of Ethics' preclearance and disclosure procedures, and the
requirements of the Committee, may be permitted to purchase, sell or hold
securities which also may be or are held in fund(s) they manage or for which
they otherwise provide investment advice.
Expenses. The Investment Management Agreement with Dreyfus provides for a
"unitary fee." Under the unitary fee structure, Dreyfus pays all expenses of the
Fund except: (i) brokerage commissions, (ii) taxes, interest and extraordinary
expenses (which are expected to be minimal), and (iii) the Rule 12b-1 fees
described, as applicable. Although under the Investment Management Agreement,
Dreyfus is not required to pay the fees and expenses of the non-interested
Trustees (including counsel fees), Dreyfus is required to reduce its management
fee by the amount of such fees and expenses. Under the unitary fee, Dreyfus
provides, or arranges for one or more third parties to provide, investment
advisory, administrative, custody, fund accounting and transfer agency services
to the Fund. For the provision of such services directly, or through one or more
third parties, Dreyfus receives as full compensation for all services and
facilities provided by it, a fee computed daily and paid monthly at the annual
rate of 0.45 of 1% of the value of the Fund's average daily net assets. The
Investment Management Agreement provides that certain redemption, exchange and
account closeout charges are payable directly by the Fund's shareholders to the
Fund's Transfer Agent (although the Fund will waive such fees if the closing
balance in the shareholders account on the business day immediately preceding
the effective date of the transaction is $50,000 or more) and the fee payable by
the Fund to Dreyfus is not reduced by the amount of charges payable to the
Transfer Agent. From time to time, Dreyfus may voluntarily waive a portion of
the investment management fees payable by the Fund, which would have the effect
of lowering the expense ratio of the Fund and increasing return to investors.
Expenses attributable to the Fund are charged against the Fund's assets; other
expenses of the Trust are allocated among its funds on the basis determined by
the Trustees, including, but not limited to, proportionately in relation to the
net assets of each fund.
For the last three fiscal years, the Fund has had the following
expenses:
For the Fiscal Year Ended June 30,
2000 1999 1998
---- ---- ----
Management Fee $545,961 $461,141 $402,329
The Distributor. Effective March 22, 2000, the Distributor, a wholly-owned
subsidiary of Dreyfus, located at 200 Park Avenue, New York, New York, 10166,
has served as the Fund's distributor on a best efforts basis pursuant to an
agreement which is renewable annually. From August 23, 1994 through March 21,
2000, Premier Mutual Fund Services, Inc., located at 60 State Street, Boston, MA
02109, served as the Fund's distributor. 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.
Transfer and Dividend Disbursing Agent and Custodian. Dreyfus Transfer,
Inc. (the "Transfer Agent"), a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, serves as the Trust's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Trust, the
Transfer Agent arranges for the maintenance of shareholder account records for
the Trust, the handling of certain communications between shareholders and the
Fund and the payment of dividends and distributions payable by the Fund. For
these services, the Transfer Agent receives a monthly fee computed on the basis
of the number of shareholder accounts it maintains for the Trust during the
month, and is reimbursed for certain out-of-pocket expenses.
Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as the custodian of the Fund's investments.
Under a custody agreement with the Trust, Mellon Bank holds the Fund's portfolio
securities and keeps all necessary accounts and records. Dreyfus Transfer, Inc.
and Mellon Bank, as custodian, have no part in determining the investment
policies of the Fund or which securities are to be purchased or sold by the
Fund.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies,"
"Services for Fund Investors," "Instructions
for Regular Accounts."
General. You can purchase Fund shares without a sales charge if you
purchase them directly from the Distributor; you may be charged a fee if you
effect transactions in Fund shares through an Agent. Share certificates are
issued only upon written request. No certificates are issued for fractional
shares. It is not recommended that the Fund be used as a vehicle for Keogh, IRA
or other qualified plans. The Fund reserves the right to reject any purchase
order.
The minimum initial investment is $25,000. The Fund may waive its minimum
initial investment requirement for new Fund accounts opened through an Agent
whenever Dreyfus Institutional Services Division ("DISD") determines for the
initial account opened through such Agent which is below the Fund's minimum
initial investment requirement that the existing accounts in the Fund opened
through that Agent have an average account size, or the Agent has adequate
intent and access to funds to result in maintenance of accounts in the Fund
opened through that Agent with an average account size, in an amount equal to or
in excess of $25,000. DISD will periodically review the average size of the
accounts opened through each Agent and, if necessary, reevaluate the Agent's
intent and access to funds. DISD will discontinue the waiver as to new accounts
to be opened through an Agent if DISD determines that the average size of
accounts opened through that Agent is less than $25,000 and the Agent does not
have the requisite intent and access to funds. Subsequent investments must be at
least $1,000 (or at least $100 in the case of persons who have held Fund shares
as of November 20, 1995). The initial investment must be accompanied by the
Fund's Account Application.
You may purchase Fund shares by check or wire, or through the Dreyfus
TeleTransfer Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds." Payments to open new accounts which are mailed should
be sent to The Dreyfus Family of Funds, P.O. Box 9387, Providence, Rhode Island
02940-9387, together with your Account Application. For subsequent investments,
your Fund account number should appear on the check and an investment slip
should be enclosed and sent to The Dreyfus Family of Funds, P.O. Box 105,
Newark, New Jersey 07101-0105. Neither initial nor subsequent investments should
be made by third party check. Purchase orders may be delivered in person only to
a Dreyfus Financial Center. These orders will be forwarded to the Fund and will
be processed only upon receipt thereby. For the location of the nearest Dreyfus
Financial Center, you should call the telephone number listed on the cover of
this Statement of Additional Information.
Wire payments may be made if your bank account is in a commercial bank
that is a member of the Federal Reserve System or any other bank having a
correspondent bank in New York City. Immediately available funds may be
transmitted by wire to Boston Safe Deposit and Trust Company, DDA# 043508
Dreyfus BASIC California Municipal Money Market Fund, for purchase of Fund
shares in your name. The wire must include your Fund account number (for new
accounts, your Taxpayer Identification Number ("TIN") should be included
instead), account registration and dealer number, if applicable. If your initial
purchase of Fund shares is by wire, you should call 1-800-645-6561 after
completing the wire payment to obtain the Fund account number. You should
include your Fund account number on the Fund's Account Application and promptly
mail the Account Application to the Fund, as no redemptions will be permitted
until the Account Application is received. You may obtain further information
about remitting funds in this manner from your bank. All payments should be made
in U.S. dollars and, to avoid fees and delays, should be drawn only on U.S.
banks. A charge will be imposed if any check used for investment in your account
does not clear. The Fund makes available to certain large institutions the
ability to issue purchase instructions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of funds
from an account maintained in a bank or other domestic financial institution
that is an Automated Clearing House ("ACH") member. You must direct the
institution to transmit immediately available funds through the ACH System to
Boston Safe Deposit and Trust Company with instructions to credit your Fund
account. The instructions must specify your Fund account registration and Fund
account number preceded by the digits "4540."
Federal regulations require that you provide a certified TIN upon opening
or reopening an account. See "Dividends, Other Distributions and Taxes" and the
Fund's Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject investors to a $50
penalty imposed by the IRS.
Net Asset Value Per Share. An investment portfolio's NAV refers to the
worth of one share. The NAV for Fund shares, which are offered on a continuous
basis, is calculated on the basis of amortized cost, which involves initially
valuing a portfolio instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. The Fund
intends to maintain a constant NAV of $1.00, although there is no assurance that
this can be done on a continuing basis. See "Determination of Net Asset Value."
The offering price of Fund shares is their NAV. Investments and requests
to exchange or redeem shares received by the Transfer Agent or other authorized
entity to receive orders on behalf of the Fund before 4 p.m., Eastern time, on
each day that the NYSE is open (a "business day") are effective, and will
receive the price next determined, on that business day. The NAV of the Fund is
calculated two times each business day, at 12 noon and 4 p.m., Eastern time.
Investment, exchange or redemption requests received after 4 p.m., Eastern time
are effective, and receive the first share price determined, on the next
business day.
Dreyfus TeleTransfer Privilege. You may purchase Fund shares by telephone
through the Dreyfus TeleTransfer Privilege if you have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds will be
transferred between the bank account designated in one of these documents and
your Fund account. Only a bank account maintained in a domestic financial
institution that is an ACH member may be so designated. Dreyfus TeleTransfer
purchase orders may be made at the Transfer Agent any time. Purchase orders
received by 4:00 p.m., New York time, on any business day that the Transfer
Agent and the NYSE are open for business will be credited to the shareholder's
Fund account on the next bank business day following such purchase order.
Purchase orders made after 4:00 p.m., New York time, on any business day the
Transfer Agent and the NYSE are open for business, or orders made on Saturday,
Sunday or any Fund holiday (e.g., when the NYSE is not open for business), will
be credited to the shareholder's Fund account on the second bank business day
following such purchase order. To qualify to use the Dreyfus TeleTransfer
Privilege, the initial payment for purchase of Fund shares must be drawn on, and
redemption proceeds paid to, the same bank and account as are designated on the
Account Application or Shareholder Services Form on file. If the proceeds of a
particular redemption are to be wired to an account at any other bank, the
request must be in writing and signature-guaranteed. See "Redemption of Shares -
Dreyfus TeleTransfer Privilege." The Fund may modify or terminate this Privilege
at any time or charge a service fee upon notice to shareholders. No such fee
currently is contemplated.
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the calendar
year the account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.
In-Kind Purchases. If the following conditions are satisfied, the Fund may
at its discretion, permit the purchase of shares through an "in-kind" exchange
of securities. Any securities exchanged must meet the investment objective,
policies and limitations of the Fund, must have a readily ascertainable market
value, must be liquid and must not be subject to restrictions on resale. The
market value of any securities exchanged, plus any cash, must be at least equal
to $25,000. Shares purchased in exchange for securities generally cannot be
redeemed for fifteen days following the exchange in order to allow time for the
transfer to settle.
The basis of the exchange will depend upon the relative NAV of the shares
purchased and securities exchanged. Securities accepted by the Fund will be
valued in the same manner as the Fund values its assets. Any interest earned on
the securities following their delivery to the Fund and prior to the exchange
will be considered in valuing the securities. All interest, dividends,
subscription or other rights attached to the securities become the property of
the Fund, along with the securities. For further information about "in-kind"
purchases, call 1-800-645-6561.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies," "Services
For Fund Investors," "Instructions
for Regular Accounts."
General. You may request redemption of Fund shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When a
request is received in proper form by the Transfer Agent or other authorized
entity to receive orders on behalf of the Fund, the Fund will redeem the shares
at the next determined NAV as described below.
You will be charged $5.00 when you redeem all shares in your account or
your account is otherwise closed out (unless you have held Fund shares since
November 20, 1995). The fee will be deducted from your redemption proceeds and
paid to the Transfer Agent. The account closeout fee does not apply to exchanges
out of the Fund or to wire or Dreyfus TeleTransfer redemptions, for each of
which a $5.00 fee may apply. However, the Fund will waive this fee if the
closing balance in the shareholder's account on the business day immediately
preceding the effective date of such transaction is $50,000 or more. Agents may
charge a fee for effecting redemptions of Fund shares. Any certificates
representing Fund shares being redeemed must be submitted with the redemption
request. The value of the shares redeemed may be more or less than their
original cost, depending upon the Fund's then current NAV.
The Fund ordinarily will make payment for all shares redeemed within seven
days after receipt by the Transfer Agent of a redemption request in proper form,
except as provided by the rules of the SEC. However, if you have purchased Fund
shares by check or by the Dreyfus TeleTransfer Privilege and subsequently submit
a written redemption request to the Transfer Agent, the Fund may delay
redemption of such shares, and the redemption proceeds may not be transmitted to
you, for up to eight business days after the purchase of such shares. In
addition, the Fund will not honor Redemption Checks ("Checks") under the
Checkwriting Privilege, and will reject requests to redeem shares by wire or
telephone or pursuant to the Dreyfus TeleTransfer Privilege for a period of up
to eight business days after receipt by the Transfer Agent of the purchase check
or the Dreyfus TeleTransfer purchase order against which such redemption is
requested. These procedures will not apply if your shares were purchased by wire
payment, or you otherwise have a sufficient collected balance in your account to
cover the redemption request. Fund shares will not be redeemed until the
Transfer Agent has received your Account Application.
Procedures. You may redeem shares by using the regular redemption
procedure through the Transfer Agent, or through the Telephone Redemption
Privilege or the Checkwriting Privilege, which are granted automatically unless
you specifically refuse them by checking the applicable "No" box on the Account
Application. The Telephone Redemption Privilege and the Checkwriting Privilege
may be established for an existing account by a separate signed Shareholder
Services Form, or with respect to the Telephone Redemption Privilege, by oral
request from any of the authorized signatories on the account by calling
1-800-645-6561. You also may redeem shares through the Wire Redemption
Privilege, or the Dreyfus TeleTransfer Privilege, if you have checked the
appropriate box and supplied the necessary information on the Account
Application or have filed a Shareholder Services Form with the Transfer Agent.
Other redemption procedures may be in effect for clients of certain Agents and
institutions. The Fund makes available to certain large institutions the ability
to issue redemption instructions through compatible computer facilities. The
Fund reserves the right to refuse any request made by wire or telephone,
including requests made shortly after a change of address, and may limit the
amount involved or the number of such requests. The Fund may modify or terminate
any redemption Privilege at any time. Shares for which certificates have been
issued are not eligible for the Checkwriting, Wire Redemption, Telephone
Redemption or Dreyfus TeleTransfer Privilege.
The Telephone Redemption Privilege, the Dreyfus TeleTransfer Privilege or
Telephone Exchange Privilege authorizes the Transfer Agent to act on telephone
instructions (including over The Dreyfus Touch(R) automated telephone system)
from any person representing himself or herself to be you, or a representative
of your Agent, and reasonably believed by the Transfer Agent to be genuine. The
Fund will require the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions are
genuine and, if it does not follow such procedures, the Fund or the Transfer
Agent may be liable for any losses due to unauthorized or fraudulent
instructions. Neither the Fund nor the Transfer Agent will be liable for
following telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may experience
difficulty in contacting the Transfer Agent by telephone to request a redemption
or an exchange of Fund shares. In such cases, you should consider using the
other redemption procedures described herein. Use of these other redemption
procedures may result in your redemption request being processed at a later time
than it would have been if telephone redemption had been used.
Regular Redemption. Under the regular redemption procedure, you may redeem
your shares by written request mailed to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671. Redemption requests may be delivered
in person only to a Dreyfus Financial Center. These requests will be forwarded
to the Fund and will be processed only upon receipt thereby. For the location of
the nearest financial center, you should call the telephone number listed on the
cover of this Statement of Additional Information. Redemption requests must be
signed by each shareholder, including each owner of a joint account, and each
signature must be guaranteed. The Transfer Agent has adopted standards and
procedures pursuant to which signature guarantees in proper form generally will
be accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations, as well as from participants in the NYSE 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.
Checkwriting Privilege. You may write Checks drawn on your Fund account.
The Fund provides Checks automatically upon opening an account, unless you
specifically refuse the Checkwriting 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 Checkwriting
Privilege may be established for an existing account by a separate signed
Shareholder Services Form. The Account Application or Shareholder Services Form
must be manually signed by the registered owner(s). Checks are drawn on your
account and may be made payable to the order of any person in an amount of
$1,000 or more ($500 for shareholders who have held Fund shares since November
20, 1995). An investor (other than one who has held Fund shares since November
20, 1995), will be charged $2.00 for each check redemption. When a Check is
presented to the Transfer Agent for payment, the Transfer Agent, as the
investor's agent, will cause the Fund to redeem a sufficient number of full or
fractional shares in the investor's account to cover the amount of the Check and
the $2.00 charge. The fee will be waived if the closing balance in the
shareholder's account on the business day immediately preceding the effective
date of the transaction is $50,000 or more. Dividends are earned until the Check
clears. After clearance, a copy of the Check will be returned to the investor.
Investors generally will be subject to the same rules and regulations that apply
to checking accounts, although election of this Privilege creates only a
shareholder-transfer agent relationship with the Transfer Agent.
If the amount of the Check, plus any applicable charges, is greater than
the value of the shares in an investor's account, the Check will be returned
marked insufficient funds. Checks should not be used to close an account. Checks
are free but the Transfer Agent will impose a fee for stopping payment of a
Check upon request or if the Transfer Agent cannot honor a Check because of
insufficient funds or other valid reason. Such fees are not subject to waiver
based on account balance or other factors. The Fund may return an unpaid Check
that would draw your account balance below $5.00 and you may be subject to extra
charges. Investors should date Checks with the current date when writing them.
Please do not postdate Checks. If Checks are postdated, the Transfer Agent will
honor, upon presentment, even if presented before the date of the Check, all
postdated Checks which are dated within six months of presentment for payment,
if they are otherwise in good order.
This Privilege will be terminated immediately, without notice, with
respect to any account which is, or becomes, subject to back-up withholding.
Any check written on an account which has become subject to back-up withholding
on redemptions will not be honored by the Transfer Agent.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone or letter redemption
instructions from any person representing himself or herself to be the investor,
or a representative of the investor's Agent, and reasonably believed by the
Transfer Agent to be genuine. An investor (other than one who has held Fund
shares since November 20, 1995) will be charged a $5.00 fee for each wire
redemption, which will be deducted from the investor's account and paid to the
Transfer Agent. However, the Fund will waive the this fee if the closing balance
in the shareholder's account on the business day immediately preceding the
effective date of such transaction is $50,000 or more. Ordinarily, the Fund will
initiate payment for shares redeemed pursuant to this Privilege on the next
business day after receipt if the Transfer Agent receives the redemption request
in proper form. Redemption proceeds ($5,000 minimum) will be transferred by
Federal Reserve wire only to the commercial bank account specified by the
investor on the Account Application or Shareholder Services Form, or to a
correspondent bank if the investor's bank is not a member of the Federal Reserve
System. Fees ordinarily are imposed by such bank and are usually borne by the
investor. Immediate notification by the correspondent bank to the investor's
bank is necessary to avoid a delay in crediting the funds to the investor's bank
account. Holders of jointly registered Fund or bank accounts may have redemption
proceeds of only up to $500,000 wired within any 30-day period. Investors may
telephone redemption requests by calling 1-800-645-6561 or, if calling from
overseas, 516-794-5452.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code which
may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may have
the wire transmitted by contacting a TRT Cables operator at 1-800-654-7171, toll
free. Investors should advise the operator that the above transmittal code must
be used and should also inform the operator of the Transfer Agent's answer back
sign.
To change the commercial bank or account designated to receive redemption
proceeds, a written request must be sent to the Transfer Agent. This request
must be signed by each shareholder, with each signature guaranteed as described
below under "Share Certificates; Signatures."
Telephone Redemption Privilege. You may request by telephone that
redemption proceeds (maximum $250,000 per day) be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-645-6561 or, if calling from overseas, 516-794-5452. The Telephone
Redemption Privilege is granted automatically unless you specifically refuse it.
Dreyfus TeleTransfer Privilege. You may request by telephone that
redemption proceeds (minimum $1,000 per day) be transferred between your Fund
account and your bank account. Only a bank account maintained in a domestic
financial institution which is an ACH member may be designated. Redemption
proceeds will be on deposit in your account at an ACH member bank ordinarily two
business days after receipt of the redemption request. An investor (other than
one who has held Fund shares since November 20, 1995) will be charged a $5.00
fee for each redemption effected pursuant to this Privilege, which will be
deducted from the investor's account and paid to the Transfer Agent. The fee
will be waived if the closing balance in the shareholder's account on the
business day immediately preceding the effective date of the transaction is
$50,000 or more. Investors should be aware that if they have selected the
Dreyfus TeleTransfer Privilege, any request for a wire redemption will be
effected as a Dreyfus TeleTransfer transaction through the ACH system unless
more prompt transmittal specifically is requested. Holders of jointly registered
Fund or bank accounts may redeem through the Dreyfus TeleTransfer Privilege for
transfer to their bank account only up to $500,000 within any 30-day period.
Share Certificates; Signatures. Any certificates representing Fund shares
to be redeemed must be submitted with the redemption request. Written redemption
requests must be signed by each shareholder, including each holder of a joint
account, and each signature must be guaranteed. Signatures on endorsed
certificates submitted for redemption also must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations
as well as from participants in the NYSE Medallion Signature Program, STAMP, and
the Stock Exchanges Medallion Program. Guarantees must be signed by an
authorized signatory of the guarantor and "Signature-Guaranteed" must appear
with the signature. The Transfer Agent may request additional documentation from
corporations, executors, administrators, trustees or guardians, and may accept
other suitable verification arrangements from foreign investors, such as
consular verification. For more information with respect to
signature-guarantees, please call one of the telephone numbers listed on the
cover.
Redemption Commitment. The Trust has committed itself to pay in cash all
redemption requests by any shareholder of record of the Fund, limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the value of the
Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the SEC. In the case of requests for
redemption in excess of such amount, the Board of 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 NAV is not reasonably practicable, or (c)
for such other periods as the SEC, by order, may permit for protection of the
Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies" and
"Services for Fund Investors."
Fund Exchanges. You may purchase, in exchange for shares of the Fund,
shares of certain other funds managed or administered by Dreyfus or shares of
certain funds advised by Founders Asset Management LLC ("Founders"), an
affiliate of Dreyfus, to the extent such shares are offered for sale in your
state of residence. 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 NAV per share as follows:
A. Exchanges for shares of funds that are offered without
a sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged for
shares of other funds sold with a sales load, and the applicable
sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged without
a sales load for shares of other funds sold without a sales load.
D. Shares of funds purchased with a sales load, shares of
funds acquired by a previous exchange from shares
purchased with a sales load and additional shares
acquired through reinvestment of dividends or other
distributions of any such funds (collectively referred
to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred
to herein as "Offered Shares"), provided that, if the
sales load applicable to the Offered Shares exceeds the
maximum sales load that could have been imposed in
connection with the Purchased Shares (at the time the
Purchased Shares were acquired), without giving effect
to any reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, shareholders must notify the
Transfer Agent of their prior ownership of fund shares and their account number.
Any such exchange is subject to confirmation of a shareholder's holdings through
a check of appropriate records.
To request an exchange, an investor, or the investor's Agent acting on the
investor's behalf, must give exchange instructions to the Transfer Agent in
writing or by telephone. Before any exchange, investors must obtain and should
review a copy of the current prospectus of the fund into which the exchange is
being made. Prospectuses may be obtained by calling 1-800-645-6561. The shares
being exchanged must have a current value of at least $1,000; furthermore, when
establishing a new account by exchange, the shares being exchanged must have a
value of at least the minimum initial investment required for the fund into
which the exchange is being made. The ability to issue exchange instructions by
telephone is given to all Fund shareholders automatically, unless the investor
checks the applicable "No" box on the Account Application, indicating that the
investor specifically refuses this Privilege. The Telephone Exchange Privilege
may be established for an existing account by written request signed by all
shareholders on the account, by a separate signed Shareholder Services Form,
available by calling 1-800-645-6561, or by oral request from any of the
authorized signatories on the account, also by calling 1-800-645-6561. Investors
who have previously established the Telephone Exchange Privilege may telephone
exchange instructions (including over The Dreyfus Touch(R) automated telephone
system) by calling 1-800-645-6561. If calling from overseas, investors may call
516-794-5452. Upon an exchange into a new account, the following shareholder
services and privileges, as applicable and where available, will be
automatically carried over to the fund into which the exchange is made:
Telephone Exchange Privilege, Checkwriting Privilege, Wire Redemption Privilege,
Telephone Redemption Privilege, Dreyfus TeleTransfer Privilege and the dividends
and distributions payment option (except for Dividend Sweep) selected by the
investor.
By using the Telephone Exchange Privilege, the investor authorizes the
Transfer Agent to act on telephonic instructions (including over The Dreyfus
Touch(R) automated telephone system) from any person representing himself or
herself to be the investor or a representative of the investor's Agent, and
reasonably believed by the Transfer Agent to be genuine. Telephone exchanges may
be subject to limitations as to the amount involved. Shares issued in
certificate form are not eligible for telephone exchange. Exchanges out of the
Fund pursuant to Fund Exchanges are limited to four per calendar year. The Fund
reserves the right, upon not less than 60 days' written notice, to charge
shareholders who have held Fund shares since November 20, 1995 a nominal fee for
each exchange in accordance with Rules promulgated by the SEC.
The Fund reserves the right to reject any exchange request in whole or in
part. The availability of fund exchanges may be modified or terminated at any
time upon notice to investors.
The exchange of shares of one fund for shares of another is treated for
Federal income tax purpose as a sale of the shares given in exchange by the
shareholder and, therefore, an exchanging shareholder may realize a taxable gain
or loss.
Dividend Option. Dreyfus Dividend Sweep allows you to invest automatically
your dividends or dividends and capital gain distributions, if any, from the
Fund in shares of another fund in the Dreyfus Family of Funds or shares of
certain funds advised by Founders, of which you are a shareholder. Shares of the
other funds purchased pursuant to this Privilege will be purchased on the basis
of relative NAV per share as follows:
A. Dividends and other distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that are
offered without a sales load.
B. Dividends and other distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds sold
with a sales load, and the applicable sales load will be deducted.
C. Dividends and other distributions paid by a fund which
charges a sales load may be invested in shares of other
funds sold with a sales load (referred to herein as
"Offered Shares"), provided that, if the sales load
applicable to the Offered Shares exceeds the maximum
sales load charged by the fund from which dividends or
other distributions are being swept, without giving
effect to any reduced loads, the difference will be
deducted.
D. Dividends and other distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales charge
("CDSC") and the applicable CDSC, if any, will be imposed upon
redemption of such shares.
For more information concerning this Privilege, or to request a Dividend
Options Form, investors should call toll free 1-800-645-6561. Investors may
cancel their participation in this Privilege by mailing written notification to
the Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671.
To select a new fund after cancellation, investors must submit a new Dividend
Options Form. Enrollment in or cancellation of this privilege is effective three
business days following receipt. This Privilege is available only for existing
accounts and may not be used to open new accounts. Minimum subsequent
investments do not apply. The Fund may modify or terminate this Privilege at any
time or charge a service fee. No such fee currently is contemplated.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies."
The NAV for Fund shares is calculated on the basis of amortized cost,
which involves initially valuing a portfolio instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which the value, as determined by amortized cost,
is higher or lower than the price the Fund would receive if it sold the
instrument. The Fund intends to maintain a constant NAV of $1.00 per share,
although there is no assurance that this can be done on a continuing basis.
The use of amortized cost is permitted by Rule 2a-7 under the 1940 Act.
Pursuant to the provisions of Rule 2a-7, the Trustees have established
procedures reasonably designed to stabilize the Fund's price per share, as
computed for the purpose of sale and redemption, at $1.00. These procedures
include the determination of the Trustees, at such times as they deem
appropriate, of the extent of deviation, if any, of the Fund's current NAV per
share, using market values, from $1.00; periodic review by the Trustees of the
amount of and the methods used to calculate the deviation; maintenance of
records of the determination; and review of such deviations. The procedures
employed to stabilize the Fund's price per share require the Trustees to
consider promptly what action, if any, should be taken by the Trustees if such
deviation exceeds 1/2 of one percent. Such procedures also require the Trustees
to take appropriate action to eliminate or reduce, to the extent reasonably
practicable, material dilution or other unfair effects resulting from any
deviation. Such action may include: selling portfolio instruments prior to
maturity to realize capital gains or losses or to shorten average portfolio
maturity; withholding dividends or paying distributions from capital or capital
gains; redeeming shares in kind; or establishing a NAV by using available market
quotations. In addition to such procedures, Rule 2a-7 requires the Fund to
purchase instruments having remaining maturities of 397 days or less, to
maintain a dollar-weighted average portfolio maturity of 90 days or less and to
invest only in securities determined by the Trustees to be of high quality, as
defined in Rule 2a-7, with minimal credit risks.
In periods of declining interest rates, the indicated daily yield on Fund
shares computed by dividing the annualized daily income on the Fund by the NAV
per share computed as above may tend to be higher than a similar computation
made by using a method of valuation based on market prices and estimates. In
periods of rising interest rates, the indicated daily yield on Fund shares
computed the same way may tend to be lower than a similar computation made by
using a method of calculation based upon market prices and estimates.
NYSE Closings. The holidays (as observed) on which the NYSE
-------------
is currently scheduled to be closed are: New Year's Day, Dr.
Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Past Performance."
The Fund's "yield" refers to the income generated by an investment in the
Fund over a seven-day period identified in the advertisement. This income is
then "annualized." That is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period and
is shown as a percentage of the investment. The "effective yield" is calculated
similarly, but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The effective "yield" will be slightly higher than
the "yield" because of the compounding effect of this assumed reinvestment. The
Fund's "yield" and "effective yield" may reflect absorbed expenses pursuant to
any undertaking that may be in effect. Since yields fluctuate, yield data cannot
necessarily be used to compare an investment in the Fund with bank deposits,
savings accounts, and similar investment alternatives which often provide an
agreed-upon or guaranteed fixed yield for a stated period of time, or other
investment companies which may use a different method of computing yield. The
Fund's tax equivalent yield shows the level of taxable yield needed to produce
an after-tax equivalent to the Fund's tax-free yield. This is done by increasing
the Fund's yield by the amount necessary to reflect the payment of Federal
income tax (and state income tax, if applicable) at a stated tax rate.
Any fees charged by an Agent directly to its customers' account in
connection with investments in the Fund will not be included in calculations of
yield.
The Fund computes its current annualized and compound effective yields
using standardized methods required by the SEC. The annualized yield for the
Fund is computed by (a) determining the net change in the value of a
hypothetical account having a balance of one share at the beginning of a seven
calendar day period; (b) dividing the net change by the value of the account at
the beginning of the period to obtain the base period return; and (c)
annualizing the results (i.e., multiplying the base period return by 365/7). The
net change in the value of the account reflects the value of additional shares
purchased with dividends declared on both the original share and such additional
shares, but does not include realized gains and losses or unrealized
appreciation and depreciation. Compound effective yields are computed by adding
1 to the base period return (calculated as described above), raising that sum to
a power equal to 365/7 and subtracting 1. The Fund's tax equivalent yield is
computed by dividing that portion of the Fund's yield which is tax-exempt by one
minus a stated income tax rate and adding the product to that portion, if any,
of the Fund's yield that is not tax-exempt.
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the Fund's yield fluctuates, its yield cannot be compared
with yields on savings accounts or other investment alternatives that provide an
agreed-to or guaranteed fixed yield for a stated period of time. However, yield
information may be useful to an investor considering temporary investments in
money market instruments. In comparing the yield of one money market fund to
another, consideration should be given to the Fund's investment policies,
including the types of investments made, length of maturities of portfolio
securities, the methods used by the Fund to compute the yield (methods may
differ) and whether there are any special account charges which may reduce
effective yield.
For the seven-day period ended June 30, 2000, the Fund's yield was 3.68%,
effective yield was 3.75% and equivalent taxable yield* was 6.72%.
From time to time, advertising materials for the Fund may refer to
Morningstar ratings and related analyses supporting the rating.
--------
* Example assumes a Federal marginal tax rate of 39.6% and a California marginal
tax rate of 9.30% (combined effective rate of 45.22%).
Performance rankings as reported in Changing Times, Business Week,
Institutional Investor, The Wall Street Journal, Mutual Fund Forecaster, No Load
Investor, Money Magazine, Morningstar Mutual Fund Values, U.S. News and World
Report, Forbes, Fortune, Barron's, Financial Planning, Financial Planning on
Wall Street, Certified Financial Planner Today, Investment Advisor, Kiplinger's,
Smart Money and similar publications may also be used in comparing a Fund's
performance. Furthermore, a Fund may quote its yields in advertisements or in
shareholder reports.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer to, or
include commentary by the portfolio manager relating to, investment strategy,
asset growth, current or past business, political, economic or financial
conditions and other matters of general interest to investors.
From time to time, advertising materials may refer to studies performed by
Dreyfus or its affiliates, such as "The Dreyfus Tax Informed Investing Study" or
"The Dreyfus Gender Investment Comparison Study (1996-1997)" or other such
studies.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the Section in the Fund's Prospectus entitled "Distributions and Taxes."
General. The Fund ordinarily declares dividends from net investment income
on each day that the NYSE is open for business. The Fund's earnings for
Saturdays, Sundays and holidays are declared as dividends on the preceding
business day. Dividends usually are paid on the last calendar day of each month
and are automatically reinvested in additional Fund shares at NAV or, at an
investor's option, paid in cash. If an investor redeems all shares in their
account at any time during the month, all dividends to which the investor is
entitled will be paid along with the proceeds of the redemption. If an omnibus
accountholder indicates in a partial redemption request that a portion of any
accrued dividends to which such account is entitled belongs to an underlying
accountholder who has redeemed all of his or her Fund shares, that portion of
the accrued dividends will be paid along with the proceeds of the redemption.
Dividends from net realized short-term capital gains, if any, generally are
declared and paid once a year, but the Fund may make distributions on a more
frequent basis to comply with the distribution requirements of the Code, in all
events in a manner consistent with the provisions of the 1940 Act. The Fund will
not make distributions from net realized capital gains unless capital loss
carryovers, if any, have been utilized or have expired. The Fund does not expect
to realize any long-term capital gains or losses. Investors may choose whether
to receive dividends in cash or to reinvest them in additional Fund shares at
NAV. All expenses are accrued daily and deducted before declaration of dividends
to investors.
Except as provided below, shares of the Fund purchased on a day on which
the Fund calculates its NAV will not begin to accrue dividends until the
following business day and redemption orders effected on any particular day will
receive all dividends declared through the day of redemption. However, if
immediately available funds are received by the Transfer Agent prior to 12:00
noon, Eastern time, investors may receive the dividend declared on the day of
purchase. Investors will not receive the dividends declared on the day of
redemption if a wire redemption order is placed prior to 12:00 noon, Eastern
time.
It is expected that the Fund will continue to qualify for treatment as a
regulated investment company ("RIC") under the Code. Such qualification will
relieve the Fund of any liability for federal income tax to the extent its
earnings and realized gains are distributed in accordance with applicable
provisions of the Code. To qualify for treatment as a RIC under the Code, the
Fund - which is treated as a separate corporation for federal tax purposes - (1)
must distribute to its shareholders each year at least 90% of its investment
company taxable income (generally consisting of net taxable investment income
and net short-term capital gains, plus its net interest income excludable from
gross income under section 103(a) of the Code) ("Distribution Requirement"), (2)
must derive at least 90% of its annual gross income from specified sources
("Income Requirement"), and (3) must meet certain asset diversification and
other requirements. If the Fund failed to qualify for treatment as a RIC for any
taxable year, (1) it would be taxed at corporate rates on the full amount of its
taxable income for that year without being able to deduct the distributions it
makes to its shareholders and (2) the shareholders would treat all those
distributions, including distributions that otherwise would be "exempt-interest
dividends," as dividends (that is, ordinary income) to the extent of the Fund's
earnings and profits. In addition, the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest and make substantial
distributions before requalifying for RIC treatment. The Fund also intends to
continue to qualify to pay "exempt-interest" dividends, which requires, among
other things, that at the close of each quarter of its taxable year at least 50%
of the value of its total assets must consist of municipal securities.
The Fund may be subject to a 4% nondeductible excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary (taxable) income for that year and capital gain net income for the
one-year period ending October 31 of that year, plus certain other amounts. To
avoid the application of this excise tax, the Fund may make an additional
distribution shortly before December 31 in each year of any undistributed
ordinary (taxable) income or capital gains and expects to pay any other
dividends and distributions necessary to avoid the application of this tax.
Distributions by the Fund that are designated by it as "exempt-interest
dividends" generally may be excluded from gross income. Interest on indebtedness
incurred or continued to purchase or carry shares of the Fund will not be
deductible for Federal income tax purposes to the extent that the Fund's
distributions (other than capital gains distributions) consist of
exempt-interest dividends. The Fund may invest in "private activity bonds," the
interest on which is treated as a tax preference item for shareholders in
determining their liability for the alternative minimum tax. Proposals may be
introduced before Congress for the purpose of restricting or eliminating the
Federal income tax exemption for interest on municipal securities. If such a
proposal were enacted, the availability of such securities for investment by the
Fund and the value of its portfolio would be affected. In such event, the Fund
would reevaluate its investment objective and policies.
Dividends and other distributions, to the extent taxable, are taxable
regardless of whether they are received in cash or reinvested in additional Fund
shares, even if the value of shares is below cost. If investors purchase shares
shortly before a taxable distribution (i.e., any distribution other than an
exempt-interest dividend paid by the Fund), they must pay income taxes on the
distribution, even though the value of the investment (plus cash received, if
any) remains the same. In addition, the share price at the time investors
purchase shares may include unrealized gains in the securities held in the Fund.
If these portfolio securities are subsequently sold and the gains are realized,
they will, to the extent not offset by capital losses, be paid as a capital gain
distribution and will be taxable.
Dividends from the Fund's investment company taxable income together with
distributions from net realized short-term capital gains, if any (collectively,
"dividend distributions"), will be taxable to U.S. shareholders, including
certain non-qualified retirement plans, as ordinary income to the extent of the
Fund's earnings and profits, whether received in cash or reinvested in
additional Fund shares. Distributions by the Fund of net capital gain, when
designated as such, are taxable as long-term capital gains, regardless of the
length of time of share ownership. The Fund is not expected to realize long-term
capital gains, or, therefore, to make distributions of net capital gain (the
excess of net long-term capital gain over net short-term capital loss). Nor will
dividends paid by the Fund be eligible for the dividends-received deductions
allowed to corporations.
Dividends derived by the Fund from tax-exempt interest are designated as
tax-exempt in the same percentage of the day's dividend as the actual tax-exempt
income earned that day. Thus, the percentage of the dividend designated as
tax-exempt may vary from day to day. Similarly, dividends derived by the Fund
from interest on 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 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 is concerned. In other cases,
however, the ability of the Fund to participate in volume transactions will
produce better executions for the Fund. While the Trustees will continue to
review simultaneous transactions, it is their present opinion that the
desirability of retaining Dreyfus as investment manager to the Fund outweighs
any disadvantages that may be Statement of Additional Information to exist from
exposure to simultaneous transactions.
The Fund paid no stated brokerage commissions for the fiscal years ended
June 30, 2000, 1999 and 1998.
INFORMATION ABOUT THE FUND/TRUST
Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. Fund shares
are without par value, have no preemptive or subscription rights, and are freely
transferable.
The Trust is a "series fund," which is a mutual fund divided into separate
portfolios, each of which is treated as a separate entity for certain matters
under the 1940 Act and for other purposes. A shareholder of one portfolio is not
deemed to be a shareholder of any other portfolio. For certain matters
shareholders vote together as a group; as to others they vote separately by
portfolio. The Trustees have authority to create an unlimited number of shares
of beneficial interest, without par value, in separate series. The Trustees have
authority to create additional series at any time in the future without
shareholder approval.
Each share (regardless of class) has one vote. On each matter submitted to
a vote of the shareholders, all shares of each fund or class shall vote together
as a single class, except as to any matter for which a separate vote of any fund
or class is required by the 1940 Act and except as to any matter which affects
the interest of a particular fund or class, in which case only the holders of
shares of the one or more affected funds or classes shall be entitled to vote,
each as a separate class.
The assets received by the Trust for the issue or sale of shares of each
fund and all income, earnings, profits and proceeds thereof, subject only to the
rights of creditors, are specifically allocated to such fund, and constitute the
underlying assets of such fund. The underlying assets of each fund are required
to be segregated on the books of account, and are to be charged with the
expenses in respect to such fund and with a share of the general expenses of the
Trust. Any general expenses of the Trust not readily identifiable as belonging
to a particular fund shall be allocated by or under the direction of the
Trustees in such manner as the Trustees determine to be fair and equitable,
taking into consideration, among other things, the relative sizes of the funds
and the relative difficulty in administering each fund. Each share of each fund
represents an equal proportionate interest in that fund with each other share
and is entitled to such dividends and distributions out of the income belonging
to such fund as are declared by the Trustees. Upon any liquidation of a fund,
shareholders thereof are entitled to share pro rata in the net assets belonging
to that fund available for distribution.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Trust to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Trustees or the
appointment of auditors. However, the holders of at least 10% of the shares
outstanding and entitled to vote may require the Trust to hold a special meeting
of shareholders for purposes of removing a Trustee from office. Shareholders may
remove a Trustee by the affirmative vote of two-thirds of the Trust's
outstanding voting shares. In addition, the Board of Trustees will call a
meeting of shareholders for the purpose of electing Trustees if, at any time,
less than a majority of the Trustees then holding office have been elected by
shareholders.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an investment
company, such as the Trust, will not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each series affected by such matter. Rule 18f-2 further provides that a series
shall be deemed to be affected by a matter unless it is clear that the interests
of each series in the matter are identical or that the matter does not affect
any interest of such series. The Rule exempts the selection of independent
accountants and the election of Trustees from the separate voting requirements
of the Rule.
The Fund will send annual and semi-annual financial statements to all of
its shareholders.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Agreement and Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or a Trustee. The Agreement and Declaration of Trust provides for
indemnification from the Trust's property for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust. Thus, the
risk of a shareholder's incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself would be unable
to meet its obligations, a possibility which Dreyfus believes is remote. Upon
payment of any liability incurred by the Trust, the shareholder paying such
liability will be entitled to reimbursement from the general assets of the
Trust. The Trustees intend to conduct the operations of each fund in such a way
so as to avoid, as far as possible, ultimate liability of the shareholders for
liabilities of such fund.
COUNSEL AND INDEPENDENT AUDITORS
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second Floor,
Washington, D.C., 20036-1800, has passed upon the legality of the shares offered
by the Prospectus and this Statement of Additional Information.
KPMG LLP, 757 Third Avenue, New York, NY 10017, was appointed by the Board
of Trustees to serve as the Fund's independent auditors for the year ending June
30, 2001, providing audit services including (1) examination of the annual
financial statements, (2) assistance, review and consultation in connection with
SEC filings and (3) review of the annual Federal income tax return filed on
behalf of the Fund.
<PAGE>
APPENDIX A
INVESTING IN CALIFORNIA MUNICIPAL OBLIGATIONS
The following information is a summary of special factors affecting
investments in California Municipal Obligations. It 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 (the "State")
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 respects.
State Finances
The Budget Process
The State's fiscal year begins on July 1 and ends on June 30. The State
operates on a budget basis, using a modified accrual system of accounting, with
revenues credited in the period in which they are measurable and available and
expenditures debited in the period in which the corresponding liabilities are
incurred.
The annual budget is proposed by the Governor by January 10 of each year
for the next fiscal year (the "Governor's Budget"). Under State law, the annual
proposed Governor's Budget cannot provide for projected expenditures in excess
of projected revenues and balances available from prior fiscal years. Following
the submission of the Governor's Budget, the Legislature takes up the proposal.
Under the State Constitution, money may be drawn from the Treasury only
through an appropriation made by law. The primary source of the annual
expenditure authorizations is the Budget Act as approved by the Legislature and
signed by the Governor. The Budget Act must be approved by a two-thirds majority
vote of each House of the Legislature. The Governor may reduce or eliminate
specific line items in the Budget Act or any other appropriations bill without
vetoing the entire bill. Such individual line-item vetoes are subject to
override by a two-thirds majority vote of each House of the Legislature.
Appropriations also may be included in legislation other than the Budget
Act. Bills containing appropriations (except for K-12 and community college
("K-14") education) must be approved by a two-thirds majority vote in each House
of the Legislature and be signed by the Governor. Bills containing K-14
education appropriations require a simple majority vote. Continuing
appropriations, available without regard to fiscal year, also may be provided by
statute or the State Constitution. There is litigation pending concerning the
validity of such continuing appropriations. See "Litigation" below.
Funds necessary to meet an appropriation need not be in the State Treasury
at the time such appropriation is enacted; revenues may be appropriated in
anticipation of their receipt.
The General Fund
The moneys of the State are segregated into the General Fund and over 900
special funds, including bond, trust and pension funds. The General Fund
consists of revenues received by the State Treasury and not required by law to
be credited to any other fund, as well as earnings from the investment of State
moneys not allocable to another fund. The General Fund is the principal
operating fund for the majority of governmental activities and is the depository
of most of the major revenue sources of the State. The General Fund may be
expended as a consequence of appropriation measures enacted by the Legislature
and approved by the Governor, as well as appropriations pursuant to various
constitutional authorizations and initiative statutes.
The Special Fund for Economic Uncertainties
The Special Fund for Economic Uncertainties ("SFEU") is funded with
General Fund revenues and was established to protect the State from unforeseen
revenue reductions and/or unanticipated expenditure increases. Amounts in the
SFEU may be transferred by the State Controller as necessary to meet cash needs
of the General Fund. The State Controller is required to return moneys so
transferred without payment of interest as soon as there are sufficient moneys
in the General Fund.
At the time of the release of the May 2000 Revision to the 2000-01
Governor's Budget (the "May Revision") on May 15, 2000, the Department of
Finance projected the SFEU would have a balance of about $6.920 billion at June
30, 2000, compared to the amount of $880 billion projected at the time the 1999
Budget Act was signed on July 29, 1999, and the amount of $2.420 billion
projected in the 2000-01 Governor's Budget released January 10, 2000. See
"Current State Budget" below.
Inter-Fund Borrowings
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,
1999, the General Fund had no outstanding loans from the SFEU, General Fund
special accounts or other special funds.
Investment of Funds
Moneys on deposit in the State's Centralized Treasury System are invested
by the Treasurer in the Pooled Money Investment Account (the "PMIA"). As of
March 31, 2000, the PMIA held approximately $21.57 billion of State moneys
invested for about 2,785 local governmental entities through the Local Agency
Investment Fund ("LAIF").
Welfare Reform
The Personal Responsibility and Work Opportunity Reconciliation Act of
1996 (the "Welfare Reform Law") has fundamentally reformed he nation's welfare
system. Among its many provisions, the Welfare Reform Law includes: (1)
conversion of Aid to Families with Dependent Children from an entitlement
program to a block grant titled Temporary Assistance for Needy Families (TANF),
with time limits on TANF recipients, work requirements and other changes; (ii)
provisions denying certain federal welfare and public benefits to legal
noncitizens (this provision has been amended by subsequent federal law),
allowing states to elect to deny additional benefits (including TANF) to legal
noncitizens, and generally denying almost all benefits to illegal immigrants;
and (iii) changes in the Food Stamp program, including reducing maximum benefits
and imposing work requirements.
California's response to the federal welfare reforms is embodied in
Chapter 270, Statutes of 1997 and is called California Work Opportunity and
Responsibility to Kids ("CalWORKs"), which replaced the former Aid to Families
with Dependent Children (AFDC) and Greater Avenues to Independence (GAIN)
programs, effective January 1, 1998. Consistent with the Welfare Reform Law,
CalWORKs contains new time limits on receipt of welfare aid, both lifetime as
well as for any current period on aid. The centerpiece of CalWORKs is the
linkage of eligibility to work participation requirements. Administration of the
new CalWORKs program is largely at the county level, and counties are given
financial incentives for success in this program.
The long-term impact of the Welfare Reform Law and CalWORKs cannot be
determined until there has been more experience and until an independent
evaluation of the CalWORKs program by the RAND Corporation is completed. In the
short-term, the implementation of the CalWORKs program has continued the trend
of declining welfare caseloads. The CalWORKs caseload trend is projected to have
been 580,000 in 1999-00 and to be 549,000 in 2000-01, down from a high of
921,000 cases in 1994-95.
The 2000-01 CalWORKs budget reflects California's success in meeting the
federally-mandated work participation requirements for federal fiscal year 1998.
With that goal being met, the federally-imposed maintenance-of-effort (MOE)
level for California is reduced from 80% of the federal fiscal year 1994
baseline expenditures for the former AFDC program ($2.9 billion) to 75% ($2.7
billion).
The 2000-01 May Revision to the Governor's Budget proposes expenditures
which will continue to meet, but not exceed, the federally-required $2.7 billion
combined State and county MOE requirement, Total CalWORKS-related expenditures
are estimated to be $7.2 billion for 1999-2000 and $7.0 billion for 2001-01,
including child care transfer amounts for the Department of Education.
Local Governments
The primary units of local government in California are the counties,
ranging in population from 1,200 in Alpine County to over 9,900,000 in Los
Angeles County. Counties are responsible for the provision of many basic
services, including indigent health care, welfare, jails and public safety in
unincorporated areas. There also are about 475 incorporated cities and thousands
of special districts formed for education, utility and other services. The
fiscal condition of local governments has been constrained since the enactment
of "Proposition 13" in 1978, which reduced and limited the future growth of
property taxes and limited the ability of local governments to impose "special
taxes" (those devoted to a specific purpose) without two-thirds voter approval.
Counties, in particular, have had fewer options to raise revenues than many
other local government entities, and have been required to maintain many
services.
In the aftermath of Proposition 13, the State provided aid to local
governments from the General Fund to make up some of the loss of property tax
moneys, including taking over the principal responsibility for funding K-12
schools and community colleges. During the recession, the Legislature eliminated
most of the remaining components of post-Proposition 13 aid to local government
entities other than K-14 education districts by requiring cities and counties to
transfer some of their property tax revenues to school districts. However, the
Legislature also provided additional funding sources (such as sales taxes) and
reduced certain mandates for local services. Since then, the State also has
provided additional funding to counties and cities through such programs as
health and welfare realignment, welfare reform, trial court restructuring, the
COPs program supporting local public safety departments, and various other
measures.
The 1999 Budget Act included a $150 million one-time subvention from the
General Fund to local agencies for relief from the 1992 and 1993 property tax
shifts. Legislation has been passed, subject to voter approval at the election
in November 2000, to provide a more permanent payment to local governments to
offset the property tax shift. In addition, legislation was enacted in 1999 to
provide approximately $35.8 million annual relief to cities based on 1997-98
costs of jail booking and processing fees paid to counties.
Historically, funding for the State's trial court system was divided
between the State and the counties. However, Chapter 850, Statutes of 1997,
implemented a restructuring of the State's trial court funding system. Funding
for the courts, with the exception of costs for facilities, local judicial
benefits, and revenue collection, was consolidated at the State level. The
county contribution for both their general fund and fine and penalty amounts is
capped at the 1994-95 level and becomes part of the Trial Court Trust Fund,
which supports all trial court operations. The State assumed responsibility for
future growth in trial court funding. The consolidation of funding is intended
to streamline the operation of the courts, provide a dedicated revenue source,
and relieve fiscal pressure on the counties. Beginning in 1998-99, the county
general fund contribution for court operations was reduced by $290 million, and
cities retained $62 million in fine and penalty revenue previously remitted to
the State. The General Fund reimbursed the $352 million revenue loss to the
Trial Court Trust Fund. The 1999 Budget Act included funds to further reduce the
county General Fund contribution by an additional $96 million. The 2000 May
Revision proposes to continue this permanent assistance to local governments.
The entire statewide welfare system has been changed in response to the
change in federal welfare law enacted in 1996 (see "Welfare Reform" above).
Under the CalWORKs program, counties are given flexibility to develop their own
plans, consistent with State law, to implement the program and to administer
many of its elements, and their costs for administrative and supportive services
are capped at the 1996-97 levels. Counties also are given financial incentives
if, at the individual county level or statewide, the CalWORKs program produces
savings associated with specified standards. Counties will still be required to
provide "general assistance" aid to certain persons who cannot obtain welfare
from other programs.
In 1996, voters approved Proposition 218, entitled the "Right to Vote on
Taxes Act," which incorporates new Articles XIII C and XIII D into the
California Constitution. These new provisions place limitations on the ability
of local government agencies to impose or raise various taxes, fees, charges and
assessments without voter approval. Certain "general taxes" imposed after
January 1, 1995 must be approved by voters in order to remain in effect. In
addition, Article XIII C clarifies the right of local voters to reduce taxes,
fees, assessments or charges through local initiatives. Proposition 218 does not
affect the State or its ability to levy or collect taxes.
State Appropriations Limit
The State is subject to an annual appropriations limit imposed by Article
XIII B of the State Constitution (the "Appropriations Limit"). The
Appropriations Limit does not restrict appropriations to pay debt service on
voter-authorized bonds.
Article XIII B prohibits the State from spending "appropriations subject
to limitation" in excess of the Appropriations Limit. "Appropriations subject to
limitation," with respect to the State, are authorizations to spend "proceeds of
taxes," which consist of tax revenues, and certain other funds, including
proceeds from regulatory licenses, user charges or other fees to the extent that
such proceeds exceed "the cost reasonably borne by that entity in providing the
regulation, product or service," but "proceeds of taxes" exclude most state
subventions to local governments, tax refunds and some benefit payments such as
unemployment insurance. No limit is imposed on appropriations of funds which are
not "proceeds of taxes," such as reasonable user charges or fees and certain
other non-tax funds.
Not included in the Appropriations Limit are appropriations for the debt
service costs of bonds existing or authorized by January 1, 1979, or
subsequently authorized by the voters, appropriations required to comply with
mandates of courts or the federal government, appropriations for qualified
capital outlay projects, appropriations of revenues derived from any increase in
gasoline taxes and motor vehicle weight fees above January 1, 1990 levels, and
appropriation of certain special taxes imposed by initiative (e.g., cigarette
and tobacco taxes). The Appropriations Limit may be exceeded in cases of
emergency.
The State's Appropriations Limit in each year is based on the limit for
the prior year, adjusted annually for changes in state per capita personal
income and changes in population, and adjusted, when applicable, for any
transfer of financial responsibility of providing services to or from another
unit of government or any transfer of the financial source for the provisions of
services from tax proceeds to non tax proceeds. The measurement of change in
population is a blended average of statewide overall population growth, and
change in attendance at local K-14 school districts. The Appropriations Limit is
tested over consecutive two-year periods. Any excess of the aggregate "proceeds
of taxes" received over such two-year period above the combined Appropriations
Limits for those two years is divided equally between transfers to K-14 school
districts and refunds to taxpayers.
The Legislature has enacted legislation to implement Article XIII B which
defines certain terms used in Article XIII B and sets forth the methods for
determining the Appropriations Limit. California Government Code Section 7912
requires an estimate of the Appropriations Limit to be included in the
Governor's Budget, and thereafter to be subject to the budget process and
established in the Budget Act.
The following table shows the State's Appropriations Limit for the past
three fiscal years, the current fiscal year and proposed budget year. As of the
release of the May Revision to the 2000-01 Governor's Budget, the Department of
Finance projects the State's Appropriations Limit for 2000-01 will be $54.073
billion. As of June 2000, the Department of Finance is in the process of
determining the Appropriations Subject to the Limit. Preliminary estimates
indicate the State may be over the Appropriations Limit for 1999-2000 by several
hundred million dollars, and would be below the Limit for 2000-01 by three to
four billion dollars. No action will occur under Articles XIIIB unless the State
exceeds the Limit over a two-year period.
State Appropriations Limit
(Millions)
Fiscal Years
1996-97 1997-98 1998-99 1999-00 2000-01
State Appropriations Limit $42,002 $44,778 $47,573 $50,673 $54,073*
Appropriations Subject to Limit (35,103) (40,743) (43,780) ** **
------- ------- ------- ------- -------
Amount (Over)/Under Limit $6,899 $4,035 $3,793 $ ** $ **
====== ====== ====== ==== =====
---------------------
* Estimated/Projected
** Department of Finance is presently estimating Appropriations Subject to
Limit.
SOURCE: State of California, Department of Finance.
Proposition 98
On November 8, 1988, voters of the State approved Proposition 98, a
combined initiative constitutional amendment and statute called the "Classroom
Instructional Improvement and Accountability Act." Proposition 98 changed State
funding of public education below the university level and the operation of the
State Appropriations Limit, primarily by guaranteeing K-14 schools a minimum
share of General Fund revenues. Under Proposition 98 (as modified by Proposition
111, which was enacted on June 5, 1990), K-14 schools are guaranteed the greater
of (a) in general, a fixed percent of General Fund revenues ("Test 1"), (b) the
amount appropriated to K-14 schools in the prior year, adjusted for changes in
the cost of living (measured as in Article XIII B by reference to State per
capita personal income) and enrollment ("Test 2"), or (c) a third test, which
would replace Test 2 in any year when the percentage growth in per capita
General Fund revenues from the prior year plus one half of one percent is less
than the percentage growth in State per capita personal income ("Test 3"). Under
Test 3, schools would receive the amount appropriated in the prior year adjusted
for changes in enrollment and per capita General Fund revenues, plus an
additional small adjustment factor. If Test 3 is used in any year, the
difference between Test 3 and Test 2 would become a "credit" to schools which
would be the basis of payments in future years when per capita General Fund
revenue growth exceeds per capita personal income growth. Legislation adopted
prior to the end of the 1988-89 Fiscal Year, implementing Proposition 98,
determined the K-14 schools' funding guarantee under Test 1 to be 40.3 percent
of the General Fund tax revenues, based on 1986-87 appropriations. However, that
percent has been adjusted to approximately 35 percent to account for a
subsequent redirection of local property taxes, since such redirection directly
affects the share of General Fund revenues to schools.
Proposition 98 permits the Legislature by two-thirds vote of both Houses,
with the Governor's concurrence, to suspend the K-14 schools' minimum funding
formula for a one-year period. Proposition 98 also contains provisions
transferring certain State tax revenues in excess of the Article XIII B limit to
K-14 schools. See "State Finances--State Appropriations Limit" above.
During the recession in the early 1990s, General Fund revenues for several
years were less than originally projected, so that the original Proposition 98
appropriations turned out to be higher than the minimum percentage provided in
the law. The Legislature responded to these developments by designating the
"extra" Proposition 98 payments in one year as a "loan" from future years'
Proposition 98 entitlements, and also intended that the "extra" payments would
not be included in the Proposition 98 "base" for calculating future years'
entitlements. By implementing these actions, per-pupil funding from Proposition
98 sources stayed almost constant at approximately $4,200 from Fiscal Year
1991-92 to Fiscal Year 1993-94.
In 1992, a lawsuit was filed, California Teachers' Association v. Gould,
which challenged the validity of these off-budget loans. The settlement of this
case, finalized in July 1996, provides, among other things, that both the State
and K-14 schools share in the repayment of prior years' emergency loans to
schools. Of the total $1.76 billion in loans, the State is repaying $935 million
by forgiveness of the amount owed, while schools will repay $825 million. The
State share of the repayment will be reflected as an appropriation above the
current Proposition 98 base calculation. The schools' share of the repayment
will count as appropriations that count toward satisfying the Proposition 98
guarantee, or from "below" the current base. Repayments are spread over the
eight-year period of 1994-95 through 2001-02 to mitigate any adverse fiscal
impact.
Substantially increased General Fund revenues, above initial budget
projections, in the fiscal years 1994-95 through 1999-00 have resulted in
retroactive increases in Proposition 98 appropriations from subsequent fiscal
years' budgets. Because of the State's increasing revenues, per-pupil funding at
the K-12 level has increased by more than 50 percent from the level in place in
1991-92, and is estimated at about $6,672 per ADA in 2000-01. A significant
amount of the "extra" Proposition 98 monies in the last few years has been
allocated to special programs. Since the State expects General Fund revenue
growth to continue in 2000-01, there also are new initiatives. See "Current
State Budget" for further discussion of education funding.
Prior Fiscal Years' Financial Results
The State's financial condition improved markedly during the fiscal years
starting in 1995-96, with a combination of better than expected revenues,
slowdown in growth of social welfare programs, and continued spending restraint
based on actions taken in earlier years. The State's cash position also
improved, and no external deficit borrowing occurred over the end of the last
four fiscal years.
The State economy grew strongly during the fiscal years beginning in
1995-96 and, as a result, the General Fund took in substantially
greater tax revenues (around $2.2 billion in 1995-96, $1.6 billion in
1996-97, $2.4 billion in 1997-98 and $1.7 billion in 1998-99) than
were initially planned when the budgets were enacted. The accumulated
budget deficit from the recession years was finally eliminated with
the repayment of the revenue anticipation warrants in April 1996.
These additional funds were largely directed to school spending as
mandated by Proposition 98, to make up shortfalls from reduced
federal health and welfare aid in 1995-96 and 1996-97 and
particularly in 1998-99 to fund new program incentives.
The following were major features of the 1998 Budget Act and certain
additional fiscal bills enacted before the end of the legislative session:
1. The most significant feature of the 1998-99 budget was agreement on a
total of $1.4 billion of tax cuts. The central element was a bill which provided
for a phased-in reduction of the Vehicle License Fee ("VLF"). Since the VLF is
transferred to cities and counties under existing law, the bill provided for the
General Fund to replace the lost revenues. Starting on January 1, 1999, the VLF
has been reduced by 25 percent, at a cost to the General Fund of approximately
$500 million in the 1998-99 Fiscal Year and about $1 billion annually
thereafter.
In addition to the cut in VLF, the 1998-99 budget included both temporary
and permanent increases in the personal income tax dependent credit ($612
million General Fund cost in 1998-99, but less in future years), a nonrefundable
renters tax credit ($133 million), and various targeted business tax credits
($106 million).
2. Proposition 98 funding for K-14 schools was increased by $1.7 billion
in General Fund moneys over revised 1997-98 levels, over $300 million higher
than the minimum Proposition 98 guarantee. Of the 1998-99 funds, major new
programs included money for instructional and library materials, deferred
maintenance, support for increasing the school year to 180 days and reduction of
class sizes in Grade 9. The Budget also included $250 million as repayment of
prior years' loans to schools, as part of the settlement of the California
Teachers' Association v. Gould lawsuit. See "State Finances - Proposition 98"
above.
3. Funding for higher education increased substantially above the actual
1997-98 level. General Fund support was increased by $340 million (15.6 percent)
for the University of California and $267 million (14.1 percent) for the
California State University system. In addition, Community Colleges funding
increased by $300 million (6.6 percent).
4. The Budget included increased funding for health, welfare and social
services programs. A 4.9 percent grant increase was included in the basic
welfare grants, the first increase in those grants in 9 years.
5. Funding for the judiciary and criminal justice programs increased by
about 11 percent over 1997-98, primarily to reflect increased State support for
local trial courts and rising prison population.
6. Major legislation enacted after the 1998 Budget Act included new
funding for resources projects, a share of the purchase of the Headwaters
Forest, funding for the Infrastructure and Economic Development Bank ($50
million) and funding for the construction of local jails. The State realized
savings of $433 million from a reduction in the State's contribution to the
State Teacher's Retirement System in 1998-99.
Final tabulation of revenues and expenditures contained in the 2000-01
Governor's Budget, released on January 10, 2000, reveals that stronger than
expected economic conditions in the State produced total 1998-99 General Fund
revenues of about $58.6 billion, almost $1.6 billion above the 1998 Budget Act
estimates. Actual General Fund expenditures were $57.8 billion, the amount
estimated at the 1998 Budget Act. Some of this additional revenue will be
directed to K-14 schools pursuant to Proposition 98. The Governor's Budget
reports a balance in the SFEU at June 30, 1999, of approximately $3.1 billion on
a budgetary basis.
Current State Budget
The discussion below of the 1999-00 Fiscal Year budget is based on the
State's estimates and projections of revenues and expenditures for the current
fiscal year and must not be construed as statements of fact. These estimates and
projections are based upon various assumptions as updated in the 1999 Budget
Act, which may be affected by numerous factors, including future economic
conditions in the State and the nation, and there can be no assurance that the
estimates will be achieved.
1999-2000 Fiscal Year Budget
On January 8, 1999, the Governor released a proposed budget for Fiscal
Year 1999-00 (the "January Governor's Budget"). The January Governor's Budget
generally reported that General Fund revenues for Fiscal Year 1998-99 and Fiscal
Year 1999-00 would be lower than earlier projections (primarily due to weaker
overseas economic conditions perceived in late 1998), while some caseloads would
be higher than earlier projections. The January Governor's Budget proposed $60.5
billion of General Fund expenditures in Fiscal Year 1999-00, with a $415 million
SFEU reserve at June 30, 2000.
The 1999 May Revision showed an additional $4.3 billion of revenues for
combined fiscal years 1998-99 and 1999-00. The final Budget Bill was adopted by
the Legislature on June 16, 1999, and was signed by the Governor on June 29,
1999 (the "1999 Budget Act"), meeting the Constitutional deadline for budget
enactment for only the second time in the 1990's.
The final 1999 Budget Act estimated General Fund revenues and transfers of
$63.0 billion, and contained expenditures totaling $63.7 billion after the
Governor used the line-item veto to reduce the legislative Budget Bill
expenditures by $581 million (both General Fund and Special Fund). The 1999
Budget Act also contained expenditures of $16.1 billion from special funds and
$1.5 billion from bond funds. The Administration estimated that the SFEU would
have a balance at June 30, 2000, of about $880 million. Not included in this
amount was an additional $300 million which (after the Governor's vetoes) was
"set aside" to provide funds for employee salary increases (to be negotiated in
bargaining with employee unions), and for litigation reserves. The 1999 Budget
Act anticipated normal cash flow borrowing during the fiscal year.
The principal features of the 1999 Budget Act include the following:
1. Proposition 98 funding for K-12 schools was increased by $1.6 billion
in General Fund moneys over revised 1998-99 levels, $108.6 million higher than
the minimum Proposition 98 guarantee. Of the 1999-00 funds, major new programs
included money for reading improvement, new textbooks, school safety, improving
teacher quality, funding teacher bonuses, providing greater accountability for
school performance, increasing preschool and after school care programs and
funding deferred maintenance of school facilities. The Budget also includes $310
million as repayment of prior years' loans to schools, as part of the settlement
of the California Teachers' Association v. Gould lawsuit. See also "State
Finances - Proposition 98" above.
2. Funding for higher education increased substantially above the actual
1998-99 level. General Fund support was increased by $184 million (7.3 percent)
for the University of California and $126 million (5.9 percent) for the
California State University system. In addition, Community Colleges funding
increased by $324.3 million (6.6 percent). As a result, undergraduate fees at UC
and CSU will be reduced for the second consecutive year, and the per-unit charge
at Community Colleges will be reduced by $1.
3. The Budget included increased funding of nearly $600
million for health and human services.
4. About $800 million from the General Fund will be directed toward
infrastructure costs, including $425 million in additional funding for the
Infrastructure Bank, initial planning costs for a new prison in the Central
Valley, additional equipment for train and ferry service, and payment of
deferred maintenance for state parks.
5. The Legislature enacted a one-year additional reduction of 10 percent
of the VLF for calendar year 2000, at a General Fund cost of about $250 million
in each of Fiscal Year 1999-00 and Fiscal Year 2000-01 to make up lost funding
to local governments. Conversion of this one-time reduction to a permanent cut
will remain subject to the revenue tests in the legislation adopted last year.
Several other targeted tax cuts, primarily for businesses, also were approved at
a cost of $54 million in Fiscal Year 1999-00.
6. A one-time appropriation of $150 million, to be split between cities
and counties, was made to offset property tax shifts during the early 1990's.
Additionally, an ongoing $50 million was appropriated as a subvention to cities
for jail booking or processing fees charged by counties when an individual
arrested by city personnel is taken to a county detention facility.
Revised 1999-2000 Budget Estimates. The revised 1999-2000 budget included
in the May 2000 Revision of the 2000-01 Governor's Budget (the "2000 May
Revision"), released on May 15, 2000, reflects the latest estimated costs or
savings as provided in various pieces of legislation passed and signed after the
1999 Budget Act. As a result of the very strong economy in the State and
associated extraordinary revenue receipts, revised 1999-2000 General Fund
revenues are $70.9 billion, an increase of $7.9 billion above the projections
made when the 1999 Budget Act was enacted, and $5.7 billion above the previous
estimate made in the 2000-01 Governor's Budget in January, 2000. Revised
1999-2000 expenditures are $67.3 billion or $3.6 billion higher than projections
at the 1999 Budget Act. These additional expenditures include a supplemental
appropriation of $665 million for Smog Impact Fee refunds. The Department of
Finance projects that the balance is the SEFU will be about $6.9 billion at June
30, 2000, much of which will be appropriated for Fiscal Year 2000-01.
Proposed 2000-01 Fiscal Year Budget
On January 10, 2000, the Governor released his proposed budget for Fiscal
Year 2000-01. The 2000-01 Governor's Budget generally reflected an estimate that
General Fund revenues for Fiscal Year 1999-2000 would be higher than projections
made at the time of the 1999 Budget Act. Even these positive estimates proved to
be greatly understated as continuing economic growth and stock market gains (at
least through the first quarter of 2000) resulted in a surge of revenues. The
Administration estimated in the 2000 May Revision that General Fund revenues
would total $70.9 billion in 1999-2000, and $73.8 billion in 2000-01, a two-year
increase of $12.3 billion above the January Governor's Budget revenue estimates.
The 2000-01 revenue estimate assumes a $545 million reduction in personal income
tax revenue from the Governor's proposal to provide an income tax exemption for
all teachers in the State
The 2000 May Revision proposes General Fund expenditures of $78.2 billion,
as compared to an original spending proposal of $68.8 billion in the January
Governor's Budget. Included in the revised Budget are set-asides of $500 million
for legal contingencies and $200 million for various one-time legislative
initiatives. Based on the proposed revenues and expenditures, the 2000 May
Revision projects the June 30, 2001 balance in the SFEU to be $1.769 billion, up
from $1.238 billion proposed in the January Governor's Budget.
The Revenue and Expenditure assumptions set forth have been based upon
certain estimates of the performance of the California and national economies in
calendar years 2000 and 2001. In the 2000 May Revision released on May 15, 2000,
the Department of Finance projected that the California economy will continue to
show strong growth in 2000, followed by more moderate gains in 2001. The
projection assumes a relatively flat stock market, and a 25% reduction in stock
option income in 2000-01. The economic expansion has been market by strong
growth in high technology manufacturing and business services (including
software, computer programming and the Internet), nonresidential construction,
entertainment and tourism-related industries. Growth in 1999 was greater than
earlier years in the economic expansion, with 3.7% year-over-year increase in
nonfarm payroll employment. Unemployment, now less than 5%, is at the lowest
rate in over 30 years. Taxable sales in the first quarter of 2000 are 10% above
year-earlier levels. Significant economic improvement in Asia (Japan excluded),
ongoing strength in NAFTA partners Mexico and Canada, and stronger growth in
Europe are expected to further increase California-made exports in 2000 and
2001. Nonresidential construction has been strong for the past four years. New
residential construction has increased since lows of the early 1990's recession,
but remains lower than during the previous economic expansion in 1980's.
The 2000 May Revision contains a number of proposals for spending the
additional revenues, mostly in 2000-01. According to a report by a Legislative
Analyst's Office, about $7.2 billion is proposed for one-time expenditures,
including a general tax rebate and senior citizen's tax relief ($1.9 billion),
aid to public schools ($1.5 billion), transportation ($1.5 billion), housing
($500 million), set-asides and increased reserves ($600 million) and other uses
($1.2 billion). About $5.1 billion is proposed for program enhancements which
would be permanent, including increased Proposition 98 funds for schools ($2.4
billion), tax relief ($600 million, including the exemption for teachers
mentioned above), transportation ($440 million per year for five years), health
and social services ($1.1 billion) and other ($600 million). All of these
proposals are subject to review and action by the Legislature.
Economy and Population
Introduction
California's economy, the largest among the 50 states and one of the
largest in the world, has major components in high technology, trade,
entertainment, agriculture, manufacturing, tourism, construction and services.
Since 1994, California's economy has been performing strongly after suffering a
deep recession between 1990-93.
Population and Labor Force
The State's July 1, 1999 population of over 34 million represented over 12
percent of the total United States population.
California's population is concentrated in metropolitan areas. As of the
April 1, 1990 census, 96 percent resided in the 23 Metropolitan Statistical
Areas in the State. As of July 1, 1998, the 5-county Los Angeles area accounted
for 49 percent of the State's population, with over 16.0 million residents, and
the 10-county San Francisco Bay Area represented 21 percent, with a population
of over 7.0 million.
The following table shows California's population data for 1994 through
1999.
Population 1994-98
% Increase % Increase
Over Over California
California Preceding United States Preceding as % of
Year Population(a) Year Population(a) Year United States
1994 31,790,000 0.9 260,292,000 1.0 12.2
1995 32,063,000 0.9 262,761,000 0.9 12.2
1996 32,383,000 1.0 265,179,000 0.9 12.2
1997 32,957,000 1.8 267,636,000 0.9 12.3
1998 33,494,000 1.6 270,029,000 0.9 12.4
1999 34,036,000 1.6 272,691,000 0.9 12.5
------------
(a) Population as of July 1.
SOURCE: U.S. Department of Commerce, Bureau of the Census; State
of California, Department of Finance.
The following table presents civilian labor force data for the resident
population, age 16 and over, for the years 1993 to 1999.
Labor Force
1993-98
Labor Force Trends (Thousands) Unemployment Rate (%)
Labor United
Year Force Employment California States
1993 15,359 13,918 9.4 6.9
1994 15,450 14,122 8.6 6.1
1995 15,412 14,203 7.8 5.6
1996 15,511 14,391 7.2 5.4
1997 15,941 14,937 6.3 4.9
1998 16,330 15,361 5.9 4.5
1999 16,586 15,722 5.2 4.2
-----------------
SOURCE: State of California, Employment Development Department.
Litigation
The State is a party to numerous legal proceedings. The following are the
more significant lawsuits pending against the State, as reported by the Office
of the Attorney General.
On December 24, 1997, a consortium of California counties filed a test
claim with the Commission on State Mandates asking the Commission on State
Mandates to determine whether the property tax shift from counties to school
districts beginning in 1993-94 is a reimbursable state mandated cost. See "State
Finances - Local Governments" above. The test claim was heard on October 29,
1998, and the Commission on State Mandates found in favor of the State. In March
1999, Sonoma County filed suit in the Superior Court to overturn the Commission
on State Mandate's decision. In October 1999, a Sonoma County Superior Court
Judge ruled in favor of the County. The State will continue to contest this
lawsuit. Should the courts ultimately find in favor of the counties, the impact
to the State General Fund could be as high as $10.0 billion. In addition, there
would be an annual Proposition 98 General Fund cost of at least $3.75 billion.
This cost would grow in accordance with the annual assessed value growth rate.
On June 24, 1998, plaintiffs in Howard Jarvis Taxpayers Association et al.
v. Kathleen Connell filed a complaint for certain declaratory and injunctive
relief challenging the authority of the State Controller to make payments from
the State Treasury in the absence of a state budget. On July 21, 1998, the trial
court issued a preliminary injunction prohibiting the State Controller from
paying moneys from the State Treasury for fiscal year 1998-99, with certain
limited exceptions, in the absence of a state budget. The preliminary
injunction, among other things, prohibited the State Controller from making any
payments pursuant to any continuing appropriation. On July 22 and 27, 1998,
various employee unions which had intervened in the case appealed the trial
court's preliminary injunction and asked the Court of Appeal to stay the
preliminary injunction. On July 28, 1998, the Court of Appeal granted the
unions' requests and stayed the preliminary injunction pending the Court of
Appeal's decision on the merits of the appeal. On August 5, 1998, the Court of
Appeal denied the plaintiffs' request to reconsider the stay. Also on July 22,
1998, the State Controller asked the California Supreme Court to immediately
stay the trial court's preliminary injunction and to overrule the order granting
the preliminary injunction on the merits. On July 29, 1998, the Supreme Court
transferred the State Controller's request to the Court of Appeal. The matters
are now pending before the Court of Appeal. Briefs have been submitted; no date
has yet been set for oral argument.
The State is involved in a lawsuit, Thomas Hayes v. Commission on State
Mandates, related to state-mandated costs. The action involves an appeal by the
Director of Finance from a 1984 decision by the State Board of Control (now
succeeded by the Commission on State Mandates (COSM)). The Board of Control
decided in favor of local school districts' claims for reimbursement for special
education programs for handicapped students. The case then was brought to the
trial court by the State and later remanded to the COSM for redetermination. The
COSM since has expanded the claim to include supplemental claims filed by
several other institutions. To date, the Legislature has not appropriated funds.
The liability to the State, if all potentially eligible school districts pursue
timely claims, has been estimated by the Department of Finance at more than $1
billion. COSM issued a decision in December 1998 determining that a small number
of components of the State's special education program are state mandated local
costs. The administrative proceeding is in the "parameters and guidelines" stage
where the commission is considering whether and to what extent the costs
associated with the state mandated components of the special education program
are offset by funds that the State already allocates to that program. The
State's position is that all costs are offset by existing funding. The State has
the option to seek judicial review of the mandate finding. Potential liability
of the State, if all potentially eligible school districts pursue timely claims,
has been estimated by the Department of Finance to be in excess of $1.5 billion,
if the State is not credited for its existing funding of the program. The COSM
was unable to resolve two other identified aspects of the state's program due to
tie votes. As such, the COSM referred these matters to an administrative law
judge for preparation of recommend decisions. One of these matters encompasses
all special education services for students between the ages of 3 to 5 and 18 to
21, and thus represents significant additional potential liability if the claim
is ultimately upheld and the State is denied credit for its existing funding.
In January 1997, California experienced major flooding in six different
areas with preliminary estimates of property damage of approximately $1.6 to
$2.0 billion. A substantial number of plaintiffs have joined suit against the
State, local agencies, and private companies and contractors seeking
compensation for the damages they suffered as a result of the 1997 flooding. The
State is vigorously defending the action.
The State is a defendant in Ceridian Corporation v. Franchise Tax Board, a
suit which challenges the validity of two sections of the California Tax Laws.
The first relates to deduction from corporate taxes for dividends received from
insurance companies to the extent the insurance companies have California
activities. The second relates to corporate deduction of dividends to the extent
the earnings of the dividend paying corporation have already been included in
the measure of their California tax. On August 13, 1998, the court issued a
judgment against the Franchise Tax Board on both issues. The Franchise Tax Board
has appealed the judgment. Briefing has been competed. The State has taken the
position that, if the challenged section of the Revenue & Taxation Code is
struck down, all deductions relating to dividends would be eliminated and the
result would be additional income to the State. Plaintiffs, however, contend
that if they prevail, the deduction should be extended to all dividends which
would result in a one-time liability for open years of approximately $60
million, including interest, and an annual revenue loss of approximately $10
million. No date has yet has been set for oral argument.
The State is also a defendant in First Credit bank etc. v. Franchise Tax
Board which challenges a Revenue & Taxation Code section similar to the one
challenged in the Ceridian case, but applicable to a different group of
corporate taxpayers. The State's motion for summary judgment is currently
pending and a trial date has been set in September 2000. A decision in the
Ceridian case could impact the outcome of this case. The State has taken the
position that, if the challenged section of the Revenue & Taxation Code is
struck down, all deductions relating to dividends would be eliminated and the
result would be additional income to the State. Plaintiffs, however, contend
that if they prevail, the deduction should be extended to all dividends which
would result in a one-time liability for open years of approximately $385
million, including interest, and an annual revenue loss of approximately $60
million.
The State is involved in a lawsuit related to contamination at the
Stringfellow toxic waste site. In United States, People of the State of
California v. J.B. Stringfellow, Jr., et al., the State is seeking recovery for
past costs of cleanup of the site, a declaration that the defendants are jointly
and severally liable for future costs, and an injunction ordering completion of
the cleanup. However, the defendants have filed a counterclaim against the State
for alleged negligent acts, resulting in significant findings of liability
against the State as owner, operator, and generator of wastes taken to the site.
The State has appealed the rulings. Present estimates of the cleanup range from
$400 million to $600 million. Potential State liability falls within this same
range. However, all or a portion of any judgment against the State could be
satisfied by recoveries from the State's insurance carriers. The State has filed
a suit against certain of these carriers and trial is currently set for January
16, 2001.
The State is a defendant in a coordinated action involving 3,000
plaintiffs seeking recovery for damages caused by the Yuba River flood of
February 1986. The trial court found liability in inverse condemnation and
awarded damages of $500,000 to a sample of plaintiffs. The State's potential
liability to the remaining plaintiffs ranges from $800 million to $1.5 billion.
In 1992, the State and plaintiffs filed appeals. In August 1999, the Court of
Appeal issued a decision reversing the trial court's judgment against the State
and remanding the case for retrial on the inverse condemnation cause of action.
Plaintiffs in County of San Bernardino v. Barlow Respiratory Hospital and
related actions seek mandamus relief requiring the State to retroactively
increase out-patient Medi-Cal reimbursement rates. Plaintiffs have estimated the
damages to be several hundred million dollars. The State is vigorously defending
these cases, as well as related federal cases addressing the calculation of
Medi-Cal reimbursement rates in the future.
The State is involved in two refund actions, Cigarettes
Cheaper!, et al. v. Board of Equalization, et al. and California
Assn. Of Retail Tobacconists (CART), et al. v. Board of
Equalization, et al., that challenge the constitutionality of
Proposition 10, approved by the voters in 1998. Plaintiffs
allege that Proposition 10, which increases the excise tax on
tobacco products, violates 11 sections of the California
Constitution and related provisions of law. Plaintiffs
Cigarettes Cheaper! seek declaratory and injunctive relief and a
refund of over $4 million. The CART case filed by retail
tobacconists in San Diego seeks a refund of $5 million. The
State is vigorously contesting these cases. If the statute is
declared unconstitutional, exposure may include the entire $750
million collected annually with interest.
The State is involved in two cases challenging the constitutionality of
the interest offset provisions of the Revenue and Taxation Code: Hunt-Wesson,
Inc., v. Franchise Tax Board and F.W. Woolworth Co. and Kinney Shoe Corporation
v. Franchise Tax Board. In both cases, the Franchise Tax Board prevailed in the
California Court of Appeal and the California Supreme Court denied taxpayers's
petitions for review. In both cases, the United States Supreme Court granted
centiorari. On February 22, 2000 the United States Supreme Court reversed and
remanded the Hunt-Wesson case to the California Court of Appeal for further
proceedings. Although the Court did not take similar action in the Woolworth Co.
case, it is anticipated that it will do so. The Franchise Tax Board recently
estimated that the adverse decision in these cases will result in a reduction in
state revenues of approximately $15 million annually, with past year collection
and interest exposure of approximately $95 million.
Guy F. Atkinson Company of California v. Franchise Tax Board is a
corporation tax refund action involving the solar energy system tax credit
provided for under the Revenue and Taxation Code. The case went to trial in May
1998 and the trial court entered judgment in favor of the Franchise Tax Board.
The taxpayer has filed an appeal to the California Court of Appeal and briefing
is completed. The Franchise Tax Board estimates that the cost would be $150
million annually if the plaintiff prevails. Allowing refunds for all open years
would entail a refund of at least $500 million.
Jordan, et al. v. Department of Motor Vehicles, et al. challenges the
validity of the Vehicle Smog Impact Fee, a $300 fee which is collected by the
Department of Motor Vehicles from vehicle registrants when a vehicle without a
California new-vehicle certification is first registered in California. The
plaintiffs contend that the fee violates the interstate commerce and equal
protection clauses of the United States Constitution as well as Article XIX of
the State Constitution. In October 1999, the Court of Appeals upheld a trial
court judgment for the plaintiffs in the Jordan case, and the State has declined
to appeal further. Although refunds through the court actions could be limited
by a three-year statute of limitations, with a potential liability of about $750
million, the Governor has proposed refunding fees collected back to the
initiation of these fees in 1990. Legislation has been enacted, which the
Governor is prepared to sign, providing a $665 million supplemental
appropriation in 1999-2000 to pay these claims.
PTI, Inc., et al. v. Philip Morris, et al. was filed by five distributors
in the cigarette import/re-entry business, seeking to overturn the tobacco
Master Settlement Agreement ("MSA") entered between 46 states and the tobacco
industry in November 1998. The primary focus of the complaint is the provision
of the MSA encouraging participating states to adopt a statute requiring
nonparticipating manufacturers to either become participating manufacturers and
share the financial obligations under the MSA or pay money into an escrow
account. Plaintiffs seek compensatory and punitive damages against the State and
State officials and an order placing tobacco settlement funds into a trust to be
administered by the court for the treatment of medical expenses of persons
injured by tobacco products. A motion to dismiss the complaint was heard on May
8, 2000. The potential fiscal impact of an adverse ruling is largely unknown,
but could exceed the full amount of the settlement (estimated to be $1 billion
annually, of which 50% will go directly to the State's General Fund and the
other 50% directly to the State's 58 counties and 4 largest cities).
Arnett v. California Public Employees Retirement System, et. al. was filed
by seven former employees of the State of California and local agencies seeking
back wages, damages and injunctive relief. Plaintiffs are former public safety
members who began employment after the age of 40 and are recipients of
Industrial Disability Retirement ("IDR") benefits. Plaintiffs contend that the
formula which determines the amount of IDR benefits violates the federal Age
Discrimination in Employment Act of 1967. Plaintiffs contend that, but for their
ages at hire, they would receive increased monthly IDR benefits similar to their
younger counterparts who began employment before the age of 40. On August 17,
1999, the Ninth Circuit Court of Appeals reversed the District Court's dismissal
of the complaint for failure to state a claim. The United States Supreme Court
vacated the judgment of the Ninth Circuit and remanded the case back to the
Ninth Circuit. In the event of an unfavorable result, CalPERS has estimated the
liability to the State as approximately $315.5 million.
On March 30, 2000, a group of students, parents, and community based
organizations representing school children in the Los Angeles Unified School
District brought a law suit against the State Allocation Board ("SAB"), the
State Office of Public School Construction ("OPSC") and a number of State
officials (Godinez, et al. v. Davis, et al.) in the Superior Court in the County
of Los Angeles. The lawsuit principally alleges SAB and OPSC have
unconstitutionally and improperly allocated funds to local school districts for
new public school construction as authorized by the Class Size Reduction
Kindergarten-University Public Education Facilities Bond Act (hereafter referred
to as "Proposition 1A"). Plaintiffs allege that funds are not being allocated
reasonably and fairly according to need on the basis of a uniform, state wide
assessment of highest priority needs. Plaintiffs seek a declaration of the
illegality of the current allocation system, and a preliminary and permanent
injunction and/or a writ of mandate against further allocation of Proposition 1A
funds unless the allocation system is modified. On May 12, 2000, Judge David P.
Yaffe of the Superior Court denied Plaintiffs' request for a temporary
restraining order, and a hearing on Plaintiffs' request for a preliminary
injunction is scheduled on June 20, 2000. The State will vigorously defend this
lawsuit. The Plaintiffs have not questioned the legality of, or sought any
relief concerning, any commercial paper notes or bonds issued by the State under
Proposition 1A, all of which funded projects based on allocations made prior to
the filing of the lawsuit. The Attorney General is of the opinion that the
lawsuit does not affect the validity of any State bonds.
<PAGE>
APPENDIX B
Municipal Bond, Municipal Note, Bond, Note and Commercial Paper
Ratings
S&P
Municipal Bond and Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA An obligation rated `AA' differs from the highest rated issues only in
small degree. The obligors capacity to meet its financial commitment on
the obligation is very strong.
A An obligation rated `A' is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity to
meet its financial commitment on the obligation is still strong.
BBB An obligation rated `BBB' exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
The ratings from `AA' to `BBB' may be modified by the addition of a plus (+) or
a minus (-) sign to show relative standing within the major rating categories
Municipal Note and Note Ratings
SP-1 Strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the term of the
notes.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1 This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issuers designated `A-1.'
A-3 Issues carrying this designation have an adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher
designations.
Moody's
Municipal Bond and Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk
and generally are referred to as "gilt edge." Interest
payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various
protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise
what generally are known as high-grade bonds. They are
rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make
the longterm risks appear somewhat larger than in Aaa
securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment some time in
the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor
poorly secured). Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within each generic rating classification from Aa through Baa.
The modifier 1 indicates a ranking for the security in the higher end of a
rating category; the modifier 2 indicates a midrange ranking; and the
modifier 3 indicates a ranking in the lower end of a rating category.
Municipal Note, Note and other Short-Term Obligations
There are four rating categories for short-term obligations that define an
investment grade situation. These are designated Moody's Investment Grade as MIG
1 (best quality) through MIG 4 (adequate quality). Short-term obligations of
speculative quality are designated SG.
In the case of variable rate demand obligations (VRDOs), a two component rating
is assigned. The first element represents an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the other
represents an evaluation of the degree of risk associated with the demand
feature. The short-term rating assigned to the demand feature of VRDOs is
designated as VMIG. When either the long- or short-term aspect of a VRDO is not
rated, that piece is designated NR, e.g., Aaa/NR or NR/VMIG 1.
MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG-2/
MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/
VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow
and market access for refinancing is likely to be less well
established.
MIG 4/
VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
Commercial Paper Rating
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
1. Leading market positions in well-established industries.
2. High rates of return on funds employed.
3. Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
4. Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
5. Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have
a strong ability for repayment of senior short-term
debt obligations. This will normally be evidenced by
many of the characteristics cited above but to a lesser
agree. Earnings trends and coverage ratios, while
sound, may be more subject to variation.
Capitalization characteristics, while still
appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have
an acceptable ability for repayment of senior
short-term obligations. The effect of industry
characteristics and market compositions may be more
pronounced. Variability in earnings and profitability
may result in changes in the level of debt protection
measurements and may require relatively high financial
leverage. Adequate alternative liquidity is maintained.
Fitch
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.
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, 2000
-----------------------------------------------------------------------------
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of the
Dreyfus BASIC Massachusetts Municipal Money Market Fund (the "Fund"), dated
November 1, 2000, 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
The financial statements of the Fund for the fiscal year ended June 30,
2000, 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.
TABLE OF CONTENTS
Page
Description of the Fund/Trust.................................B-2
Management of the Fund........................................B-14
Management Arrangements.......................................B-18
Purchase of Shares............................................B-21
Redemption of Shares..........................................B-24
Shareholder Services..........................................B-28
Determination of Net Asset Value..............................B-31
Performance Information.......................................B-32
Dividends, Other Distributions and Taxes......................B-34
Portfolio Transactions........................................B-38
Information About the Fund/Trust..............................B-39
Counsel and Independent Auditors..............................B-41
Appendix A....................................................B-42
Appendix B....................................................B-45
<PAGE>
DESCRIPTION OF THE FUND/TRUST
The Trust is an open-end management investment company organized as an
unincorporated business trust under the laws of the Commonwealth of
Massachusetts by an Agreement and Declaration of Trust dated March 28, 1983,
amended and restated December 9, 1992, and subsequently further amended. On 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.
Dreyfus Service Corporation (the "Distributor") is the distributor of the
Fund's shares.
General Investment Objective and Policies. The Fund seeks to provide a
high level of current income exempt from Federal income taxes and Massachusetts
personal income taxes to the extent consistent with the preservation of capital
and the maintenance of liquidity. The Fund seeks to achieve its objective by
investing in debt obligations issued by the Commonwealth of Massachusetts, its
political subdivisions, municipalities, and public authorities and in municipal
obligations issued by other governmental entities if, in the opinion of counsel
to the respective issuers, the interest from such obligations is excluded from
gross income for Federal and Massachusetts personal income tax purposes
("Massachusetts Municipal Obligations" or "Municipal Obligations").
Under normal market conditions, the Fund attempts to invest 100%, and will
invest a minimum of 80%, of its total assets in Massachusetts Municipal
Obligations. When, in the opinion of Dreyfus, adverse market conditions exist
for Massachusetts Municipal Obligations, and a "defensive" investment posture is
warranted, the Fund may temporarily invest more than 20% of its total assets in
money market instruments having maturity and quality characteristics comparable
to those for Massachusetts Municipal Obligations, but which produce income
exempt from Federal but not Massachusetts personal income taxes for resident
shareholders of Massachusetts, or more than 20% of its total assets in taxable
obligations (including obligations the interest on which is included in the
calculation of alternative minimum tax for individuals). Periods when a
defensive posture is warranted include those periods when the Fund's monies
available for investment exceed the Massachusetts Municipal Obligations
available for purchase to meet the Fund's rating, maturity and other investment
criteria. The Fund's policy of investing a minimum of 80% of its total assets in
Massachusetts Municipal Obligations is a fundamental policy of the Fund.
The Fund pursues its objective by investing in a varied portfolio of high
quality, short-term Massachusetts Municipal Obligations.
The Massachusetts Municipal Obligations purchased by the Fund may include:
(1) municipal bonds; (2) municipal notes; (3) municipal commercial paper; and
(4) municipal lease obligations. The Fund will limit its portfolio investments
to securities that, at the time of acquisition, (i) are rated in the two highest
short-term rating categories by at least two nationally recognized statistical
rating organizations (or by one organization if only one organization has rated
the security), (ii) if not rated, are obligations of an issuer whose comparable
outstanding short-term debt obligations are so rated, or (iii) if not rated, are
of comparable quality, as determined by Dreyfus under procedures established by
the Board of Trustees. The Fund will limit its investments to securities that
present minimal credit risk, as determined by Dreyfus under procedures
established by the Board of Trustees.
Because many issuers of Massachusetts Municipal Obligations may choose not
to have their obligations rated, it is possible that a large portion of the
Fund's portfolio may consist of unrated obligations. Unrated obligations are not
necessarily of lower quality than rated obligations, but to the extent the Fund
invests in unrated obligations, the Fund will be more reliant on Dreyfus'
judgment, analysis and experience than would be the case if the Fund invested in
only rated obligations. The Fund invests only in securities that have remaining
maturities of thirteen months or less at the date of purchase. Floating rate or
variable rate obligations (described below) which are payable on demand under
conditions established by the SEC, may have a stated maturity in excess of
thirteen months; these securities will be deemed to have remaining maturities of
thirteen months or less. The Fund maintains a dollar-weighted average portfolio
maturity of 90 days or less. The Fund seeks to maintain a constant net asset
value ("NAV") of $1.00 per share, although there is no assurance it can do so on
a continuing basis, using the amortized cost method of valuing its securities
pursuant to Rule 2a-7 under the Investment Company Act of 1940, as amended (the
"1940 Act"), which Rule includes various maturity, quality and diversification
requirements.
The Fund 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
purposes and to pledge its assets to the same extent in connection with such
borrowings.
Certain Portfolio Securities
Description of Municipal Obligations. "Municipal Obligations" and
------------------------------------
"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.
Portfolio Securities. The average distribution of investments (at value)
in Municipal Obligations by ratings for the fiscal year ended June 30, 2000,
computed on a monthly basis, was as follows:
"Moody's" Standard &
Fitch IBCA, or Investors Or Poor's Percentage
Inc Service, Inc. Ratings Of Value
("Fitch") ("Moody's") Group ("S&P")
--------------- ---------------- -------------- -----------
F-1+/F-1 VMIG 1/MIG 1, SP-1+/SP-1, 76.1%
P-1 A1+/A1
AAA Aaa/Aa AAA/AA 11.5%
Not Rated Not Rated Not Rated 12.4%
100.0%
---------------
(1) Included in the not rated category are securities comprising 12.4% of the
value of the Fund's market value which, while not rated, have been determined by
Dreyfus to be of comparable quality to securities in the VMIG 1/MIG 1 rating
category.
The actual distribution of the Fund's Municipal Obligations by ratings on
any given date will vary. In addition, the distribution of the Fund's
investments by rating as set forth above should not be considered as
representative of the Fund's future portfolio composition.
Use of Ratings as Investment Criteria. The ratings of nationally
recognized statistical rating organizations ("NRSROs") such as S&P, Fitch and
Moody's represent the opinions of these agencies as to the quality of Municipal
Obligations which they rate. It should be emphasized, however, that such ratings
are relative and subjective and are not absolute standards of quality. These
ratings will be used by the Fund as initial criteria for the selection of
portfolio securities, but the Fund will also rely upon the independent advice of
Dreyfus to evaluate potential investments. Among the factors which will be
considered are the short-term and long-term ability of the issuer to pay
principal and interest and general economic trends. Further information
concerning the ratings of the NRSROs and their significance is contained in the
Appendix B to this Statement of Additional Information.
After being purchased by the Fund, the rating of a Municipal Obligation
may be reduced below the minimum rating required for purchase by the Fund or the
issuer of the Municipal Obligation may default on its obligations with respect
to the Municipal Obligation. In that event, the Fund will dispose of the
Municipal Obligation as soon as practicable, consistent with achieving an
orderly disposition of the Municipal Obligation, unless the Trust's Board of
Trustees determines that disposal of the Municipal Obligation would not be in
the best interest of the Fund. In addition, it is possible that a Municipal
Obligation may cease to be rated or an NRSRO might not timely change its rating
of a particular Municipal Obligation to reflect subsequent events. Although
neither event will require the sale of such Municipal Obligation by the Fund,
Dreyfus will consider such event in determining whether the Fund should continue
to hold the Municipal Obligation. In addition, if an NRSRO changes its rating
system, the Fund will attempt to use comparable ratings as standards for its
investments in accordance with its investment objective and policies.
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.
Floating Rate and Variable Rate Obligations. The Fund may purchase
floating rate and variable rate obligations, including participation interests
therein. Floating rate or variable rate obligations provide that the rate of
interest is set as a specific percentage of a designated base rate (such as the
prime rate at a major commercial bank) and that the Fund can demand payment of
the obligation at par plus accrued interest. Variable rate obligations provide
for a specified periodic adjustment in the interest rate, while floating rate
obligations have an interest rate which changes whenever there is a change in
the external interest rate. Frequently such obligations are secured by letters
of credit or other credit support arrangements provided by banks. The quality of
the underlying creditor or of the bank, as the case may be, must, as determined
by Dreyfus under the supervision of the Trustees, be equivalent to the quality
standard prescribed for the Fund. In addition, Dreyfus monitors the earning
power, cash flow and other liquidity ratios of the issuers of such obligations,
as well as the creditworthiness of the institution responsible for paying the
principal amount of the obligations under the demand feature. Changes in the
credit quality of banks and other financial institutions that provide such
credit or liquidity enhancements to the Fund's portfolio securities could cause
losses to the Fund and affect its share price. The Fund is currently permitted
to purchase floating rate and variable rate obligations with demand features in
accordance with requirements established by the SEC, which, among other things,
permit such instruments to be deemed to have remaining maturities of thirteen
months or less, notwithstanding that they may otherwise have a stated maturity
in excess of thirteen months.
The Fund may invest in participation interests purchased from banks in
floating rate or variable rate tax-exempt Municipal Obligations owned by banks.
A participation interest gives the purchaser an undivided interest in the
Municipal Obligation in the proportion that the Fund's participation interest
bears to the total principal amount of the Municipal Obligation, and provides a
demand feature. Each participation is backed by an irrevocable letter of credit
or guarantee of a bank (which may be the bank issuing the participation
interest, a bank issuing a confirming letter of credit to that of the issuing
bank, or a bank serving as agent of the issuing bank with respect to the
possible repurchase of the participation interest) that Dreyfus, under the
supervision of the Trustees, has determined meets the prescribed quality
standards for the Fund. The Fund has the right to sell the instrument back to
the issuing bank or draw on the letter of credit on demand for all or any part
of the Fund's participation interest in the Municipal Obligation, plus accrued
interest. The Fund is currently permitted to invest in participation interests
when the demand provision complies with conditions established by the SEC. Banks
will retain a service and letter of credit fee and a fee for issuing repurchase
commitments in an amount equal to the excess of the interest paid on the
Municipal Obligations over the negotiated yield at which the instruments were
purchased by the Fund.
When-Issued Securities. The Fund may purchase Municipal Obligations on a
when-issued basis (i.e., for delivery beyond the normal settlement date at the
stated price and yield). The payment obligation and the interest rate that will
be received on the Municipal Obligations purchased on a when-issued basis are
each fixed at the time the buyer enters into the commitment. Although the Fund
generally will purchase Municipal Obligations on a when-issued basis only with
the intention of actually acquiring the securities, the Fund may sell these
securities before the settlement date if it is deemed advisable as a matter of
investment strategy.
Municipal Obligations purchased on a when-issued basis and the securities
held in the Fund's portfolio are subject to changes in market value based upon
the public's perception of the creditworthiness of the issuer and changes, real
or anticipated, in the level of interest rates (which will generally result in
similar changes in value, i.e., both experiencing appreciation when interest
rates decline and depreciation when interest rates rise). Therefore, to the
extent the Fund remains substantially fully invested at the same time that it
has purchased securities on a when-issued basis, there will be a greater
possibility of fluctuation in the Fund's net asset value. Purchasing Municipal
Obligations on a when-issued basis can involve a risk that the yields available
in the market when the delivery takes place may actually be higher than those
obtained in the transaction.
The Fund will establish with the Fund's custodian a segregated account
consisting of cash or liquid debt securities in an amount at least equal to the
amount of its when-issued commitments. When the time comes to pay for
when-issued securities, the Fund will meet its obligations from then-available
cash flow, sale of securities held in the separate account, sale of other
securities or, although it would not normally expect to do so, from the sale of
the when-issued securities themselves (which may have a value greater or lesser
than the Fund's payment obligations). Sale of securities to meet such
obligations carries with it a greater potential for the realization of capital
gains, which are not exempt from Federal income tax.
Purchase of Securities with Stand-by Commitments. Pursuant to an exemptive
order issued by the SEC under the 1940 Act, the Fund may acquire stand-by
commitments with respect to Municipal Obligations held in its portfolio. Under a
stand-by commitment, a broker-dealer, dealer or bank would agree to purchase, at
the Fund's option, a specified Municipal Obligation at a specified price.
Stand-by commitments acquired by the Fund may also be referred to as "put
options." The amount payable to the Fund upon its exercise of a stand-by
commitment normally would be (a) the acquisition cost of the Municipal
Obligation, less any amortized market premium or plus any amortized market or
original issue discount during the period the Fund owned the security, plus (b)
all interest accrued on the security since the last interest payment date during
the period. Absent unusual circumstances, in determining net asset value the
Fund would value the underlying Municipal Obligation at amortized cost.
Accordingly, the amount payable by the broker-dealer, dealer or bank upon
exercise of a stand-by commitment will normally be substantially the same as the
portfolio value of the underlying Municipal Obligation.
The Fund's right to exercise a stand-by commitment is unconditional and
unqualified. Although the Fund could not transfer a stand-by commitment, the
Fund could sell the underlying Municipal Obligation to a third party at any
time. It is expected that stand-by commitments generally will be available to
the Fund without the payment of any direct or indirect consideration. The Fund
may, however, pay for stand-by commitments either separately in cash or by
paying a higher price for portfolio securities which are acquired subject to the
commitment (thus reducing the yield to maturity otherwise available for the same
securities). The total amount paid in either manner for outstanding stand-by
commitments held in the Fund's portfolio will not exceed 0.5 of 1% of the value
of the Fund's total assets calculated immediately after such stand-by commitment
was acquired.
The Fund intends to enter into stand-by commitments only with
broker-dealers, dealers or banks that Dreyfus believes present minimum credit
risks. The Fund's ability to exercise a stand-by commitment will depend on the
ability of the issuing institution to pay for the underlying securities at the
time the commitment is exercised. The credit of each institution issuing a
stand-by commitment to the Fund will be evaluated on an ongoing basis by Dreyfus
in accordance with procedures established by the Trustees.
The Fund intends to acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The acquisition of a stand-by commitment would not affect the
valuation or maturity of the underlying Municipal Obligation, which will
continue to be valued in accordance with the amortized cost method. Each
stand-by commitment will be valued at zero in determining net asset value.
Should the Fund pay directly or indirectly for a stand-by commitment, its costs
will be reflected as an unrealized loss for the period during which the
commitment is held by the Fund and will be reflected in realized gain or loss
when the commitment is exercised or expires. Stand-by commitments will not
affect the dollar-weighted average maturity of the Fund's portfolio. The Fund
understands that the Internal Revenue Service ("IRS") has issued a revenue
ruling to the effect that a registered investment company will be treated for
Federal income tax purposes as the owner of Municipal Obligations acquired
subject to stand-by commitments and the interest on the Municipal Obligations
will be tax-exempt to the Fund.
Custodial Receipts. The Fund may purchase securities, frequently referred
to as "custodial receipts," representing the right to receive future principal
and interest payments on municipal obligations underlying such receipts. A
number of different arrangements are possible. In a typical custodial receipt
arrangement, an issuer or a third party owner of a municipal obligation deposits
such obligation with a custodian in exchange for two or more classes of
receipts. The class of receipts that the Fund may purchase has the
characteristics of a typical tender option security backed by a conditional
"put," which provides the holder with the equivalent of a short-term variable
rate note. At specified intervals, the interest rate for such securities is
reset by the remarketing agent in order to cause the securities to be sold at
par through a remarketing mechanism. If the remarketing mechanism does not
result in a sale, the conditional put can be exercised. In either event, the
holder is entitled to full principal and accrued interest to the date of the
tender or exercise of the "put." The "put" may be terminable in the event of a
default in payment of principal or interest on the underlying municipal
obligation and for other reasons. Before purchasing such security, Dreyfus is
required to make certain determinations with respect to the likelihood of, and
the ability to monitor, the occurrence of the conditions that would result in
the put not being exercisable. The interest rate for these receipts generally is
expected to be below the coupon rate of the underlying municipal obligations and
generally is at a level comparable to that of a municipal obligation of similar
quality and having a maturity equal to the period between interest rate
readjustments. These custodial receipts are sold in private placements. The Fund
also may purchase directly from issuers, and not in a private placement,
municipal obligations having the characteristics similar to the custodial
receipts in which the Fund may invest.
Other types of tax-exempt instruments that may become available in the
future may be purchased by the Fund as long as Dreyfus believes the quality of
these instruments meets the Fund's quality standards.
Taxable Investments. The Fund anticipates being as fully invested as
practicable in Municipal Obligations. Because the Fund's purpose is to provide
income exempt from Federal and state personal income taxes, the Fund will invest
in taxable obligations only if and when Dreyfus believes it would be in the best
interests of its shareholders to do so. Situations in which the Fund may invest
up to 20% of its total assets in taxable securities include: (a) pending
investment of proceeds of sales of shares of the Fund or of portfolio
securities, (b) pending settlement of purchases of portfolio securities, and (c)
when the Fund is attempting to maintain liquidity for the purpose of meeting
anticipated redemptions. The Fund may temporarily invest more than 20% of its
total assets in taxable securities to maintain a "defensive" posture when, in
the opinion of Dreyfus, it is advisable to do so because of adverse market
conditions affecting the market for Municipal Obligations. The Fund may invest
in only the following kinds of taxable securities maturing in one year or less
from the date of purchase: (1) obligations of the United States Government, its
agencies or instrumentalities; (2) commercial paper rated at the time of
purchase at least Prime-1 by Moody's or A-1+ or A-1 by S&P; (3) certificates of
deposit of domestic banks with total assets of $1 billion or more; and (4)
repurchase agreements (instruments under which the seller of a security agrees
to repurchase the security at a specific time and price) with respect to any
securities that the Fund is permitted to hold.
Repurchase Agreements. The Fund may enter into repurchase agreements with
member banks of the Federal Reserve System or certain non-bank dealers. Under
each repurchase agreement the selling institution will be required to maintain
the value of the securities subject to the agreement at not less than their
repurchase price. If a particular bank or non-bank dealer defaults on its
obligation to repurchase the underlying debt instrument as required by the terms
of a repurchase agreement, the Fund will incur a loss to the extent that the
proceeds it realizes on the sale of the collateral are less than the repurchase
price of the instrument. In addition, should the defaulting bank or non-bank
dealer file for bankruptcy, the Fund could incur certain costs in establishing
that it is entitled to dispose of the collateral and its realization on the
collateral may be delayed or limited. Investments in repurchase agreements are
subject to the policy prohibiting investment of more than 10% of the Fund's
assets in illiquid securities, securities without readily available market
quotations and repurchase agreements maturing in more than seven days.
Other Investment Companies. The Fund may invest in securities issued by
other investment companies to the extent that such investments are consistent
with its investment objective and policies and permissible under the 1940 Act.
As a shareholder of another investment company, the Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to the
advisory and other expenses that the Fund bears directly in connection with its
own operations.
Special Factors Affecting the Fund
Investing in Massachusetts Municipal Obligations. You should review the
information in "Appendix A", which provides a brief summary of special
investment considerations and risk factors relating to investing in
Massachusetts Municipal Obligations.
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.
Certain Investments. From time to time, to the extent consistent with its
investment objective, policies and restrictions, the Fund may invest in
securities of companies with which Mellon Bank, N.A. ("Mellon Bank"), an
affiliate of Dreyfus, has a lending relationship.
Investment Restrictions
Fundamental. The following limitations have been adopted by the Fund. The
Fund may not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of shareholders
duly called if the holders of more than 50% of the outstanding shares of the
Fund are present or represented by proxy; or (b) more than 50% of the
outstanding shares of the Fund, whichever is less. The Fund may not:
1. Purchase any securities which would cause more than 25% of the value of
the Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities and
state or municipal governments and their political subdivisions are not
considered members of any industry. In addition, this limitation does not apply
to investments of domestic banks, including U.S. branches of foreign banks and
foreign branches of U.S. banks.)
2. Borrow money or issue senior securities as defined in the 1940 Act,
except that (a) the Fund may borrow money in an amount not exceeding one-third
of the Fund's total assets at the time of such borrowing, and (b) the Fund may
issue multiple classes of shares. The purchase or sale of futures contracts and
related options shall not be considered to involve the borrowing of money or
issuance of senior securities.
3. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this restriction, debt instruments and repurchase agreements shall
not be treated as loans.
4. Underwrite securities issued by any other person, except to the extent
that the purchase of securities and the later disposition of such securities in
accordance with the Fund's investment program may be deemed an underwriting.
5. Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund from
investing in securities or other instruments backed by real estate, including
mortgage loans, or securities of companies that engage in the real estate
business or invest or deal in real estate or interests therein).
6. Purchase or sell commodities, except that the Fund may enter into
futures contracts and related options, forward currency contracts and other
similar instruments.
The Fund may, notwithstanding any other fundamental investment policy or
restriction, invest all of its investable assets in securities of a single
open-end management investment company with substantially the same fundamental
investment objective, policies, and restrictions as the Fund.
Nonfundamental. The Fund has adopted the following additional
non-fundamental restrictions. These non-fundamental restrictions may be
changed without shareholder approval, in compliance with applicable law and
regulatory policy.
1. The Fund will not purchase or retain the securities of any issuer if
the officers, directors or Trustees of the Trust, its advisers, or managers
owning beneficially more than one half of one percent of the securities of each
issuer together own beneficially more than five percent of such securities.
2. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate investment
in such classes of securities will exceed 5% of its total assets, except that:
(a) this restriction shall not apply to standby commitments, and (b) this
restriction shall not apply to the Fund's transactions in futures contracts and
related options.
3. The Fund will not purchase warrants if at the time of such purchase:
(a) more than 5% of the value of the Fund's net assets would be invested in
warrants, or (b) more than 2% of the value of the Fund's assets would be
invested in warrants that are not listed on the New York Stock Exchange ("NYSE")
or American Stock Exchange ("AMEX") (for purposes of this limitation, warrants
acquired by the Fund in units or attached to securities will be deemed to have
no value).
4. The Fund will not invest more than 10% of the value of its net assets
in illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, and other securities which are not readily
marketable. For purposes of this restriction, illiquid securities shall not
include commercial paper issued pursuant to Section 4(2) of the Securities Act
of 1933 and securities which may be resold under Rule 144A under the Securities
Act of 1933, provided that the Board of Trustees, or its delegate, determines
that such securities are liquid based upon the trading markets for the specific
security.
5. The Fund may not invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation or acquisition
of assets and except to the extent otherwise permitted by the 1940 Act.
6. The Fund will not purchase oil, gas or mineral leases (the Fund may,
however, purchase and sell the securities of companies engaged in the
exploration, development, production, refining, transporting and marketing of
oil, gas or minerals).
7. The Fund shall not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amounts to the securities sold
short, and provided that transactions in futures contracts and options are not
deemed to constitute selling securities short.
8. The Fund shall not purchase securities on margin, except that the Fund
may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection with futures
contracts and options on futures contracts shall not constitute purchasing
securities on margin.
9. The Fund shall not purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.
If a percentage restriction is adhered to at the time of an investment, a
later increase or decrease in such percentage resulting from a change in the
values of assets will not constitute a violation of such restriction.
The investment objective, policies, restrictions, practices and procedures
of the Fund, unless otherwise specified, may be changed without shareholder
approval. If the Fund's investment objective, policies, restrictions, practices
or procedures change, shareholders should consider whether the Fund remains an
appropriate investment in light of their then current position and needs.
MANAGEMENT OF THE FUND
Trustees and Officers
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
Dreyfus Service Corporation.......................Distributor
Dreyfus Transfer, Inc..........................Transfer Agent
Mellon Bank ........................................Custodian
......The Trust has a Board composed of eight Trustees. The following lists the
Trustees and officers and their positions with the Trust and their present and
principal occupations during the past five years. Each Trustee who is an
"interested person" of the Trust (as defined in the 1940 Act) is indicated by an
asterisk(*). Each of the Trustees also serves as a Director of The
Dreyfus/Laurel Funds, Inc. and as a Trustee of The Dreyfus/Laurel Funds Trust
(collectively, with the Trust, the "Dreyfus/Laurel Funds") and the Dreyfus High
Yield Strategies Fund.
Trustees of the Trust
o+JOSEPH S. DIMARTINO. Chairman of the Board of the Trust. Since January
1995, Mr. DiMartino has served as Chairman of the Board for various
funds in the Dreyfus Family of Funds. He is also a Director of The
Muscular Dystrophy Association; HealthPlan Services Corporation, a
provider of marketing, administrative and risk management services to
health and other benefit programs; Carlyle Industries, Inc. (formerly
Belding Heminway Company, Inc.), a button packager and distributor;
Century Business Services, Inc. (formerly, International Alliance
Services, Inc.), a provider of various outsourcing functions for small
and medium sized companies; The Newark Group, a privately held company
providing a national network of paper recovery facilities, paperboard
mills and paperboard converting plants; and QuikCAT.com, Inc., a private
company engaged in the development of high speed movement, routing,
storage and encryption of data across cable, wireless and all other
modes of data transport. For more than five years prior to January
1995, he was President, a director and, until August, 1994, Chief
Operating Officer of Dreyfus and Executive Vice President and a director
of the Distributor. From August 1994 to December 31, 1994, he was a
director of Mellon Financial Corporation. Age: 57 years old. Address:
200 Park Avenue, New York, New York 10166.
o+JAMES M. FITZGIBBONS. Trustee of the Trust; Director, Lumber Mutual
Insurance Company; Director, Barrett Resources, Inc.; Chairman of the
Board, Davidson Cotton Company; former Chairman of the Board and CEO of
Fieldcrest Cannon, Inc.
Age: 66 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: 72 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: 78 years old. Address: Way
Hollow Road and Woodland Road, Sewickley, Pennsylvania 15143.
o+KENNETH A. HIMMEL. Trustee of the Trust; President and CEO, The Palladium
Company President and CEO, Himmel and Company, Inc.; CEO, American Food
Management; former Director, The Boston Company, Inc. ("TBC"), and
Boston Safe Deposit and Trust Company each an affiliate of Dreyfus.
Age: 54 years old. Address: 625 Madison Avenue, New York, New York
10022.
o+STEPHEN J. LOCKWOOD. Trustee of the Trust; Chairman of the Board and CEO,
LDG Reinsurance Corporation; Vice Chairman, HCCH. Age: 53 years old.
Address: 401 Edgewater Place, Wakefield, Massachusetts 01880.
o+ROSLYN M. WATSON. Trustee of the Trust; Principal, Watson Ventures, Inc.;
Director, American Express Centurion Bank; Director, Ontario Hydro
Services Company; Trustee, the Hyams Foundation, Inc. Age: 51 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: 54
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
STEPHEN E. CANTER. President of the Trust; President, Chief Operating
Officer, Chief Investment Officer, and a director of Dreyfus, and an
officer of other investment companies advised and administered by
Dreyfus. Mr. Canter also is a Director or an Executive Committee Member
of the other investment management subsidiaries of Mellon Financial
Corporation, each of which is an affiliate of Dreyfus. He is 55 years
old.
MARK N. JACOBS. Vice President of the Trust; Vice President, Secretary, and
General Counsel to Dreyfus, and an officer of other investment companies
advised and administered by Dreyfus. He is 54 years old.
JOSEPH CONNOLLY. Vice President and Treasurer of the Trust; Director - Mutual
Fund Accounting of Dreyfus, and an officer of other investment companies
advised and administered by Dreyfus. He is 43 years old.
STEVEN F. NEWMAN. Secretary of the Trust; Associate General Counsel and
Assistant Secretary of Dreyfus, and an officer of other investment
companies advised and administered by Dreyfus. He is 51 years old.
JEFF PRUSNOFSKY. Assistant Secretary of the Trust; Associate General
Counsel of Dreyfus, and an officer of other investment companies
advised and administered by Dreyfus. He is 35 years old.
MICHAEL A. ROSENBERG. Assistant Secretary of the Trust; Associate General
Counsel of Dreyfus, and an officer of other investment companies
advised and administered by Dreyfus. He is 41 years old.
MICHAEL CONDON. Assistant Treasurer of the Trust; Senior Treasury Manager
of Dreyfus, and an officer of other investment companies advised and
administered by Dreyfus. He is 39 years old.
GREGORY S. GRUBER. Assistant Treasurer of the Trust; Senior Accounting
Manager - Municipal Bond Funds of Dreyfus, and an officer of other
investment companies advised and administered by Dreyfus. He is 41
years old.
The address of each Trust officer 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. The Dreyfus/Laurel Funds pay each
Director/Trustee who is not an "interested person" of the Trust (as defined in
the 1940 Act) $40,000 per annum, plus $5,000 per joint Dreyfus/Laurel Funds
Board meeting attended, $2,000 for separate committee meetings attended which
are not held in conjunction with a regularly scheduled Board meeting and $500
for Board meetings and separate committee meetings attended that are conducted
by telephone. The Dreyfus/Laurel Funds also reimburse each Director/Trustee who
is not an "interested person" of the Trust (as defined in the 1940 Act) for
travel and out-of-pocket expenses. The Chairman of the Board receives an
additional 25% of such compensation (with the exception of reimbursable
amounts). In the event that there is a joint committee meeting of the
Dreyfus/Laurel Funds and the Dreyfus High Yield Strategies Fund, the $2,000 fee
will be allocated between the Dreyfus/Laurel Funds and the Dreyfus High Yield
Strategies Fund.
In addition, the Trust currently has two Emeritus Board members who are
entitled to receive an annual retainer and a per meeting fee of one-half the
amount paid to them as Board members.
The aggregate amount of fees and expenses received by each current Trustee
from the Trust for the fiscal year ended June 30, 2000, and from all other funds
in the Dreyfus Family of Funds for which such person was a Board member (the
number of which is set forth in parentheses next to each Board member's total
compensation)* during the year ended December 31, 1999 were as follows:
Total
Compensation
Aggregate From the Trust
Name of Board Compensation and Fund Complex
Member From the Trust # Paid to Board Member
------------- ---------------- --------------------
Joseph S. DiMartino** $27,083 $ 642,177 (189)
James M. Fitzgibbons $20,000 $ 74,989 (28)
J. Tomlinson Fort*** None None (28)
Arthur L. Goeschel $21,666 $ 80,989 (28)
Kenneth A. Himmel $18,333 $ 62,489 (28)
Stephen J. Lockwood $18,333 $ 68,989 (28)
Roslyn M. Watson $21,666 $ 80,989 (28)
Benaree Pratt Wiley $21,666 $ 80,989 (28)
----------------------------
# 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 $1,775.82 for the Trust.
* Represents the number of separate portfolios comprising the investment
companies in the Fund complex, including the Trust, for which the Board
member served.
** Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
*** J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board member
of the Trust and the funds in the Dreyfus/Laurel Funds and separately by the
Dreyfus High Yield Strategies Fund. For the fiscal year ended June 30, 2000,
the aggregate amount of fees received by J. Tomlinson Fort from Dreyfus for
serving as a Board member of the Trust was $21,666. For the year ended
December 31, 1999, the aggregate amount of fees received by Mr. Fort for
serving as a Board member of all funds in the Dreyfus/Laurel Funds
(including the Trust) and Dreyfus High Yield Strategies Fund (for which
payment is made directly by the fund) was $80,989. In addition, Dreyfus
reimbursed Mr. Fort a total of $821.35 for expenses attributable to the
Trust's Board meetings which is not included in the $1,775.82 amount in note
# above.
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, 2000.
Principal Shareholders. As of October 2, 2000, the following
----------------------
shareholder(s) owned beneficially or of record 5% or more of the outstanding
Fund shares: Boston & Co., c/o Mellon Bank, PO Box 534005 Pittsburgh, PA
15253; 70.60%.
A shareholder who beneficially owns, directly or indirectly, more than 25%
of the Fund's voting securities may be deemed a "control person" (as defined in
the 1940 Act) of the Fund.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Expenses" and "Management."
Dreyfus is a wholly-owned subsidiary of Mellon Bank, which is a
wholly-owned subsidiary of Mellon Financial Corporation ("Mellon"). Mellon is a
global multibank financial 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 20
largest bank holding companies in the United States based on total assets.
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Trust (the
"Investment Management Agreement") subject to the overall authority of the
Trust's Board of Trustees in accordance with Massachusetts laws. Pursuant to the
Investment Management Agreement, Dreyfus provides, or arranges for one or more
third parties to provide, investment advisory, administrative, custody, fund
accounting and transfer agency services to the Fund. As investment manager,
Dreyfus manages the Fund by making investment decisions based on the Fund's
investment objective, policies and restrictions. The Investment Management
Agreement is subject to review and approval at least annually by the Board of
Trustees.
The Investment Management Agreement will continue from year to year
provided that a majority of the Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Trust and either a majority of all Trustees or a
majority (as defined in the 1940 Act) of the shareholders of the Fund approve
its continuance. The Trust may terminate the Investment Management Agreement
upon the vote of a majority of the Board of Trustees or upon the vote of a
majority of the outstanding voting securities of the Fund on 60 days' written
notice to Dreyfus. Dreyfus may terminate the Investment Management Agreement
upon 60 days' written notice to the Trust. The Investment Management Agreement
will terminate immediately and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment
Officer and a director; Thomas F. Eggers, Vice Chairman- Institutional and a
director; Lawrence S. Kash, Vice Chairman; J. David Officer, Vice Chairman
and a director; Ronald P. O'Hanley III, Vice Chairman; William T. Sandalls,
Jr., Executive Vice President; Stephen R. Byers, Senior Vice President;
Patrice M. Kozlowski, Senior Vice President-Corporate Communications; Mark N.
Jacobs, Vice President, General Counsel and Secretary; Diane P. Durnin, Vice
President-Product Development; Mary Beth Leibig, Vice President-Human
Resources; Ray Van Cott, Vice President-Information Systems; Theodore A.
Schachar, Vice President-Tax; Wendy Strutt, 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 G. McGuinn, Richard W. Sabo and Richard F. Syron, directors.
Dreyfus' Code of Ethics subjects its employees' personal securities
transactions to various restrictions to ensure that such trading does not
disadvantage any fund advised by Dreyfus. In that regard, portfolio managers and
other investment personnel of Dreyfus must preclear and report their personal
securities transactions and holdings, which are reviewed for compliance with the
Code of Ethics and are also subject to the oversight of Mellon's Investment
Ethics Committee. Portfolio managers and other investment personnel who comply
with the Code of Ethics' preclearance and disclosure procedures, and the
requirements of the Committee, may be permitted to purchase, sell or hold
securities which also may be or are held in fund(s) they manage or for which
they otherwise provide investment advice.
Expenses. The Investment Management Agreement with Dreyfus provides for a
"unitary fee." Under the unitary fee structure, Dreyfus pays all expenses of the
Fund except: (i) brokerage commissions, (ii) taxes, interest and extraordinary
expenses (which are expected to be minimal), and (iii) Rule 12b-1 fees, as
applicable. Under the unitary fee, Dreyfus provides, or arranges for one or more
third parties to provide, investment advisory, administrative, custody, fund
accounting and transfer agency services to the Fund. Although, under the
Investment Management Agreement, Dreyfus is not required to pay the fees and
expenses of the non-interested Trustees (including counsel fees), Dreyfus is
required to reduce its management fee by the amount of such fees and expenses.
For the provision of such services directly, or through one or more third
parties, Dreyfus receives as full compensation for all services and facilities
provided by it, a fee computed daily and paid monthly at the annual rate of 0.45
of 1% of the value of the Fund's average daily net assets. The Investment
Management Agreement provides that certain redemption, exchange and account
closeout charges are payable directly by the Fund's shareholders to the Fund's
Transfer Agent (although the Fund will waive such fees if the closing balance in
the shareholders account on the business day immediately preceding the effective
date of the transaction is $50,000 or more) and the fee payable by the Fund to
Dreyfus is not reduced by the amount of charges payable to the Transfer Agent.
From time to time, Dreyfus may voluntarily waive a portion of the investment
management fees payable by the Fund, which would have the effect of lowering the
expense ratio of the Fund and increasing return to investors. Expenses
attributable to the Fund are charged against the Fund's assets; other expenses
of the Trust are allocated among its funds on the basis determined by the
Trustees, including, but not limited to, proportionately in relation to the net
assets of each fund.
For the last three fiscal years, the Fund has had the following expenses:
For the Fiscal Year Ended June 30,
2000 1999 1998
---- ---- ----
Management Fee $529,668 $579,262 $531,090
The Distributor. Effective March 22, 2000, the Distributor, a wholly-owned
subsidiary of Dreyfus, located at 200 Park Avenue, New York, New York 10166, has
served as the Fund's distributor on a best efforts basis pursuant to an
agreement which is renewable annually. From August 23, 1994 through March 21,
2000, Premier Mutual Fund Services, Inc., located at 60 State Street, Boston, MA
02109, served as the Fund's distributor. 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.
Transfer and Dividend Disbursing Agent and Custodian. Dreyfus Transfer,
Inc. (the "Transfer Agent"), a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, serves as the Trust's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Trust, the
Transfer Agent arranges for the maintenance of shareholder account records for
the Trust, the handling of certain communications between shareholders and the
Fund and the payment of dividends and distributions payable by the Fund. For
these services, the Transfer Agent receives a monthly fee computed on the basis
of the number of shareholder accounts it maintains for the Trust during the
month, and is reimbursed for certain out-of-pocket expenses.
Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as the custodian of the Fund's investments.
Under a custody agreement with the Trust, Mellon Bank holds the Fund's portfolio
securities and keeps all necessary accounts and records. Dreyfus Transfer, Inc.
and Mellon Bank, as custodian, have no part in determining the investment
policies of the Fund or which securities are to be purchased or sold by the
Fund.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies,"
"Services for Fund Investors," "Instructions for Regular Accounts."
General. You can purchase Fund shares without a sales charge if you
purchase them directly from the Distributor; you may be charged a fee if you
effect transactions in Fund shares through an Agent. Share certificates are
issued only upon written request. No certificates are issued for fractional
shares. It is not recommended that the Fund be used as a vehicle for Keogh, IRA
or other qualified plans. The Fund reserves the right to reject any purchase
order.
The minimum initial investment is $25,000. The Fund may waive its minimum
initial investment requirement for new Fund accounts opened through an Agent
whenever Dreyfus Institutional Services Division ("DISD") determines for the
initial account opened through such Agent which is below the Fund's minimum
initial investment requirement that the existing accounts in the Fund opened
through that Agent have an average account size, or the Agent has adequate
intent and access to funds to result in maintenance of accounts in the Fund
opened through that Agent with an average account size, in an amount equal to or
in excess of $25,000. DISD will periodically review the average size of the
accounts opened through each Agent and, if necessary, reevaluate the Agent's
intent and access to funds. DISD will discontinue the waiver as to new accounts
to be opened through an Agent if DISD determines that the average size of
accounts opened through that Agent is less than $25,000 and the Agent does not
have the requisite intent and access to funds. Subsequent investments must be at
least $1,000 (or at least $100 in the case of persons who have held Fund shares
as of May 8, 1996). The initial investment must be accompanied by the Fund's
Account Application.
You may purchase Fund shares by check or wire, or through the Dreyfus
TeleTransfer Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds." Payments to open new accounts which are mailed should
be sent to The Dreyfus Family of Funds, P.O. Box 9387, Providence, Rhode Island
02940-9387, together with your Account Application. For subsequent investments,
your Fund account number should appear on the check and an investment slip
should be enclosed and sent to The Dreyfus Family of Funds, P.O. Box 105,
Newark, New Jersey 07101-0105. Neither initial nor subsequent investments should
be made by third party check. Purchase orders may be delivered in person only to
a Dreyfus Financial Center. These orders will be forwarded to the Fund and will
be processed only upon receipt thereby. For the location of the nearest Dreyfus
Financial Center, you should call the telephone number listed on the cover of
this Statement of Additional Information.
Wire payments may be made if your bank account is in a commercial bank
that is a member of the Federal Reserve System or any other bank having a
correspondent bank in New York City. Immediately available funds may be
transmitted by wire to Boston Safe Deposit and Trust Company, DDA# 043508
Dreyfus BASIC Massachusetts Municipal Money Market Fund, for purchase of Fund
shares in your name. The wire must include your Fund account number (for new
accounts, your Taxpayer Identification Number ("TIN") should be included
instead), account registration and dealer number, if applicable. If your initial
purchase of Fund shares is by wire, you should call 1-800-645-6561 after
completing the wire payment to obtain the Fund account number. You should
include your Fund account number on the Fund's Account Application and promptly
mail the Account Application to the Fund, as no redemptions will be permitted
until the Account Application is received. You may obtain further information
about remitting funds in this manner from your bank. All payments should be made
in U.S. dollars and, to avoid fees and delays, should be drawn only on U.S.
banks. A charge will be imposed if any check used for investment in your account
does not clear. The Fund makes available to certain large institutions the
ability to issue purchase instructions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of funds
from an account maintained in a bank or other domestic financial institution
that is an Automated Clearing House ("ACH") member. You must direct the
institution to transmit immediately available funds through the ACH System to
Boston Safe Deposit and Trust Company with instructions to credit your Fund
account. The instructions must specify your Fund account registration and Fund
account number preceded by the digits "4540."
Federal regulations require that you provide a certified TIN upon opening
or reopening an account. See "Dividends, Other Distributions and Taxes" and the
Fund's Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject investors to a $50
penalty imposed by the IRS.
Net Asset Value Per Share. An investment portfolio's NAV refers to the
worth of one share. The NAV for Fund shares, which are offered on a continuous
basis, is calculated on the basis of amortized cost, which involves initially
valuing a portfolio instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. The Fund
intends to maintain a constant NAV of $1.00, although there is no assurance that
this can be done on a continuing basis.
See "Determination of Net Asset Value."
The offering price of Fund shares is their NAV. Investments and requests
to exchange or redeem shares received by the Transfer Agent or other authorized
entity to receive orders on behalf of the Fund before 4 p.m., Eastern time, on
each day that the NYSE is open (a "business day") are effective, and will
receive the price next determined on, that business day. The NAV of the Fund is
calculated two times each business day, at 12 noon and 4 p.m., Eastern time.
Investment, exchange or redemption requests received after 4 p.m., Eastern time
are effective, and receive the first share price determined, on the next
business day.
Dreyfus TeleTransfer Privilege. You may purchase Fund shares by telephone
through the Dreyfus TeleTransfer Privilege if they have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds will be
transferred between the bank account designated in one of these documents and
your Fund account. Only a bank account maintained in a domestic financial
institution that is an ACH member may be so designated. Dreyfus TeleTransfer
purchase orders may be made at the Transfer Agent any time. Purchase orders
received by 4:00 p.m., New York time, on any business day that the Transfer
Agent and the NYSE are open for business will be credited to the shareholder's
Fund account on the next bank business day following such purchase order.
Purchase orders made after 4:00 p.m., New York time, on any business day the
Transfer Agent and the NYSE are open for business, or orders made on Saturday,
Sunday or any Fund holiday (e.g., when the NYSE is not open for business), will
be credited to the shareholder's Fund account on the second bank business day
following such purchase order. To qualify to use the Dreyfus TeleTransfer
Privilege, the initial payment for purchase of Fund shares must be drawn on, and
redemption proceeds paid to, the same bank and account as are designated on the
Account Application or Shareholder Services Form on file. If the proceeds of a
particular redemption are to be wired to an account at any other bank, the
request must be in writing and signature-guaranteed. See "Redemption of Shares -
Dreyfus TeleTransfer Privilege." The Fund may modify or terminate this Privilege
at any time or charge a service fee upon notice to shareholders. No such fee
currently is contemplated.
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the calendar
year the account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.
In-Kind Purchases. If the following conditions are satisfied, the Fund may
at its discretion, permit the purchase of shares through an "in-kind" exchange
of securities. Any securities exchanged must meet the investment objective,
policies and limitations of the Fund, must have a readily ascertainable market
value, must be liquid and must not be subject to restrictions on resale. The
market value of the any securities exchanged, plus any cash, must be at least
equal to $25,000. Shares purchased in exchange for securities generally cannot
be redeemed for fifteen days following the exchange in order to allow time for
the transfer to settle.
The basis of the exchange will depend upon the relative NAV of the shares
purchased and securities exchanged. Securities accepted by the Fund will be
valued in the same manner as the Fund values its assets. Any interest earned on
the securities following their delivery to the Fund and prior to the exchange
will be considered in valuing the securities. All interest, dividends,
subscription or other rights attached to the securities become the property of
the Fund, along with the securities. For further information about "in-kind"
purchases, call 1-800-645-6561.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies," "Services
For Fund Investors," "Instructions for Regular Accounts."
General. You may request redemption of Fund shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When a
request is received in proper form by the Transfer Agent or other authorized
entity to receive orders on behalf of the Fund, the Fund will redeem the shares
at the next determined NAV as described below.
You will be charged $5.00 when you redeem all shares in your account or
your account is otherwise closed out (unless you have held Fund shares since May
8, 1996). The fee will be deducted from your redemption proceeds and paid to the
Transfer Agent. The account closeout fee does not apply to exchanges out of the
Fund or to wire or Dreyfus TeleTransfer redemptions, for each of which a $5.00
fee may apply. However, the Fund will waive this fee if the closing balance in
the shareholder's account on the business day immediately preceding the
effective date of such transaction is $50,000 or more. Agents may charge a fee
for effecting redemptions of Fund shares. Any certificates representing Fund
shares being redeemed must be submitted with the redemption request. The value
of the shares redeemed may be more or less than their original cost, depending
upon the Fund's then current NAV.
The Fund ordinarily will make payment for all shares redeemed within seven
days after receipt by the Transfer Agent of a redemption request in proper form,
except as provided by the rules of the SEC. However, if you have purchased Fund
shares by check or by the Dreyfus TeleTransfer Privilege and subsequently submit
a written redemption request to the Transfer Agent, the Fund may delay
redemption of such shares, and the redemption proceeds may not be transmitted to
you, for up to eight business days after the purchase of such shares. In
addition, the Fund will not honor Redemption Checks ("Checks") under the
Checkwriting Privilege, and will reject requests to redeem shares by wire or
telephone or pursuant to the Dreyfus TeleTransfer Privilege for a period of up
to eight business days after receipt by the Transfer Agent of the purchase check
or the Dreyfus TeleTransfer purchase order against which such redemption is
requested. These procedures will not apply if your shares were purchased by wire
payment, or you otherwise have a sufficient collected balance in your account to
cover the redemption request. Fund shares will not be redeemed until the
Transfer Agent has received your Account Application.
Procedures. You may redeem shares by using the regular redemption
procedure through the Transfer Agent, or through the Telephone Redemption
Privilege or the Checkwriting Privilege, which are granted automatically unless
you specifically refuse them by checking the applicable "No" box on the Account
Application. The Telephone Redemption Privilege and the Checkwriting Privilege
may be established for an existing account by a separate signed Shareholder
Services Form, or with respect to the Telephone Redemption Privilege, by oral
request from any of the authorized signatories on the account by calling
1-800-645-6561. You also may redeem shares through the Wire Redemption
Privilege, or the Dreyfus TeleTransfer Privilege, if you have checked the
appropriate box and supplied the necessary information on the Account
Application or have filed a Shareholder Services Form with the Transfer Agent.
Other redemption procedures may be in effect for clients of certain Agents and
institutions. The Fund makes available to certain large institutions the ability
to issue redemption instructions through compatible computer facilities. The
Fund reserves the right to refuse any request made by wire or telephone,
including requests made shortly after a change of address, and may limit the
amount involved or the number of such requests. The Fund may modify or terminate
any redemption Privilege at any time. Shares for which certificates have been
issued are not eligible for the Checkwriting, Wire Redemption, Telephone
Redemption or Dreyfus TeleTransfer Privilege.
The Telephone Redemption Privilege, Dreyfus TeleTransfer or Telephone
Exchange Privilege authorizes the Transfer Agent to act on telephone
instructions (including over The Dreyfus Touch(R) automated telephone system)
from any person representing himself or herself to be you, or a representative
of your Agent, and reasonably believed by the Transfer Agent to be genuine. The
Fund will require the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions are
genuine and, if it does not follow such procedures, the Fund or the Transfer
Agent may be liable for any losses due to unauthorized or fraudulent
instructions. Neither the Fund nor the Transfer Agent will be liable for
following telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may experience
difficulty in contacting the Transfer Agent by telephone to request a redemption
or an exchange of Fund shares. In such cases, you should consider using the
other redemption procedures described herein. Use of these other redemption
procedures may result in your redemption request being processed at a later time
than it would have been if telephone redemption had been used.
Regular Redemption. Under the regular redemption procedure, investors may
redeem shares by written request mailed to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671. Redemption requests may be delivered
in person only to a Dreyfus Financial Center. These requests will be forwarded
to the Fund and will be processed only upon receipt thereby. For the location of
the nearest financial center, you should call the telephone number listed on the
cover of this Statement of Additional Information. Redemption requests must be
signed by each shareholder, including each owner of a joint account, and each
signature must be guaranteed. The Transfer Agent has adopted standards and
procedures pursuant to which signature guarantees in proper form generally will
be accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations, as well as from participants in the NYSE Medallion
Signature Program, the Securities Transfer Agents Medallion Program ("STAMP"),
and the Stock Exchanges Medallion Program.
Redemption proceeds of at least $5,000 will be wired to any member bank of
the Federal Reserve System in accordance with a written signature-guaranteed
request.
Check Redemption Privilege. You may write Checks drawn on your Fund
account. The Fund provides Checks automatically upon opening an account, unless
you specifically refuse the Checkwriting 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 Checkwriting
Privilege may be established for an existing account by a separate signed
Shareholder Services Form. The Account Application or Shareholder Services Form
must be manually signed by the registered owner(s). Checks are drawn on your
account and may be made payable to the order of any person in an amount of
$1,000 or more ($500 for shareholders who have held Fund shares since May 8,
1996). An investor (other than one who has held Fund shares since May 8, 1996)
will be charged $2.00 for each check redemption. When a Check is presented to
the Transfer Agent for payment, the Transfer Agent, as the investor's agent,
will cause the Fund to redeem a sufficient number of full or fractional shares
in the investor's account to cover the amount of the Check and the $2.00 charge.
The fee will be waived if the closing balance in the shareholder's account on
the business day immediately preceding the effective date of the transaction is
$50,000 or more. Dividends are earned until the Check clears. After clearance, a
copy of the Check will be returned to the investor. Investors generally will be
subject to the same rules and regulations that apply to checking accounts,
although election of this Privilege creates only a shareholder-transfer agent
relationship with the Transfer Agent.
If the amount of the Check, plus any applicable charges, is greater than
the value of the shares in an investor's account, the Check will be returned
marked insufficient funds. Checks should not be used to close an account. Checks
are free but the Transfer Agent will impose a fee for stopping payment of a
Check upon request or if the Transfer Agent cannot honor a Check because of
insufficient funds or other valid reason. Such fees are not subject to waiver
based on account balance or other factors. The Fund may return an unpaid Check
that would draw your account balance below $5.00 and you may be subject to extra
charges. Investors should date Checks with the current date when writing them.
Please do not postdate Checks. If Checks are postdated, the Transfer Agent will
honor, upon presentment, even if presented before the date of the Check, all
postdated Checks which are dated within six months of presentment for payment,
if they are otherwise in good order.
This Privilege will be terminated immediately, without notice, with
respect to any account which is, or becomes, subject to back-up withholding.
Any check written on an account which has become subject to back-up withholding
on redemptions will not be honored by the Transfer Agent.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone or letter redemption
instructions from any person representing himself or herself to be the investor,
or a representative of the investor's Agent, and reasonably believed by the
Transfer Agent to be genuine. An investor (other than one who has held Fund
shares since May 8, 1996) will be charged a $5.00 fee for each wire redemption,
which will be deducted from the investor's account and paid to the Transfer
Agent. However, the Fund will waive the this fee if the closing balance in the
shareholder's account on the business day immediately preceding the effective
date of such transaction is $50,000 or more. Ordinarily, the Fund will initiate
payment for shares redeemed pursuant to this Privilege on the next business day
after receipt if the Transfer Agent receives the redemption request in proper
form. Redemption proceeds ($5,000 minimum) will be transferred by Federal
Reserve wire only to the commercial bank account specified by the investor on
the Account Application or Shareholder Services Form, or to a correspondent bank
if the investor's bank is not a member of the Federal Reserve System. Fees
ordinarily are imposed by such bank and are usually borne by the investor.
Immediate notification by the correspondent bank to the investor's bank is
necessary to avoid a delay in crediting the funds to the investor's bank
account. Holders of jointly registered Fund or bank accounts may have redemption
proceeds of only up to $500,000 wired within any 30-day period. Investors may
telephone redemption requests by calling 1-800-645-6561 or, if calling from
overseas, 516-794-5452.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code which
may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may have
the wire transmitted by contacting a TRT Cables operator at 1-800-654-7171, toll
free. Investors should advise the operator that the above transmittal code must
be used and should also inform the operator of the Transfer Agent's answer back
sign.
To change the commercial bank or account designated to receive redemption
proceeds, a written request must be sent to the Transfer Agent. This request
must be signed by each shareholder, with each signature guaranteed as described
below under "Share Certificates; Signatures."
Telephone Redemption Privilege. You may request by telephone that
redemption proceeds (maximum $250,000 per day) be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-645-6561 or, if calling from overseas, 516-794-5452. The Telephone
Redemption Privilege is granted automatically unless investors specifically
refuse it.
Dreyfus TeleTransfer Privilege. You may request by telephone that
redemption proceeds (minimum $1000 per day) be transferred between your Fund
account and your bank account. Only a bank account maintained in a domestic
financial institution which is an ACH member may be designated. Redemption
proceeds will be on deposit in your account at an ACH member bank ordinarily two
business days after receipt of the redemption request. An investor (other than
one who has held Fund shares since May 8, 1996) will be charged a $5.00 fee for
each redemption effected pursuant to this Privilege, which will be deducted from
the investor's account and paid to the Transfer Agent. The fee will be waived if
the closing balance in the shareholder's account on the business day immediately
preceding the effective date of the transaction is $50,000 or more. Investors
should be aware that if they have selected the Dreyfus TeleTransfer Privilege,
any request for a wire redemption will be effected as a Dreyfus TeleTransfer
transaction through the ACH system unless more prompt transmittal specifically
is requested. Holders of jointly registered Fund or bank accounts may redeem
through the Dreyfus TeleTransfer Privilege for transfer to their bank account
only up to $500,000 within any 30-day period.
Share Certificates; Signatures. Any certificates representing Fund shares
to be redeemed must be submitted with the redemption request. Written redemption
requests must be signed by each shareholder, including each holder of a joint
account, and each signature must be guaranteed. Signatures on endorsed
certificates submitted for redemption also must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations
as well as from participants in the NYSE Medallion Signature Program, STAMP, and
the Stock Exchanges Medallion Program. Guarantees must be signed by an
authorized signatory of the guarantor and "Signature-Guaranteed" must appear
with the signature. The Transfer Agent may request additional documentation from
corporations, executors, administrators, trustees or guardians, and may accept
other suitable verification arrangements from foreign investors, such as
consular verification. For more information with respect to
signature-guarantees, please call one of the telephone numbers listed on the
cover.
Redemption Commitment. The Trust has committed itself to pay in cash all
redemption requests by any shareholder of record of the Fund, limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the value of the
Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the SEC. In the case of requests for
redemption in excess of such amount, the Board of 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 NAV is not reasonably practicable, or (c)
for such other periods as the SEC, by order, may permit for protection of the
Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies" and
"Services for Fund Investors".
Fund Exchanges. You may purchase, in exchange for shares of the Fund,
shares of certain other funds managed or administered by Dreyfus or shares of
certain funds advised by Founders Asset Management LLC ("Founders"), an
affiliate of Dreyfus, to the extent such shares are offered for sale in your
state of residence. 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 NAV per share as follows:
A. Exchanges for shares of funds that are offered without a sales load
will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged for
shares of other funds sold with a sales load, and the applicable
sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged without
a sales load for shares of other funds sold without a sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein as
"Offered Shares"), provided that, if the sales load applicable to
the Offered Shares exceeds the maximum sales load that could have
been imposed in connection with the Purchased Shares (at the time
the Purchased Shares were acquired), without giving effect to any
reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, shareholders must notify the
Transfer Agent of their prior ownership of fund shares and their account number.
Any such exchange is subject to confirmation of a shareholder's holdings through
a check of appropriate records.
To request an exchange, an investor, or the investor's Agent acting on the
investor's behalf, must give exchange instructions to the Transfer Agent in
writing or by telephone. Before any exchange, investors must obtain and should
review a copy of the current prospectus of the fund into which the exchange is
being made. Prospectuses may be obtained by calling 1-800-645-6561. The shares
being exchanged must have a current value of at least $1,000; furthermore, when
establishing a new account by exchange, the shares being exchanged must have a
value of at least the minimum initial investment required for the fund into
which the exchange is being made. The ability to issue exchange instructions by
telephone is given to all Fund shareholders automatically, unless the investor
checks the applicable "No" box on the Account Application, indicating that the
investor specifically refuses this Privilege. The Telephone Exchange Privilege
may be established for an existing account by written request signed by all
shareholders on the account, by a separate signed Shareholder Services Form,
available by calling 1-800-645-6561, or by oral request from any of the
authorized signatories on the account, also by calling 1-800-645-6561. Investors
who have previously established the Telephone Exchange Privilege may telephone
exchange instructions (including over The Dreyfus Touch(R) automated telephone
system) by calling 1-800-645-6561. If calling from overseas, investors may call
516-794-5452. Upon an exchange into a new account, the following shareholder
services and privileges, as applicable and where available, will be
automatically carried over to the fund into which the exchange is made:
Telephone Exchange Privilege, Checkwriting Privilege, Wire Redemption Privilege,
Telephone Redemption Privilege, Dreyfus TeleTransfer Privilege and the dividends
and distributions payment option (except for Dividend Sweep) selected by the
investor.
By using the Telephone Exchange Privilege, the investor authorizes the
Transfer Agent to act on telephonic instructions (including over The Dreyfus
Touch(R) automated telephone system) from any person representing himself or
herself to be the investor or a representative of the investor's Agent, and
reasonably believed by the Transfer Agent to be genuine. Telephone exchanges may
be subject to limitations as to the amount involved. Shares issued in
certificate form are not eligible for telephone exchange. Exchanges out of the
Fund pursuant to Fund Exchanges are limited to four per calendar year. The Fund
reserves the right, upon not less than 60 days' written notice, to charge
shareholders who have held Fund shares since May 8, 1996 a nominal fee for each
exchange in accordance with Rules promulgated by the SEC.
The Fund reserves the right to reject any exchange request in whole or in
part. The availability of fund exchanges may be modified or terminated at any
time upon notice to investors.
The exchange of shares of one fund for shares of another is treated for
Federal income tax purposes as a sale of the shares given in exchange by the
shareholder and, therefore, an exchanging shareholder may realize a taxable gain
or loss.
Dividend Option. Dreyfus Dividend Sweep allows you to invest automatically
your dividends or dividends and capital gain distributions, if any, from the
Fund in shares of another fund in the Dreyfus Family of Funds or shares of
certain funds advised by Founders, of which you are a shareholder. Shares of the
other funds purchased pursuant to this Privilege will be purchased on the basis
of relative NAV per share as follows:
A. Dividends and other distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that are
offered without a sales load.
B. Dividends and other distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds sold
with a sales load, and the applicable sales load will be deducted.
C. Dividends and other distributions paid by a fund which charges a
sales load may be invested in shares of other funds sold with a sales
load (referred to herein as "Offered Shares"), provided that, if the
sales load applicable to the Offered Shares exceeds the maximum sales
load charged by the fund from which dividends or other distributions
are being swept, without giving effect to any reduced loads, the
difference will be deducted.
D. Dividends and other distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales charge
("CDSC") and the applicable CDSC, if any, will be imposed upon
redemption of such shares.
For more information concerning this Privilege, or to request a Dividend
Options Form, investors should call toll free 1-800-645-6561. Investors may
cancel their participation in this Privilege by mailing written notification to
the Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671.
To select a new fund after cancellation, investors must submit a new Dividend
Options Form. Enrollment in or cancellation of this privilege is effective three
business days following receipt. This privilege is available only for existing
accounts and may not be used to open new accounts. Minimum subsequent
investments do not apply. The Fund may modify or terminate this privilege at any
time or charge a service fee. No such fee currently is contemplated.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies."
The NAV for Fund shares is calculated on the basis of amortized cost,
which involves initially valuing a portfolio instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which the value, as determined by amortized cost,
is higher or lower than the price the Fund would receive if it sold the
instrument. The Fund intends to maintain a constant NAV of $1.00 per share,
although there is no assurance that this can be done on a continuing basis.
The use of amortized cost is permitted by Rule 2a-7 under the 1940 Act.
Pursuant to the provisions of Rule 2a-7, the Trustees have established
procedures reasonably designed to stabilize the Fund's price per share, as
computed for the purpose of sale and redemption, at $1.00. These procedures
include the determination of the Trustees, at such times as they deem
appropriate, of the extent of deviation, if any, of the Fund's current NAV per
share, using market values, from $1.00; periodic review by the Trustees of the
amount of and the methods used to calculate the deviation; maintenance of
records of the determination; and review of such deviations. The procedures
employed to stabilize the Fund's price per share require the Trustees to
consider promptly what action, if any, should be taken by the Trustees if such
deviation exceeds 1/2 of one percent. Such procedures also require the Trustees
to take appropriate action to eliminate or reduce, to the extent reasonably
practicable, material dilution or other unfair effects resulting from any
deviation. Such action may include: selling portfolio instruments prior to
maturity to realize capital gains or losses or to shorten average portfolio
maturity; withholding dividends or paying distributions from capital or capital
gains; redeeming shares in kind; or establishing a NAV by using available market
quotations. In addition to such procedures, Rule 2a-7 requires the Fund to
purchase instruments having remaining maturities of 397 days or less, to
maintain a dollar-weighted average portfolio maturity of 90 days or less and to
invest only in securities determined by the Trustees to be of high quality, as
defined in Rule 2a-7, with minimal credit risks.
In periods of declining interest rates, the indicated daily yield on Fund
shares computed by dividing the annualized daily income on the Fund by the NAV
per share computed as above may tend to be higher than a similar computation
made by using a method of valuation based on market prices and estimates. In
periods of rising interest rates, the indicated daily yield on Fund shares
computed the same way may tend to be lower than a similar computation made by
using a method of calculation based upon market prices and estimates.
NYSE Closings. The holidays (as observed) on which the NYSE is
-------------
currently scheduled to be closed are: New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Past Performance"
The Fund's "yield" refers to the income generated by an investment in the
Fund over a seven-day period identified in the advertisement. This income is
then "annualized." That is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period and
is shown as a percentage of the investment. The "effective yield" is calculated
similarly, but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The effective "yield" will be slightly higher than
the "yield" because of the compounding effect of this assumed reinvestment. The
Fund's "yield" and "effective yield" may reflect absorbed expenses pursuant to
any undertaking that may be in effect. Since yields fluctuate, yield data cannot
necessarily be used to compare an investment in the Fund with bank deposits,
savings accounts, and similar investment alternatives which often provide an
agreed-upon or guaranteed fixed yield for a stated period of time, or other
investment companies which may use a different method of computing yield. The
Fund's tax equivalent yield shows the level of taxable yield needed to produce
an after-tax equivalent to the Fund's tax-free yield. This is done by increasing
the Fund's yield by the amount necessary to reflect the payment of Federal
income tax (and state income tax, if applicable) at a stated tax rate.
Any fees charged by an Agent directly to its customers' account in
connection with investments in the Fund will not be included in calculations of
yield.
The Fund computes its current annualized and compound effective yields
using standardized methods required by the SEC. The annualized yield for the
Fund is computed by (a) determining the net change in the value of a
hypothetical account having a balance of one share at the beginning of a seven
calendar day period; (b) dividing the net change by the value of the account at
the beginning of the period to obtain the base period return; and (c)
annualizing the results (i.e., multiplying the base period return by 365/7). The
net change in the value of the account reflects the value of additional shares
purchased with dividends declared on both the original share and such additional
shares, but does not include realized gains and losses or unrealized
appreciation and depreciation. Compound effective yields are computed by adding
1 to the base period return (calculated as described above), raising that sum to
a power equal to 365/7 and subtracting 1. The Fund's tax equivalent yield is
computed by dividing that portion of the Fund's yield which is tax-exempt by one
minus a stated income tax rate and adding the product to that portion, if any,
of the Fund's yield that is not tax-exempt.
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the Fund's yield fluctuates, its yield cannot be compared
with yields on savings accounts or other investment alternatives that provide an
agreed-to or guaranteed fixed yield for a stated period of time. However, yield
information may be useful to an investor considering temporary investments in
money market instruments. In comparing the yield of one money market fund to
another, consideration should be given to the Fund's investment policies,
including the types of investments made, length of maturities of portfolio
securities, the methods used by the Fund to compute the yield (methods may
differ) and whether there are any special account charges which may reduce
effective yield.
For the seven-day period ended June 30, 2000, the Fund's yield was 3.97%,
effective yield was 4.05% and equivalent taxable yield* was 6.98%.
From time to time, advertising materials for the Fund may refer to
Morningstar ratings and related analyses supporting the rating.
Performance rankings as reported in Changing Times, Business Week,
Institutional Investor, The Wall Street Journal, Mutual Fund Forecaster, No Load
Investor, Money Magazine, Morningstar Mutual Fund Values, U.S. News and World
Report, Forbes, Fortune, Barron's, Financial Planning, Financial Planning on
Wall Street, Certified Financial Planner Today, Investment Advisor, Kiplinger's,
Smart Money and similar publications may also be used in comparing a Fund's
performance. Furthermore, a Fund may quote its yields in advertisements or in
shareholder reports.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer to, or
include commentary by the portfolio manager relating to, investment strategy,
asset growth, current or past business, political, economic or financial
conditions and other matters of general interest to investors.
From time to time, advertising materials may refer to studies performed by
Dreyfus or its affiliates, such as "The Dreyfus Tax Informed Investing Study" or
"The Dreyfus Gender Investment Comparison Study (1996-1997)" or other such
studies.
--------
* Example assumes a Federal marginal tax rate of 39.6%, and a Massachusetts
marginal tax rate of 5.85% (combined effective rate of 43.13%).
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the Section in the Fund's Prospectus entitled "Distributions and Taxes."
General. The Fund ordinarily declares dividends from net investment income
on each day that the NYSE is open for business. The Fund's earnings for
Saturdays, Sundays and holidays are declared as dividends on the preceding
business day. Dividends usually are paid on the last calendar day of each month
and are automatically reinvested in additional Fund shares at NAV or, at an
investor's option, paid in cash. If an investor redeems all shares in their
account at any time during the month, all dividends to which the investor is
entitled will be paid along with the proceeds of the redemption. If an omnibus
accountholder indicates in a partial redemption request that a portion of any
accrued dividends to which such account is entitled belongs to an underlying
accountholder who has redeemed all of his or her Fund shares, that portion of
the accrued dividends will be paid along with the proceeds of the redemption.
Dividends from net realized short-term capital gains, if any, generally are
declared and paid once a year, but the Fund may make distributions on a more
frequent basis to comply with the distribution requirements of the Code, in all
events in a manner consistent with the provisions of the 1940 Act. The Fund will
not make distributions from net realized capital gains unless capital loss
carryovers, if any, have been utilized or have expired. The Fund does not expect
to realize any long-term capital gains or losses. Investors may choose whether
to receive dividends in cash or to reinvest them in additional Fund shares at
NAV. All expenses are accrued daily and deducted before declaration of dividends
to investors.
Except as provided below, shares of the Fund purchased on a day on which
the Fund calculates its NAV will not begin to accrue dividends until the
following business day and redemption orders effected on any particular day will
receive all dividends declared through the day of redemption. However, if
immediately available funds are received by the Transfer Agent prior to 12:00
noon, Eastern time, investors may receive the dividend declared on the day of
purchase. Investors will not receive the dividends declared on the day of
redemption if a wire redemption order is placed prior to 12:00 noon, Eastern
time.
It is expected that the Fund will continue to qualify for treatment as a
regulated investment company ("RIC") under the Code. Such qualification will
relieve the Fund of any liability for federal income tax to the extent its
earnings and realized gains are distributed in accordance with applicable
provisions of the Code. To qualify for treatment as a RIC under the Code, the
Fund - which is treated as a separate corporation for federal tax purposes - (1)
must distribute to its shareholders each year at least 90% of its investment
company taxable income (generally consisting of net taxable investment income
and net short-term capital gains, plus its net interest income excludable from
gross income under section 103(a) of the Code) ("Distribution Requirement"), (2)
must derive at least 90% of its annual gross income from specified sources
("Income Requirement"), and (3) must meet certain asset diversification and
other requirements. If the Fund failed to qualify for treatment as a RIC for any
taxable year, (1) it would be taxed at corporate rates on the full amount of its
taxable income for that year without being able to deduct the distributions it
makes to its shareholders and (2) the shareholders would treat all those
distributions, including distributions that otherwise would be "exempt-interest
dividends," as dividends (that is, ordinary income) to the extent of the Fund's
earnings and profits. In addition, the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest and make substantial
distributions before requalifying for RIC treatment. The Fund also intends to
continue to qualify to pay "exempt-interest" dividends, which requires, among
other things, that at the close of each quarter of its taxable year at least 50%
of the value of its total assets must consist of municipal securities.
The Fund may be subject to a 4% nondeductible excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary (taxable) income for that year and capital gain net income for the
one-year period ending October 31 of that year, plus certain other amounts. To
avoid the application of this excise tax, the Fund may make an additional
distribution shortly before December 31 in each year of any undistributed
ordinary (taxable) income or capital gains and expects to pay any other
dividends and distributions necessary to avoid the application of this tax.
Distributions by the Fund that are designated by it as "exempt-interest
dividends" generally may be excluded from gross income. Distributions by the
Fund of net capital gain, when designated as such, are taxable as long-term
capital gains, regardless of the length of time of share ownership. Interest on
indebtedness incurred or continued to purchase or carry shares of the Fund will
not be deductible for Federal income tax purposes to the extent that the Fund's
distributions (other than capital gains distributions) consist of
exempt-interest dividends. The Fund may invest in "private activity bonds," the
interest on which is treated as a tax preference item for shareholders in
determining their liability for the alternative minimum tax. Proposals may be
introduced before Congress for the purpose of restricting or eliminating the
Federal income tax exemption for interest on municipal securities. If such a
proposal were enacted, the availability of such securities for investment by the
Fund and the value of its portfolio would be affected. In such event, the Fund
would reevaluate its investment objective and policies.
Dividends and other distributions, to the extent taxable, are taxable
regardless of whether they are received in cash or reinvested in additional Fund
shares, even if the value of shares is below cost. If investors purchase shares
shortly before a taxable distribution (i.e., any distribution other than an
exempt-interest dividend paid by the Fund), they must pay income taxes on the
distribution, even though the value of the investment (plus cash received, if
any) remains the same. In addition, the share price at the time investors
purchase shares may include unrealized gains in the securities held in the Fund.
If these portfolio securities are subsequently sold and the gains are realized,
they will, to the extent not offset by capital losses, be paid as a capital gain
distribution and will be taxable.
Dividends from the Fund's investment company taxable income together with
distributions from net realized short-term capital gains, if any (collectively,
"dividend distributions"), will be taxable to U.S. shareholders, including
certain non-qualified retirement plans, as ordinary income to the extent of the
Fund's earnings and profits, whether received in cash or reinvested in
additional Fund shares. Distributions by the Fund of net capital gain, when
designated as such, are taxable as long-term capital gains, regardless of the
length of time of share ownership. The Fund is not expected to realize long-term
capital gains, or, therefore, to make distributions of net capital gain (the
excess of net long-term capital gain over net short-term capital loss). Nor will
dividends paid by the Fund be eligible for the dividends-received deductions
allowed to corporations.
Dividends derived by the Fund from tax-exempt interest are designated as
tax-exempt in the same percentage of the day's dividend as the actual tax-exempt
income earned that day. Thus, the percentage of the dividend designated as
tax-exempt may vary from day to day. Similarly, dividends derived by the Fund
from interest on Massachusetts Municipal Obligations will be designated as
exempt from Massachusetts taxation in the same percentage of the day's dividend
as the actual interest on Massachusetts Municipal Obligations earned on that
day.
Dividends paid by the Fund to qualified retirement plans ordinarily will
not be subject to taxation until the proceeds are distributed from the plans.
The Fund will not report to the 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 is 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, 2000, 1999 and 1998.
INFORMATION ABOUT THE FUND/TRUST
Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. Fund shares
are without par value, have no preemptive or subscription rights, and are freely
transferable.
The Trust is a "series fund," which is a mutual fund divided into separate
portfolios, each of which is treated as a separate entity for certain matters
under the 1940 Act and for other purposes. A shareholder of one portfolio is not
deemed to be a shareholder of any other portfolio. For certain matters
shareholders vote together as a group; as to others they vote separately by
portfolio. The Trustees have authority to create an unlimited number of shares
of beneficial interest, without par value, in separate series. The Trustees have
authority to create additional series at any time in the future without
shareholder approval.
Each share (regardless of class) has one vote. On each matter submitted to
a vote of the shareholders, all shares of each fund or class shall vote together
as a single class, except as to any matter for which a separate vote of any fund
or class is required by the 1940 Act and except as to any matter which affects
the interest of a particular fund or class, in which case only the holders of
shares of the one or more affected funds or classes shall be entitled to vote,
each as a separate class.
The assets received by the Trust for the issue or sale of shares of each
fund and all income, earnings, profits and proceeds thereof, subject only to the
rights of creditors, are specifically allocated to such fund, and constitute the
underlying assets of such fund. The underlying assets of each fund are required
to be segregated on the books of account, and are to be charged with the
expenses in respect to such fund and with a share of the general expenses of the
Trust. Any general expenses of the Trust not readily identifiable as belonging
to a particular fund shall be allocated by or under the direction of the
Trustees in such manner as the Trustees determine to be fair and equitable,
taking into consideration, among other things, the relative sizes of the funds
and the relative difficulty in administering each fund. Each share of each fund
represents an equal proportionate interest in that fund with each other share
and is entitled to such dividends and distributions out of the income belonging
to such fund as are declared by the Trustees. Upon any liquidation of a fund,
shareholders thereof are entitled to share pro rata in the net assets belonging
to that fund available for distribution.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Trust to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Trustees or the
appointment of auditors. However, the holders of at least 10% of the shares
outstanding and entitled to vote may require the Trust to hold a special meeting
of shareholders for purposes of removing a Trustee from office. Shareholders may
remove a Trustee by the affirmative vote of two-thirds of the Trust's
outstanding voting shares. In addition, the Board of Trustees will call a
meeting of shareholders for the purpose of electing Trustees if, at any time,
less than a majority of the Trustees then holding office have been elected by
shareholders.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an investment
company, such as the Trust, will not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each series affected by such matter. Rule 18f-2 further provides that a series
shall be deemed to be affected by a matter unless it is clear that the interests
of each series in the matter are identical or that the matter does not affect
any interest of such series. The Rule exempts the selection of independent
accountants and the election of Trustees from the separate voting requirements
of the Rule.
The Fund will send annual and semi-annual financial statements to all of
its shareholders.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Agreement and Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or a Trustee. The Agreement and Declaration of Trust provides for
indemnification from the Trust's property for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust. Thus, the
risk of a shareholder's incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself would be unable
to meet its obligations, a possibility which Dreyfus believes is remote. Upon
payment of any liability incurred by the Trust, the shareholder paying such
liability will be entitled to reimbursement from the general assets of the
Trust. The Trustees intend to conduct the operations of each fund in such a way
so as to avoid, as far as possible, ultimate liability of the shareholders for
liabilities of such fund.
COUNSEL AND INDEPENDENT AUDITORS
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C., 20036-1800, has passed upon the legality of the
shares offered by the Prospectus and this Statement of Additional Information.
KPMG LLP, 757 Third Avenue, New York, NY 10017, was appointed by the Board
of Trustees to serve as the Fund's independent auditors for the year ending June
30, 2001 providing audit services including (1) examination of the annual
financial statements, (2) assistance, review and consultation in connection with
SEC filings and (3) review of the annual Federal income tax return filed on
behalf of the Fund.
<PAGE>
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.
Between 1982 and 1988, the economies of Massachusetts and New England were
among the strongest performers in the nation, with growth rates considerably
higher than those for the national economy as a whole. Between 1989 and 1992,
however, both Massachusetts and New England experienced growth rates
significantly below the national average. Since then, growth rates in
Massachusetts and New England have improved to levels on par with the rest of
the nation. In 1997, the economies of both Massachusetts and New England grew at
a faster pace than the nation as a whole for the first time since 1988. The
Massachusetts economy has been the strongest in New England, making up an
average of 47.7% of New England's total Gross Product and an average of 2.8% of
the nation's economy over the decade and a half.
In 1998, employment levels in every industry increased or remained
constant. The most rapid growth in 1998 came in the construction sector and the
services sector, which grew at rates of 7.6% and 2.8%, respectively. Total
non-agricultural employment in Massachusetts grew at a rate of 1.9% in 1998.
While the Massachusetts unemployment rate was significantly lower than the
national average between 1979 and 1989, the economic recession of the early
1990s caused unemployment rates in Massachusetts to rise significantly above the
national average. However, the economic recovery that began in 1993 has caused
unemployment rates in Massachusetts to decline faster than the national average.
As a result, since 1994 the unemployment rate in Massachusetts has been below
the national average. The unemployment rate in Massachusetts fell from 3.4% in
June 1998 to 3.1% in June 1999 and the United States unemployment rate remained
the same between June 1998 and June 1999.
Massachusetts ended each of the fiscal years 1995 through 1999 with a
positive closing fund balance in its budgeted operating funds, and expects to do
so again at the close of fiscal 2000.
In recent years, health related costs have risen dramatically in
Massachusetts and across the nation, and the increase in Massachusetts' Medicaid
and group health insurance costs reflects this trend. In fiscal 1993, Medicaid
was the largest item in Massachusetts' budget and has been one of the fastest
growing budget items. However the rate of increase has abated in recent years,
due to a number of savings and cost-cutting initiatives, such as managed care
and utilization review. During fiscal years 1995, 1996, 1997, 1998 and 1999,
Medicaid expenditures were $3.398 billion, $3.416 billion, $3.456 billion,
$3.666 billion and $3.856 billion, respectively. The average annual growth rate
from fiscal 1995 to fiscal 1999 was 3.3%. It is estimated that in fiscal 2000,
Medicaid expenditures will be $4.092 billion, an increase of 6.1% from fiscal
1999.
Massachusetts' pension costs had risen dramatically as the Commonwealth
appropriated funds to address in part the unfunded liabilities that had
accumulated over several decades. Total pension costs increased an aggregate
rate of 3.54% from $908.9 million in fiscal 1994 to $1.07 billion in fiscal
1998. Since fiscal 1998, total pension costs have decreased to $990.2 million in
fiscal 1999 and are estimated to be $987.4 million in fiscal 2000.
Payments for debt service on Massachusetts general obligation bonds and
notes have risen at an average annual rate of 1.11% from $1.15 billion in fiscal
1994 to $1.21 billion in fiscal 1998. Payments for debt service in fiscal 1999
amounted to $1.17 billion. State law generally imposes a 10% limit on the total
appropriations in any fiscal year that may be expended for payment of interest
and principal on general obligation debt. As of January 1, 2000 the State had
approximately $9.9 billion of long-term general obligation debt outstanding and
short-term direct obligations of the Commonwealth totaled $175.0 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. Massachusetts' 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. Massachusetts 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, as amended
to date, 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 two-thirds of their member cities and towns. During the 1980's,
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 2000, approximately 21.7% of Massachusetts'
budgeted expenditures were allocated to Local Aid.
Many factors affect the financial condition of the Commonwealth and its
cities, towns and public bodies, such as social, environmental, and economic
conditions, many of which are not within the control of such entities. As is the
case with most urban states, the continuation of many of Massachusetts'
programs, particularly its human services programs, is in significant part
dependent upon continuing Federal reimbursements which have been steadily
declining. The loss of grants to Massachusetts and its cities and towns could
further slow economic development. To the extent that such factors may exist,
they could have an adverse effect on economic conditions in Massachusetts,
although what effects, if any, such factors would have on Massachusetts'
Municipal Obligations cannot be predicted.
<PAGE>
APPENDIX B
Municipal Bond, Municipal Note, Bond, Note and Commercial Paper Ratings
S&P
Municipal Bond and Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA An obligation rated `AA' differs from the highest rated issues only in
small degree. The obligors capacity to meet its financial commitment on
the obligation is very strong.
A An obligation rated `A' is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity to
meet its financial commitment on the obligation is still strong.
BBB An obligation rated `BBB' exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
The ratings from `AA' to `BBB' may be modified by the addition of a plus (+) or
a minus (-) sign to show relative standing within the major rating categories
Municipal Note and Note Ratings
SP-1 Strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the term of the
notes.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the likelihood
of timely payment of debt having an original maturity of no more than 365 days.
A-1 This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issuers designated `A-1.'
A-3 Issues carrying this designation have an adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher
designations.
Moody's
Municipal Bond and Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and generally are referred to as
"gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment some time in
the future.
Baa Bonds which are rated Baa are considered as medium grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within each generic rating classification from Aa through Baa.
The modifier 1 indicates a ranking for the security in the higher end of a
rating category; the modifier 2 indicates a midrange ranking; and the
modifier 3 indicates a ranking in the lower end of a rating category.
Municipal Note, Note and other Short-Term Obligations
There are four rating categories for short-term obligations that define an
investment grade situation. These are designated Moody's Investment Grade as MIG
1 (best quality) through MIG 4 (adequate quality). Short-term obligations of
speculative quality are designated SG.
In the case of variable rate demand obligations (VRDOs), a two component
rating is assigned. The first element represents an evaluation of the degree of
risk associated with scheduled principal and interest payments, and the other
represents an evaluation of the degree of risk associated with the demand
feature. The short-term rating assigned to the demand feature of VRDOs is
designated as VMIG. When either the long- or short-term aspect of a VRDO is not
rated, that piece is designated NR, e.g., Aaa/NR or NR/VMIG 1.
MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG-2/
MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/
VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow
and market access for refinancing is likely to be less well
established.
MIG 4/
VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
Commercial Paper Rating
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated issuers:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
1 Leading market positions in well-established industries.
2 High rates of return on funds employed.
3 Conservative capitalization structure with moderate reliance on
debt and ample asset protection.
4 Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
5 Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited above
but to a lesser agree. Earnings trends and coverage ratios, while
sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of
industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require
relatively high financial leverage. Adequate alternative liquidity is
maintained.
Fitch
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.
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, 2000
------------------------------------------------------------------------------
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of the
Dreyfus BASIC New York Municipal Money Market Fund (the "Fund"), dated November
1, 2000, 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
The financial statements of the Fund for the fiscal year ended June 30,
2000, 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.
TABLE OF CONTENTS
Page
Description of The Fund/Trust.............................................B-2
Management of The Fund....................................................B-14
Management Arrangements...................................................B-18
Purchase of Shares........................................................B-20
Redemption of Shares......................................................B-23
Shareholder Services......................................................B-28
Determination of Net Asset Value..........................................B-30
Performance Information...................................................B-31
Dividends, Other Distributions and Taxes..................................B-33
Portfolio Transactions....................................................B-37
Information About The Fund/Trust..........................................B-38
Counsel and Independent Auditors..........................................B-40
Appendix A................................................................B-41
Appendix B................................................................B-69
DESCRIPTION OF THE FUND/TRUST
The Trust is an open-end management investment company organized as an
unincorporated business trust under the laws of the Commonwealth of
Massachusetts by an Agreement and Declaration of Trust dated March 28, 1983,
amended and restated December 9, 1992, and subsequently further amended. On
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.
Dreyfus Service Corporation (the "Distributor") is the distributor of the
Fund's shares.
General Investment Objective and Policies. The Fund seeks to provide a
high level of current income exempt from Federal income taxes and New York State
and New York City personal income taxes to the extent consistent with the
preservation of capital and the maintenance of liquidity. The Fund seeks to
achieve its objective by investing in debt obligations issued by the State of
New York, its political subdivisions, municipalities and public authorities and
in municipal obligations issued by other governmental entities if, in the
opinion of counsel to the respective issuers, the interest from such obligations
is excluded from gross income for Federal, New York State and New York City
income tax purposes ("New York Municipal Obligations" or "Municipal
Obligations").
Under normal market conditions, the Fund attempts to invest 100%, and will
invest a minimum of 80%, of its total assets in New York Municipal Obligations.
When, in the opinion of Dreyfus, adverse market conditions exist for New York
Municipal Obligations, and a "defensive" investment posture is warranted, the
Fund may temporarily invest more than 20% of its total assets in money market
instruments having maturity and quality characteristics comparable to those for
New York Municipal Obligations, but which produce income exempt from Federal but
not New York State or New York City personal income taxes for resident
shareholders of New York, or more than 20% of its total assets in taxable
obligations (including obligations the interest on which is included in the
calculation of alternative minimum tax for individuals). Periods when a
defensive posture is warranted include those periods when the Fund's monies
available for investment exceed the New York Municipal Obligations available for
purchase to meet the Fund's rating, maturity and other investment criteria. The
Fund's policy of investing a minimum of 80% of its total assets in New York
Municipal Obligations is a fundamental policy of the Fund.
The Fund pursues its objective by investing in a varied portfolio of high
quality, short-term New York Municipal Obligations.
The New York Municipal Obligations purchased by the Fund may include (1)
municipal bonds; (2) municipal notes; (3) municipal commercial paper; and (4)
municipal lease obligations. The Fund will limit its portfolio investments to
securities that, at the time of acquisition, (i) are rated in the two highest
short-term rating categories by at least two nationally recognized statistical
rating organizations (or by one organization if only one organization has rated
the security), (ii) if not rated, are obligations of an issuer whose other
outstanding short-term debt obligations are so rated, or (iii) if not rated, are
of comparable quality, as determined by Dreyfus under procedures established by
the Board of Trustees. The Fund will limit its investments to securities that
present minimal credit risk, as determined by Dreyfus under procedures
established by the Board of Trustees.
Because many issuers of New York Municipal Obligations may choose not to
have their obligations rated, it is possible that a large portion of the Fund's
portfolio may consist of unrated obligations. Unrated obligations are not
necessarily of lower quality than rated obligations, but to the extent the Fund
invests in unrated obligations, the Fund will be more reliant on Dreyfus'
judgment, analysis and experience than would be the case if the Fund invested
only in rated obligations. The Fund invests only in securities that have
remaining maturities of thirteen months or less at the date of purchase.
Floating rate or variable rate obligations (described below) which are payable
on demand under conditions established by the SEC may have a stated maturity in
excess of thirteen months; these securities will be deemed to have remaining
maturities of thirteen months or less. The Fund maintains a dollar-weighted
average portfolio maturity of 90 days or less. The Fund seeks to maintain a
constant net asset value ("NAV") of $1.00 per share, although there is no
assurance it can do so on a continuing basis, using the amortized cost method of
valuing its securities pursuant to Rule 2a-7 under the Investment Company Act of
1940, as amended (the "1940 Act"), which Rule includes various maturity, quality
and diversification requirements.
The Fund is classified as a "non-diversified" investment company, as
defined under the 1940 Act. However, the Fund intends to conduct its operations
so that it will qualify under the Internal Revenue Code of 1986, as amended (the
"Code") as a "regulated investment company." To continue to qualify, among other
requirements, the Fund will be required to limit its investments so that, at the
close of each quarter of the taxable year, with respect to at least 50% of its
total assets, not more than 5% of such assets will be invested in the securities
of a single issuer. In addition, not more than 25% of the value of the Fund's
total assets may be invested in the securities of a single issuer at the close
of each quarter of the taxable year. The provisions of the Code place limits on
the extent to which the Fund's portfolio may be non-diversified. Furthermore,
under rules established by the SEC, the Fund may not purchase, with respect to
75% of its total assets, a security if, as a result, more than 5% of its total
assets would be invested in the securities of any issuer. The Fund may invest
more than 5% of its total assets in securities of one issuer only if the
securities are in the highest short-term rating category, or are determined to
be of comparable quality by Dreyfus.
The ability of the Fund to meet its investment objective is subject to the
ability of municipal issuers to meet their payment obligations. In addition, the
Fund's portfolio will be affected by general changes in interest rates which may
result in increases or decreases in the value of Fund holdings. Investors should
recognize that, in periods of declining interest rates, the Fund's yield will
tend to be somewhat higher than prevailing market rates, and in periods of
rising interest rates, the Fund's yield will tend to be somewhat lower. Also,
when interest rates are falling, the influx of new money to the Fund will likely
be invested in portfolio instruments producing lower yields than the balance of
the Fund's portfolio, thereby reducing the Fund's current yield. In periods of
rising interest rates, the opposite can be expected to occur.
The Fund may invest without limit in New York Municipal Obligations which
are repayable out of revenue streams generated from economically related
projects or facilities or whose issuers are located in New York State. Sizable
investments in these obligations could increase risk to the Fund should any of
the related projects or facilities experience financial difficulties. The Fund
is authorized to borrow up to 10% of its total assets for temporary or emergency
purposes and to pledge its assets to the same extent in connection with such
borrowings.
Certain Portfolio Securities
Description of Municipal Obligations. "Municipal Obligations" and "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.
Portfolio Securities. The average distribution of investments (at value)
in Municipal Obligations by ratings for the fiscal year ended June 30, 2000,
computed on a monthly basis, was as follows:
Moody's Standard &
Fitch IBCA, Inc. Investors Poor's Ratings
("Fitch") Service, Inc. Group ("S&P") Percentage of
or ("Moody's") or Value
F-1+/F-1 VMIG 1/MIG 1, SP-1+/SP-1, 88.9%
P-1 A1+/A1
AAA/AA Aaa/Aa AAA/AA 9.3%
Not Rated Not Rated Not Rated 1.8%
100.0%
------------------
(1) Included in the not rated category are securities comprising 1.8% of the
Fund's market value which, while not rated, have been determined by Dreyfus to
be of comparable quality to securities in the VMIG 1/MIG 1 rating category.
The actual distribution of the Fund's Municipal Obligations by ratings on
any given date will vary. In addition, the distribution of the Fund's
investments by rating as set forth above should not be considered as
representative of the Fund's future portfolio composition.
Use of Ratings as Investment Criteria. The ratings of nationally
recognized statistical rating organizations ("NRSROs") such as S&P, Fitch and
Moody's represent the opinions of these agencies as to the quality of Municipal
Obligations which they rate. It should be emphasized, however, that such ratings
are relative and subjective and are not absolute standards of quality. These
ratings will be used by the Fund as initial criteria for the selection of
portfolio securities, but the Fund will also rely upon the independent advice of
Dreyfus to evaluate potential investments. Among the factors which will be
considered are the short-term and long-term ability of the issuer to pay
principal and interest and general economic trends. Further information
concerning the ratings of the NRSROs and their significance is contained in the
Appendix B to this Statement of Additional Information.
After being purchased by the Fund, the rating of a Municipal Obligation
may be reduced below the minimum rating required for purchase by the Fund or the
issuer of the Municipal Obligation may default on its obligations with respect
to the Municipal Obligation. In that event, the Fund will dispose of the
Municipal Obligation as soon as practicable, consistent with achieving an
orderly disposition of the Municipal Obligation, unless the Trust's Board of
Trustees determines that disposal of the Municipal Obligation would not be in
the best interest of the Fund. In addition, it is possible that a Municipal
Obligation may cease to be rated or an NRSRO might not timely change its rating
of a particular Municipal Obligation to reflect subsequent events. Although
neither event will require the sale of such Municipal Obligation by the Fund,
Dreyfus will consider such event in determining whether the Fund should continue
to hold the Municipal Obligation. In addition, if an NRSRO changes its rating
system, the Fund will attempt to use comparable ratings as standards for its
investments in accordance with its investment objective and policies.
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.
Floating Rate and Variable Rate Obligations. The Fund may purchase
floating rate and variable rate obligations, including participation interests
therein. Floating rate or variable rate obligations provide that the rate of
interest is set as a specific percentage of a designated base rate (such as the
prime rate at a major commercial bank) and that the Fund can demand payment of
the obligation at par plus accrued interest. Variable rate obligations provide
for a specified periodic adjustment in the interest rate, while floating rate
obligations have an interest rate which changes whenever there is a change in
the external interest rate. Frequently such obligations are secured by letters
of credit or other credit support arrangements provided by banks. The quality of
the underlying creditor or of the bank, as the case may be, must, as determined
by Dreyfus under the supervision of the Trustees, be equivalent to the quality
standard prescribed for the Fund. In addition, Dreyfus monitors the earning
power, cash flow and other liquidity ratios of the issuers of such obligations,
as well as the creditworthiness of the institution responsible for paying the
principal amount of the obligations under the demand feature. Changes in the
credit quality of banks and other financial institutions that provide such
credit or liquidity enhancements to the Fund's portfolio securities could cause
losses to the Fund and affect its share price. The Fund is currently permitted
to purchase floating rate and variable rate obligations with demand features in
accordance with requirements established by the SEC, which, among other things,
permit such instruments to be deemed to have remaining maturities of thirteen
months or less, notwithstanding that they may otherwise have a stated maturity
in excess of thirteen months.
The Fund may invest in participation interests purchased from banks in
floating rate or variable rate tax-exempt Municipal Obligations owned by banks.
A participation interest gives the purchaser an undivided interest in the
Municipal Obligation in the proportion that the Fund's participation interest
bears to the total principal amount of the Municipal Obligation, and provides a
demand feature. Each participation is backed by an irrevocable letter of credit
or guarantee of a bank (which may be the bank issuing the participation
interest, a bank issuing a confirming letter of credit to that of the issuing
bank, or a bank serving as agent of the issuing bank with respect to the
possible repurchase of the participation interest) that Dreyfus, under the
supervision of the Trustees, has determined meets the prescribed quality
standards for the Fund. The Fund has the right to sell the instrument back to
the issuing bank or draw on the letter of credit on demand for all or any part
of the Fund's participation interest in the Municipal Obligation, plus accrued
interest. The Fund is currently permitted to invest in participation interests
when the demand provision complies with conditions established by the SEC. Banks
will retain a service and letter of credit fee and a fee for issuing repurchase
commitments in an amount equal to the excess of the interest paid on the
Municipal Obligations over the negotiated yield at which the instruments were
purchased by the Fund.
When-Issued Securities. The Fund may purchase Municipal Obligations on a
when-issued basis (i.e., for delivery beyond the normal settlement date at the
stated price and yield).
The payment obligation and the interest rate that will be received on the
Municipal Obligations purchased on a when-issued basis are each fixed at the
time the buyer enters into the commitment. Although the Fund generally will
purchase Municipal Obligations on a when-issued basis only with the intention of
actually acquiring the securities, the Fund may sell these securities before the
settlement date if it is deemed advisable as a matter of investment strategy.
Municipal Obligations purchased on a when-issued basis and the securities
held in the Fund's portfolio are subject to changes in market value based upon
the public's perception of the creditworthiness of the issuer and changes, real
or anticipated, in the level of interest rates (which will generally result in
similar changes in value, i.e., both experiencing appreciation when interest
rates decline and depreciation when interest rates rise). Therefore, to the
extent the Fund remains substantially fully invested at the same time that it
has purchased securities on a when-issued basis, there will be a greater
possibility of fluctuation in the Fund's net asset value. Purchasing Municipal
Obligations on a when-issued basis can involve a risk that the yields available
in the market when the delivery takes place may actually be higher than those
obtained in the transaction.
The Fund will establish with the Fund's custodian a segregated account
consisting of cash or liquid debt securities in an amount at least equal to the
amount of its when-issued commitments. When the time comes to pay for
when-issued securities, the Fund will meet its obligations from then-available
cash flow, sale of securities held in the separate account, sale of other
securities or, although it would not normally expect to do so, from the sale of
the when-issued securities themselves (which may have a value greater or lesser
than the Fund's payment obligations). Sale of securities to meet such
obligations carries with it a greater potential for the realization of capital
gains, which are not exempt from Federal income tax.
Purchase of Securities with Stand-by Commitments. Pursuant to an exemptive
order issued by the SEC under the 1940 Act, the Fund may acquire stand-by
commitments with respect to Municipal Obligations held in its portfolio. Under a
stand-by commitment, a broker-dealer, dealer or bank would agree to purchase, at
the Fund's option, a specified Municipal Obligation at a specified price.
Stand-by commitments acquired by the Fund may also be referred to as "put
options." The amount payable to the Fund upon its exercise of a stand-by
commitment normally would be (a) the acquisition cost of the Municipal
Obligation, less any amortized market premium or plus any amortized market or
original issue discount during the period the Fund owned the security, plus (b)
all interest accrued on the security since the last interest payment date during
the period. Absent unusual circumstances, in determining net asset value the
Fund would value the underlying Municipal Obligation at amortized cost.
Accordingly, the amount payable by the broker-dealer, dealer or bank upon
exercise of a stand-by commitment will normally be substantially the same as the
portfolio value of the underlying Municipal Obligation.
The Fund's right to exercise a stand-by commitment is unconditional and
unqualified. Although the Fund could not transfer a stand-by commitment, the
Fund could sell the underlying Municipal Obligation to a third party at any
time. It is expected that stand-by commitments generally will be available to
the Fund without the payment of any direct or indirect consideration. The Fund
may, however, pay for stand-by commitments either separately in cash or by
paying a higher price for portfolio securities which are acquired subject to the
commitment (thus reducing the yield to maturity otherwise available for the same
securities). The total amount paid in either manner for outstanding stand-by
commitments held in the Fund's portfolio will not exceed 0.5 of 1% of the value
of the Fund's total assets calculated immediately after such stand-by commitment
was acquired.
The Fund intends to enter into stand-by commitments only with
broker-dealers, dealers or banks that Dreyfus believes present minimum credit
risks. The Fund's ability to exercise a stand-by commitment will depend on the
ability of the issuing institution to pay for the underlying securities at the
time the commitment is exercised. The credit of each institution issuing a
stand-by commitment to the Fund will be evaluated on an ongoing basis by Dreyfus
in accordance with procedures established by the Trustees.
The Fund intends to acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The acquisition of a stand-by commitment would not affect the
valuation or maturity of the underlying Municipal Obligation, which will
continue to be valued in accordance with the amortized cost method. Each
stand-by commitment will be valued at zero in determining net asset value.
Should the Fund pay directly or indirectly for a stand-by commitment, its costs
will be reflected as an unrealized loss for the period during which the
commitment is held by the Fund and will be reflected in realized gain or loss
when the commitment is exercised or expires. Stand-by commitments will not
affect the dollar-weighted average maturity of the Fund's portfolio. The Fund
understands that the Internal Revenue Service ("IRS") has issued a revenue
ruling to the effect that a registered investment company will be treated for
Federal income tax purposes as the owner of Municipal Obligations acquired
subject to stand-by commitments and the interest on the Municipal Obligations
will be tax-exempt to the Fund.
Custodial Receipts. The Fund may purchase securities, frequently referred
to as "custodial receipts," representing the right to receive future principal
and interest payments on municipal obligations underlying such receipts. A
number of different arrangements are possible. In a typical custodial receipt
arrangement, an issuer or a third party owner of a municipal obligation deposits
such obligation with a custodian in exchange for two or more classes of
receipts. The class of receipts that the Fund may purchase has the
characteristics of a typical tender option security backed by a conditional
"put," which provides the holder with the equivalent of a short-term variable
rate note. At specified intervals, the interest rate for such securities is
reset by the remarketing agent in order to cause the securities to be sold at
par through a remarketing mechanism. If the remarketing mechanism does not
result in a sale, the conditional put can be exercised. In either event, the
holder is entitled to full principal and accrued interest to the date of the
tender or exercise of the "put." The "put" may be terminable in the event of a
default in payment of principal or interest on the underlying municipal
obligation and for other reasons. Before purchasing such security, Dreyfus is
required to make certain determinations with respect to the likelihood of, and
the ability to monitor, the occurrence of the conditions that would result in
the put not being exercisable. The interest rate for these receipts generally is
expected to be below the coupon rate of the underlying municipal obligations and
generally is at a level comparable to that of a municipal obligation of similar
quality and having a maturity equal to the period between interest rate
readjustments. These custodial receipts are sold in private placements. The Fund
also may purchase directly from issuers, and not in a private
placement, municipal obligations having the characteristics similar to the
custodial receipts in which the Fund may invest.
Other types of tax-exempt instruments that may become available in the
future may be purchased by the Fund as long as Dreyfus believes the quality of
these instruments meets the Fund's quality standards.
Taxable Investments. The Fund anticipates being as fully invested as
practicable in Municipal Obligations. Because the Fund's purpose is to provide
income exempt from Federal and New York State and New York City personal income
taxes, the Fund will invest in taxable obligations only if and when Dreyfus
believes it would be in the best interests of its shareholders to do so.
Situations in which the Fund may invest up to 20% of its total assets in taxable
securities include: (a) pending investment of proceeds of sales of shares of the
Fund or of portfolio securities, (b) pending settlement of purchases of
portfolio securities, and (c) when the Fund is attempting to maintain liquidity
for the purpose of meeting anticipated redemptions. The Fund may temporarily
invest more than 20% of its total assets in taxable securities to maintain a
"defensive" posture when, in the opinion of Dreyfus, it is advisable to do so
because of adverse market conditions affecting the market for Municipal
Obligations. The Fund may invest in only the following kinds of taxable
securities maturing in one year or less from the date of purchase: (1)
obligations of the United States Government, its agencies or instrumentalities;
(2) commercial paper rated at the time of purchase at least Prime-1 by Moody's
or A-1+ or A-1 by S & P; (3) certificates of deposit of domestic banks with
total assets of $1 billion or more; and (4) repurchase agreements (instruments
under which the seller of a security agrees to repurchase the security at a
specific time and price) with respect to any securities that the Fund is
permitted to hold.
Repurchase Agreements. The Fund may enter into repurchase agreements with
member banks of the Federal Reserve System or certain non-bank dealers. Under
each repurchase agreement the selling institution will be required to maintain
the value of the securities subject to the agreement at not less than their
repurchase price. If a particular bank or non-bank dealer defaults on its
obligation to repurchase the underlying debt instrument as required by the terms
of a repurchase agreement, the Fund will incur a loss to the extent that the
proceeds it realizes on the sale of the collateral are less than the repurchase
price of the instrument. In addition, should the defaulting bank or non-bank
dealer file for bankruptcy, the Fund could incur certain costs in establishing
that it is entitled to dispose of the collateral and its realization on the
collateral may be delayed or limited. Investments in repurchase agreements are
subject to the policy prohibiting investment of more than 10% of the Fund's
assets in illiquid securities, securities without readily available market
quotations and repurchase agreements maturing in more than seven days.
Other Investment Companies. The Fund may invest in securities issued by
other investment companies to the extent that such investments are consistent
with its investment objective and policies and permissible under the 1940 Act.
As a shareholder of another investment company, the Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to the
advisory and other expenses that the Fund bears directly in connection with its
own operations.
Special Factors Affecting the Fund
Investing in New York Municipal Obligations. You should review the
information in "Appendix A," which provides a brief summary of special
investment considerations and risk factors relating to investing in New York
Municipal Obligations.
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.
Certain Investments. From time to time, to the extent consistent with its
investment objective, policies and restrictions, the Fund may invest in
securities of companies with which Mellon Bank, N.A. ("Mellon Bank"), an
affiliate of Dreyfus, has a lending relationship.
Investment Restrictions
Fundamental. The following limitations have been adopted by the Fund. The
Fund may not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of shareholders
duly called if the holders of more than 50% of the outstanding shares of the
Fund are present or represented by proxy; or (b) more than 50% of the
outstanding shares of the Fund, whichever is less. The Fund may not:
1. Purchase any securities which would cause more than 25% of the value of
the Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities and
state or municipal governments and their political subdivisions are not
considered members of any industry. In addition, this limitation does not apply
to investments of domestic banks, including U.S. branches of foreign banks and
foreign branches of U.S. banks.)
2. Borrow money or issue senior securities as defined in the 1940 Act,
except that (a) the Fund may borrow money in an amount not exceeding one-third
of the Fund's total assets at the time of such borrowing, and (b) the Fund may
issue multiple classes of shares. The purchase or sale of futures contracts and
related options shall not be considered to involve the borrowing of money or
issuance of senior securities.
3. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this restriction, debt instruments and repurchase agreements shall
not be treated as loans.
4. Underwrite securities issued by any other person, except to the extent
that the purchase of securities and the later disposition of such securities in
accordance with the Fund's investment program may be deemed an underwriting.
5. Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund from
investing in securities or other instruments backed by real estate, including
mortgage loans, or securities of companies that engage in the real estate
business or invest or deal in real estate or interests therein).
6. Purchase or sell commodities, except that the Fund may enter into
futures contracts and related options, forward currency contracts and other
similar instruments.
The Fund may, notwithstanding any other fundamental investment policy or
restriction, invest all of its investable assets in securities of a single
open-end management investment company with substantially the same fundamental
investment objective, policies, and restrictions as the Fund.
Nonfundamental. The Fund has adopted the following additional
non-fundamental restrictions. These non-fundamental restrictions may be
changed without shareholder approval, in compliance with applicable law and
regulatory policy.
1. The Fund will not purchase or retain the securities of any issuer if
the officers, directors or Trustees of the Trust, its advisers, or managers
owning beneficially more than one half of one percent of the securities of each
issuer together own beneficially more than five percent of such securities.
2. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate investment
in such classes of securities will exceed 5% of its total assets, except that:
(a) this restriction shall not apply to standby commitments and (b) this
restriction shall not apply to the Fund's transactions in futures contracts and
related options.
3. The Fund will not purchase warrants if at the time of such purchase:
(a) more than 5% of the value of the Fund's net assets would be invested in
warrants or (b) more than 2% of the value of the Fund's assets would be invested
in warrants that are not listed on the New York Stock Exchange ("NYSE") or
American Stock Exchange ("AMEX") (for purposes of this limitation, warrants
acquired by the Fund in units or attached to securities will be deemed to have
no value).
4. The Fund will not invest more than 10% of the value of its net assets
in illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, and other securities which are not readily
marketable. For purposes of this restriction, illiquid securities shall not
include commercial paper issued pursuant to Section 4(2) of the Securities Act
of 1933 and securities which may be resold under Rule 144A under the Securities
Act of 1933, provided that the Board of Trustees, or its delegate, determines
that such securities are liquid based upon the trading markets for the specific
security.
5. The Fund may not invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation or acquisition
of assets and except to the extent otherwise permitted by the 1940 Act.
6. The Fund will not purchase oil, gas or mineral leases (the Fund may,
however, purchase and sell the securities of companies engaged in the
exploration, development, production, refining, transporting and marketing of
oil, gas or minerals).
7. The Fund shall not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amounts to the securities sold
short, and provided that transactions in futures contracts and options are not
deemed to constitute selling securities short.
8. The Fund shall not purchase securities on margin, except that the Fund
may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection with futures
contracts and options on futures contracts shall not constitute purchasing
securities on margin.
9. The Fund shall not purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.
If a percentage restriction is adhered to at the time of an investment, a
later increase or decrease in such percentage resulting from a change in the
values of assets will not constitute a violation of such restriction.
The investment objective, policies, restrictions, practices and procedures
of the Fund, unless otherwise specified, may be changed without shareholder
approval. If the Fund's investment objective, policies, restrictions, practices
or procedures change, shareholders should consider whether the Fund remains an
appropriate investment in light of their then current position and needs.
MANAGEMENT OF THE FUND
Trustees and Officers
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
Dreyfus Service Corporation..................................Distributor
Dreyfus Transfer, Inc.....................................Transfer Agent
Mellon Bank...................................................Custodian
The Trust has a Board composed of eight Trustees. The following lists the
Trustees and officers and their positions with the Trust and their present and
principal occupations during the past five years. Each Trustee who is an
"interested person" of the Trust (as defined in the 1940 Act) is indicated by an
asterisk(*). Each of the Trustees also serves as a Director of The
Dreyfus/Laurel Funds, Inc. and as a Trustee of The Dreyfus/Laurel Funds Trust
(collectively, with the Trust, the "Dreyfus/Laurel Funds") and the Dreyfus High
Yield Strategies Fund.
Trustees of the Trust
o+JOSEPH S. DIMARTINO. Chairman of the Board of the Trust. Since January
1995, Mr. DiMartino has served as Chairman of the Board for various
funds in the Dreyfus Family of Funds. He is also a Director of The
Muscular Dystrophy Association; HealthPlan Services Corporation, a
provider of marketing, administrative and risk management services to
health and other benefit programs; Carlyle Industries, Inc. (formerly,
Belding Heminway Company, Inc.), a button packager and distributor;
Century Business Services, Inc. (formerly, International Alliance
Services, Inc.), a provider of various outsourcing functions for small
and medium sized companies; The Newark Group, a privately held company
providing a national network of paper recovery facilities, paperboard
mills and paperboard converting plants; and QuikCAT.com, Inc., a
private company engaged in the development of high speed movement,
routing, storage and encryption of data across cable, wireless and all
other modes of data transport. For more than five years prior to
January 1995, he was President, a director and, until August, 1994,
Chief Operating Officer of Dreyfus and Executive Vice President and a
director of the Distributor. From August 1994 to December 31, 1994, he
was a director of Mellon Financial Corporation. Age: 57 years old.
Address: 200 Park Avenue, New York, New York 10166.
o+JAMES M. FITZGIBBONS. Trustee of the Trust; Director, Lumber Mutual
Insurance Company; Director, Barrett Resources, Inc.; Chairman of the
Board, Davidson Cotton Company; former Chairman of the Board and CEO of
Fieldcrest Cannon, Inc. Age: 66 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: 72 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: 78 years old. Address: Way
Hollow Road and Woodland Road, Sewickley, Pennsylvania 15143.
o+KENNETH A. HIMMEL. Trustee of the Trust; President and CEO, The Palladium
Company; President and CEO, Himmel and Company, Inc.; CEO, American
Food Management; former Director, The Boston Company, Inc. ("TBC"), and
Boston Safe Deposit and Trust Company, each an affiliate of Dreyfus.
Age: 54 years old. Address: 625 Madison Avenue, New York, New York
10022.
o+STEPHEN J. LOCKWOOD. Trustee of the Trust; Chairman and CEO, LDG
Reinsurance Corporation; Vice Chairman, HCCH. Age: 53 years old.
Address: 401 Edgewater Place, Wakefield, Massachusetts 01880.
o+ROSLYN M. WATSON. Trustee of the Trust; Principal, Watson Ventures, Inc.;
Director, American Express Centurion Bank; Director, Ontario Hydro
Services Company; Trustee, the Hyams Foundation, Inc. Age: 51 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: 54
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
STEPHEN E. CANTER. President of the Trust; President, Chief Operating
Officer, Chief Investment Officer and director of Dreyfus, and an
officer of other investment companies advised and administered by
Dreyfus. Mr. Canter also is a Director or an Executive Committee
Member of the other investment management subsidiaries of Mellon
Financial Corporation, each of which is an affiliate of Dreyfus. He is
55 years old.
MARK N. JACOBS. Vice President of the Trust; Vice President, Secretary, and
General Counsel to Dreyfus, and an officer of other investment
companies advised and administered by Dreyfus. He is 54 years old.
JOSEPH CONNOLLY. Vice President and Treasurer of the Trust; Director - Mutual
Fund Accounting of Dreyfus, and an officer of other investment companies
advised and administered by Dreyfus. He is 43 years old.
STEVEN F. NEWMAN. Secretary of the Trust; Associate General Counsel and
Assistant Secretary of Dreyfus, and an officer of other investment
companies advised and administered by Dreyfus. He is 51 years old.
JEFF PRUSNOFSKY. Assistant Secretary of the Trust; Associate General Counsel
of Dreyfus, and an officer of other investment companies advised and
administered by Dreyfus. He is 35 years old.
MICHAEL A. ROSENBERG. Assistant Secretary of the Trust; Associate General
Counsel of Dreyfus, and an officer of other investment companies
advised and administered by Dreyfus. He is 40 years old.
MICHAEL CONDON. Assistant Treasurer of the Trust; Senior Treasury Manager of
Dreyfus, and an officer of other investment companies advised and
administered by Dreyfus. He is 38 years old.
GREGORY S. GRUBER. Assistant Treasurer of the Trust; Senior Accounting
Manager - Municipal Bond Funds of Dreyfus, and an officer of other
investment companies advised and administered by Dreyfus. He is 41
years old.
The address of each Trust officer 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. The Dreyfus/Laurel Funds pay each
Director/Trustee who is not an "interested person" of the Trust (as defined in
the 1940 Act) $40,000 per annum, plus $5,000 per joint Dreyfus/Laurel Funds
Board meeting attended, $2,000 for separate committee meetings attended which
are not held in conjunction with a regularly scheduled Board meeting and $500
for Board meetings and separate committee meetings attended that are conducted
by telephone. The Dreyfus/Laurel Funds also reimburse each Director/Trustee who
is not an "interested person" of the Trust (as defined in the 1940 Act) for
travel and out-of-pocket expenses. The Chairman of the Board receives an
additional 25% of such compensation (with the exception of reimbursable
amounts). In the event that there is a joint committee meeting of the
Dreyfus/Laurel Funds and the Dreyfus High Yield Strategies Fund, the $2,000 fee
will be allocated between the Dreyfus/Laurel Funds and the Dreyfus High Yield
Strategies Fund.
In addition, the Trust currently has two Emeritus Board members who are
entitled to receive an annual retainer and a per meeting fee of one-half the
amount paid to them as Board members.
The aggregate amount of fees and expenses received by each current Trustee
from the Trust for the fiscal year ended June 30, 2000, and from all other funds
in the Dreyfus Family of Funds for which such person was a Board member (the
number of which is set forth in parentheses next to each Board member's total
compensation)* during the year ended December 31, 1999 were as follows:
Total Compensation
Aggregate From the Trust and
Name of Board Compensation Fund Complex Paid
Member From the to Board Member
Trust#
Joseph S. DiMartino** $27,083 $ 642,177 (189)
James M. Fitzgibbons $20,000 $ 74,989 (28)
J. Tomlinson Fort*** None None (28)
Arthur L. Goeschel $21,666 $ 80,989 (28)
Kenneth A. Himmel $18,333 $ 62,489 (28)
Stephen J. Lockwood $18,333 $ 68,989 (28)
Roslyn M. Watson $21,666 $ 80,989 (28)
Benaree Pratt Wiley $21,666 $ 80,989 (28)
----------------------------
# 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 $1,775.82 for the Trust.
* Represents the number of separate portfolios comprising the investment
companies in the Fund complex, including the Trust, for which the Board member
served.
** Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
***J. Tomlinson Fort is paid directly by Dreyfus for serving as
a Board member of the Trust and the funds in the Dreyfus/Laurel Funds and
separately by the Dreyfus High Yield Strategies Fund. For the fiscal year ended
June 30, 2000, the aggregate amount of fees received by J. Tomlinson Fort from
Dreyfus for serving as a Board member of the Trust was $21,666. For the year
ended December 31, 1999, the aggregate amount of fees received by Mr. Fort for
serving as a Board member of all funds in the Dreyfus/Laurel Funds (including
the Trust) and Dreyfus High Yield Strategies Fund (for which payment is made
directly by the fund) was $80,989. In addition, Dreyfus reimbursed Mr. Fort a
total of $821.35 for expenses attributable to the Trust's Board meetings
which is not included in the $1,775.82 amount in note # above.
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, 2000.
Principal Shareholder. As of October 2, 2000, the following shareholder
owned beneficially or of record 5% or more of the outstanding Fund shares: Irwin
Lieber & Madeline Lieber JTTEN, 8 Applegreen Drive, Old Westbury, NY 11568;
6.35%.
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, which is a wholly
owned subsidiary of Mellon Financial Corporation ("Mellon"). Mellon is a global
multibank financial 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 20 largest bank
holding companies in the United States based on total assets.
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Trust (the
"Investment Management Agreement") subject to the overall authority of the
Trust's Board of Trustees in accordance with Massachusetts law. Pursuant to the
Investment Management Agreement, Dreyfus provides, or arranges for one or more
third parties to provide, investment advisory, administrative, custody, fund
accounting and transfer agency services to the Fund. As investment manager,
Dreyfus manages the Fund by making investment decisions based on the Fund's
investment objective, policies and restrictions. The Investment Management
Agreement is subject to review and approval at least annually by the Board of
Trustees.
The Investment Management Agreement will continue from year to year
provided that a majority of the Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Trust and either a majority of all Trustees or a
majority (as defined in the 1940 Act) of the shareholders of the Fund approve
its continuance. The Trust may terminate the Investment Management Agreement
upon the vote of a majority of the Board of Trustees or upon the vote of a
majority of the outstanding voting securities of the Fund on 60 days' written
notice to Dreyfus. Dreyfus may terminate the Investment Management Agreement
upon 60 days' written notice to the Trust. The Investment Management Agreement
will terminate immediately and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment
Officer and a director; Thomas F. Eggers, Vice Chairman- Institutional and a
director; Lawrence S. Kash, Vice Chairman; J. David Officer, Vice Chairman
and a director; Ronald P. O'Hanley III, Vice Chairman; William T. Sandalls,
Jr., Executive Vice President; Stephen R. Byers, Senior Vice President;
Patrice M. Kozlowski, Senior Vice President-Corporate Communications; Mark N.
Jacobs, Vice President, General Counsel and Secretary; Diane P. Durnin, Vice
President-Product Development; Mary Beth Leibig, Vice President-Human
Resources; Ray Van Cott, Vice President-Information Systems; Theodore A.
Schachar, Vice President-Tax; Wendy Strutt, 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 G. McGuinn, Richard W. Sabo and Richard F. Syron, directors.
Dreyfus' Code of Ethics subjects its employees' personal securities
transactions to various restrictions to ensure that such trading does not
disadvantage any fund advised by Dreyfus. In that regard, portfolio managers and
other investment personnel of Dreyfus must preclear and report their personal
securities transactions and holdings, which are reviewed for compliance with the
Code of Ethics and are also subject to the oversight of Mellon's Investment
Ethics Committee. Portfolio managers and other investment personnel who comply
with the Code of Ethics' preclearance and disclosure procedures, and the
requirements of the Committee, may be permitted to purchase, sell or hold
securities which also may be or are held in fund(s) they manage or for which
they otherwise provide investment advice.
Expenses. The Investment Management Agreement with Dreyfus provides for a
"unitary fee." Under the unitary fee structure, Dreyfus pays all expenses of the
Fund except: (i) brokerage commissions, (ii) taxes, interest and extraordinary
expenses (which are expected to be minimal), and (iii) Rule 12b-1 fees, as
applicable. Under the unitary fee, Dreyfus provides, or arranges for one or more
third parties to provide, investment advisory, administrative, custody, fund
accounting and transfer agency services to the Fund. Although, under the
Investment Management Agreement, Dreyfus is not required to pay the fees and
expenses of the non-interested Trustees (including counsel fees), Dreyfus is
required to reduce its management fee by the amount of such fees and expenses.
For the provision of such services directly, or through one or more third
parties, Dreyfus receives as full compensation for all services and facilities
provided by it, a fee computed daily and paid monthly at the annual rate of 0.45
of 1% of the value of the Fund's average daily net assets. The Investment
Management Agreement provides that certain redemption, exchange and account
closeout charges are payable directly by the Fund's shareholders to the Fund's
Transfer Agent (although the Fund will waive such fees if the closing balance in
the shareholders account on the business day immediately preceding the effective
date of the transaction is $50,000 or more) and the fee payable by the Fund to
Dreyfus is not reduced by the amount of charges payable to the Transfer Agent.
From time to time, Dreyfus may voluntarily waive a portion of the investment
management fees payable by the Fund, which would have the effect of lowering the
expense ratio of the Fund and increasing return to investors. Expenses
attributable to the Fund are charged against the Fund's assets; other expenses
of the Trust are allocated among its funds on the basis determined by the
Trustees, including, but not limited to, proportionately in relation to the net
assets of each fund.
For the last three fiscal years, the Fund has had the following expenses:
For the Fiscal Year Ended June 30,
2000 1999 1998
---- ---- ----
Management Fee $1,499,748 $1,526,997 $1,435,212
The Distributor. Effective March 22, 2000, the Distributor, a wholly-owned
subsidiary of Dreyfus, located at 200 Park Avenue, New York, New York, 10166,
has served as the Fund's distributor on a best efforts basis pursuant to an
agreement which is renewable annually. From August 23, 1994 through March 21,
2000, Premier Mutual Fund Services, Inc., located at 60 State Street, Boston, MA
02109, served as the Fund's distributor. 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.
Transfer and Dividend Disbursing Agent and Custodian. Dreyfus Transfer,
Inc. (the "Transfer Agent"), a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, serves as the Trust's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Trust, the
Transfer Agent arranges for the maintenance of shareholder account records for
the Trust, the handling of certain communications between shareholders and the
Fund and the payment of dividends and distributions payable by the Fund. For
these services, the Transfer Agent receives a monthly fee computed on the basis
of the number of shareholder accounts it maintains for the Trust during the
month, and is reimbursed for certain out-of-pocket expenses.
Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as the custodian of the Fund's investments.
Under a custody agreement with the Trust, Mellon Bank holds the Fund's portfolio
securities and keeps all necessary accounts and records. Dreyfus Transfer, Inc.
and Mellon Bank, as custodian, have no part in determining the investment
policies of the Fund or which securities are to be purchased or sold by the
Fund.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies,"
"Services for Fund Investors," "Instructions for Regular Accounts."
General. You can purchase Fund shares without a sales charge if you
purchase them directly from the Distributor; you may be charged a fee if you
effect transactions in Fund shares through an Agent. Share certificates are
issued only upon written request. No certificates are issued for fractional
shares. It is not recommended that the Fund be used as a vehicle for Keogh, IRA
or other qualified plans. The Fund reserves the right to reject any purchase
order.
The minimum initial investment is $25,000. The Fund may waive its minimum
initial investment requirement for new Fund accounts opened through an Agent
whenever Dreyfus Institutional Services Division ("DISD") determines for the
initial account opened through such Agent which is below the Fund's minimum
initial investment requirement that the existing accounts in the Fund opened
through that Agent have an average account size, or the Agent has adequate
intent and access to funds to result in maintenance of accounts in the Fund
opened through that Agent with an average account size, in an amount equal to or
in excess of $25,000. DISD will periodically review the average size of the
accounts opened through each Agent and, if necessary, reevaluate the Agent's
intent and access to funds. DISD will discontinue the waiver as to new accounts
to be opened through an Agent if DISD determines that the average size of
accounts opened through that Agent is less than $25,000 and the Agent does not
have the requisite intent and access to funds. Subsequent investments must be at
least $1,000 (or at least $100 in the case of persons who have held Fund shares
as of December 8, 1995). The initial investment must be accompanied by the
Fund's Account Application.
You may purchase Fund shares by check or wire, or through the Dreyfus
TeleTransfer Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds." Payments to open new accounts which are mailed should
be sent to The Dreyfus Family of Funds, P.O. Box 9387, Providence, Rhode Island
02940-9387, together with your Account Application. For subsequent investments,
your Fund account number should appear on the check and an investment slip
should be enclosed and sent to The Dreyfus Family of Funds, P.O. Box 105,
Newark, New Jersey 07101-0105. Neither initial nor subsequent investments should
be made by third party check. Purchase orders may be delivered in person only to
a Dreyfus Financial Center. These orders will be forwarded to the Fund and will
be processed only upon receipt thereby. For the location of the nearest Dreyfus
Financial Center, you should call the telephone number listed on the cover of
this Statement of Additional Information.
Wire payments may be made if your bank account is in a commercial bank
that is a member of the Federal Reserve System or any other bank having a
correspondent bank in New York City. Immediately available funds may be
transmitted by wire to Boston Safe Deposit and Trust Company, DDA# 043508
Dreyfus BASIC New York Municipal Money Market Fund, for purchase of Fund shares
in your name. The wire must include your Fund account number (for new accounts,
your Taxpayer Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable. If your initial purchase of Fund
shares is by wire, you should call 1-800-645-6561 after completing the wire
payment to obtain the Fund account number. You should include your Fund account
number on the Fund's Account Application and promptly mail the Account
Application to the Fund, as no redemptions will be permitted until the Account
Application is received. You may obtain further information about remitting
funds in this manner from your bank. All payments should be made in U.S. dollars
and, to avoid fees and delays, should be drawn only on U.S. banks. A charge will
be imposed if any check used for investment in your account does not clear. The
Fund makes available to certain large institutions the ability to issue purchase
instructions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of funds
from an account maintained in a bank or other domestic financial institution
that is an Automated Clearing House ("ACH") member. You must direct the
institution to transmit immediately available funds through the ACH System to
Boston Safe Deposit and Trust Company with instructions to credit your Fund
account. The instructions must specify your Fund account registration and Fund
account number preceded by the digits "4540."
Federal regulations require that you provide a certified TIN upon opening
or reopening an account. See "Dividends, Other Distributions and Taxes" and the
Fund's Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject investors to a $50
penalty imposed by the IRS.
Net Asset Value Per Share. An investment portfolio's NAV refers to the
worth of one share. The NAV for Fund shares, which are offered on a continuous
basis, is calculated on the basis of amortized cost, which involves initially
valuing a portfolio instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. The Fund
intends to maintain a constant NAV of $1.00, although there is no assurance that
this can be done on a continuing basis.
See "Determination of Net Asset Value."
The offering price of Fund shares is their NAV. Investments and requests
to exchange or redeem shares received by the Transfer Agent or other authorized
entity to receive orders on behalf of the Fund before 4 p.m., Eastern time, on
each day that the NYSE is open (a "business day") are effective, and will
receive the price next determined, on that business day. The NAV of the Fund is
calculated two times each business day, at 12 noon and 4 p.m., Eastern time.
Investment, exchange or redemption requests received after 4 p.m., Eastern time
are effective, and receive the first share price determined, on the next
business day.
Dreyfus TeleTransfer Privilege. You may purchase Fund shares by telephone
through the Dreyfus TeleTransfer Privilege if you have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds will be
transferred between the bank account designated in one of these documents and
your Fund account. Only a bank account maintained in a domestic financial
institution that is an ACH member may be so designated. Dreyfus TeleTransfer
purchase orders may be made at the Transfer Agent any time. Purchase orders
received by 4:00 p.m., New York time, on any business day that the Transfer
Agent and the NYSE are open for business will be credited to the shareholder's
Fund account on the next bank business day following such purchase order.
Purchase orders made after 4:00 p.m., New York time, on any business day the
Transfer Agent and the NYSE are open for business, or orders made on Saturday,
Sunday or any Fund holiday (e.g., when the NYSE is not open for business), will
be credited to the shareholder's Fund account on the second bank business day
following such purchase order. To qualify to use the Dreyfus TeleTransfer
Privilege, the initial payment for purchase of Fund shares must be drawn on, and
redemption proceeds paid to, the same bank and account as are designated on the
Account Application or Shareholder Services Form on file. If the proceeds of a
particular redemption are to be wired to an account at any other bank, the
request must be in writing and signature-guaranteed. See "Redemption of- Dreyfus
TeleTransfer Privilege." The Fund may modify or terminate this Privilege at any
time or charge a service fee upon notice to shareholders. No such fee currently
is contemplated.
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the calendar
year the account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.
In-Kind Purchases. If the following conditions are satisfied, the Fund may
at its discretion, permit the purchase of shares through an "in-kind" exchange
of securities. Any securities exchanged must meet the investment objective,
policies and limitations of the Fund, must have a readily ascertainable market
value, must be liquid and must not be subject to restrictions on resale. The
market value of any securities exchanged, plus any cash, must be at least equal
to $25,000. Shares purchased in exchange for securities generally cannot be
redeemed for fifteen days following the exchange in order to allow time for the
transfer to settle.
The basis of the exchange will depend upon the relative NAV of the shares
purchased and securities exchanged. Securities accepted by the Fund will be
valued in the same manner as the Fund values its assets. Any interest earned on
the securities following their delivery to the Fund and prior to the exchange
will be considered in valuing the securities. All interest, dividends,
subscription or other rights attached to the securities become the property of
the Fund, along with the securities. For further information about "in-kind"
purchases, call 1-800-645-6561.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies," "Services
For Fund Investors," "Instructions for Regular Accounts."
General. You may request redemption of Fund shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When a
request is received in proper form by the Transfer Agent or other authorized
entity to receive orders on behalf of the Fund, the Fund will redeem the shares
at the next determined NAV as described below.
You will be charged $5.00 when you redeem all shares in your account or
your account is otherwise closed out (unless you have held Fund shares since
December 8, 1995). The fee will be deducted from your redemption proceeds and
paid to the Transfer Agent. The account closeout fee does not apply to exchanges
out of the Fund or to wire or Dreyfus TeleTransfer redemptions, for each of
which a $5.00 fee may apply. However, the Fund will waive this fee if the
closing balance in the shareholder's account on the business day immediately
preceding the effective date of such transaction is $50,000 or more. Agents may
charge a fee for effecting redemptions of Fund shares. Any certificates
representing Fund shares being redeemed must be submitted with the redemption
request. The value of the shares redeemed may be more or less than their
original cost, depending upon the Fund's then current NAV.
The Fund ordinarily will make payment for all shares redeemed within seven
days after receipt by the Transfer Agent of a redemption request in proper form,
except as provided by the rules of the SEC. However, if you have purchased Fund
shares by check or by the Dreyfus TeleTransfer Privilege and subsequently submit
a written redemption request to the Transfer Agent, the Fund may delay
redemption of such shares, and the redemption proceeds may not be transmitted to
you, for up to eight business days or after the purchase of such shares. In
addition, the Fund will not honor Redemption Checks ("Checks") under the
Checkwriting Privilege, and will reject requests to redeem shares by wire or
telephone or pursuant to the Dreyfus TeleTransfer Privilege for a period of up
to eight business days after receipt by the Transfer Agent of the purchase check
or the Dreyfus TeleTransfer purchase order against which such redemption is
requested. These procedures will not apply if your shares were purchased by wire
payment, or if you otherwise have a sufficient collected balance in your account
to cover the redemption request. Fund shares will not be redeemed until the
Transfer Agent has received your Account Application.
Procedures. You may redeem shares by using the regular redemption
procedure through the Transfer Agent, or through the Telephone Redemption
Privilege or the Checkwriting Privilege, which are granted automatically unless
you specifically refuse them by checking the applicable "No" box on the Account
Application. The Telephone Redemption Privilege and the Checkwriting Privilege
may be established for an existing account by a separate signed Shareholder
Services Form, or with respect to the Telephone Redemption Privilege, by oral
request from any of the authorized signatories on the account by calling
1-800-645-6561. You also may redeem shares through the Wire Redemption
Privilege, or the Dreyfus TeleTransfer Privilege, if you have checked the
appropriate box and supplied the necessary information on the Account
Application or have filed a Shareholder Services Form with the Transfer Agent.
Other redemption procedures may be in effect for clients of certain Agents and
institutions. The Fund makes available to certain large institutions the ability
to issue redemption instructions through compatible computer facilities. The
Fund reserves the right to refuse any request made by wire or telephone,
including requests made shortly after a change of address, and may limit the
amount involved or the number of such requests. The Fund may modify or terminate
any redemption Privilege at any time. No such fee currently is contemplated.
Shares for which certificates have been issued are not eligible for the
Checkwriting, Wire Redemption, Telephone Redemption or Dreyfus TeleTransfer
Privilege.
The Telephone Redemption Privilege, the Dreyfus TeleTransfer Privilege or
Telephone Exchange Privilege authorizes the Transfer Agent to act on telephone
instructions (including over The Dreyfus Touch(R) automated telephone system)
from any person representing himself or herself to be you, or a representative
of your Agent, and reasonably believed by the Transfer Agent to be genuine. The
Fund will require the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions are
genuine and, if it does not follow such procedures, the Fund or the Transfer
Agent may be liable for any losses due to unauthorized or fraudulent
instructions. Neither the Fund nor the Transfer Agent will be liable for
following telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may experience
difficulty in contacting the Transfer Agent by telephone to request a redemption
or an exchange of Fund shares. In such cases, you should consider using the
other redemption procedures described herein. Use of these other redemption
procedures may result in your redemption request being processed at a later time
than it would have been if telephone redemption had been used.
Regular Redemption. Under the regular redemption procedure, you may redeem
your shares by written request mailed to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671. Redemption requests may be delivered
in person only to a Dreyfus Financial Center. These requests will be forwarded
to the Fund and will be processed only upon receipt thereby. For the location of
the nearest financial center, you should call the telephone number listed on the
cover of this Statement of Additional Information. Redemption requests must be
signed by each shareholder, including each owner of a joint account, and each
signature must be guaranteed. The Transfer Agent has adopted standards and
procedures pursuant to which signature guarantees in proper form generally will
be accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations, as well as from participants in the NYSE 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.
Checkwriting Privilege. You may write Checks drawn on a Fund account. The
Fund provides Checks automatically upon opening an account, unless you
specifically refuses the Checkwriting 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 Checkwriting
Privilege may be established for an existing account by a separate signed
Shareholder Services Form. The Account Application or Shareholder Services Form
must be manually signed by the registered owner(s). Checks are drawn on your
account and may be made payable to the order of any person in an amount of
$1,000 or more ($500 for shareholders who have held Fund shares since December
8, 1995). An investor (other than one who has held Fund shares since December 8,
1995) will be charged $2.00 for each check redemption. When a Check is presented
to the Transfer Agent for payment, the Transfer Agent, as the investor's agent,
will cause the Fund to redeem a sufficient number of full or fractional shares
in the investor's account to cover the amount of the Check and the $2.00 charge.
The fee will be waived if the closing balance in the shareholder's account on
the business day immediately preceding the effective date of the transaction is
$50,000 or more. Dividends are earned until the Check clears. After clearance, a
copy of the Check will be returned to the investor. Investors generally will be
subject to the same rules and regulations that apply to checking accounts,
although election of this Privilege creates only a shareholder-transfer agent
relationship with the Transfer Agent.
If the amount of the Check, plus any applicable charges, is greater than
the value of the shares in an investor's account, the Check will be returned
marked insufficient funds. Checks should not be used to close an account. Checks
are free but the Transfer Agent will impose a fee for stopping payment of a
Check upon request or if the Transfer Agent cannot honor a Check because of
insufficient funds or other valid reason. Such fees are not subject to waiver
based on account balance or other factors. The Fund may return an unpaid Check
that would draw your account balance below $5.00 and you may be subject to extra
charges. Investors should date Checks with the current date when writing them.
Please do not postdate Checks. If Checks are postdated, the Transfer Agent will
honor, upon presentment, even if presented before the date of the Check, all
postdated Checks which are dated within six months of presentment for payment,
if they are otherwise in good order.
This Privilege will be terminated immediately, without notice, with
respect to any account which is, or becomes, subject to back-up withholding. Any
checkwritten on an account which has become subject to back-up withholding on
redemptions will not be honored by the Transfer Agent.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone or letter redemption
instructions from any person representing himself or herself to be the investor,
or a representative of the investor's Agent, and reasonably believed by the
Transfer Agent to be genuine. An investor (other than one who has held Fund
shares since December 8, 1995) will be charged a $5.00 fee for each wire
redemption, which will be deducted from the investor's account and paid to the
Transfer Agent. However, the Fund will waive the this fee if the closing balance
in the shareholder's account on the business day immediately preceding the
effective date of such transaction is $50,000 or more. Ordinarily, the Fund will
initiate payment for shares redeemed pursuant to this Privilege on the next
business day after receipt if the Transfer Agent receives the redemption request
in proper form. Redemption proceeds ($5,000 minimum) will be transferred by
Federal Reserve wire only to the commercial bank account specified by the
investor on the Account Application or Shareholder Services Form, or to a
correspondent bank if the investor's bank is not a member of the Federal Reserve
System. Fees ordinarily are imposed by such bank and are usually borne by the
investor. Immediate notification by the correspondent bank to the investor's
bank is necessary to avoid a delay in crediting the funds to the investor's bank
account. Holders of jointly registered Fund or bank accounts may have redemption
proceeds of only up to $500,000 wired within any 30-day period. Investors may
telephone redemption requests by calling 1-800-645-6561 or, if calling from
overseas, 516-794-5452.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code which
may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may have
the wire transmitted by contacting a TRT Cables operator at 1-800-654-7171, toll
free. Investors should advise the operator that the above transmittal code must
be used and should also inform the operator of the Transfer Agent's answer back
sign.
To change the commercial bank or account designated to receive redemption
proceeds, a written request must be sent to the Transfer Agent. This request
must be signed by each shareholder, with each signature guaranteed as described
below under "Share Certificates; Signatures."
Telephone Redemption Privilege. You may request by telephone that
redemption proceeds (maximum $250,000 per day) be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-645-6561 or, if calling from overseas, 516-794-5452. The Telephone
Redemption Privilege is granted automatically unless you specifically refuse it.
Dreyfus TeleTransfer Privilege. You may request by telephone that
redemption proceeds (minimum $1000 per day) be transferred between your Fund
account and your bank account. Only a bank account maintained in a domestic
financial institution which is an ACH member may be designated. Redemption
proceeds will be on deposit in the investor's account at an ACH member bank
ordinarily two business days after receipt of the redemption request. An
investor (other than one who has held Fund shares since December 8, 1995) will
be charged a $5.00 fee for each redemption effected pursuant to this Privilege,
which will be deducted from the investor's account and paid to the Transfer
Agent. The fee will be waived if the closing balance in the shareholder's
account on the business day immediately preceding the effective date of the
transaction is $50,000 or more. Investors should be aware that if they have
selected the Dreyfus TeleTransfer Privilege, any request for a wire redemption
will be effected as a Dreyfus TeleTransfer transaction through the ACH system
unless more prompt transmittal specifically is requested. Holders of jointly
registered Fund or bank accounts may redeem through the Dreyfus TeleTransfer
Privilege for transfer to their bank account only up to $500,000 within any
30-day period.
Share Certificates; Signatures. Any certificates representing Fund shares
to be redeemed must be submitted with the redemption request. Written redemption
requests must be signed by each shareholder, including each holder of a joint
account, and each signature must be guaranteed. Signatures on endorsed
certificates submitted for redemption also must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations
as well as from participants in the NYSE Medallion Signature Program, STAMP, and
the Stock Exchanges Medallion Program. Guarantees must be signed by an
authorized signatory of the guarantor and "Signature-Guaranteed" must appear
with the signature. The Transfer Agent may request additional documentation from
corporations, executors, administrators, trustees or guardians, and may accept
other suitable verification arrangements from foreign investors, such as
consular verification. For more information with respect to
signature-guarantees, please call one of the telephone numbers listed on the
cover.
Redemption Commitment. The Trust has committed itself to pay in cash all
redemption requests by any shareholder of record of the Fund, limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the value of the
Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the SEC. In the case of requests for
redemption in excess of such amount, the Board of 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 NAV is not reasonably practicable, or (c)
for such other periods as the SEC, by order, may permit for protection of the
Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies" and
"Services for Fund Investors".
Fund Exchanges. You may purchase, in exchange for shares of the Fund,
shares of certain other funds managed or administered by Dreyfus or shares of
certain funds advised by Founders Asset Management LLC ("Founders"), an
affiliate of Dreyfus, to the extent such shares are offered for sale in your
state of residence. 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 NAV per share as follows:
A. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged for
shares of other funds sold with a sales load, and the applicable
sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged without
a sales load for shares of other funds sold without a sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a
sales load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect
to any reduced loads, the difference will be deducted.
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 calling1-800-1-800-645-6561.
Investors who have previously established the Telephone Exchange Privilege may
telephone exchange instructions (including over The Dreyfus Touch(R) automated
telephone system) by calling 1-800-645-6561. If calling from overseas, investors
may call 516-794-5452. Upon an exchange into a new account, the following
shareholder services and privileges, as applicable and where available, will be
automatically carried over to the fund into which the exchange is made:
Telephone Exchange Privilege, Checkwriting Privilege, Wire Redemption Privilege,
Telephone Redemption Privilege, Dreyfus TeleTransfer Privilege and the dividends
and distributions payment option (except for Dividend Sweep) selected by the
investor.
By using the Telephone Exchange Privilege, the investor authorizes the
Transfer Agent to act on telephonic instructions (including over The Dreyfus
Touch(R) automated telephone system) from any person representing himself or
herself to be the investor or a representative of the investor's Agent, and
reasonably believed by the Transfer Agent to be genuine. Telephone exchanges may
be subject to limitations as to the amount involved. Shares issued in
certificate form are not eligible for telephone exchange. Exchanges out of the
Fund pursuant to Fund Exchanges are limited to four per calendar year. The Fund
reserves the right, upon not less than 60 days' written notice, to charge
shareholders who have held Fund shares since December 8, 1995 a nominal fee for
each exchange in accordance with Rules promulgated by the SEC.
The Fund reserves the right to reject any exchange request in whole or in
part. The availability of fund exchanges may be modified or terminated at any
time upon notice to investors.
The exchange of shares of one fund for shares of another is treated for
Federal income tax purpose as a sale of the shares given in exchange by the
shareholder and, therefore, an exchanging shareholder may realize a taxable gain
or loss.
Dividend Options. Dreyfus Dividend Sweep allows you to invest
automatically your dividends or dividends and capital gain distributions, if
any, from the Fund in shares of another fund in the Dreyfus Family of Funds or
shares of certain funds advised by Founders, of which you are a shareholder.
Share of the other funds purchased pursuant to this Privilege will be purchased
on the basis of relative NAV per share as follows:
A. Dividends and other distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that are
offered without a sales load.
B. Dividends and other distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds sold
with a sales load, and the applicable sales load will be deducted.
C. Dividends and other distributions paid by a fund which charges a
sales load may be invested in shares of other funds sold with a
sales load (referred to herein as "Offered Shares"), provided that,
if the sales load applicable to the Offered Shares exceeds the
maximum sales load charged by the fund from which dividends or other
distributions are being swept, without giving effect to any reduced
loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales charge
("CDSC") and the applicable CDSC, if any, will be imposed upon
redemption of such shares.
For more information concerning this Privilege, or to request a Dividend
Options Form, investors should call toll free 1-800-645-6561. Investors may
cancel their participation in this Privilege by mailing written notification to
the Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671.
To select a new fund after cancellation, investors must submit a new Dividend
Options Form. Enrollment in or cancellation of this privilege is effective three
business days following receipt. This privilege is available only for existing
accounts and may not be used to open new accounts. Minimum subsequent
investments do not apply. The Fund may modify or terminate this privilege at any
time or charge a service fee. No such fee currently is contemplated.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies."
The NAV for Fund shares is calculated on the basis of amortized cost,
which involves initially valuing a portfolio instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which the value, as determined by amortized cost,
is higher or lower than the price the Fund would receive if it sold the
instrument. The Fund intends to maintain a constant NAV of $1.00 per share,
although there is no assurance that this can be done on a continuing basis.
The use of amortized cost is permitted by Rule 2a-7 under the 1940 Act.
Pursuant to the provisions of Rule 2a-7, the Trustees have established
procedures reasonably designed to stabilize the Fund's price per share, as
computed for the purpose of sale and redemption, at $1.00. These procedures
include the determination of the Trustees, at such times as they deem
appropriate, of the extent of deviation, if any, of the Fund's current NAV per
share, using market values, from $1.00; periodic review by the Trustees of the
amount of and the methods used to calculate the deviation; maintenance of
records of the determination; and review of such deviations. The procedures
employed to stabilize the Fund's price per share require the Trustees to
consider promptly what action, if any, should be taken by the Trustees if such
deviation exceeds 1/2 of one percent. Such procedures also require the Trustees
to take appropriate action to eliminate or reduce, to the extent reasonably
practicable, material dilution or other unfair effects resulting from any
deviation. Such action may include: selling portfolio instruments prior to
maturity to realize capital gains or losses or to shorten average portfolio
maturity; withholding dividends or paying distributions from capital or capital
gains; redeeming shares in kind; or establishing a NAV by using available market
quotations. In addition to such procedures, Rule 2a-7 requires the Fund to
purchase instruments having remaining maturities of 397 days or less, to
maintain a dollar-weighted average portfolio maturity of 90 days or less and to
invest only in securities determined by the Trustees to be of high quality, as
defined in Rule 2a-7, with minimal credit risks.
In periods of declining interest rates, the indicated daily yield on Fund
shares computed by dividing the annualized daily income on the Fund by the NAV
per share computed as above may tend to be higher than a similar computation
made by using a method of valuation based on market prices and estimates. In
periods of rising interest rates, the indicated daily yield on Fund shares
computed the same way may tend to be lower than a similar computation made by
using a method of calculation based upon market prices and estimates.
NYSE Closings. The holidays (as observed) on which the NYSE is
currently scheduled to be closed are: New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Past Performance"
The Fund's "yield" refers to the income generated by an investment in the
Fund over a seven-day period identified in the advertisement. This income is
then "annualized." That is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period and
is shown as a percentage of the investment. The "effective yield" is calculated
similarly, but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The effective "yield" will be slightly higher than
the "yield" because of the compounding effect of this assumed reinvestment. The
Fund's "yield" and "effective yield" may reflect absorbed expenses pursuant to
any undertaking that may be in effect. Since yields fluctuate, yield data cannot
necessarily be used to compare an investment in the Fund with bank deposits,
savings accounts, and similar investment alternatives which often provide an
agreed-upon or guaranteed fixed yield for a stated period of time, or other
investment companies which may use a different method of computing yield. The
Fund's tax equivalent yield shows the level of taxable yield needed to produce
an after-tax equivalent to the Fund's tax-free yield. This is done by increasing
the Fund's yield by the amount necessary to reflect the payment of Federal
income tax (and state income tax, if applicable) at a stated tax rate.
Any fees charged by an Agent directly to its customers' account in
connection with investments in the Fund will not be included in calculations of
yield.
The Fund computes its current annualized and compound effective yields
using standardized methods required by the SEC. The annualized yield for the
Fund is computed by (a) determining the net change in the value of a
hypothetical account having a balance of one share at the beginning of a seven
calendar day period; (b) dividing the net change by the value of the account at
the beginning of the period to obtain the base period return; and (c)
annualizing the results (i.e., multiplying the base period return by 365/7). The
net change in the value of the account reflects the value of additional shares
purchased with dividends declared on both the original share and such additional
shares, but does not include realized gains and losses or unrealized
appreciation and depreciation. Compound effective yields are computed by adding
1 to the base period return (calculated as described above), raising that sum to
a power equal to 365/7 and subtracting 1. The Fund's tax equivalent yield is
computed by dividing that portion of the Fund's yield which is tax-exempt by one
minus a stated income tax rate and adding the product to that portion, if any,
of the Fund's yield that is not tax exempt.
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the Fund's yield fluctuates, its yield cannot be compared
with yields on savings accounts or other investment alternatives that provide an
agreed-to or guaranteed fixed yield for a stated period of time. However, yield
information may be useful to an investor considering temporary investments in
money market instruments. In comparing the yield of one money market fund to
another, consideration should be given to the Fund's investment policies,
including the types of investments made, length of maturities of portfolio
securities, the methods used by the Fund to compute the yield (methods may
differ) and whether there are any special account charges which may reduce
effective yield.
For the seven-day period ended June 30, 2000, the Fund's yield was 3.95%,
effective yield was 4.03% and equivalent taxable yield* was 7.32%.
From time to time, advertising materials for the Fund may refer to
Morningstar ratings and related analyses supporting the rating.
Performance rankings as reported in Changing Times, Business Week,
Institutional Investor, The Wall Street Journal, Mutual Fund Forecaster, No Load
Investor, Money Magazine, Morningstar Mutual Fund Values, U.S. News and World
Report, Forbes, Fortune, Barron's, Financial Planning, Financial Planning on
Wall Street, Certified Financial Planner Today, Investment Advisor, Kiplinger's,
Smart Money and similar publications may also be used in comparing a Fund's
performance. Furthermore, a Fund may quote its yields in advertisements or in
shareholder reports.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer to, or
include commentary by the portfolio manager relating to, investment strategy,
asset growth, current or past business, political, economic or financial
conditions and other matters of general interest to investors.
From time to time, advertising materials may refer to studies performed by
Dreyfus or its affiliates, such as "The Dreyfus Tax Informed Investing Study" or
"The Dreyfus Gender Investment Comparison Study (1996-1997)" or other such
studies.
--------
*Example assumes a Federal marginal tax rate of 39.68%, New York State marginal
tax rate of 6.85% and New York City marginal tax rate of 3.78% (combined
effective rate of 46.02%).
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the Section in the Fund's Prospectus entitled "Distributions and Taxes."
General. The Fund ordinarily declares dividends from net investment income
on each day that the NYSE is open for business. The Fund's earnings for
Saturdays, Sundays and holidays are declared as dividends on the preceding
business day. Dividends usually are paid on the last calendar day of each month
and are automatically reinvested in additional Fund shares at NAV or, at an
investor's option, paid in cash. If an investor redeems all shares in their
account at any time during the month, all dividends to which the investor is
entitled will be paid along with the proceeds of the redemption. If an omnibus
accountholder indicates in a partial redemption request that a portion of any
accrued dividends to which such account is entitled belongs to an underlying
accountholder who has redeemed all of his or her Fund shares, that portion of
the accrued dividends will be paid along with the proceeds of the redemption.
Dividends from net realized short-term capital gains, if any, generally are
declared and paid once a year, but the Fund may make distributions on a more
frequent basis to comply with the distribution requirements of the Code, in all
events in a manner consistent with the provisions of the 1940 Act. The Fund will
not make distributions from net realized capital gains unless capital loss
carryovers, if any, have been utilized or have expired. The Fund does not expect
to realize any long-term capital gains or losses. Investors may choose whether
to receive dividends in cash or to reinvest them in additional Fund shares at
NAV. All expenses are accrued daily and deducted before declaration of dividends
to investors.
Except as provided below, shares of the Fund purchased on a day on which
the Fund calculates its NAV will not begin to accrue dividends until the
following business day and redemption orders effected on any particular day will
receive all dividends declared through the day of redemption. However, if
immediately available funds are received by the Transfer Agent prior to 12:00
noon, Eastern time, investors may receive the dividend declared on the day of
purchase. Investors will not receive the dividends declared on the day of
redemption if a wire redemption order is placed prior to 12:00 noon, Eastern
time.
It is expected that the Fund will continue to qualify for treatment as a
regulated investment company ("RIC") under the Code. Such qualification will
relieve the Fund of any liability for federal income tax to the extent its
earnings and realized gains are distributed in accordance with applicable
provisions of the Code. To qualify for treatment as a RIC under the Code, the
Fund - which is treated as a separate corporation for federal tax purposes - (1)
must distribute to its shareholders each year at least 90% of its investment
company taxable income (generally consisting of net taxable investment income
and net short-term capital gains, plus its net interest income excludable from
gross income under section 103(a) of the Code) ("Distribution Requirement"), (2)
must derive at least 90% of its annual gross income from specified sources
("Income Requirement"), and (3) must meet certain asset diversification and
other requirements. If the Fund failed to qualify for treatment as a RIC for any
taxable year, (1) it would be taxed at corporate rates on the full amount of its
taxable income for that year without being able to deduct the distributions it
makes to its shareholders and (2) the shareholders would treat all those
distributions, including distributions that otherwise would be "exempt-interest
dividends," as dividends (that is, ordinary income) to the extent of the Fund's
earnings and profits. In addition, the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest and make substantial
distributions before requalifying for RIC treatment. The Fund also intends to
continue to qualify to pay "exempt-interest" dividends, which requires, among
other things, that at the close of each quarter of its taxable year at least 50%
of the value of its total assets must consist of municipal securities.
The Fund may be subject to a 4% nondeductible excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary (taxable) income for that year and capital gain net income for the
one-year period ending October 31 of that year, plus certain other amounts. To
avoid the application of this excise tax, the Fund may make an additional
distribution shortly before December 31 in each year of any undistributed
ordinary (taxable) income or capital gains and expects to pay any other
dividends and distributions necessary to avoid the application of this tax.
Distributions by the Fund that are designated by it as "exempt-interest
dividends" generally may be excluded from gross income. Interest on indebtedness
incurred or continued to purchase or carry shares of the Fund will not be
deductible for Federal income tax purposes to the extent that the Fund's
distributions (other than capital gains distributions) consist of
exempt-interest dividends. The Fund may invest in "private activity bonds," the
interest on which is treated as a tax preference item for shareholders in
determining their liability for the alternative minimum tax. Proposals may be
introduced before Congress for the purpose of restricting or eliminating the
Federal income tax exemption for interest on municipal securities. If such a
proposal were enacted, the availability of such securities for investment by the
Fund and the value of its portfolio would be affected. In such event, the Fund
would reevaluate its investment objective and policies.
Dividends and other distributions, to the extent taxable, are taxable
regardless of whether they are received in cash or reinvested in additional Fund
shares, even if the value of shares is below cost. If investors purchase shares
shortly before a taxable distribution (i.e., any distribution other than an
exempt-interest dividend paid by the Fund), they must pay income taxes on the
distribution, even though the value of the investment (plus cash received, if
any) remains the same. In addition, the share price at the time investors
purchase shares may include unrealized gains in the securities held in the Fund.
If these portfolio securities are subsequently sold and the gains are realized,
they will, to the extent not offset by capital losses, be paid as a capital gain
distribution and will be taxable.
Dividends from the Fund's investment company taxable income together with
distributions from net realized short-term capital gains, if any (collectively,
"dividend distributions"), will be taxable to U.S. shareholders, including
certain non-qualified retirement plans, as ordinary income to the extent of the
Fund's earnings and profits, whether received in cash or reinvested in
additional Fund shares. Distributions by the Fund of net capital gain, when
designated as such, are taxable as long-term capital gains, regardless of the
length of time of share ownership. The Fund is not expected to realize long-term
capital gains, or, therefore, to make distributions of net capital gain (the
excess of net long-term capital gain over net short-term capital loss). Nor will
dividends paid by the Fund be eligible for the dividends-received deductions
allowed to corporations.
Dividends derived by the Fund from tax-exempt interest are designated as
tax-exempt in the same percentage of the day's dividend as the actual tax-exempt
income earned that day. Thus, the percentage of the dividend designated as
tax-exempt may vary from day to day. Similarly, dividends derived by the Fund
from interest on New York Municipal Obligations will be designated as exempt
from the New York City and New York State taxation in the same percentage of the
day's dividend as the actual interest on New York Municipal Obligations earned
on that day.
Dividends paid by the Fund to qualified retirement plans ordinarily will
not be subject to taxation until the proceeds are distributed from the plans.
The Fund will not report to the IRS distributions paid to such plans. Generally,
distributions from Qualified Retirement Plans, except those representing returns
of non-deductible contributions thereto, will be taxable as ordinary income and,
if made prior to the time the participant reaches age 59 1/2, generally will be
subject to an additional tax equal to 10% of the taxable portion of the
distribution. The administrator, trustee or custodian of a qualified retirement
plan will be responsible for reporting distributions from the plan to the IRS.
Moreover, certain contributions to a qualified retirement plan in excess of the
amounts permitted by law may be subject to an excise tax. If a distributee of an
"eligible rollover distribution" from a qualified retirement plan does not elect
to have the distribution paid directly from the plan to an eligible retirement
plan in a "direct rollover," the distribution is subject to a 20% income tax
withholding.
The Fund must withhold and remit to the U.S. Treasury ("backup
withholding") 31% of dividends, capital gain distributions and redemption
proceeds, regardless of the extent to which gain or loss may be realized, paid
to an individual or certain other non-corporate shareholders if such shareholder
fails to certify that the TIN furnished to the Fund is correct. Backup
withholding at that rate also is required from dividends and capital gain
distributions payable to such a shareholder if (1) that shareholder fails to
certify that he or she has not received notice from the IRS of being subject to
backup withholding as a result of a failure properly to report taxable dividend
or interest income on a Federal income tax return or (2) the IRS notifies the
Fund to institute backup withholding because the IRS determines that the
shareholder's TIN is incorrect or that the shareholder has failed properly to
report such income.
In January of each year, the Fund will send shareholders a Form 1099-DIV
notifying them of the status for federal income tax purposes of their dividends
from the Fund for the preceding year. The Fund also will advise shareholders of
the percentage, if any, of the dividends paid by the Fund that are exempt from
Federal income tax and the portion, if any, of those dividends that is a tax
preference item for purposes of the Federal alternative minimum tax.
Shareholders must furnish the Fund with their TIN and state whether they
are subject to backup withholding for prior under-reporting, certified under
penalties of perjury. Unless previously furnished, investments received without
such a certification will be returned. The Fund is required to withhold 31% of
all dividends payable to any individuals and certain other non-corporate
shareholders who do not provide the Fund with a correct TIN or who otherwise are
subject to backup withholding. A TIN is either the Social Security number, IRS
individual taxpayer identification number, or employer identification number of
the record owner of an account. Any tax withheld as a result of backup
withholding does not constitute an additional tax
imposed on the record owner and may be claimed as a credit on the record owner's
Federal income tax return.
State and Local Taxes. Depending upon the extent of its activities in
states and localities in which it is deemed to be conducting business, the Fund
may be subject to the tax laws thereof. Shareholders are advised to consult
their tax advisers concerning the application of state and local taxes to them.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal income
taxation of a shareholder who, as to the United States, is a non-resident alien
individual, a foreign trust or estate, a foreign corporation or a foreign
partnership (a "foreign shareholder") depends on whether the income from the
Fund is "effectively connected" with a U.S. trade or business carried on by the
shareholder, as discussed below. Special U.S. federal income tax rules that
differ from those described below may apply to certain foreign persons who
invest in the Fund such as a foreign shareholder entitled to claim the benefits
of an applicable tax treaty. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of an
investment in the Fund.
Foreign Shareholders - Dividends. Dividends (other than exempt-interest
dividends) distributed to a foreign shareholder whose ownership of Fund shares
is not effectively connected with a U.S. trade or business carried on by the
foreign shareholder ("effectively connected") generally will be subject to a
U.S. federal withholding tax of 30% (or lower treaty rate). If a foreign
shareholder's ownership of Fund shares is effectively connected, however, then
all distributions to that shareholder will not be subject to such withholding
and instead will be subject to U.S. federal income tax at the graduated rates
applicable to U.S. citizens and domestic corporations, as the case may be.
Foreign shareholders also may be subject to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of the Fund, that they own at the time of their death. Certain
credits against that tax and relief under applicable tax treaties may be
available.
The foregoing is only a summary of certain tax considerations generally
affecting the Fund and its shareholders, and is not intended as a substitute for
careful tax planning. Individuals may be exempt from New York City and New York
State personal income taxes on exempt-interest income derived from obligations
of issuers located in New York, but are usually subject to such taxes on such
dividends that are derived from obligations of issuers located in other
jurisdictions. Investors are urged to consult their tax advisers with specific
reference to their own tax situations.
Returned Checks. If an investor elects to receive dividends in cash, and
the investor's dividend check is returned to the Fund as undeliverable or
remains uncashed for six months, the Fund reserves the right to reinvest that
dividend and all future dividends payable in additional Fund shares at NAV. No
interest will accrue on amounts represented by uncashed dividend or redemption
checks.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund by
Dreyfus. Debt securities purchased and sold by the Fund are generally traded on
a net basis (i.e., without commission) through dealers acting for their own
account and not as brokers, or otherwise involve transactions directly with the
issuer of the instrument. This means that a dealer (the securities firm or bank
dealing with the Fund) makes a market for securities by offering to buy at one
price and sell at a slightly higher price. The difference between the prices is
known as a spread. Other portfolio transactions may be executed through brokers
acting as agent. The Fund will pay a spread or commissions in connection with
such transactions. Dreyfus uses its best efforts to obtain execution of
portfolio transactions at prices which are advantageous to the Fund and at
spreads and commission rates, if any, which are reasonable in relation to the
benefits received. Dreyfus also places transactions for other accounts that it
provides with investment advice.
Brokers and dealers involved in the execution of portfolio transactions on
behalf of the Fund are selected on the basis of their professional capability
and the value and quality of their services. In selecting brokers or dealers,
Dreyfus will consider various relevant factors, including, but not limited to,
the size and type of the transaction; the nature and character of the markets
for the security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer; the broker-dealer's
execution services rendered on a continuing basis; and the reasonableness of any
spreads (or commissions, if any). Any spread, commission, fee or other
remuneration paid to an affiliated broker-dealer is paid pursuant to the Trust's
procedures adopted in accordance with Rule 17e-1 of the 1940 Act.
Dreyfus may use research services of and place brokerage commissions with
broker-dealers affiliated with it or Mellon Bank if the commissions are
reasonable, fair and comparable to commissions charged by non-affiliated firms
for similar services.
Dreyfus is authorized to allocate purchase and sale orders for portfolio
securities to certain financial institutions, including, in the case of agency
transactions, financial institutions that are affiliated with Dreyfus or Mellon
Bank or that have sold shares of the Fund, if Dreyfus believes that the quality
of the transaction and the commission are comparable to what they would be with
other qualified brokerage firms.
Brokers or dealers may be selected who provide brokerage and/or research
services to a Fund and/or other accounts over which Dreyfus or its affiliates
exercise investment discretion. Such services may include advice concerning the
value of securities; the advisability of investing in, purchasing or selling
securities; the availability of securities or the purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and performance of
accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to a Fund and/or its other
clients; and, conversely, such information provided by brokers or dealers who
have executed transaction orders on behalf of other clients of Dreyfus may be
useful to Dreyfus in carrying out its obligation to the Fund. The receipt of
such research services does not reduce the normal independent research
activities of Dreyfus; however, it enables Dreyfus to avoid the additional
expenses which might otherwise be incurred if it were to attempt to develop
comparable information through its own staffs.
The Fund will not purchase Municipal Obligations during the existence of
any underwriting or selling group relating thereto of which an affiliate is a
member, except to the extent permitted by the SEC. Under certain circumstances,
the Fund may be at a disadvantage because of this limitation in comparison with
other investment companies which have a similar investment objective but are not
subject to such limitations.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made for
these other accounts. It sometimes happens that the same security is held by
more than one of the accounts managed by Dreyfus. Simultaneous transactions may
occur when several accounts are managed by the same investment manager,
particularly when the same investment instrument is suitable for the investment
objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated in
accordance with a formula considered by Dreyfus to be equitable to each account.
In some cases this system could have a detrimental effect on the price or volume
of the investment instrument as far as the Fund is 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, 2000, 1999 and 1998.
INFORMATION ABOUT THE FUND/TRUST
Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. Fund shares
are without par value, have no preemptive or subscription rights, and are freely
transferable.
The Trust is a "series fund," which is a mutual fund divided into separate
portfolios, each of which is treated as a separate entity for certain matters
under the 1940 Act and for other purposes. A shareholder of one portfolio is not
deemed to be a shareholder of any other portfolio. For certain matters
shareholders vote together as a group; as to others they vote separately by
portfolio. The Trustees have authority to create an unlimited number of shares
of beneficial interest, without par value, in separate series. The Trustees have
authority to create additional series at any time in the future without
shareholder approval.
Each share (regardless of class) has one vote. On each matter submitted to
a vote of the shareholders, all shares of each fund or class shall vote together
as a single class, except as to any matter for which a separate vote of any fund
or class is required by the 1940 Act and except as to any matter which affects
the interest of a particular fund or class, in which case only the holders of
shares of the one or more affected funds or classes shall be entitled to vote,
each as a separate class.
The assets received by the Trust for the issue or sale of shares of each
fund and all income, earnings, profits and proceeds thereof, subject only to the
rights of creditors, are specifically allocated to such fund, and constitute the
underlying assets of such fund. The underlying assets of each fund are required
to be segregated on the books of account, and are to be charged with the
expenses in respect to such fund and with a share of the general expenses of the
Trust. Any general expenses of the Trust not readily identifiable as belonging
to a particular fund shall be allocated by or under the direction of the
Trustees in such manner as the Trustees determine to be fair and equitable,
taking into consideration, among other things, the relative sizes of the fund
and the relative difficulty in administering each fund. Each share of each fund
represents an equal proportionate interest in that fund with each other share
and is entitled to such dividends and distributions out of the income belonging
to such fund as are declared by the Trustees. Upon any liquidation of a fund,
shareholders thereof are entitled to share pro rata in the net assets belonging
to that fund available for distribution.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Trust to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Trustees or the
appointment of auditors. However, the holders of at least 10% of the shares
outstanding and entitled to vote may require the Trust to hold a special meeting
of shareholders for purposes of removing a Trustee from office. Shareholders may
remove a Trustee by the affirmative vote of two-thirds of the Trust's
outstanding voting shares. In addition, the Board of Trustees will call a
meeting of shareholders for the purpose of electing Trustees if, at any time,
less than a majority of the Trustees then holding office have been elected by
shareholders.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an investment
company, such as the Trust, will not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each series affected by such matter. Rule 18f-2 further provides that a series
shall be deemed to be affected by a matter unless it is clear that the interests
of each series in the matter are identical or that the matter does not affect
any interest of such series. The Rule exempts the selection of independent
accountants and the election of Trustees from the separate voting requirements
of the Rule.
The Fund will send annual and semi-annual financial statements to all of
its shareholders.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Agreement and Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or a Trustee. The Agreement and Declaration of Trust provides for
indemnification from the Trust's property for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust. Thus, the
risk of a shareholder's incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself would be unable
to meet its obligations, a possibility which Dreyfus believes is remote. Upon
payment of any liability incurred by the Trust, the shareholder paying such
liability will be entitled to reimbursement from the general assets of the
Trust. The Trustees intend to conduct the operations of each fund in such a way
so as to avoid, as far as possible, ultimate liability of the shareholders for
liabilities of such fund.
COUNSEL AND INDEPENDENT AUDITORS
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C., 20036-1800, has passed upon the legality of the
shares offered by the Prospectus and this Statement of Additional Information.
KPMG LLP, 757 Third Avenue, New York, NY 10017, was appointed by the Board
of Trustees to serve as the Fund's independent auditors for the year ending June
30, 2001, providing audit services including (1) examination of the annual
financial statements, (2) assistance, review and consultation in connection with
SEC filings and (3) review of the annual Federal income tax return filed on
behalf of the Fund.
<PAGE>
APPENDIX A
RISK FACTORS--INVESTING IN NEW YORK MUNICIPAL OBLIGATIONS
The following information constitutes only a brief summary, does not
purport to be a complete description, and is based primarily on information
drawn from the Annual Information Statement of the State of New York (the
"State") 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 respects.
The State's fiscal year begins on April 1st and ends on March 31st. On
March 30, 2000, the State adopted the debt service portion of the State budget
for the 2000-01 fiscal year; on May 5, 2000, it enacted the remainder of the
budget. The Governor approved the budget as passed by the Legislature. Prior to
passing the budget in its entirety for the 2000-01 fiscal year, the State
enacted appropriations that permitted the State to continue its operations.
Following enactment of the 2000-01 budget, the State prepared a Financial
Plan for the 2000-01 fiscal year (the "2000-01 Financial Plan") that sets forth
projected receipts and disbursements based on the actions taken by the
Legislature. For fiscal year 2000-01, General Fund disbursements, including
transfers to support capital projects, debt service and other funds, were
estimated at $38.92 billion, an increase of $1.75 billion or 4.72% over
1999-2000. Projected spending under the 2000-01 enacted budget was $992 million
above the Governor's Executive Budget recommendations.
The 2000-01 Financial Plan projected closing balances in the General Fund
and other reserves of $3.2 billion, including $1.71 billion in the General Fund.
This closing balance is comprised of $675 million in reserves for potential
labor costs resulting from new collective bargaining agreements and other
spending commitments, $547 million in the Tax Stabilization Reserve Fund (TSRF)
(for use in case of unanticipated deficits), $150 million in the Contingency
Reserve Fund (CRF) (which helps offset litigation risks), and $338 million in
the Community Projects Fund (CPF) (which finances legislative initiatives). In
addition to the $1.71 billion balance in the General Fund, $1.2 billion was
projected for reserve in the STAR Special Revenue Fund and $250 million in the
Debt Reduction Reserve Fund (DRRF).
Several developments arising from negotiations on the budget will affect
State finances in subsequent years. First, a portion of Legislative additions to
the 2000-01 Executive Budget will recur at higher spending levels in 2001-02 and
beyond, including increased funding for school aid, tuition assistance, and
prescription drug coverage for the elderly. Second, the Legislature enacted the
Debt Reform Act of 2000 (Debt Reform Act). The Debt Reform Act, which applies to
new State-supported debt issued on or after April 1, 2000, imposes caps on new
debt outstanding and new debt service costs, restricts the use of debt to
capital purposes only, and restricts the maximum term of State debt issuances to
no more than 30 years. Finally, the State adopted an additional tax relief
package that will reduce tax receipts by $1.2 billion when fully effective; this
package includes the elimination or reduction of gross receipts taxes on energy
($330 million), the expansion of the "Power for Jobs" energy tax credit program
($125 million), a college tuition deduction or credit taken against personal
income taxes ($200 million), and reduction of the marriage penalty for taxpayers
who file jointly ($200 million).
Many complex political, social and economic forces influence the State's
economy and finances, which in turn may affect the State Financial Plan. These
forces may affect the State unpredictably from fiscal year to fiscal year and
are influenced by governments, institutions, and organizations that are not
subject to the State's control. The State Financial Plan also is based upon
forecasts of national and State economic activity. Economic forecasts frequently
have failed to predict accurately the timing and magnitude of changes in the
national and State economies. The Division of Budget (DOB) believes that its
projections of receipts and disbursements relating to the current State
Financial Plan, and the assumptions on which they are based, are reasonable.
Actual results, however, could differ materially and adversely from the
projections set forth in the State's Annual Information Statement and summarized
below, and those projections may be changed materially and adversely from time
to time. See the section entitled "Special Considerations" below for a
discussion of risks and uncertainties faced by the State.
2000-01 State Financial Plan
Four governmental fund types comprise the State Financial Plan: the
General Fund, the Special Revenue Funds, the Capital Projects Funds, and the
Debt Service Funds. The State's fund structure adheres to the accounting
standards of the Governmental Accounting Standards Board.
General Fund
The General Fund is the principal operating fund of the State and is used
to account for all financial transactions except those required to be accounted
for in another fund. It is the State's largest fund and receives almost all
State taxes and other resources not dedicated to particular purposes. In the
State's 2000-01 fiscal year, the General Fund (exclusive of transfers) is
expected to account for approximately 46.6 % of All Governmental Funds
disbursements and 67.8 % of total State Funds disbursements. General Fund moneys
also are transferred to other funds, primarily to support certain capital
projects and debt service payments in other fund types.
Total receipts and transfers from other funds are projected to be $39.72
billion in 2000-01, an increase of $2.32 billion over 1999-2000. Total General
Fund disbursements and transfers to other funds are projected to be $39.29
billion, an increase of $2.12 billion over 1999-2000.
On July 31, 2000, the State released the first of three quarterly updates
to the 2000-01 Financial Plan (the "July Update"). In the July Update, the State
continues to project the 2000-01 Financial Plan will remain in balance. At the
end of the first quarter of the 2000-01 fiscal year, the General Fund had a cash
balance of $6.75 billion, $446 million above the estimate in the Financial Plan.
Total General Fund receipts and transfers from other funds totaled $14.93
billion in the first quarter, $464 million higher than the Financial Plan
cashflow projections. Total General Fund disbursements and transfers to other
funds totaled $9.35 billion in the first quarter, $18 million above the cashflow
projections, which is attributable to the timing of payments and not anticipated
to affect year-end totals.
Projected General Fund Receipts
Total General Fund receipts and transfers in 2000-01 are projected to be
$39.72 billion, an increase of $2.32 billion from the $37.40 billion recorded in
1999-2000. This total includes $36.35 billion in tax receipts, $1.34 billion in
miscellaneous receipts, and $2.03 billion in transfers from other funds. The
transfer of $3.4 billion net resources through the tax refund reserve account
from 1999-2000 to the 2000-01 fiscal period has the effect of exaggerating the
growth in State receipts from year to year by depressing reported 1999-2000
figures and inflating 2000-01 projections.
The Personal Income Tax is imposed on the income of individuals, estates
and trusts and is based, with certain modifications, on federal definitions of
income and deductions. Net General Fund personal income tax collections are
projected to reach $24.33 billion in 2000-01, well over half of all General Fund
receipts and nearly $4 billion above the reported 1999-2000 collection total.
Much of this increase is associated with the $3.4 billion net impact of the
transfer of the surplus from 1999-2000 to the current year as partially offset
by the diversion of an additional $1.99 billion in income tax receipts to the
School Tax Relief (STAR) fund. The STAR program was created in 1997 as a
State-funded local property tax relief program funded through the use of
personal income tax receipts. Adjusted for these transactions, the growth in net
income tax receipts is roughly $1.3 billion, an increase of almost 5 %.
This growth is largely a function of two factors: (i) the 9 % growth in
income tax liability projected for tax year 2000; and (ii) the impact of the
1999 tax year settlement recorded early in the 2000-01 fiscal year.
The most significant statutory changes made this fiscal year provide for
an increase, phased-in over two years, in the earned income tax credit from 25%
to 30% of the federal credit.
User taxes and fees are comprised of three-quarters of the State's 4%
sales and use tax, cigarette, alcoholic beverage, container, and auto rental
taxes, and a portion of the motor fuel excise levies. This category also
includes receipts from the motor vehicle registration fees and alcoholic
beverage license fees. Dedicated transportation funds outside of the General
Fund receive a portion of motor fuel tax and motor vehicle registration fees and
all of the highway use taxes. Receipts from user taxes and fees are projected to
total $7.02 billion, a decrease of $583 million below reported collections in
the prior year.
The sales tax and cigarette tax components of this category account for
virtually all of the 2000-01 decline. Growth in base sales tax yield, after
adjusting for tax law and other changes, is projected at 4.5%. Modest decreases
in motor fuel and alcoholic beverage taxes over 1999-2000 levels also are
expected. However, receipts from auto rental taxes are estimated to increase
modestly.
Business taxes include franchise taxes based generally on net income of
general business, bank and insurance corporations, as well as
gross-receipts-based taxes on utilities and gallonage-based petroleum business
taxes.
Total business tax collections in 2000-01 are now projected to be $4.23
billion, $332 million below results for the prior fiscal year. The
year-over-year decline in projected receipts in this category is largely
attributable to statutory changes. These include the first year impact of a
scheduled corporation franchise tax rate reduction, a reduction in the cap on
tax liability for non-life insurers, and the expansion of the economic
development zone (renamed Empire Zones, effective May 19, 2000) and zone
equivalent areas tax credits. Ongoing tax reductions include the second year of
the corporation franchise rate reduction, the gross receipts tax rate cut from
3.25% to 2.5%, the continuation of the "Power for Jobs" program, and the use of
tax credits for investments in certified capital companies.
Other taxes include the estate and gift tax, the real property gains tax
and pari-mutual taxes. Taxes in this category are now projected to total $766
million, $341 million below last year's amount. The primary factors accounting
for most of the expected decline are legislation enacted previously that
repealed both the real property gains tax and the gift tax and significantly
reduced estate tax rates, and the incremental effects of tax reductions in the
pari-mutual tax.
Miscellaneous receipts include investment income, abandoned property
receipts, medical provider assessments, minor federal grants, receipts from
public authorities, and certain other license and fee revenues. Miscellaneous
receipts are expected to total $1.34 billion, down $309 million from the prior
year amount. This reflects the loss of non-recurring receipts received in
1999-2000 and the phase-out of the medical provider assessments completed in
January 2000.
Transfers from other funds to the General Fund consist primarily of tax
revenues in excess of debt service requirements, including the 1% sales tax used
to support payments to Local Government Assistance Corporation (LGAC).
Transfers from other funds are expected to total $2.03 billion, or $108
million less than total receipts from this category during 1999-2000. Total
transfers of sales taxes in excess of LGAC debt service requirements are
expected to decrease by approximately $74 million, while transfers from all
other funds are expected to decrease by $34 million.
Projected General Fund Disbursements
General Fund disbursements, including transfers to support capital
projects, debt service and other funds, are estimated in the July Update to be
at $39.29 billion in 2000-01, an increase of $370 million over the Financial
Plan enacted in May 2000. The entire net increase in disbursements reflects the
cost of labor agreements ratified by State employee unions and approved by the
State Legislature.
Following the pattern of the last three fiscal years, education programs
receive the largest share of new funding contained in the 2000-01 Financial
Plan. School aid is expected to grow by $850 million or 8.0% over 1999-2000
levels (on a State fiscal year basis). Outside of education, the largest growth
in spending is for State Operations ($801 million increase); and general State
charges ($104 million).
The Financial Plan also reflects the use of resources from the Health Care
Reform Act of 2000 (HCRA 2000) that will help finance several health and mental
hygiene programs in Special Revenue Funds, including prescription drug
assistance for the elderly, supplemental Medicare insurance, and other public
health services.
Grants to Local Governments is the largest category of General Fund
disbursements and includes financial assistance to local governments and
not-for-profit corporations, as well as entitlement benefits to individuals. The
largest areas of spending in this category are for aid to elementary and
secondary schools (43%) and for the State's share of Medicaid payments to
providers (21%). Grants to Local Governments are projected in the July Update to
be at $26.87 billion in 2000-01, an increase of $1.23 billion over 1999-2000.
Under the 2000-01 enacted budget, General Fund spending on school aid is
projected at $11.47 billion on a State fiscal year basis, an increase of $850
million from the prior year. The budget provides additional funding for
operating aid, building aid, and several other targeted aid programs. For all
other educational programs, disbursements are projected to grow by $376 million
to $3.23 billion.
Spending for Medicaid in 2000-01 is projected to total $5.59 billion, an
increase of 4% from 1999-2000. Welfare spending is projected at $1.20 billion, a
decrease of $77 million from the prior year. Disbursements for all other health
and social welfare programs are projected to total $1.93 billion, an increase of
$262 million.
The remaining disbursements primarily support community-based mental
hygiene programs, local transportation programs, and revenue sharing payments to
local governments. Revenue sharing and other general purpose aid to local
governments is projected at $923 million.
State operations pays for the costs of operating the Executive,
Legislative, and Judicial branches of government, including the prison system,
mental hygiene institutions, and the State University system (SUNY). Spending in
State operations is projected in the July Update to be $7.40 billion, an
increase of $801 million over the prior year. The growth reflects $324 million
for new labor contacts, offset by $30 million in savings from efficiencies in
agency operations, a $38 million reduction in one-time receipts from the State
University, and a $56 million decrease in Federal grants from the Department of
Correctional Services. The State's overall workforce is expected to remain
stable at around 195,000 employees.
General State charges account for the costs of providing fringe benefits
to State employees and retirees of the Executive, Legislature, and Judiciary.
These payments, many of which are mandated by statute and collective bargaining
agreements, include employer contributions for pensions, social security, health
insurance, workers' compensation, and unemployment insurance. General State
charges also cover State payments-in-lieu-of-taxes to local governments for
certain State-owned lands, and the costs of defending lawsuits against the State
and its public officers.
Disbursements in this category are estimated at $2.19 billion, an increase
of $104 million from the prior year. The change primarily reflects higher health
insurance rates in calendar year 2000, primarily to cover the increasing cost of
providing prescription drug benefits for State employees. The 2000-01 spending
estimate continues to assume the $250 million in offset funds related to the
dissolution of the Medical Malpractice Insurance Association (MMIA), which is
the last year these funds are expected to be available.
This category accounts for debt service on short-term obligations of the
State, i.e., the interest costs of the State's commercial paper program. The
commercial paper program is expected to have a maximum of $45 million
outstanding during 2000-01, as this program is being replaced with additional
variable rate general obligation bonds. The majority of the State's debt service
is for long-term bonds, and is shown in the Financial Plan as a transfer to the
General Debt Service Fund.
Transfers to other funds from the General Fund are made primarily to
finance certain portions of State capital projects spending and debt service on
long-term bonds where these costs are not funded from other sources.
Long-term debt service transfers are projected at $2.26 billion in
2000-01, an increase of $18 million from 1999-2000. The increase reflects debt
service costs from prior-year bond sales (net of refunding savings), and certain
sales planned to occur during the 2000-01 fiscal year to support new capital
spending, primarily for economic development, the environment and education.
Transfers for capital projects provide General Fund support for projects
that are not financed with bond proceeds, dedicated taxes, other revenues, or
federal grants. Transfers in this category are projected to total $234 million
in 2000-01, an increase of $23 million from the prior year.
All other transfers, which reflect the remaining transfers from the
General Fund to other funds, are estimated to total $294 million in 2000-01, a
decline of $94 million from 1999-2000.
The Debt Reduction Reserve Fund (DRRF) is assumed by DOB to be
reclassified from the General Fund to the Capital Projects fund type in 2000-01.
The 2000-01 Financial Plan reflects the deposit of an additional $250 million in
General Fund receipts to DRRF in 2000-01, as well as $250 million in one-time
resources from the State's share of tobacco settlement proceeds.
Non-recurring Resources
The DOB estimates that the 2000-01 State Financial Plan contains new
actions that provide non-recurring resources or savings totaling approximately
$36 million, excluding use of the 1999-2000 surplus.
General Fund Closing Balance
The July Update projects a closing balance of $1.34 billion in the General
Fund for 2000-01, a decrease of $370 million from the Financial Plan enacted in
May 2000. The planned use of labor reserves to finance approved labor agreements
accounts for the decline. The closing balance is comprised of $305 million in
remaining reserves for collective bargaining and other purposes, $547 million in
the Tax Stabilization Reserve Fund (for unanticipated budget shortfalls), $150
million in the Contingency Reserve Fund (for litigation risks), and $338 million
in the Community Projects Fund (for legislative initiatives). The closing fund
balance does not include additional reserves of $1.2 billion in the School Tax
Relief (STAR) Special Reserve Fund (for future STAR payments) and $250 million
in the Debt Reduction Reserve Fund (for 2001-02 debt reduction).
Outyear Projections of Receipts and Disbursements
State law requires the Governor to propose a balanced budget each year.
Preliminary analysis by DOB indicates that the State will have a 2001-02 budget
gap of approximately $2 billion, which is comparable with gaps projected
following enactment of recent state budgets. This estimate includes projected
costs of new collective bargaining agreements, no assumed operating
efficiencies, and the planned application of approximately $1.2 billion in STAR
tax reduction reserves. In recent years, the State has closed projected budget
gaps which DOB estimates have ranged from $5.0 billion to less than $1 billion.
DOB will formally update its projections of receipts and disbursements for
future years as part of the Governor's 2001-02 Executive Budget submission. The
revised expectations for these years will reflect the cumulative impact of tax
reductions and spending commitments enacted over the last several years as well
as new 2001-02 Executive Budget recommendations.
Sustained growth in the State's economy could contribute to closing
projected budget gaps over the next several years, both in terms of
higher-than-projected tax receipts and in lower-than-expected entitlement
spending. The State assumes that savings from initiatives by State agencies to
deliver services more efficiently, workforce management efforts, maximization of
federal and non-General Fund spending offsets, and other actions necessary to
help bring projected disbursements and receipts into balance.
From 1999-2000 through 2002-03, the State expects to receive $1.54 billion
under the nationwide settlement with cigarette manufacturers. Counties,
including New York City, are projected to receive settlement payments of $1.47
billion over the same period. The State plans to use $1.29 billion in tobacco
settlement money over the next three years to finance health programs under HCRA
2000 ($1.01 billion) and projected increased costs in Medicaid ($274 million).
The remaining $250 million in one-time tobacco payments from 1999-2000 will be
deposited to DRRF.
Other Governmental Funds
In addition to the General Fund, the State Financial Plan includes Special
Revenue Funds, Capital Projects Funds and Debt Service Funds which are discussed
below. Amounts below do not include other sources and uses of funds transferred
to or from other fund types.
All Governmental Funds spending is estimated at $77.53 billion in 2000-01,
an increase of $4.17 billion or 5.7% above the prior year. When spending for the
STAR tax relief program is excluded, spending growth is 4.6%. The spending
growth is comprised of changes in the General Fund ($1.81 billion excluding
transfers), Special Revenue Funds ($2.03 billion), Capital Projects Funds ($124
million) and Debt Service Funds ($206 million).
Special Revenue Funds
Total disbursements for programs supported by Special Revenue Funds are
projected at $33.25 billion, an increase of $2.03 billion or 6.5% over
1999-2000. Special Revenue Funds include federal grants and State special
revenue funds.
Federal grants are projected to comprise 69% of all Special Revenue Funds
spending in 2000-01, comparable to prior years. Disbursements from federal funds
are estimated at $22.87 billion, an increase of $798 million or 3.6%. Medicaid
is the largest program within federal funds, accounting for over half of total
spending in this category. In 2000-01, Medicaid spending is projected at $14.93
billion, an increase of $396 million over 1999-2000. The remaining growth in
federal funds is primarily for the Child Health Plus program, which is estimated
to increase by $86 million in 2000-01, as well as increased spending in various
social service programs.
State special revenue spending is projected to be $10.38 billion, an
increase of $1.23 billion or 13.5% from the last fiscal year. The spending
reflects the next phase of the STAR program valued at $2.0 billion (up $785
million from 1999-2000), and $617 million in additional spending resulting from
HCRA 2000. This growth is offset by decreased spending of $176 million due to
the elimination of medical provider assessments on January 1, 2000.
Capital Projects Funds
Spending from Capital Projects Funds in 2000-01 is projected at $4.35
billion, an increase of $124 million or 2.9% from last fiscal year. The increase
is attributed to $184 million for new capital projects, primarily for
transportation, economic development, the environment and education and planned
increases for school construction and economic development programs.
Debt Service Funds
Spending from Debt Service Funds is estimated at $3.79 billion in 2000-01,
up $206 million or 5.7% from 1999-2000. Transportation purposes, including debt
service on bonds issued for State and local highway and bridge programs financed
through the New York State Thruway Authority and supported by the Dedicated
Highway and Bridge Trust Fund, account for $127 million of the year-to-year
growth. Debt service for educational purposes, including State and City
University programs financed through the Dormitory Authority, will increase by
$59 million. The remaining growth is for a variety of programs in mental health
and corrections, and for general obligation financings.
GAAP-Basis Financial Plan (2000-01)
State law requires the State to update its projected GAAP-basis financial
results for the current fiscal year on or before September first of each year.
The State bases its GAAP projections on the cash estimates in the July Update
and the actual results for 1999-2000 as reported by the State Comptroller on
July 28, 2000.
The State ended 1999-2000 with an accumulated General Fund surplus of
$3.93 billion, as measured by GAAP, marking the third consecutive fiscal year
that has ended with an accumulated surplus. During 2000-01, the State expects to
close the fiscal year with a positive GAAP balance of $1.84 billion in the
General Fund.
The GAAP-basis General Fund Financial Plan for 2000-01 projects tax
revenues of $34.22 billion and miscellaneous revenues of $3.04 billion, which
will finance projected expenditures of $39.31 billion and net financing uses of
$43 million.
Special Considerations
Despite recent budgetary surpluses recorded by the State, actions
affecting the level of receipts and disbursements, the relative strength of the
State and regional economy, and actions by the federal government could impact
projected budget gaps for the State. These gaps would result from a disparity
between recurring revenues and the costs of increasing the level of support for
State programs. To address a potential imbalance in any given fiscal year, the
State would be required to take actions to increase receipts and/or reduce
disbursements as it enacts the budget for that year, and, under the State
Constitution, the Governor is required to propose a balanced budget each year.
There can be no assurance, however, that the Legislature will enact the
Governor's proposals or that the State's actions will be sufficient to preserve
budgetary balance in a given fiscal year or to align recurring receipts and
disbursements in future fiscal years.
Many complex political, social and economic forces influence the State's
economy and finances, which may in turn affect the 2000-01 Financial Plan. These
forces may affect the State unpredictably from fiscal year to fiscal year and
are influenced by governments, institutions, and events that are not subject to
the State's control. The 2000-01 Financial Plan is based upon forecasts of
national and State economic activity developed through both internal analysis
and review of national and State economic forecasts prepared by commercial
forecasting services and other public and private forecasters. Many
uncertainties exist in forecasts of both the national and State economies,
including consumer attitudes toward spending, the extent of corporate and
governmental restructuring, the condition of the financial sector, federal,
fiscal and monetary policies, the level of interest rates, and the condition of
the world economy, which could have an adverse effect on the State. There can be
no assurance that the State economy will not experience results in the current
fiscal year that are worse than predicted, with corresponding material and
adverse effects on the State's projections of receipts and disbursements.
Projections of total State receipts in the 2000-01 Financial Plan are
based on the State tax structure in effect during the fiscal year and on
assumptions relating to basic economic factors and their historical
relationships to State tax receipts. In preparing projections of State receipts,
economic forecasts relating to personal income, wages, consumption, profits and
employment have been particularly important. The projection of receipts from
most tax or revenue sources is generally made by estimating the change in yield
of such tax or revenue source caused by economic and other factors, rather than
by estimating the total yield of such tax or revenue source from its estimated
tax base. The forecasting methodology, however, ensures that State fiscal year
collection estimates for taxes that are based on a computation of annual
liability, such as the business and personal income taxes, are consistent with
estimates of total liability under such taxes.
Projections of total State disbursements are based on assumptions relating
to economic and demographic factors, potential collective bargaining agreements,
levels of disbursements for various services provided by local governments
(where the cost is partially reimbursed by the State), and the results of
various administrative and statutory mechanisms in controlling disbursements for
State operations. Factors that may affect the level of disbursements in the
fiscal year include uncertainties relating to the economy of the nation and the
State, the policies of the federal government, collective bargaining
negotiations and changes in the demand for and use of State services.
An ongoing risk to the 2000-01 Financial Plan arises from the potential
impact of certain litigation and of federal disallowances now pending against
the State, which could adversely affect the State's projections of receipts and
disbursements. The 2000-01 Financial Plan contains projected reserves of $150
million in 2000-01 for such events, but assumes no significant federal
disallowance or other federal actions that could affect State finances.
Additional risks to the 2000-01 Financial Plan arise out of actions at the
federal level. The Personal Responsibility and Work Opportunity Reconciliation
Act of 1996 created a new Temporary Assistance to Needy Families program (TANF)
partially funded with a fixed federal block grant to states. Congress has
recently debated proposals under which the federal government would take a
portion of state reserves from the TANF block grant for use in funding other
federal programs. It has also considered proposals that would lower the State's
share of mass transit operating assistance. Finally, several proposals to alter
federal tax law that have surfaced in recent years could adversely affect State
revenues, since many State taxes depend on federal definitions of income. While
Congress has not enacted these proposals, it may do so in the future, or it may
take other actions that could have an adverse effect on State finances.
The 2000-01 Financial Plan assumes the availability of certain resources
to finance portions of General Fund spending for fringe benefits, health and
welfare programs. These resources could become unavailable or decrease, placing
additional pressures on budget balance.
The Division of the Budget believes that its projections of receipts and
disbursements relating to the current State Financial Plan, and the assumptions
on which they are based, are reasonable. Actual results, however, could differ
materially and adversely from projections. In the past, the State has taken
management actions to address potential Financial Plan shortfalls, and may take
similar actions should adverse variances occur in its projections for the
current fiscal year.
GAAP-Basis Results for Prior Fiscal Years
1999-2000 Fiscal Year
The State completed its 1999-2000 fiscal year with a combined governmental
funds operating surplus of $3.03 billion, which included operating surpluses in
the General Fund ($2.23 billion), in Special Revenue Funds ($665 million), in
Debt Service Funds ($38 million) and in Capital Projects Funds ($99 million).
General Fund
The State reported a General Fund operating surplus of $2.23 billion for
the 1999-2000 fiscal year, as compared to an operating surplus of $1.08 billion
for the 1998-99 fiscal year. The operating surplus for 1999-2000 resulted in
part from higher personal income tax receipts, and increases in taxes receivable
and other assets of $754 million and $137 million, respectively, and decreases
in deferred revenues, due to other funds and other liabilities of $134 million.
These gains were partially offset by decreases in accounts receivable and money
due from other funds of $77 million, increases in payables to local governments
and accrued liabilities of $80 million and $175 million, respectively, and an
increase in tax refunds payable of $537 million.
The State reported an accumulated fund balance of $3.92 billion in the
General Fund for 1999-2000. The accumulated fund balance is $50 million higher
after a restatement by the State Comptroller to reflect the reclassification of
the Debt Reduction Reserve Fund to the General Fund.
General Fund revenues increased $2.30 billion (6.4%) over the prior fiscal
year with increases in personal income and consumption and use taxes, and
miscellaneous revenues. Business tax and other tax revenues fell from the prior
fiscal year. Personal income taxes grew $1.98 billion, an increase of nearly
9.7%. The increase in personal income taxes was caused by strong employment and
wage growth and the continued strong performance of the financial markets during
1999. Consumption and use taxes increased $327 million, or 4.5%, to reflect a
continuing high level of consumer confidence. Miscellaneous revenues increased
$303 million (14.1%), primarily due to growth in investment earnings, fees,
licenses, royalties and rents and reimbursements from regulated industries used
to fund State administrative costs (e.g., banking and insurance). These
increases were partially offset by decreases in business and other taxes.
Business taxes decreased nearly $301 million, or 6.2%, because of prior year
refunds and the application of credit carryforwards which were applied against
current year (1999) liabilities. Other taxes decreased $12 million, or 1.1%.
General Fund expenditures increased $1.39 billion (3.9%) from the prior
fiscal year, with the largest increases occurring in education, health and
environment. Education expenditures grew $739 million (6.1%) due mainly to an
increase in spending for support for public schools, handicapped pupil education
and municipal and community colleges. Health and environment expenditures
increased over $215 million (33.5%) primarily reflecting increased spending for
local health programs. Personal service costs increased $202 million (3.3%)
principally as a result of increases in wages as required by recently approved
collective bargaining agreements. Non-personal service costs increased $264
million (11.7%) due primarily to increased spending for goods and services.
Net other financing sources in the General Fund increased $192 million
(45.9%) primarily because transfers of surplus revenues from the Debt Service
Funds increased by nearly $100 million and transfers from the Abandoned Property
Fund and the Hospital Bad Debt and Charity Accounts increased by nearly $120
million.
Special Revenue, Debt Service and Capital Projects Fund Types
An operating surplus of $665 million was reported for the Special Revenue
Funds for the 1999-2000 fiscal year which increased the accumulated fund balance
to $2.14 billion after restatement of prior year fund balances. As a result of
legislation enacted during the fiscal year ended March 31, 2000, the Hospital
Bad Debt and Charity Accounts were reclassified to Special Revenue Funds thereby
increasing the beginning fund balance by $1.01 billion. Revenues increased $2.15
billion over the prior fiscal year (6.9%) as a result of increases in tax,
federal grants, and miscellaneous revenues. Expenditures increased $1.49 billion
(5.4%) as a result of increased costs for local assistance grants and
non-personal service. Net other financing uses increased $174 million (4.5%).
Debt Service Funds ended the 1999-2000 fiscal year with an operating
surplus of $38 million and, as a result, the accumulated fund balance increased
to $2.06 billion. Revenues increased $200 million (7.4%) primarily because of
increases in dedicated taxes. Debt service expenditures increased $429 million
(15.0%). Net other financing sources increased $113 million (36.1%) due
primarily to increases in transfers from the General Fund.
An operating surplus of $99 million was reported in the Capital Projects
Funds for the State's 1999-2000 fiscal year and, as a result, the accumulated
fund balance deficit decreased to $129 million. Revenues increased $93 million
(3.7%) primarily because federal grant revenues increased $90 million for
transportation projects. Expenditures increased $84 million (2.3%) primarily
because of increases capital construction spending for transportation projects.
Net other financing sources decreased by $63 million (4.6%).
1998-99 Fiscal Year
The State completed its 1998-99 fiscal year with a combined governmental
funds operating surplus of $1.32 billion, which included operating surpluses in
the General Fund ($1.078 billion), in Debt Service Funds ($209 million) and in
Capital Projects Funds ($154 million) offset, in part, by an operating deficit
in Special Revenue Funds ($117 million).
1997-98 Fiscal Year
The State completed its 1997-98 fiscal year with a combined governmental
funds operating surplus of $1.80 billion, which included an operating surplus in
the General Fund of $1.56 billion, in Capital Projects Funds of $232 million and
in Special Revenue Funds of $49 million, offset, in part, by an operating
deficit of $43 million in Debt Service Funds.
Cash-Basis Results for Prior Fiscal Years
General Fund 1997-98 through 1999-2000
New York State's financial operations have improved during recent fiscal
years. During its last eight fiscal years, the State has recorded balanced
budgets on a cash basis, with positive year-end fund balances.
1999-2000 Fiscal Year
The State ended its 1999-2000 fiscal year in balance on a cash basis, with
a General Fund cash surplus as reported by the DOB of $1.51 billion. As in
recent years, strong growth in receipts above forecasted accounts produced most
of the year-end surplus. Spending was also modestly below projections, further
adding to the surplus.
The State reported a General Fund closing balance of $1.17 billion, an
increase of $275 million from the prior fiscal year. The balance was held in
four accounts within the General Fund: the Tax Stabilization Reserve Fund
(TSRF), the Contingency Reserve Fund (CRF) the Debt Reduction Reserve Fund
(DRRF) and the Community Projects Fund (CPF). The balance is comprised of $547
million in the TSRF after a deposit of $74 million in 1999-2000; $107 million in
the CRF; $250 million in the DRRF; and $263 million in the CPF.
The closing fund balance excludes $3.97 billion that the State deposited
into the tax refund reserve account at the close of 1999-2000 to pay for tax
refunds in 2000-01 of which $521 million was made available as a result of the
Local Government Assistance Corporation (LGAC) financing program and was
required to be on deposit as of March 31, 2000. The tax refund reserve account
transaction has the effect of decreasing reported personal income tax receipts
in 1999-2000, while increasing reported receipts in 2000-01.
General Fund receipts and transfers from other funds (net of tax refund
reserve account activity) for the 1999-2000 fiscal year totaled $37.40 billion,
an increase of 1.6% from 1998-99 levels. General Fund disbursements and
transfers to other funds totaled $37.17 billion for the 1999-2000 fiscal year,
an increase of 1.6% from the prior fiscal year.
1998-99 Fiscal Year
The State ended its 1998-99 fiscal year on March 31, 1999, in balance on a
cash basis, with a General Fund cash surplus as reported by DOB of approximately
$1.82 billion. The cash surplus was derived primarily from higher-than-projected
tax collections as a result of continued economic growth, particularly in the
financial markets and securities industries.
The General Fund had a closing balance of $892 million, an increase of
$254 million from the prior fiscal year. The TSRF closing balance was $473
million, following an additional deposit of $73 million in 1998-99. The CRF
closing balance was $107 million, in following a $39 million deposit in 1998-99.
The CPF closed the fiscal year with a balance of $312 million. The General Fund
closing balance did not include $2.31 billion in the tax refund reserve account,
of which $521 million was made available as a result of the LGAC financing
program and was required to be on deposit on March 31, 1999.
General Fund receipts and transfers from other funds (net of tax refund
reserve account activity) for the 1998-99 fiscal year totaled $36.82 billion, an
annual increase of 6.2% over 1997-98. General Fund disbursements and transfers
to other funds were $36.57 billion, an annual increase of 6.1%.
1997-98 Fiscal Year
The State ended its 1997-98 fiscal year in balance on a cash basis, with a
General Fund cash surplus as reported by DOB of approximately $2.04 billion. The
cash surplus was derived primarily from higher-than-anticipated receipts and
lower spending on welfare, Medicaid, and other entitlement programs.
The General Fund closing balance was $638 million, an increase of $205
million from the prior fiscal year. The balance included $400 million in the
TSRF, after a required deposit of $15 million (repaying a transfer made in
1991-92) and an additional deposit of $68 million made from the 1997-98 surplus.
(The CRF closing balance was $68 million, following a $27 million deposit from
the surplus. The CPF closed the fiscal year with a balance of $170 million. The
General Fund closing balance did not include $2.39 billion in the tax refund
reserve account, of which $521 million was made available as a result of the
LGAC financing program and was required to be on deposit on March 31, 1998.)
General Fund receipts and transfers from other funds (net of tax refund
reserve account activity) for the 1997-98 fiscal year totaled $34.67 billion, an
increase of 4.9% from the previous fiscal year. General Fund disbursements and
transfers to other funds totaled $34.47 billion, an increase of 4.8%.
Other Governmental Funds (1997-98 through 1999-2000)
Activity in the three other governmental funds has remained relatively
stable over the last three fiscal years, with federally-funded programs
comprising approximately two-thirds of these funds. The most significant change
in the structure of these funds has been the redirection of a portion of
transportation-related revenues from the General Fund to two 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, the
Metropolitan Transportation Authority (MTA) and other transit entities.
In the Special Revenue Funds, disbursements increased from $27.65 billion
to $31.22 billion over the last three years, primarily as a result of increased
costs for the federal share of Medicaid and the initial costs of the STAR
program. Other activity reflected dedication of taxes for mass transportation
purposes, new lottery games, and new fees for criminal justice programs.
Disbursements in the Capital Projects Funds increased over the three-year
period from $3.57 billion to $4.22 billion, primarily for education,
environment, public protection and transportation programs. The composition of
this fund type's receipts also has changed as dedicated taxes, federal grants
and reimbursements from public authority bonds increased, while general
obligation bond proceeds declined.
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
ongoing costs of the LGAC fiscal reform program. The increases were moderated by
the refunding savings achieved by the State over the last several years using
strict present value savings criteria. Disbursements in this fund type increased
from $3.09 billion to $3.59 billion over the three-year period.
The New York Economy
New York is the third most populous state in the nation and has a
relatively high level of personal wealth. The State's economy is diverse, with a
comparatively large share of the nation's finance, insurance, transportation,
communications and services employment, and a very small share of the nation's
farming and mining activity. The State's location and its air transport
facilities and natural harbors have made it an important link in international
commerce. Travel and tourism constitute an important part of the economy. Like
the rest of the nation, New York has a declining proportion of its workforce
engaged in manufacturing, and an increasing proportion engaged in service
industries.
New York's employment remained strong for the first six months of 2000.
Most industry sectors experienced employment gains, with the service sector
accounting for the largest increases. The July forecast makes no change in the
employment outlook from the forecast contained in the Financial Plan enacted in
May 2000. Strong job growth is expected to continue throughout the rest of 2000.
Total employment growth of 2.1% is expected to exceed national employment
growth, although less than the 2.6% growth in 1999. As in the recent past,
employment increases are expected to be concentrated in the services sector.
Wage growth for 2000 is expected to be 8.2%, while personal income growth is
estimated at 6.5%.
Given the importance of the securities industry in the New York State
economy, a significant change in stock market performance during the forecast
horizon could result in financial sector profits and bonuses that are
significantly different from those embodied in the forecast. Any actions by the
Federal Reserve Board to moderate inflation by increasing interest rates more
than anticipated may have an adverse impact in New York given the sensitivity of
financial markets to interest rate shifts and the prominence of these markets in
the New York economy. In addition, there is a possibility that
greater-than-anticipated mergers, downsizing, and relocation of firms caused by
deregulation and global competition may have a significant adverse effect on
employment growth.
Services: The services sector, which includes entertainment, personal
services, such as health care and auto repairs, and business-related services,
such as information processing, law and accounting, is the State's leading
economic sector. The services sector accounts for more than three of every ten
nonagricultural jobs in New York and has a noticeably higher proportion of total
jobs than does the rest of the nation.
Manufacturing: Manufacturing employment continues to decline in importance
in New York, as in most other states, and New York's economy is less reliant on
this sector than in the past. However, it remains an important sector of the
State economy, particularly for the upstate economy, as high concentrations of
manufacturing industries for transportation equipment, optics and imaging,
materials processing, and refrigeration, heating, and electrical equipment
products are located in the upstate region.
Trade: Wholesale and retail trade is the second largest sector in terms of
nonagricultural jobs in New York but is considerably smaller when measured by
income share. Trade consists of wholesale businesses and retail businesses, such
as department stores and eating and drinking establishments.
Finance, Insurance and Real Estate: New York City is the nation's leading
center of banking and finance and, as a result, this is a far more important
sector in the State than in the nation as a whole. Although this sector accounts
for under one-tenth of all nonagricultural jobs in the State, it contributes
about one-fifth of total wages.
Agriculture: Farming is an important part of the economy of large regions
of the State, although it constitutes a very minor part of total State output.
Principal agricultural products of the State include milk and dairy products,
greenhouse and nursery products, apples and other fruits, and fresh vegetables.
New York ranks among the nation's leaders in the production of these
commodities.
Government: Federal, State and local government together are the third
largest sector in terms of nonagricultural jobs, with the bulk of the employment
accounted for by local governments. Public education is the source of nearly
one-half of total State and local government employment.
Economic and Demographic Trends
In the calendar years 1987 through 1998, the State's rate of economic
growth was somewhat slower than that of the nation. In particular, during the
1990-91 recession and post-recession period, 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. However, the situation has been
improving during recent years. In 1999, for the first time in 13 years, the
employment growth rate of the State surpassed the national growth rate. Although
the State unemployment rate has been higher than the national rate since 1991,
the gap between them has narrowed in recent years.
State per capita personal income has historically been significantly
higher than the national average, although the ratio has varied substantially.
Because New York City is a regional employment center for a multi-state region,
State personal income measured on a residence basis understates the relative
importance of the State to the national economy and the size of the base to
which State taxation applies.
Debt and Other Financing Activities
Financing activities of the State include general obligation debt and
State-guaranteed debt, to which the full faith and credit of the State has been
pledged, as well as lease-purchase and contractual-obligation financings, moral
obligation and other financings through public authorities and municipalities,
where the State's legal obligation to make payments to those public authorities
and municipalities for their debt service is subject to annual appropriation by
the Legislature.
The State has never defaulted on any of its general obligation
indebtedness or its obligations under lease-purchase or contractual-obligation
financing arrangements and has never been called upon to make any direct
payments pursuant to its guarantees.
The State's 2000-01 borrowing plan projects issuances of $367 million in
general obligation bonds, including $45 million for purposes of redeeming the
remaining outstanding BANs. The State does not anticipate issuing new BANs
during the 2000-01 fiscal year. The State is expected to issue up to $276
million in COPs to finance equipment purchases (including costs of issuance,
reserve funds, and other costs) during the 2000-01 fiscal year. Of this amount,
it is anticipated that approximately $76 million will be used to finance agency
equipment acquisitions. Approximately $200 million is expected to finance the
purchase of new welfare computer systems designed to improve case management,
fraud detection and child support collection capabilities.
Borrowings by public authorities pursuant to lease-purchase and
contractual-obligation financings for capital programs of the State are
projected to total approximately $2.91 billion, including costs of issuance,
reserve funds, and other costs, net of anticipated refundings and other
adjustments in 2000-01.
Public Authorities
The fiscal stability of the State is related in part to the fiscal
stability of its public authorities. For the purposes of this AIS, public
authorities refer to public benefit corporations, created pursuant to State law,
other than local authorities. Public authorities are not subject to the
constitutional restrictions on the incurrence of debt that apply to the State
itself and may issue bonds and notes within the amounts and restrictions set
forth in legislative authorization. The State's access to the public credit
markets could be impaired and the market price of its outstanding debt may be
materially and adversely affected if any of its public authorities were to
default on their respective obligations. As of December 31, 1999, there were 17
public authorities that had outstanding debt of $100 million or more, and the
aggregate outstanding debt, including refunding bonds, of these State public
authorities was $95 billion, only a portion of which constitutes State-supported
or State-related debt.
The State has numerous public authorities with various responsibilities,
including those which finance, construct and/or operate revenue-producing public
facilities. Public authorities generally pay their operating expenses and debt
service costs from revenues generated by the projects they finance or operate,
such as tolls charged for the use of highways, bridges or tunnels, charges for
public power, electric and gas utility services, rentals charged for housing
units, and charges for occupancy at medical care facilities. In addition, State
legislation authorizes several financing techniques for public authorities.
Also, there are statutory arrangements providing for State local assistance
payments otherwise payable to localities to be made under certain circumstances
to public authorities. Although the State has no obligation to provide
additional assistance to localities whose local assistance payments have been
paid to public authorities under these arrangements, the affected localities may
seek additional State assistance if local assistance payments are diverted. Some
authorities also receive moneys from State appropriations to pay for the
operating costs of certain of their programs. As described below, the MTA
receives the bulk of this money in order to provide transit and commuter
services.
Beginning in 1998, the Long Island Power Authority (LIPA) assumed
responsibility for the provision of electric utility services previously
provided by Long Island Lighting Company for Nassau, Suffolk and a portion of
Queen Counties, as part of an estimated $7 billion financing plan. As of the
date of this AIS, LIPA has issued over $7 billion in bonds secured solely by
ratepayer charges. LIPA's debt is not considered either State-supported or
State-related debt.
Metropolitan Transportation Authority
The MTA oversees the operation of subway and bus lines in New York City by
its affiliates, the New York City Transit Authority and the Manhattan and Bronx
Surface Transit Operating Authority (collectively, the TA). The MTA operates
certain commuter rail and bus services in the New York metropolitan area through
the MTA's subsidiaries, the Long Island Rail Road Company, the Metro-North
Commuter Railroad Company, and the Metropolitan Suburban Bus Authority. In
addition, the Staten Island Rapid Transit Operating Authority, an MTA
subsidiary, operates a rapid transit line on Staten Island. Through its
affiliated agency, the Triborough Bridge and Tunnel Authority (TBTA), the MTA
operates certain intrastate toll bridges and tunnels. Because fare revenues are
not sufficient to finance the mass transit portion of these operations, the MTA
has depended on, and will continue to depend on, operating support from the
State, local governments and TBTA, including loans, grants and subsidies. If
current revenue projections are not realized and/or operating expenses exceed
current projections, the TA or commuter railroads may be required to seek
additional State assistance, raise fares or take other actions.
Since 1980, the State has enacted several taxes--including a surcharge on
the profits of banks, insurance corporations and general business corporations
doing business in the 12-county Metropolitan Transportation Region served by the
MTA and a special one-quarter of 1% regional sales and use tax--that provide
revenues for mass transit purposes, including assistance to the MTA. Since 1987,
State law also has required that the proceeds of a one-quarter of 1% mortgage
recording tax paid on certain mortgages in the Metropolitan Transportation
Region be deposited in a special MTA fund for operating or capital expenses. In
1993, the State dedicated a portion of certain additional State petroleum
business tax receipts to fund operating or capital assistance to the MTA. The
2000-01 enacted budget provides State assistance to the MTA totaling
approximately $1.35 billion and initiates a five-year State transportation plan
that includes nearly $2.2 billion in dedicated revenue support for the MTA's
2000-04 Capital Program. This capital commitment includes an additional $800
million of newly dedicated State petroleum business tax revenues, motor vehicle
fees, and motor fuel taxes not previously dedicated to the MTA.
State legislation accompanying the 2000-01 enacted State budget increased
the aggregate bond cap for the MTA, TBTA and TA to $16.5 billion in order to
finance a portion of the $17.1 billion MTA capital plan for the 2000-04 Capital
Program. On May 4, 2000, the Capital Program Review Board approved the MTA's
$17.1 billion capital program for transit purposes for 2000 through 2004. The
2000-04 Capital Program is the fifth 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
system by investing in new rolling stock, maintaining replacement schedules for
existing assets, bringing the MTA system into a state of good repair, and making
major investments in system expansion projects such as the Second Avenue Subway
project and the East Side Access project.
The currently approved 2000-04 Capital Program assumes the issuance of an
estimated $8.9 billion in new money bonds. The remainder of the plan is
projected to be financed with assistance from the Federal Government, the State,
the City of New York, and from various other revenues generated from actions
taken by the MTA. In addition, $1.6 billion in State support is projected to be
financed using proceeds from State general obligation bonds under the proposed
$3.8 billion Transportation Infrastructure Bond Act of 2000, if approved by the
voters in the November 2000 general election. Further, the enacted State budget
authorized the MTA to undertake a major debt restructuring initiative which will
enable the MTA to refund approximately $13.7 billion in bonds, consolidate its
credit sources, and obviate the need for debt service reserves. The
authorization for debt restructuring includes outstanding bonds secured by
service contracts with the State.
There can be no assurance that all the necessary governmental actions for
future capital programs will be taken, that funding sources currently identified
will not be decreased or eliminated, or that the 2000-04 Capital Program or
parts thereof will not be delayed or reduced. Should funding levels fall below
current projections, the MTA would have to revise its 2000-04 Capital Program
accordingly. If the 2000-04 Capital Program is delayed or reduced, ridership and
fare revenues may decline, which could, among other things, impair the MTA's
ability to meet its operating expenses without additional assistance.
The City of New York
The fiscal health of the State also may be affected by the fiscal health
of New York City, which continues to receive significant financial assistance
from the State. State aid contributes to the City's ability to balance its
budget and meet its cash requirements. The State also may be affected by the
ability of the City and certain entities issuing debt for the benefit of the
City to market their securities successfully in the public credit markets.
In recent years, the State constitutional debt limit would have prevented
the City from entering into new capital contracts. To prevent disruptions in the
capital program, two actions were taken to increase the City's capital financing
capacity: (i) the State Legislature created the New York City Transitional
Finance Authority (TFA) in 1997, and (ii) in 1999, the City created TSASC, Inc.,
a not-for-profit corporation empowered to issue tax-exempt debt backed by
tobacco settlement revenues. During the 2000 legislative session, the State
enacted legislation that increased the borrowing authority of the TFA by $4
billion, to $11.5 billion, which the City expects will provide sufficient
financing capacity to continue its capital program over the next four fiscal
years.
Fiscal Oversight
In response to the City's fiscal crisis in 1975, the State took action to
assist the City in returning to fiscal stability. Among those actions, the State
established the Municipal Assistance Corporation for the City of New York (NYC
MAC) to provide financing assistance to the City; the New York State Financial
Control Board (the Control Board) to oversee the City's financial affairs; and
the Office of the State Deputy Comptroller for the City of New York (OSDC) to
assist the Control Board in exercising its powers and responsibilities. A
"control period" existed from 1975 to 1986, during which the City was subject to
certain statutorily-prescribed fiscal controls. The Control Board terminated the
control period 1986 when certain statutory conditions were met. State law
requires the Control Board to reimpose a control period upon the occurrence, or
"substantial likelihood and imminence" of the occurrence, of certain events,
including (but not limited to) a City operating budget deficit of more than $100
million or impaired access to the public credit markets.
Currently, the City and its Covered Organizations (i.e., those
organizations which receive or may receive moneys from the City directly,
indirectly or contingently) operate under the City's Financial Plan. The City's
Financial Plan summarizes its capital, revenue and expense projections and
outlines proposed gap-closing programs for years with projected budget gaps. The
City's projections set forth in its Financial Plan are based on various
assumptions and contingencies, some of which are uncertain and may not
materialize. Unforeseen developments and changes in major assumptions could
significantly affect the City's ability to balance its budget as required by
State law and to meet its annual cash flow and financing requirements.
Monitoring Agencies
The staffs of the Control Board, OSDC and the City Comptroller issue
periodic reports on the City's Financial Plans. The reports analyze the City's
forecasts of revenues and expenditures, cash flow, and debt service
requirements, as well as evaluate compliance by the City and its Covered
Organizations with its Financial Plan. According to staff reports, economic
growth in New York City has been very strong in recent years, led by a surge in
Wall Street profitability which resulted in increased tax revenues and produced
a substantial surplus for the City in City fiscal years 1996-97, 1997-98 and
1998-99. Recent staff reports also indicate that the City projects a surplus for
City fiscal year 1999-2000. Although several sectors of the City's economy have
expanded over the last several years, especially tourism, media, business and
professional services, City tax revenues remain heavily dependent on the
continued profitability of the securities industries and the performance of the
national economy. In addition, the size of recent tax reductions has increased
to over $2.3 billion in City fiscal year 1999-2000 through the expiration of a
personal income tax surcharge, the repeal of the non-resident earnings tax and
the elimination of the sales tax on clothing items costing less than $110. The
Mayor has proposed additional tax reductions that would raise the total worth of
recent tax cuts to $3.7 billion by City fiscal year 2003-04. Staff reports have
indicated that recent City budgets have been balanced in part through the use of
nonrecurring resources and that the City's Financial Plan relies in part on
actions outside its direct control. These reports also have indicated that the
City has not yet brought its long-term expenditure growth in line with recurring
revenue growth and that the City is likely to continue to face substantial gaps
between forecast revenues and expenditures in future years that must be closed
with reduced expenditures and/or increased revenues. In addition to these
monitoring agencies, the Independent Budget Office (IBO) has been established
pursuant to the City Charter to provide analysis to elected officials and the
public on relevant fiscal and budgetary issues affecting the City.
Other Localities
Certain localities outside New York City have experienced financial
problems and have requested and received additional State assistance during the
last several State fiscal years. The potential impact on the State of any future
requests by localities for additional oversight or financial assistance is not
included in the projections of the State's receipts and disbursements for the
State's 2000-01 fiscal year.
The State has provided extraordinary financial assistance to select
municipalities, primarily cities, since the 1996-97 fiscal year. Funding has
essentially been continued or increased in each subsequent fiscal year. Such
funding in 2000-01 totals $200.4 million. The 2000-01 enacted budget increased
General Purpose State Aid for local governments by $11 million to $562 million.
While the distribution of General Purpose State Aid for local governments
was originally based on a statutory formula, in recent years both the total
amount appropriated and the shares appropriated to specific localities have been
determined by the Legislature. A State commission established to study the
distribution and amounts of general purpose local government aid failed to agree
on any recommendations for a new formula.
Counties, cities, towns, villages and school districts have engaged in
substantial short-term and long-term borrowings. In 1998, the total indebtedness
of all localities in the State, other than New York City, was approximately
$20.3 billion. A small portion (approximately $80 million) of that 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 New York City) authorized by State law to issue debt to finance
deficits during the period that such deficit financing is outstanding.
Twenty-three localities had outstanding indebtedness for deficit financing at
the close of their fiscal year ending in 1998.
Like the State, local governments must respond to changing political,
economic and financial influences over which they have little or no control.
Such changes may adversely affect the financial condition of certain local
governments. For example, the federal government may reduce (or in some cases
eliminate) federal funding of some local programs which, in turn, may require
local governments to fund these expenditures from their own resources. It is
also possible that the State, New York City, or any of their respective public
authorities may suffer serious financial difficulties that could jeopardize
local access to the public credit markets, which may adversely affect the
marketability of notes and bonds issued by localities within the State.
Localities also may face unanticipated problems resulting from certain pending
litigation, judicial decisions and long-range economic trends. Other large-scale
potential problems, such as declining urban populations, increasing
expenditures, and the loss of skilled manufacturing jobs, also may adversely
affect localities and necessitate State assistance.
Litigation
General
The legal proceedings listed below involve State finances and programs and
miscellaneous civil rights, real property, contract and other tort claims in
which the State is a defendant and the potential monetary claims against the
State are substantial, generally in excess of $100 million. These proceedings
could adversely affect the financial condition of the State in the 2000-01
fiscal year or thereafter.
The State is party to other claims and litigation which its legal counsel
has advised are not probable of adverse court decisions or are not deemed
adverse and material. Although the amounts of potential losses resulting from
this litigation, if any, are not presently determinable, it is the State's
opinion that its ultimate liability in these cases is not expected to have a
material and adverse effect on the State's financial position in the 2000-01
fiscal year or thereafter.
The General Purpose Financial Statements for the 1999-2000 fiscal year
report estimated probable awarded and anticipated unfavorable judgments of $895
million, of which $132 million is expected to be paid during the 1999-2000
fiscal year.
Adverse developments in the proceedings described below, other proceedings
for which there are unanticipated, unfavorable and material judgments, or the
initiation of new proceedings could affect the ability of the State to maintain
a balanced 2000-01 Financial Plan. The State believes that the proposed 2000-01
Financial Plan includes sufficient reserves to offset the costs associated with
the payment of judgments that may be required during the 2000-01 fiscal year.
These reserves include (but are not limited to) amounts appropriated for Court
of Claims payments and projected fund balances in the General Fund. In addition,
any amounts ultimately required to be paid by the State may be subject to
settlement or may be paid over a multi-year period. There can be no assurance,
however, that adverse decisions in legal proceedings against the State would not
exceed the amount of all potential 2000-01 Financial Plan resources available
for the payment of judgments, and could therefore affect the ability of the
State to maintain a balanced 2000-01 Financial Plan.
Tax Law
In New York Association of Convenience Stores, et al. v. Urbach, et al.,
petitioners, New York Association of Convenience Stores, National Association of
Convenience Stores, M.W.S. Enterprises, Inc. and Sugarcreek Stores, Inc. are
seeking to compel respondents, the Commissioner of Taxation and Finance and the
Department of Taxation and Finance, to enforce sales and excise taxes imposed,
pursuant to Tax Law Articles 12-A, 20 and 28, on tobacco products and motor fuel
sold to non-Indian consumers on Indian reservations. In orders dated August 13,
1996 and August 24, 1996, the Supreme Court, Albany County, ordered, inter alia,
that there be equal implementation and enforcement of said taxes for sales to
non-Indian consumers on and off Indian reservations, and further ordered that,
if respondents failed to comply within 120 days, no tobacco products or motor
fuel could be introduced onto Indian reservations other than for Indian
consumption or, alternately, the collection and enforcement of such taxes would
be suspended statewide. Respondents appealed to the Appellate Division, Third
Department, and invoked CPLR 5519(a)(1), which provides that the taking of the
appeal stayed all proceedings to enforce the orders pending the appeal.
Petitioners' motion to vacate the stay was denied. In a decision entered May 8,
1997, the Third Department modified the orders by deleting the portion thereof
that provided for the statewide suspension of the enforcement and collection of
the sales and excise taxes on motor fuel and tobacco products. The Third
Department held, inter alia, that petitioners had not sought such relief in
their petition and that it was an error for the Supreme Court to have awarded
such undemanded relief without adequate notice of its intent to do so. On May
22, 1997, respondents appealed to the Court of Appeals on other grounds, and
again invoked the statutory stay. On October 23, 1997, the Court of Appeals
granted petitioners' motion for leave to cross appeal from the portion of the
Third Department's decision that deleted the statewide suspension of the
enforcement and collection of the sales and excise taxes on motor fuel and
tobacco. On July 9, 1998, the New York Court of Appeals reversed the order of
the Appellate Division, Third Department, and remanded the matter to the Supreme
Court, Albany County, for further proceedings. The Court held that the
petitioners had standing to assert an equal protection claim, but that their
claim did not implicate racial discrimination. The Court remanded the case to
Supreme Court, Albany County, for resolution of the question of whether there
was a rational basis for the Tax Department's policy of non-enforcement of the
sales and excise taxes on reservation sales of cigarettes and motor fuel to
non-Indians. In a footnote, the Court stated that, in view of its disposition of
the case, petitioners' cross-appeal regarding the statewide suspension of the
taxes is "academic." By decision and judgment dated July 9, 1999, the Supreme
Court, Albany County, granted judgment dismissing the petition. On September 2,
1999, petitioners appealed to the Appellate Division, Third Department, from the
July 9, 1999 decision and order. On August 3, 2000, the Third Department
affirmed the judgment dismissing the petition.
Line Item Veto
In an action commenced in June 1998 by the Speaker of the Assembly of the
State of New York against the Governor of the State of New York (Silver v.
Pataki, Supreme Court, New York County), the Speaker challenges the Governor's
application of his constitutional line item veto authority to certain portions
of budget bills adopted by the State Legislature contained in Chapters 56, 57
and 58 of the Laws of 1998. On July 10, 1998, the State filed a motion to
dismiss this action. By order entered January 7, 1999, the Court denied the
State's motion to dismiss. On January 27, 1999, the State appealed that order.
By decision dated July 20, 2000, the Appellate Division reversed the January 7,
1999 order and dismissed the petition.
Real Property Claims
On March 4, 1985 in Oneida Indian Nation of New York, et al. v. County of
Oneida, the United States Supreme Court affirmed a judgment of the United States
Court of Appeals for the Second Circuit holding that the Oneida Indians have a
common-law right of action against Madison and Oneida Counties for wrongful
possession of 872 acres of land illegally sold to the State in 1795. At the same
time, however, the Court reversed the Second Circuit by holding that a
third-party claim by the counties against the State for indemnification was not
properly before the federal courts. The case was remanded to the District Court
for an assessment of damages, which action is still pending. The counties may
still seek indemnification in the State courts.
In 1998, the United States filed a complaint in intervention in Oneida
Indian Nation of New York. In December 1998, both the United States and the
tribal plaintiffs moved for leave to amend their complaints to assert claims for
250,000 acres, to add the State as a defendant, and to certify a class made up
of all individuals who currently purport to hold title within said 250,000 acre
area. These motions were argued March 29, 1999 and are still awaiting
determination. The District Court has not yet rendered a decision. By order
dated February 24, 1999, the District Court appointed a federal settlement
master. A conference scheduled by the District Court for May 26, 1999 to address
the administration of this case has been adjourned indefinitely.
Several other actions involving Indian claims to land in upstate New York
are also pending. Included are Cayuga Indian Nation of New York v. Cuomo, et
al., and Canadian St. Regis Band of Mohawk Indians, et al. v. State of New York,
et al., both in the United States District Court for the Northern District of
New York. The Supreme Court's holding in Oneida Indian Nation of New York may
impair or eliminate certain of the State's defenses to these actions, but may
enhance others. In the Cayuga Indian Nation of New York case, by order dated
March 29, 1999, the United States District Court for the Northern District of
New York appointed a federal settlement master. In October 1999, the District
Court granted the Federal Government's motion to have the State held jointly and
severally liable for any damages owed to the plaintiffs. At the conclusion of
the damages phase of the trial of this case, a jury verdict of $35 million in
damages plus $1.9 million representing the fair rental value of the properties
at issue was rendered against the defendants. On July 17, 2000, a bench hearing
was commenced to determine whether prejudgment interest is appropriate and, if
so, the amount thereof. In the Canadian St. Regis Band of Mohawk Indians case,
the United States District Court for the Northern District of New York has
directed the parties to rebrief outstanding motions to dismiss brought by the
defendants. The State filed its brief on July 1, 1999. The motions were argued
in September 1999. No decision has been rendered on these motions. In Seneca
Nation of Indians, by order dated November 22, 1999, the District Court
confirmed the July 12, 1999 magistrate's report, which recommended granting the
State's motion to dismiss that portion of the action relating to the right of
way where the New York State Thruway crosses the Cattaraugus Reservation in Erie
and Chatauqua Counties and denying the State's motion to dismiss the Federal
Government's damage claims. The District Court has set a trial date of October
17, 2000 for that portion of the case related to the plaintiff's claim of
ownership of the islands in the Niagara River.
Civil Rights Claims
In an action commenced in 1980 (United States, et al. v. Yonkers Board of
Education, et al.), the United States District Court for the Southern District
of New York found, in 1985, that Yonkers and its public schools were
intentionally segregated. In 1986, the District Court ordered Yonkers to develop
and comply with a remedial educational improvement plan (EIP I). On January 19,
1989, the District Court granted motions by Yonkers and the NAACP to add the
State Education Department, the Yonkers Board of Education, and the State Urban
Development Corporation as defendants, based on allegations that they had
participated in the perpetuation of the segregated school system. On August 30,
1993, the District Court found that vestiges of a dual school system continued
to exist in Yonkers. On March 27, 1995, the District Court made factual findings
regarding the role of the State and the other State defendants (the State) in
connection with the creation and maintenance of the dual school system, but
found no legal basis for imposing liability. On September 3, 1996, the United
States Court of Appeals for the Second Circuit, based on the District Court's
factual findings, held the State defendants liable under 42 USC ss.1983 and the
Equal Educational Opportunity Act, 20 USC ss.ss.1701, et seq., for the unlawful
dual school system, because the State, inter alia, had taken no action to force
the school district to desegregate despite its actual or constructive knowledge
of de jure segregation. By order dated October 8, 1997, the District Court held
that vestiges of the prior segregated school system continued to exist and that,
based on the State's conduct in creating and maintaining that system, the State
is liable for eliminating segregation and its vestiges in Yonkers and must fund
a remedy to accomplish that goal. Yonkers presented a proposed educational
improvement plan (EIP II) to eradicate these vestiges of segregation. The
October 8, 1997 order of the District Court ordered that EIP II be implemented
and directed that, within 10 days of the entry of the order, the State make
available to Yonkers $450,000 to support planning activities to prepare the EIP
II budget for 1998-99 and the accompanying capital facilities plan. A final
judgment to implement EIP II was entered on October 14, 1997. On November 7,
1997, the State appealed that judgment to the Second Circuit. Additionally, the
Court adopted a requirement that the State pay to Yonkers approximately $9.85
million as its pro rata share of the funding of EIP I for the 1996-97 school
year. The requirement for State funding of EIP I was reduced to an order on
December 2, 1997 and reduced to a judgment on February 10, 1998. The State
appealed that order to the Second Circuit on December 31, 1997 and amended the
notice of appeal after entry of the judgment.
On June 15, 1998, the District Court issued an opinion setting forth the
formula for the allocation of the costs of EIP I and EIP II between the State
and the City for the school years 1997-98 through 2005-06. That opinion was
reduced to an order on July 27, 1998. The order directed the State to pay $37.5
million by August 1, 1998 for estimated EIP costs for the 1997-98 school year.
The State made this payment, as directed. On August 24, 1998, the State appealed
that order to the Second Circuit. The city of Yonkers and the Yonkers Board of
Education cross appealed to the Second Circuit from that order. By stipulation
of the parties approved by the Second Circuit on November 19, 1998, the appeals
from the July 27, 1998 order were withdrawn without prejudice to reinstatement
upon determination of the State's appeal of the October 14, 1997 judgment
discussed above.
On April 15, 1999, the District Court issued two additional orders. The
first order directed the State to pay to Yonkers an additional $11.3 million by
May 1, 1999, as the State's remaining share of EIP costs for the 1997-98 school
year. The second order directed the State to pay to Yonkers $69.1 million as its
share of the estimated EIP costs for the 1998-99 school year. The State made
both payments on April 30, 1999.
In a decision dated June 22, 1999, the Second Circuit found no basis for
the District Court's findings that vestiges of a dual system continued to exist
in Yonkers and reversed the order directing the implementation of EIP II. The
Second Circuit also affirmed the District Court's order requiring the State to
pay one-half of the cost of EIP I for the 1996-97 school year and remanded the
case to the District Court for further proceedings consistent with its decision.
On July 2, 1999 the NAACP filed a petition for rehearing of the June 22, 1999
decision before the Second Circuit, en banc. The State has joined in the City of
Yonkers motion to stay further implementation of EIP II pending the decision on
the petition for rehearing. By order dated August 5, 1999, the Second Circuit
granted the motion staying further implementation of EIP II pending appeal.
On July 27, 1999, the City of Yonkers moved in the District Court to
modify the July 27, 1998 order to require the State to make payments for EIP
expenses each month from July 1999 through April 2000 of $9.22 million per month
instead of paying $92.2 million by May 1, 2000. By memorandum and order dated
July 29, 1999, the District Court denied this motion.
In a decision dated November 16, 1999, the Second Circuit vacated its June
22, 1999 decision. In this decision, the Second Circuit again affirmed the
District Court's order requiring the State to pay one-half of the cost of EIP I
for the 1996-97 school year. The Second Circuit also found no basis for the
District Court's findings that vestiges of a dual system continued to exist in
Yonkers, and therefore vacated the District Court's EIP II order. The Second
Circuit, however, remanded to the District Court for the limited purpose of
making further findings on the existing record as to whether any other vestiges
of the dual system remain in the Yonkers public schools. On May 22, 2000, the
United States Supreme Court denied the State's petition for certiorari, seeking
leave to appeal the November 16, 1999 decision and the underlying September 3,
1996 decision.
On April 17, 2000, the District Court issued an additional order,
directing the State to pay to Yonkers $44.3 million as its share of the
estimated EIP costs for the 1999-2000 school year. On May 17, 2000, the State
appealed that order to the Second Circuit. The appeals of all of these funding
orders have been consolidated with the May 17, 2000 appeal of the April 17, 2000
order.
School Aid
In Campaign for Fiscal Equity, Inc., et al. v. State, et al. (Supreme
Court, New York County), plaintiffs challenge the funding for New York City
public schools. Plaintiffs seek a declaratory judgment that the State's public
school financing system violates article 11, section 1 of the State Constitution
and Title VI of the federal Civil Rights Act of 1964 and injunctive relief that
would require the State to satisfy State Constitutional standards. This action
was commenced in 1993. The trial of this action concluded July 27, 2000.
State Programs
Medicaid
Several cases challenge provisions of Chapter 81 of the Laws of 1995
which alter the nursing home Medicaid reimbursement methodology on and after
April 1, 1995. Included are New York State Health Facilities Association, et
al. v. DeBuono, et al., St. Luke's Nursing Center, et al. v. DeBuono, et al.,
New York Association of Homes and Services for the Aging v. DeBuono et al.
(three cases), Healthcare Association of New York State v. DeBuono and
Bayberry Nursing Home et al. v. Pataki, et al. Plaintiffs allege that the
changes in methodology have been adopted in violation of procedural and
substantive requirements of State and federal law.
In a consolidated action commenced in 1992, Medicaid recipients and home
health care providers and organizations challenge promulgation by the State
Department of Social Services (DSS) in June 1992 of a home assessment resource
review instrument (HARRI), which is to be used by DSS to determine eligibility
for and the nature of home care services for Medicaid recipients, and challenge
the policy of DSS of limiting reimbursable hours of service until a patient is
assessed using the HARRI (Dowd, et al. v. Bane, Supreme Court, New York County).
In a related case, Rodriguez v. DeBuono, on April 19, 1999, the United States
District Court for the Southern District of New York enjoined the State's use of
task based assessment, which is similar to the HARRI, unless the State assesses
safety monitoring as a separate task based assessment, on the grounds that its
use without such additional assessment violated federal Medicaid law and the
Americans with Disabilities Act. The State appealed from the April 19, 1999
order and on July 12, 1999 argued the appeal before the Second Circuit. By order
dated October 6, 1999, the Second Circuit reversed the April 19, 1999 order and
vacated the injunction. On October 20, 1999, petitioners filed a request for
rehearing en banc.
In several cases, plaintiffs seek retroactive claims for reimbursement
for services provided to Medicaid recipients who were also eligible for
Medicare during the period January 1, 1987 to June 2, 1992. Included are
Matter of New York State Radiological Society v. Wing, Appel v. Wing, E.F.S.
Medical Supplies v. Dowling, Kellogg v. Wing, Lifshitz v. Wing, New York
State Podiatric Medical Association v. Wing and New York State Psychiatric
Association v. Wing. These cases were commenced after the State's
reimbursement methodology was held invalid in New York City Health and
Hospital Corp. v. Perales. The State contends that these claims are
time-barred. In a judgment dated September 5, 1996, the Supreme Court,
Albany County, dismissed Matter of New York State Radiological Society v.
Wing as time-barred. By order dated November 26, 1997, the Appellate
Division, Third Department, affirmed that judgment. By decision dated June
9, 1998, the Court of Appeals denied leave to appeal. In a decision entered
December 15, 1998, the Appellate Division, First Department, dismissed the
remaining cases in accordance with the result in Matter of New York State
Radiological Society v. Wing. By decision dated July 8, 1999, the Court of
Appeals denied leave to appeal.
Several cases, including Port Jefferson Health Care Facility, et al. v.
Wing (Supreme Court, Suffolk County), challenge the constitutionality of Public
Health Law ss.2807-d, which imposes a tax on the gross receipts hospitals and
residential health care facilities receive from all patient care services.
Plaintiffs allege that the tax assessments were not uniformly applied, in
violation of federal regulations. In a decision dated June 30, 1997, the Court
held that the 1.2% and 3.8% assessments on gross receipts imposed pursuant to
Public Health Law ss.ss. 2807-d(2)(b)(ii) and 2807-d(2)(b)(iii), respectively,
are unconstitutional. An order entered August 27, 1997 enforced the terms of the
decision. The State appealed that order. By decision and order dated August 31,
1998, the Appellate Division, Second Department, affirmed that order. On
September 30, 1998, the State moved for re-argument or, in the alternative, for
a certified question for the Court of Appeals to review. By order dated January
7, 1999, the motion was denied. A final order was entered in Supreme Court on
January 26, 1999. On February 23, 1999, the State appealed that order to the
Court of Appeals. In a decision entered December 16, 1999, the Court of Appeal
reversed the decision below and upheld constitutionality of the assessments. On
May 15, 2000, plaintiffs filed a petition for certiorari with the United States
Supreme Court seeking to appeal the December 6, 1999 decision. The State's
response is due June 15, 2000.
In Dental Society, et al. v. Pataki, et al. (United States District Court,
Northern District of New York, commenced February 2, 1999), plaintiffs challenge
the State's reimbursement rates for dental care provided under the State's
dental Medicaid program. Plaintiffs claim that the State's Medicaid fee schedule
violates Title XIX of the Social Security Act (42 U.S.C. ss. 1396a et seq.) and
the federal and State Constitutions. On June 25, 1999, the State filed its
answer. The parties have entered into a settlement agreement dated May 8, 2000
that will increase Medicare dental reimbursement rates prospectively over a
four-year period, beginning June 1, 2000.
Shelter Allowance
In an action commenced in March 1987 against State and New York City
officials (Jiggetts, et al. v. Bane, et al., Supreme Court, New York County),
plaintiffs allege that the shelter allowance granted to recipients of public
assistance is not adequate for proper housing. In a decision dated April 16,
1997, the Court held that the shelter allowance promulgated by the Legislature
and enforced through the State Department of Social Services regulations is not
reasonably related to the cost of rental housing in New York City and results in
homelessness to families in New York City. A judgment was entered on July 25,
1997, directing, inter alia, that the State (i) submit a proposed schedule of
shelter allowances (for the Aid to Dependent Children program and any successor
program) that bears a reasonable relation to the cost of housing in New York
City; and (ii) compel the New York City Department of Social Services to pay
plaintiffs a monthly shelter allowance in the full amount of their contract
rents, provided they continue to meet the eligibility requirements for public
assistance, until such time as a lawful shelter allowance is implemented, and
provide interim relief to other eligible recipients of Aid to Dependent Children
under the interim relief system established in this case. The State appealed to
the Appellate Division, First Department from each and every provision of this
judgment except that portion directing the continued provision of interim
relief. By decision and order dated May 6, 1999, the Appellate Division, First
Department, affirmed the July 25, 1997 judgment. By order dated July 8, 1999,
the Appellate Division denied the State's motion for leave to appeal to the
Court of Appeals from the May 6, 1999 decision and order. By order dated October
14, 1999, the Court of Appeals dismissed the State's motion for leave to appeal.
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
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.
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, 2000
----------------------------------------------------------------------------
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
("Massachusetts Municipal Fund") and the Dreyfus Premier Limited Term Municipal
Fund ("Municipal Fund") (individually, the "Fund", collectively, the "Funds"),
each dated November 1, 2000, as they may be revised from time to time. The Funds
are separate portfolios 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 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
Each Fund's financial statements for the fiscal year ended June 30, 2000,
including notes to the financial statements and supplementary information, and
the Independent Auditors' Report, are included in its Annual Report to
shareholders. A copy of each Annual Report accompanies this SAI. The financial
statements included in each Annual Report, and the Independent Auditors' Report
thereon, contained therein, and related notes, are incorporated herein by
reference.
<PAGE>
TABLE OF CONTENTS
Page
Description of The Funds/Trust..................................B-3
Management of The Funds........................................B-19
Management Arrangements........................................B-25
Purchase of Shares.............................................B-28
Distribution and Service Plans.................................B-34
Redemption of Shares...........................................B-38
Shareholder Services...........................................B-43
Additional Information about Purchases,
Exchanges and Redemptions......................................B-48
Determination of Net Asset Value...............................B-49
Dividends, Other Distributions and Taxes.......................B-50
Portfolio Transactions.........................................B-56
Performance Information........................................B-58
Information about the Funds/Trust..............................B-61
Counsel and Independent Auditors...............................B-63
Appendix A.....................................................B-64
Appendix B.....................................................B-68
<PAGE>
DESCRIPTION OF THE FUNDS/TRUST
The Trust is an open-end management investment company organized as an
unincorporated business trust under the laws of the Commonwealth of
Massachusetts by an Agreement and Declaration of Trust dated March 28, 1983,
amended and restated December 9, 1992, and subsequently further amended. Prior
to March 31, 1997 the Massachusetts Municipal Fund's name was Premier Limited
Term Massachusetts Municipal Fund and Municipal Fund's name was Premier Limited
Term Municipal Fund. The Company is authorized to issue an unlimited number of
shares of beneficial interest, each without par value. The Trustees have
authorized shares of the Funds to be issued in four classes: Class A, Class B,
Class C and Class R.
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
Dreyfus Service Corporation (the "Distributor") is the distributor of the
Fund's shares.
General Investment Objective and Policies for Massachusetts Municipal
Fund. The Massachusetts Municipal Fund seeks to maximize current income exempt
from Federal income taxes and Massachusetts personal income taxes consistent
with what is believed to be the prudent risk of capital. The Massachusetts
Municipal Fund pursues its objective by investing in debt obligations of the
Commonwealth of Massachusetts, its political subdivisions, municipalities,
public authorities and municipal obligations issued by other governmental
entities, the interest from which is believed to be excluded from gross income
for Federal income taxes purposes and is exempt from Massachusetts personal
income taxes ("Massachusetts Municipal Obligations"), and which are of
"investment-grade" quality and generally of intermediate maturities.
Under normal market conditions, the Massachusetts Municipal Fund attempts
to invest 100%, and will invest a minimum of 80%, of its total assets in
Massachusetts Municipal Obligations. Massachusetts Municipal Obligations may
include (1) municipal bonds; (2) municipal notes; (3) municipal commercial
paper; (4) municipal leases, and (5) related investments. When, in Dreyfus'
opinion, adverse market conditions exist for Massachusetts Municipal
Obligations, and a "defensive" investment posture is warranted, the
Massachusetts Municipal Fund may temporarily invest more than 20% of its total
assets in money market instruments which produce income exempt from Federal
taxes, but not Massachusetts personal income taxes, or more than 20% of its
total assets in taxable obligations (including obligations the interest on which
is included in the calculation of the Federal alternative minimum tax for
individuals). Periods when a defensive posture is warranted include those
periods when the Massachusetts Municipal Fund's monies available for investment
exceed the Massachusetts Municipal Obligations available for purchase to meet
the Massachusetts Municipal Fund's rating, maturity and other investment
criteria. Under normal market conditions, the Massachusetts Municipal Fund may
invest up to 20% of its total assets in municipal obligations having maturity
and quality characteristics comparable to those for Massachusetts Municipal
Obligations, but which produce income exempt from Federal taxes, but not from
Massachusetts personal income taxes. The Massachusetts Municipal Fund's policy
of investing a minimum of 80% of its total assets in Massachusetts Municipal
Obligations is a fundamental policy of the Fund.
General Investment Objective and Policies for Municipal Fund. The
Municipal Fund seeks to maximize current income exempt from Federal income taxes
consistent with the prudent risk of capital. The Municipal Fund seeks to achieve
its objective by investing in debt obligations issued by states, cities,
counties, municipalities, municipal agencies and regional districts which are of
"investment-grade" quality and generally of intermediate maturities the interest
from which is, in the opinion of counsel to the respective issuers, exempt from
Federal income taxes ("Municipal Obligations").
Under normal market conditions, the Municipal Fund attempts to invest
100%, and will invest a minimum of 80%, of its total assets in Municipal
Obligations. However, the Municipal Fund has the ability under certain
conditions to invest 20% of its total assets in taxable obligations (including
obligations the interest on which is included in the calculation of the Federal
alternative minimum tax for individuals) and may, for defensive purposes under
abnormal market conditions, temporarily invest more than 20% of its total assets
in taxable obligations. In managing the Municipal Fund, Dreyfus seeks to take
advantage of market developments, yield disparities and variations in the
creditworthiness of issuers. The Municipal Fund's policy of investing a minimum
of 80% of its total assets in Municipal Obligations is a fundamental policy of
the Fund.
General Information Regarding Both Funds. Each Fund is classified as
"non-diversified," as defined under the Investment Company Act of 1940 ("1940
Act"), and therefore, each Fund could invest all of its assets in the
obligations of a single issuer or relatively few issuers. Due to the Funds'
non-diversified status, changes in the financial condition or in the market's
assessment of an individual issuer may cause a Fund's share price to fluctuate
to a greater degree than if the Fund were diversified. However, the Funds intend
to conduct their operations so that each Fund will qualify under the Internal
Revenue Code of 1986, as amended (the "Code"), as a "regulated investment
company." To continue to qualify, among other requirements, each Fund will be
required to limit its investments so that at the close of each quarter of the
taxable year, with respect to at least 50% of its total assets, not more than 5%
of such assets will be invested in the securities of a single issuer. In
addition, not more than 25% of the value of each Fund's total assets may be
invested in the securities of a single issuer at the close of each quarter of
the taxable year.
The ability of the Funds to meet their investment objectives is subject to
the ability of municipal issuers to meet their payment obligations. In addition,
the portfolio of each Fund will be affected by general changes in interest rates
that may result in increases or decreases in the value of Fund holdings.
Investors should recognize that, in periods of declining interest rates, the
yield of each Fund will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates, the yield of each Fund will tend to be
somewhat lower. Also, when interest rates are falling, the influx of new money
to each Fund will likely be invested in portfolio instruments producing lower
yields than the balance of that Fund's portfolio, thereby reducing the current
yield of the Fund. In periods of rising interest rates, the opposite can be
expected to occur.
The Municipal Fund may invest without limit in Municipal Obligations which
are repayable out of revenue streams generated from economically related
projects or facilities or whose issuers are located in the same state. The
Massachusetts Municipal Fund may invest without limit in Massachusetts Municipal
Obligations which are repayable out of revenue streams generated from
economically related projects or facilities or whose issuers are located in
Massachusetts. Sizable investments in these obligations could increase risk to
the Funds should any of the related projects or facilities experience financial
difficulties. To the extent the Fund may invest in private activity bonds, the
Fund may invest only up to 5% of its total assets in bonds where payment of
principal and interest are the responsibility of a company with less than three
year operating history.
Each Fund is authorized to borrow up to 10% of its total assets for
temporary or emergency purposes and to pledge its assets to the same extent in
connection with such borrowings.
Description of Municipal Obligations. "Municipal Obligations", when
referred to below, shall mean Municipal Obligations with respect to the
Municipal Fund and Massachusetts Municipal Obligations with respect to the
Massachusetts Municipal Fund. Municipal Obligations include the following:
Municipal Bonds. Municipal bonds, which generally have a maturity of more
than one year when issued, have two principal classifications: general
obligation bonds and revenue bonds. A private activity bond is a particular kind
of revenue bond. The classification of general obligation bonds, revenue bonds
and private activity bonds are discussed below.
1. General Obligation Bonds. The proceeds of these obligations are used to
finance a wide range of public projects, including construction or improvement
of schools, highways and roads, and water and sewer systems. General Obligation
Bonds are secured by the issuer's pledge of its faith, credit and taxing power
for the payment of principal and interest.
2. Revenue Bonds. Revenue Bonds are issued to finance a wide variety of
capital projects including: electric, gas, water and sewer systems; highways,
bridges and tunnels; port and airport facilities; colleges and universities; and
hospitals. The principal security for a Revenue Bond is generally the net
revenues derived from a particular facility, group of facilities or, in some
cases, the proceeds of a special excise or other specific revenue source.
Although the principal security behind these bonds may vary, many provide
additional security in the form of a debt service reserve fund whose money may
be used to make principal and interest payments on the issuer's obligations.
Some authorities provide further security in the form of a state's ability
(without obligation) to make up deficiencies in the debt service reserve fund.
3. Private Activity Bonds. Private Activity Bonds, which are considered
Municipal Obligations or Bonds if the interest paid thereon is exempt from
Federal income tax, are issued by or on behalf of public authorities to raise
money to finance various privately operated facilities for business and
manufacturing, housing, sports and pollution control. These bonds are also used
to finance public facilities such as airports, mass transit systems, ports and
parking. The payment of the principal and interest on such bonds is dependent
solely on the ability of the facility's user to meet its financial obligations
and the pledge, if any, of real and personal property so financed as security
for such payment. As discussed below under "Dividends, Other Distributions and
Taxes," interest income on these bonds may be an item of tax preference subject
to the Federal alternative minimum tax for individuals and corporations.
Municipal Notes. Municipal notes generally are used to provide for
---------------
short-term capital needs and generally have maturities of thirteen months or
less. Municipal Notes include:
1. Tax Anticipation Notes. Tax Anticipation Notes are issued to
finance working capital needs of municipalities. Generally, they are issued
in anticipation of various seasonal tax revenue, such as income, sales, use
and business taxes, and are payable from these specific future taxes.
2. Revenue Anticipation Notes. Revenue Anticipation Notes are issued
in expectation of receipt of other kinds of revenue, such as Federal revenues
available under Federal Revenue Sharing programs.
3. Bond Anticipation Notes. Bond Anticipation Notes are issued to
provide interim financing until long-term financing can be arranged. In most
cases, the long-term bonds then provide the money for the repayment of the
notes.
Municipal Commercial Paper. Issues of Municipal Commercial Paper typically
represent short-term, unsecured, negotiable promissory notes. These obligations
are issued by agencies of state and local governments to finance seasonal
working capital needs of municipalities or to provide interim construction
financing and are paid from general revenues of municipalities or are refinanced
with long-term debt. In most cases, Municipal Commercial Paper is backed by
letters of credit, lending agreements, note repurchase agreements or other
credit facility agreements offered by banks or other institutions.
Municipal Lease Obligations. Municipal leases may take the form of a lease
or a certificate of participation in a purchase contract issued by state and
local government authorities to obtain funds to acquire a wide variety of
equipment and facilities such as fire and sanitation vehicles, computer
equipment and other capital assets. A lease obligation does not constitute a
general obligation of the municipality for which the municipality's taxing power
is pledged, although the lease obligation is ordinarily backed by the
municipality's covenant to budget for, appropriate and make payments due under
the lease obligation. Municipal leases have special risks not normally
associated with Municipal Bonds. These obligations frequently contain
"non-appropriation" clauses that provide that the governmental issuer of the
obligation has no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the legislative body on a
yearly or other periodic basis. In addition to the non-appropriation risk,
municipal leases represent a type of financing that has not yet developed the
depth of marketability associated with Municipal Bonds; moreover, although the
obligations will be secured by the leased equipment, the disposition of the
equipment in the event of foreclosure might prove difficult. For purposes of the
15% limitation on the purchase of illiquid securities, a Fund will not consider
the municipal lease obligations or certificates of participation in municipal
lease obligations in which it invests as liquid, unless Dreyfus shall determine,
based upon such factors as the frequency of trades and quotes for the
obligation, the number of dealers willing to purchase or sell the security and
the number of other potential buyers, the willingness of dealers to undertake to
make a market in the security and the nature of marketplace trades, that a
security shall be treated as liquid for purposes of such limitation.
Lease obligations are a relatively new type of financing that has not yet
developed the depth of marketability associated with more conventional municipal
obligations. For these reasons, before investing in a lease obligation Dreyfus
will consider, among other things, whether (1) the leased property is essential
to a governmental function of the municipality, (2) the municipality is
prohibited from substituting or purchasing similar equipment if lease payments
are not appropriated, and (3) the municipality has maintained good market
acceptability for its lease obligations in the past.
Obligations of issuers of Municipal Obligations are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon
municipalities to levy taxes. There is also the possibility that, as a result of
litigation or other conditions, the power or ability of any issuer to pay, when
due, the principal of and interest on its Municipal Obligations may be
materially affected.
Other Instruments. Other types of tax-exempt instruments that may become
available in the future may be purchased by the Funds as long as Dreyfus
believes the quality of these instruments meets the Funds' quality standards.
Quality of Massachusetts Municipal Obligations and Municipal Obligations.
The Massachusetts Municipal Fund invests only in Massachusetts Municipal
Obligations and the Municipal Fund invests only in Municipal Obligations rated
at the time of purchase within the four highest quality ratings of Moody's
Investors Service, Inc. ("Moody's") (currently at least Baa or above for bonds,
at least MIG 3 or above for notes and at least Prime-2 or above for commercial
paper) or Standard & Poor's Ratings Group ("S&P") (at least BBB or above for
bonds, at least SP-2 or above for notes and at least A-2 or above for commercial
paper) or, if not rated by Moody's or S&P, of comparable quality to the above
ratings as determined by Dreyfus. Massachusetts Municipal Obligations and
Municipal Obligations rated within the four highest ratings are considered to be
of investment grade quality, although bonds rated in the lowest of these four
categories (Baa by Moody's or BBB by S&P) have some speculative characteristics
and involve greater risks and potentially higher yields than higher rated bonds.
A discussion of the categories of Massachusetts Municipal Obligations and
Municipal Obligations and the rating systems appears in Appendix B.
Because many issuers of Massachusetts Municipal Obligations and Municipal
Obligations may choose not to have their obligations rated, it is possible that
a large portion of a Fund's bond portfolio may consist of unrated obligations.
Unrated obligations are not necessarily of lower quality than rated obligations,
but to the extent the Funds invest in unrated obligations, the Funds will be
more reliant on Dreyfus' judgment, analysis and experience than would be the
case if the Funds invested only in rated obligations.
Price and Portfolio Maturity. The Funds generally invest in Municipal
Obligations having intermediate-term maturities, that can be expected to pay
higher yields and experience greater fluctuations in value than bonds with
short-term maturities. The average weighted maturity of the Municipal
Obligations in each Fund's individual portfolio is not expected to exceed ten
years. There is no limit on the maturity of any individual security. The market
value of the Municipal Obligations in a Fund's portfolio and, accordingly, a
Fund's net asset value ("NAV") typically will vary inversely with changes in
interest rates, declining when interest rates rise and rising when interest
rates decline. Under normal market conditions, the longer the average maturity
of a Fund's holdings, the greater its expected yield and price volatility.
Portfolio Securities. The average distribution of investments (at value)
in Municipal Obligations by ratings for each Fund for the fiscal year ended June
30, 2000, computed on a monthly basis, was as follows:
Moody's S&P Municipal
------- --- Fund
or ----
Aaa AAA 63.2%
Aa AA 21.3
A A 8.3
Baa BBB 3.7
MIG1, VMIG, P-1 SP-1+/SP-1,A-1 3.5
100.0
Massachusetts
Moody's or S&P Municipal Fund
------- --- --------------
Aaa AAA 64.6%
Aa AA 19.7
A A 3.8
Baa BBB 7.8
MIG1, VMIG, P-1 A-1 4.1
100.0
The actual distribution of a Fund's Municipal Obligations by ratings on
any given date will vary. In addition, the distribution of a Fund's investments
by rating as set forth above should not be considered as representative of that
Fund's future portfolio composition.
Tender Option Bonds. Each Fund may invest up to 10% of the value of its
assets in tender option bonds. A tender option bond is a Municipal Obligation
(generally held pursuant to a custodial arrangement) having a relatively long
maturity and bearing interest at a fixed rate substantially higher than
prevailing short-term tax-exempt rates, that has been coupled with the agreement
of a third party, such as a bank, broker-dealer or other financial institution,
pursuant to which such institution grants the security holders the option, at
periodic intervals, to tender their securities to the institution and receive
the face value thereof. As consideration for providing the option, the financial
institution receives periodic fees equal to the difference between the Municipal
Obligation's fixed coupon rate and the rate, as determined by a remarketing or
similar agent at or near the commencement of such period, that would cause the
securities, coupled with the tender option, to trade at par on the date of such
determination. Thus, after payment of this fee, the security holder effectively
holds a demand obligation that bears interest at the prevailing short-term
tax-exempt rate. Dreyfus, on behalf of each Fund, will consider on an ongoing
basis the creditworthiness of the issuer of the underlying Municipal Obligation,
of any custodian and the third-party provider of the tender option. In certain
instances and for certain tender option bonds, the option may be terminable in
the event of a default in payment of principal or interest on the underlying
Municipal Obligations and for other reasons. No Fund will invest more than 15%
of the value of its net assets in illiquid securities, which would include
tender option bonds for which the required notice to exercise the tender feature
is more than seven days if there is no secondary market available for these
obligations.
Floating Rate and Variable Rate Obligations. A Fund may purchase floating
rate and variable rate obligations, including participation interests therein.
Floating rate or variable rate obligations provide that the rate of interest is
set as a specific percentage of a designated base rate (such as the prime rate
at a major commercial bank) and that the Fund can demand payment of the
obligation at par plus accrued interest. Variable rate obligations provide for a
specified periodic adjustment in the interest rate, while floating rate
obligations have an interest rate which changes whenever there is a change in
the external interest rate. Frequently such obligations are secured by letters
of credit or other credit support arrangements provided by banks. The quality of
the underlying creditor or of the bank, as the case may be, must, as determined
by Dreyfus under the supervision of the Trustees, be equivalent to the quality
standard prescribed for the Funds. In addition, Dreyfus monitors the earning
power, cash flow and other liquidity ratios of the issuers of such obligations,
as well as the creditworthiness of the institution responsible for paying the
principal amount of the obligations under the demand feature. Changes in the
credit in the credit quality of banks and other financial institutions that
provide such credit or liquidity enhancements to the Fund's portfolio securities
could cause losses to the Fund and affect its share price.
A Fund may invest in participation interests purchased from banks in
floating rate or variable rate tax-exempt Municipal Obligations owned by banks.
A participation interest gives the purchaser an undivided interest in the
Municipal Obligation in the proportion that the Fund's participation interest
bears to the total principal amount of the Municipal Obligation, and provides a
demand feature. Each participation is backed by an irrevocable letter of credit
or guarantee of a bank (which may be the bank issuing the participation
interest, a bank issuing a confirming letter of credit to that of the issuing
bank, or a bank serving as agent of the issuing bank with respect to the
possible repurchase of the participation interest) that Dreyfus, under the
supervision of the Trustees, has determined meets the prescribed quality
standards for the Funds. A Fund has the right to sell the instrument back to the
issuing bank or draw on the letter of credit on demand for all or any part of
the Fund's participation interest in the Municipal Obligation, plus accrued
interest. Banks will retain a service and letter of credit fee and a fee for
issuing repurchase commitments in an amount equal to the excess of the interest
paid on the Municipal Obligations over the negotiated yield at which the
instruments were purchased by a Fund.
Taxable Investments. Each Fund anticipates being as fully invested as
practicable in Municipal Obligations. Because each Fund's purpose is to provide
income exempt from Federal (and in the case of the Massachusetts Municipal Fund
state personal) income taxes, a Fund will invest in taxable obligations only if
and when Dreyfus believes it would be in the best interests of its shareholders
to do so. Situations in which a Fund may invest up to 20% of its total assets in
taxable securities include: (a) pending investment of proceeds of sales of
shares of the Fund or of portfolio securities, (b) pending settlement of
purchases of portfolio securities, and (c) when the Fund is attempting to
maintain liquidity for the purpose of meeting anticipated redemptions. A Fund
may temporarily invest more than 20% of its total assets in taxable securities
to maintain a "defensive" posture when, in the opinion of Dreyfus, it is
advisable to do so because of adverse market conditions affecting the market for
Municipal Obligations. Under such circumstances, a Fund may invest in the
following kinds of taxable securities maturing in one year or less from the date
of purchase: (1) obligations of the United States Government, its agencies or
instrumentalities; (2) commercial paper rated Prime-1 by Moody's or A-1+ or A-1
by S&P; (3) certificates of deposit of domestic banks with total assets of $1
billion or more; and (4) repurchase agreements (instruments under which the
seller of a security agrees to repurchase the security at a specific time and
price) with respect to any securities that the Fund is permitted to hold.
Repurchase Agreements. A Fund may enter into repurchase agreements with
member banks of the Federal Reserve System or certain non-bank dealers. Under
each repurchase agreement the selling institution will be required to maintain
the value of the securities subject to the agreement at not less than their
repurchase price. If a particular bank or non-bank dealer defaults on its
obligation to repurchase the underlying debt instrument as required by the terms
of a repurchase agreement, a Fund will incur a loss to the extent that the
proceeds it realizes on the sale of the collateral are less than the repurchase
price of the instrument. In addition, should the defaulting bank or non-bank
dealer file for bankruptcy, a Fund could incur certain costs in establishing
that it is entitled to dispose of the collateral and its realization on the
collateral may be delayed or limited. Investments in repurchase agreements are
subject to the policy prohibiting investment of more than 15% of a Fund's assets
in illiquid securities, including repurchase agreements maturing in more than
seven days.
Other Investment Companies. Each Fund may invest in securities issued by
other investment companies to the extent that such investments are consistent
with the Fund's investment objective and policies and permissible under the 1940
Act. As a shareholder of another investment company, each Fund would bear, along
with other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to the
advisory and other expenses that the Fund bears directly in connection with its
own operations.
Investment Techniques
In connection with its investment objective and policies, each Fund may
employ, among others, the following investment techniques:
When-Issued Securities. A Fund may purchase Municipal Obligations on a
when-issued basis (i.e., for delivery beyond the normal settlement date at the
stated price and yield). The payment obligation and the interest rate that will
be received on the Municipal Obligations purchased on a when-issued basis are
each fixed at the time the buyer enters into the commitment. Although a Fund
will purchase Municipal Obligations on a when-issued basis only with the
intention of actually acquiring the securities, the Funds may sell these
securities before the settlement date if it is deemed advisable as a matter of
investment strategy.
Municipal Obligations purchased on a when-issued basis and the securities
held in the Fund's portfolio are subject to changes in market value based upon
the public's perception of the creditworthiness of the issuer and changes, real
or anticipated, in the level of interest rates (which will generally result in
similar changes in value, i.e., both experiencing appreciation when interest
rates decline and depreciation when interest rates rise). Therefore, to the
extent a Fund remain substantially fully invested at the same time that it has
purchased securities on a when-issued basis, there will be a greater possibility
of fluctuation in the Fund's NAV. Purchasing Municipal Obligations on a
when-issued basis can involve a risk that the yields available in the market
when the delivery takes place may actually be higher than those obtained in the
transaction.
Each Fund will establish with the Fund's custodian a segregated account
consisting of cash or liquid debt securities in an amount at least equal to the
amount of the when-issued commitments. When the time comes to pay for
when-issued securities, the Fund will meet its obligations from then-available
cash flow, sale of securities held in the separate account, sale of other
securities or, although it would not normally expect to do so, from the sale of
the when-issued securities themselves (which may have a value greater or lesser
than each Fund's payment obligations). Sale of securities to meet such
obligations carries with it a greater potential for the realization of capital
gains, which are not exempt from Federal income tax.
Investments in Municipal Bond Index and Interest Rate Futures Contracts
and Options on Municipal Bond Index and Interest Rate Futures Contracts. The
Fund may investment in municipal bond index futures contracts and interest rate
futures contracts and purchase and sell options on these futures contracts that
are traded on a domestic exchange or board of trade. Such investments may be
made by a Fund solely for the purpose of hedging against changes in the value of
its portfolio securities due to anticipated changes in interest rates and market
conditions, and not for purposes of speculation. Further, such investments will
be made only in unusual circumstances, such as when Dreyfus anticipates an
extreme change in interest rates or market conditions.
Municipal Bond Index and Interest Rate Futures Contracts. An interest rate
futures contract provides for the future purchase or sale of specified interest
rate sensitive debt securities such as United States Treasury bills, bonds and
notes, obligations of the Government National Mortgage Association and bank
certificates of deposit. Although most interest rate futures contracts require
the delivery of the underlying securities, some settle in cash. Each contract
designates the price, date, time and place of delivery. Entering into a futures
contract to deliver the index or instrument underlying the contract is referred
to as entering into a "short" position in the futures contract, whereas entering
into a futures contract to take delivery of the index or instrument is referred
to as entering into a "long" position in the futures contract. A municipal bond
index futures contract is an agreement pursuant to which two parties agree to
take or make delivery of an amount of cash equal to a specific dollar amount
times the difference between the value of the index at the close of the last
trading day of the contract and the price at which the index contract was
originally written. No physical delivery of the underlying municipal bonds in
the index is made. Municipal bond index futures contracts based on an index of
40 tax-exempt, long-term municipal bonds with an original issue size of at least
$50 million and a rating of A- or higher by S&P or A or higher by Moody's began
trading mid-1985.
The purpose of the acquisition or sale of a Municipal Bond Index Futures
Contract by a Fund, as the holder of long-term municipal securities, is to
protect the Fund from fluctuations in interest rates on tax-exempt securities
without actually buying or selling long-term municipal securities.
Unlike the purchase or sale of a Municipal Obligation, no consideration is
paid or received by a Fund upon the purchase or sale of a futures contract.
Initially, a Fund will be required to deposit with the broker an amount of cash
or cash equivalents equal to approximately 10% of the contract amount (this
amount is subject to change by the board of trade on which the contract is
traded and members of such board of trade may charge a higher amount). This
amount is known as initial margin and is in the nature of a performance bond or
good faith deposit on the contract which is returned to the Fund upon
termination of the futures contract, assuming that all contractual obligations
have been satisfied. Subsequent payments, known as variation margin, to and from
the broker, will be made on a daily basis as the price of the underlying
instrument or index fluctuates, making the long and short positions in the
futures contract more or less valuable, a process known as marking-to- market.
At any time prior to the expiration of the contract, a Fund may elect to close
the position by taking an opposite position, which will operate to terminate the
Fund's existing position in the futures contract.
There are several risks in connection with the use of a municipal bond
index or interest rate futures contract as a hedging device. Successful use of
such futures contracts by the Funds is subject to Dreyfus' ability to predict
correctly movements in the direction of interest rates. Such predictions involve
skills and techniques which may be different from those involved in the
management of a long-term municipal bond portfolio. In addition, there can be no
assurance that there will be a correlation between movements in the price of the
underlying instrument of municipal bond index and movements in the price of the
Municipal Obligations which are the subject of the hedge. The degree of
imperfection of correlation depends upon various circumstances, such as
variations in speculative market demand for futures contracts and municipal
securities, technical influences on futures trading, and differences between the
municipal securities being hedged and the municipal securities underlying the
municipal bond index or interest rate futures contracts, in such respects as
interest rate levels, maturities and creditworthiness of issuers. A decision of
whether, when and how to hedge involves the exercise of skill and judgment and
even a well-conceived hedge may be unsuccessful to some degree because of market
behavior or unexpected trends in interest rates.
Although the Funds intend to purchase or sell municipal bond index and
interest rate futures contracts only if there is an active market for such
contracts, there is no assurance that a liquid market will exist for the
contracts at any particular time. Most domestic futures exchanges and boards of
trade limit the amount of fluctuation permitted in futures contract prices
during a single trading day. The daily limit establishes the maximum amount the
price of a futures contract may vary either up or down from the previous day's
settlement price at the end of a trading session. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit. The daily limit governs only price movement during a
particular trading day and, therefore, does not limit potential losses because
the limit may prevent the liquidation of unfavorable positions. It is possible
that futures contract prices could move to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of futures positions and subjecting some futures traders to
substantial losses. In such event, it will not be possible to close a futures
position and, in the event of adverse price movements, the Funds would be
required to make daily cash payments of variation margin. In such circumstances,
an increase in the value of the portion of the portfolio being hedged, if any,
may partially or completely offset losses on the futures contract. As described
above, however, there is no guarantee that the price of Municipal Obligations
will, in fact, correlate with the price movements in the municipal bond index or
interest rate futures contract and thus provide an offset to losses on a futures
contract.
If a Fund has hedged against the possibility of an increase in interest
rates adversely affecting the value of the Municipal Obligations held in its
portfolio and rates decrease instead, the Fund will lose part or all of the
benefit of the increased value of the Municipal Obligations it has hedged
because it will have offsetting losses in its futures positions. In addition, in
such situations, if a Fund has insufficient cash, it may have to sell securities
to meet daily variation margin requirements. Such sales of securities may, but
will not necessarily, be at increased prices which reflect the decline in
interest rates. A Fund may have to sell securities at a time when it may be
disadvantageous to do so.
When the Funds purchase municipal bond index or interest rate futures
contracts, an amount of cash and U.S. government securities or other high grade
debt securities equal to the market value of the futures contracts will be
deposited in a segregated account with the Funds' custodian (and/or such other
persons as appropriate) to collateralize the positions and thereby insure that
the use of such futures contracts is not leveraged. In addition, the ability of
the Funds to trade in municipal bond index or interest rate futures contracts
and options on interest rate futures contracts may be materially limited by the
requirements of the Code, applicable to a regulated investment company. See
"Dividends, Other Distributions and Taxes" below.
Any income earned by the Funds from transactions in futures contracts will
be taxable. Accordingly, it is anticipated that such investments will be made
only in unusual circumstances, such as when Dreyfus anticipates an extreme
change in interest rates or market conditions. Successful use of futures
contracts by the Funds is subject to the ability of Dreyfus to correctly predict
movements in the direction of interest rates
Options on Municipal Bond Index or Interest Rate Futures Contracts. A Fund
may purchase put and call options on municipal bond index or interest rate
futures contracts which are traded on a domestic exchange or board of trade as a
hedge against changes in interest rates, and may enter into closing transactions
with respect to such options to terminate existing positions. A Fund will sell
put and call options on interest rate futures contracts only as part of closing
sale transactions to terminate its options positions. There is no guarantee that
such closing transactions can be effected.
A put or call on a municipal bond index or interest rate futures contract
gives the purchaser the right, in return for the premium paid, to assume a short
or long position, respectively, in the underlying futures contract as a
specified exercise price at any time prior to the expiration date of the option.
The Funds may purchase put and call options on both municipal bond index and
interest rate futures contracts. The Funds will sell options on these futures
contracts only as part of closing purchase transactions to terminate its options
position, although no assurance can be given that closing transactions can be
effected.
The Funds may purchase options when Dreyfus believes that interest rates
will increase and consequently the value of the Funds' portfolio securities will
decrease. The Funds may enter into futures contracts to buy an index or debt
security or may purchase call options when Dreyfus anticipates purchasing
portfolio securities at a time of declining interest rates.
Options on municipal bond index or interest rate futures contracts, as
contrasted with the direct investment in such contracts, gives the purchaser the
right, in return for the premium paid, to assume a position in such contracts at
a specified exercise price at any time prior to the expiration date of the
options. Upon exercise of an option, the delivery of the futures position by the
writer of the option to the holder of the option will be accompanied by delivery
of the accumulated balance in the writer's futures contract margin account,
which represents the amount by which the market price of the futures contract
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option on the futures contract. The potential loss related
to the purchase of an option is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed at the point of
sale, there are no daily cash payments to reflect changes in the value of the
underlying contract; however, the value of the option does change daily and that
change would be reflected in the net asset value of a Fund.
There are several risks relating to options on futures contracts. The
ability to establish and close out positions on such options will be subject to
the existence of a liquid market. In addition, a Fund's purchase of put or call
options will be based upon predictions as to anticipated interest rate trends by
Dreyfus, which could prove to be inaccurate. Even if Dreyfus' expectations are
correct there may be an imperfect correlation between the change in the value of
the options and of a Fund's portfolio securities.
Any income earned by the Funds from transactions in options on futures
contracts will be taxable. Accordingly, it is anticipated that such investments
will be made only in unusual circumstances, such as when Dreyfus anticipates an
extreme change in interest rates or market conditions. Successful use of futures
contracts by the Funds is subject to the ability of Dreyfus to correctly predict
movements in the direction of interest rates.
The Funds may not enter into futures contracts or purchase options on
futures contracts if, immediately thereafter, the sum of the amount of margin
deposits on the Funds' existing futures contracts and premiums paid for options
would exceed 5% of the value of a Fund's total assets, after taking into account
unrealized profits and losses on any existing contracts. When a Fund enters into
futures contracts, purchases an index or debt security or purchases call
options, an amount of cash, U.S. Government Securities or other high grade debt
securities equal to the market value of the contract will be deposited and
maintained in a segregated account with the Fund's custodian to collateralize
the positions, thereby insuring that the use of the contract is unleveraged.
The Funds reserve the right to invest in other kinds of futures contracts
and options on futures contracts subject to the policies the Board of Trustees
may establish from time to time.
Use of Ratings as Investment Criteria. The ratings of nationally
recognized statistical rating organizations ("NRSROs") such as S&P and Moody's
represent the opinions of these agencies as to the quality of Municipal
Obligations which they rate. It should be emphasized, however, that such ratings
are relative and subjective and are not absolute standards of quality. These
ratings will be used by the Funds as initial criteria for the selection of
portfolio securities, but the Funds will also rely upon the independent advice
of Dreyfus to evaluate potential investments. Among the factors which will be
considered are the long-term ability of the issuer to pay principal and interest
and general economic trends. Further information concerning the ratings of the
NRSROs and their significance is contained in Appendix B to this SAI.
After being purchased by a Fund, the rating of a Municipal Obligation may
be reduced below the minimum rating required for purchase by the Fund or the
issuer of the Municipal Obligation may default on its obligations with respect
to the Municipal Obligation. In that event, the Fund will dispose of the
Municipal Obligation as soon as practicable, consistent with achieving an
orderly disposition of the Municipal Obligation, unless the Trust's Board of
Trustees determines that disposal of the Municipal Obligation would not be in
the best interest of the Fund. In addition, it is possible that a Municipal
Obligation may cease to be rated or an NRSRO might not timely change its rating
of a particular Municipal Obligation to reflect subsequent events. Although
neither event will require the sale of such Municipal Obligation by a Fund,
Dreyfus will consider such event in determining whether the Fund should continue
to hold the Municipal Obligation. In addition, if an NRSRO changes its rating
system, a Fund will attempt to use comparable ratings as standards for its
investments in accordance with its investment objective and policies.
Special Factors Affecting the Fund
Investing in Massachusetts Municipal Obligations. You should review the
information in "Appendix A", which provides a brief summary of special
investment considerations and risk factors relating to investing in
Massachusetts Municipal Obligations.
Certain Investments. From time to time, to the extent consistent with its
investment objective, policies and restrictions, the Fund may invest in
securities of companies with which Mellon Bank, N.A. ("Mellon Bank"), an
affiliate of Dreyfus, has a leading relationship.
Master/Feeder Option. The Trust may in the future seek to achieve a Fund's
investment objective by investing all of the Fund's net investable assets in
another investment company having the same investment objective and
substantially the same investment policies and restrictions as those applicable
to the Fund. Shareholders of a Fund will be given at least 30 days' prior notice
of any such investment. Such investment would be made only if the Trust's Board
of Trustees determines it to be in the best interest of a Fund and its
shareholders. In making that determination, the Trust's Board of Trustees will
consider, among other things, the benefits to shareholders and/or the
opportunity to reduce costs and achieve operational efficiency. Although the
Funds believe that the Board of Trustees will not approve an arrangement that is
likely to result in higher costs, no assurance is given that risks will be
materially reduced if this option is implemented.
Investment Restrictions.
Fundamental. The following limitations have been adopted by each Fund.
Each Fund may not change any of these fundamental investment limitations without
the consent of: (a) 67% or more of the shares present at a meeting of
shareholders duly called if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy; or (b) more than 50% of
the outstanding shares of the Fund, whichever is less. Each Fund may not:
1. Purchase any securities which would cause more than 25% of the value of
a Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities and
state or municipal governments and their political subdivisions are not
considered members of any industry. In addition, this limitation does not apply
to investments of domestic banks, including U.S. branches of foreign banks and
foreign branches of U.S. banks.)
2. Borrow money or issue senior securities as defined in the 1940 Act,
except that (a) a Fund may borrow money in an amount not exceeding one-third of
the Fund's total assets at the time of such borrowing, and (b) a Fund may issue
multiple classes of shares. The purchase or sale of futures contracts and
related options shall not be considered to involve the borrowing of money or
issuance of senior securities.
3. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this restriction, debt instruments and repurchase agreements shall
not be treated as loans.
4. Underwrite securities issued by any other person, except to the extent
at the purchase of securities and the later disposition of such securities in
accordance with the Fund's investment program may be deemed an underwriting.
5. Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent a Fund from
investing in securities or other instruments backed by real estate, including
mortgage loans, or securities of companies that engage in the real estate
business or invest or deal in real estate or interests therein).
6. Purchase or sell commodities, except that each Fund may enter into
futures contracts and related options, forward currency contracts and other
similar instruments.
Each Fund of the Trust may, notwithstanding any other fundamental
investment policy or restriction, invest all of its investable assets in
securities of a single open-end management investment company with substantially
the same fundamental investment objective, policies, and restrictions as the
Fund.
Nonfundamental. Each Fund has adopted the following additional
non-fundamental restrictions. These non-fundamental restrictions may be
changed without shareholder approval, in compliance with applicable law and
regulatory policy.
1. The Trust will not purchase or retain the securities of any issuer if
the officers, directors or Trustees of the Trust, its advisers, or managers
owning beneficially more than one half of one percent of the securities of each
issuer together own beneficially more than 5% of such securities.
2. No Fund will not purchase securities of issuers (other than securities
issued or guaranteed by domestic or foreign governments or political
subdivisions thereof), including their predecessors, that have been in operation
for less than three years, if by reason thereof the value of the Fund's
investment in securities would exceed 5% of the Fund's total assets. For
purposes of this limitation, sponsors, general partners, guarantors and
originators of underlying assets may be treated as the issuer of a security.
3. No Fund will purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate investment
in such classes of securities will exceed 5% of its total assets, except that:
(a) this restriction shall not apply to standby commitments, and (b) this
restriction shall not apply to a Fund's transactions in futures contracts and
related options.
4. No Fund will purchase warrants if at the time of such purchase: (a)
more than 5% of the value of such Fund's assets would be invested in warrants,
or (b) more than 2% of the value of such Fund's assets would be invested in
warrants that are not listed on the New York Stock Exchange ("NYSE") or American
Stock Exchange (for purposes of this undertaking, warrants acquired by a Fund in
units or attached to securities will be deemed to have no value).
5. No Fund will invest more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements with remaining maturities
in excess of seven days, time deposits with maturities in excess of seven days,
and other securities which are not readily marketable. For purposes of this
restriction, illiquid securities shall not include commercial paper issued
pursuant to Section 4(2) of the Securities Act of 1933 and securities which may
be resold under Rule 144A under the Securities Act of 1933, provided that the
Board of Trustees, or its delegate, determines that such securities are liquid,
based upon the trading markets for the specific security.
6. No Fund may invest in securities of other investment companies, except
as they may be acquired as part of a merger, consolidation or acquisition of
assets and except to the extent otherwise permitted by the 1940 Act.
7. No Fund will purchase oil, gas or mineral leases (a Fund may, however,
purchase and sell the securities of companies engaged in the exploration,
development, production, refining, transporting and marketing of oil, gas or
minerals).
8. No Fund shall sell securities short, unless it owns or has the right to
obtain securities equivalent in kind and amounts to the securities sold short,
and provided that transactions in futures contracts and options are not deemed
to constitute selling securities short.
9. No Fund shall purchase securities on margin, except that a Fund may
obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection with futures
contracts and options on futures contracts shall not constitute purchasing
securities on margin.
10. No Fund shall purchase any security while borrowings representing more
than 5% of such Fund's total assets are outstanding.
If a percentage restriction is adhered to at the time of an investment, a
later increase or decrease in such percentage resulting from a change in the
values of assets will not constitute a violation of such restriction.
The investment objectives, policies, restrictions, practices and
procedures of the Funds, unless otherwise specified, may be changed without
shareholder approval. If a Fund's investment objective, policies, restrictions,
practices or procedures change, shareholders should consider whether the Fund
remains an appropriate investment in light of the shareholder's then-current
position and needs.
MANAGEMENT OF THE FUNDS
Trustees and Officers
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
Dreyfus Service Corporation......................Distributor
Dreyfus Transfer, Inc.........................Transfer Agent
Mellon Bank........................................Custodian
The Trust has a Board composed of eight Trustees. The following lists the
Trustees and officers and their positions with the Trust and their present and
principal occupations during the past five years. Each Trustee who is an
"interested person" of the Trust (as defined in the 1940 Act) is indicated by an
asterisk(*). Each of the Trustees also serves as a Director of The
Dreyfus/Laurel Funds, Inc. and as a Trustee of The Dreyfus/Laurel Funds Trust
(collectively, with the Trust, the "Dreyfus/Laurel Funds") and the Dreyfus High
Yield Strategies Fund.
Trustees of the Trust
o+JOSEPH S. DIMARTINO. Chairman of the Board of the Trust. Since January
1995, Mr. DiMartino has served as Chairman of the Board for various
funds in the Dreyfus Family of Funds. He is also a Director of The
Muscular Dystrophy Association, HealthPlan Services Corporation, a
provider of marketing, administrative and risk management services to
health and other benefit programs, Carlyle Industries, Inc. (formerly
Belding Heminway Company, Inc.), a button packager and distributor,
Century Business Services, Inc., a provider of various outsourcing
functions for small and medium sized companies, The Newark Group, a
privately held company providing a national network of paper recovery
facilities, paperboard mills and paperboard converting plants, and
QuikCAT.com, Inc., a private company engaged in the development of high
speed movement, routing, storage and encryption of data across cable,
wireless and all other modes of data transport. For more than five
years prior to January 1995, he was President, a director and, until
August, 1994, Chief Operating Officer of Dreyfus and Executive Vice
President and a director of the Distributor. From August 1994 until
December 31, 1994, he was a director of Mellon Financial Corporation.
Age: 57 years old. Address: 200 Park Avenue, New York, New York 10166.
o+JAMES M. FITZGIBBONS. Trustee of the Trust; Director, Lumber Mutual
Insurance Company; Director, Barrett Resources, Inc.; Chairman of the
Board, Davidson Cotton Company; former Chairman of the Board and CEO of
Fieldcrest Cannon, Inc. Age: 66 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: 72 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: 78 years old. Address: Way
Hollow Road and Woodland Road, Sewickley, Pennsylvania 15143.
o+KENNETH A. HIMMEL. Trustee of the Trust; President & CEO, The Palladium
Company; President and CEO, Himmel and Company, Inc.; CEO, American Food
Management; former Director, The Boston Company, Inc. ("TBC"), and
Boston Safe Deposit and Trust Company, each an affiliate of Dreyfus.
Age: 54 years old. Address: 625 Madison Avenue, New York, New York
10022.
o+STEPHEN J. LOCKWOOD. Trustee of the Trust; Chairman of the Board and CEO,
LDG Reinsurance Corporation; Vice Chairman, HCCH. Age: 53 years old.
Address: 401 Edgewater Place, Wakefield, Massachusetts 01880.
o+ROSLYN M. WATSON. Trustee of the Trust; Principal, Watson Ventures, Inc.;
Director, American Express Centurion Bank; Director, Ontario Hydro
Services Company; Trustee, the Hyams Foundation, Inc. Age: 51 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: 54 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
STEPHEN E. CANTER, President. President, Chief Operating Officer, Chief
---------
Investment Officer and Director of Dreyfus, and an officer of other
investment companies advised and administered by Dreyfus. Mr. Canter
also is a Director or an Executive Committee Member of the other
investment management subsidiaries of Mellon Financial Corporation, each
of which is an affiliate of Dreyfus. He is 55 years old.
MARK N. JACOBS, Vice President. Vice President, Secretary, and General
--------------
Counsel to Dreyfus, and an officer of other investment companies advised
and administered by Dreyfus. He is 54 years old.
JOSEPH CONNOLLY, Vice President and Treasurer. Director - Mutual Fund Accounting
of Dreyfus, and an officer of other investment companies advised and
administered by Dreyfus. He is 43 years old.
STEVEN F. NEWMAN, Secretary. Associate General Counsel and Assistant
----------
Secretary of Dreyfus, and an officer of other investment companies
advised and administered by Dreyfus. He is 51 years old.
JEFF PRUSNOFSKY, Assistant Secretary. Associate General Counsel of Dreyfus, and
an officer of other investment companies advised and administered by
Dreyfus. He is 35 years old.
MICHAEL A. ROSENBERG, Assistant Secretary. Associate General Counsel of
-------------------
Dreyfus, and an officer of other investment companies advised and
administered by Dreyfus. He is 40 years old.
MICHAEL CONDON, Assistant Treasurer. Senior Treasury Manager of Dreyfus, and an
officer of other investment companies advised and administered by Dreyfus.
He is 38 years old.
GREGORY S. GRUBER, Assistant Treasurer. Senior Accounting Manager -
-------------------
Municipal Bond Funds of Dreyfus, and an officer of other investment
companies advised and administered by Dreyfus. He is 41 years old.
The address of each Trust officer 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. The Dreyfus/Laurel Funds pay each
Director/Trustee who is not an "interested person" of the Trust (as defined in
the 1940 Act) $40,000 per annum, plus $5,000 per joint Dreyfus/Laurel Funds
Board meeting attended, $2,000 for separate committee meetings attended which
are not held in conjunction with a regularly scheduled Board meeting and $500
for Board meetings and separate committee meetings attended that are conducted
by telephone. The Dreyfus/Laurel Funds also reimburse each Director/Trustee who
is not an "interested person" of the Trust (as defined in the 1940 Act) for
travel and out-of-pocket expenses. The Chairman of the Board receives an
additional 25% of such compensation (with the exception of reimbursable
amounts). In the event that there is a joint committee meeting of the
Dreyfus/Laurel Funds and the Dreyfus High Yield Strategies Fund, the $2,000 fee
will be allocated between the Dreyfus/Laurel Funds and the Dreyfus High Yield
Strategies Fund.
In addition, the Trust currently has two Emeritus Board members who are
entitled to receive an annual retainer and a per meeting fee of one-half the
amount paid to them as Board members.
The aggregate amount of fees and expenses received by each current Trustee
from the Trust for the fiscal year ended June 30, 2000, and from all other funds
in the Dreyfus Family of Funds for which such person was a Board member (the
number of which is set forth in parentheses next to each Board member's total
compensation)* during the year ended December 31, 1999, 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** $27,083 $ 642,177 (189)
James M. Fitzgibbons $20,000 $ 74,989 (28)
J. Tomlinson Fort*** None None (28)
Arthur L. Goeschel $21,666 $ 80,989 (28)
Kenneth A. Himmel $18,333 $ 62,489 (28)
Stephen J. Lockwood $18,333 $ 68,989 (28)
Roslyn M. Watson $21,666 $ 80,989 (28)
Benaree Pratt Wiley $21,666 $ 80,989 (28)
----------------------------
# 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 $1,775.82 for the Trust.
* Represents the number of separate portfolios comprising the investment
companies in the Fund complex, including the Trust, for which the Board
member served.
** Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
*** J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board
member of the Trust and the funds in the Dreyfus/Laurel Funds and
separately by the Dreyfus High Yield Strategies Fund. For the fiscal
year ended June 30, 2000, the aggregate amount of fees received by J.
Tomlinson Fort from Dreyfus for serving as a Board member of the Trust
was $21,666. For the year ended December 31, 1999, the aggregate amount
of fees received by Mr. Fort for serving as a Board member of all funds
in the Dreyfus/Laurel Funds (including the Trust) and Dreyfus High Yield
Strategies Fund (for which payment is made directly by the fund) was
$80,989. In addition, Dreyfus reimbursed Mr. Fort a total of $ 821.35
for expenses attributable to the Trust's Board meetings which is not
included in the $1,775.82 amount in note # above.
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. 2000.
Principal Shareholders. As of October 2, 2000, the following shareholders
owned beneficially or of record 5% or more of the outstanding Class A shares of
the Massachusetts Municipal Fund: Duncan M. McFarland, 299 Clapboardtree Street,
Westwood, MA 02090-2907; 7.0337%; Patricia Ostrander, 393 Walnut Street,
Brookline, MA 02146-7523; 6.0112%; Primevest Financial Services (FBO), Natalie
K. Schlundt, 400 First Street South, Suite 300, St. Cloud, MN 56302; 5.4661%.
As of October 2, 2000, the following shareholders owned beneficially or of
record 5% or more of the outstanding Class B shares of the Massachusetts
Municipal Fund: Wexford Clearing Services Corp. FBO, Kathryn S. Grosberg, 614
Queen Anne Road, Harwich, MA 02645-1961; 39.4323%; Donaldson Lufkin Jenrette,
Securities Corporation, Inc., PO Box 2052, Jersey City, NJ 07303-9998; 18.0871%;
Howard Green, 82 Williston Road, Brookline, MA, 2445-2141; 15.4783%; Donaldson
Lufkin Jenrette, Securities Corporation Inc.,
PO Box 2052, Jersey City, NJ 07303-9998; 7.3490%
As of October 2, 2000, the following shareholders owned beneficially or of
record 5% or more of the outstanding Class C shares of the Massachusetts
Municipal Fund: NFSC FEBO John Carroll, Mary Carroll, PO Box 621, Manomet, MA
02345, 59.6330%; Painewebber For the Benefit of Thomas A Merrill, 15 May Street,
Jamacia Plain, MA 02130-3032; 25.5153%; Henry Werrick & Charlotte Werrick
JTWROS, 14 Elaine Road, Hyannis, MA 02601-3438; 13.0923%.
As of October 2, 2000, the following shareholders owned beneficially or
of record 5% or more of the outstanding Class A Shares of the Municipal
Fund: Charles Schwab & Co. Inc., Reinvest Account, 101 Montgomery Street,
San Francisco, CA 94104-4122; 7.4125%.
As of October 2, 2000, the following shareholders owned beneficially or of
record 5% or more of the outstanding Class B shares of the Municipal Fund: MLPF
& S For the Sole Benefit Of Its Customers, 4800 Deer Lake Drive, East, Floor 3,
Jacksonville, FL 32246-6484; 20.8433%; Anna L. Parker, 2505 Overland Avenue,
Baltimore, MD 21214-2443; 12.4565%; Sally Golaske & Jeffrey W. Gillespie
Conservators, FBO Katherine G. Savidge, 4619 Groveland Avenue, Royal Oak, MI
48073-1528; 7.9656%; James J. Castranova, 950 North Kings Road, Apartment 355,
West Hollywood, CA 90069-6211; 6.9232%.
As of October 2, 2000, the following shareholders owned beneficially or of
record 5% or more of the outstanding Class C shares of the Municipal Fund: Dean
Witter For the Benefit Of Albert T. Nassi TTEE, Church Street Station, New York,
NY 10008-0250; 39.5763%; MLPF & S For the Sole Benefit Of Its Customers, 4800
Dear Lake Drive, East, Floor 3, Jacksonville, FL 32246-6484; 24.5149%; NFSC FEBO
# AFS-116882, Dale J. Costello, Lynn M. Costello, 7 Valdepenas Lane, Clifton
Park, NY 12065; 6.1854%; Painewebber For the Benefit of Madhukar A. Shanbhag,
290 Wood Acres, East Amherst, NY 14051-1640; 5.5779%; Orrin Devoto & Angela
Devoto, TTEES Devoto, 1990 Revocable Trust, 119 Springfield Drive, San
Francisco, CA 94132-1456; 5.3392%; NFSC FEBO #037-406295, Lon Slaughter, 401
South Park, San Angelo, TX 76901; 5.0241%.
A shareholder who beneficially owns, directly or indirectly, more than 25%
of the Fund's voting securities may be deemed a "control person" (as defined in
the 1940 Act) of the Fund.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the sections in the Funds' Prospectuses entitled "Expenses" and
"Management"
Dreyfus is a wholly-owned subsidiary of Mellon Bank, which is a
wholly-owned subsidiary of Mellon Financial Corporation ("Mellon"). Mellon is a
global multibank financial 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
twenty largest bank holding companies in the United States based on total
assets.
Management Agreement. Dreyfus serves as the investment manager for the
Funds pursuant to an Investment Management Agreement with the Trust (the
"Management Agreement"), subject to the overall authority of the Trust's Board
of Trustees in accordance with Massachusetts law. Pursuant to the Management
Agreement, Dreyfus provides, or arranges for one or more third parties to
provide, investment advisory, administrative, custody, fund accounting and
transfer agency services to the Funds. As investment manager, Dreyfus manages
the Funds by making investment decisions based on each Fund's investment
objective, policies and restrictions. The Management Agreement is subject to
review and approval at least annually by the Board of Trustees.
The Management Agreement will continue from year to year as to each Fund
provided that a majority of the Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Trust and either a majority of all Trustees or a
majority (as defined in the 1940 Act) of the shareholders of the respective Fund
respective approve its continuance. The Trust may terminate the Management
Agreement with respect to each Fund upon the vote of a majority of the Board of
Trustees or upon the vote of a majority of the respective Fund's outstanding
voting securities on 60 days' written notice to Dreyfus. Dreyfus may terminate
the 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 a
director; Lawrence S. Kash, Vice Chairman; Ronald P. O'Hanley III, Vice
Chairman; J. David Officer, Vice Chairman and a director, William T.
Sandalls, Jr., Executive Vice President; Stephen R. Byers, Senior Vice
President; Patrice M. Kozlowski, Senior Vice President- Corporate
Communications; Mark N. Jacobs, Vice President, General Counsel and
Secretary; Diane P. Durnin, Vice President-Product Development; Mary Beth
Leibig, Vice President-Human Resources; Ray Van Cott, Vice
President-Information Systems; Theodore A. Schachar, Vice President-Tax;
Wendy Strutt, Vice President; William H. Maresca, Controller; James Bitetto,
Assistant Secretary; Steven F. Newman, Assistant Secretary and Mandell L.
Berman, Burton Borgelt, Steven G. Elliott, Martin G. McGuinn, Richard W.
Sabo, and Richard F. Syron, directors.
Dreyfus' Code of Ethics subjects its employees' personal securities
transactions to various restrictions to ensure that such trading does not
disadvantage any fund advised by Dreyfus. In that regard, portfolio managers and
other investment personnel of Dreyfus must preclear and report their personal
securities transactions and holdings, which are reviewed for compliance with the
Code of Ethics and are also subject to the oversight of Mellon's Investment
Ethics Committee. Portfolio managers and other investment personnel who comply
with the Code of Ethics' 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. Under the
unitary fee structure, Dreyfus pays all of the Funds' expenses, except: (i)
brokerage fees, (ii) taxes, interest and extraordinary expenses (which are
expected to be minimal), and (iii) Rule 12b-1 fees, as applicable. Although
under the Management Agreement, Dreyfus is not required to pay the fees and
expenses of the non-interested Trustees (including counsel fees), Dreyfus is
required to reduce its management fee by the amount of such fees and expenses.
Under the unitary fee, Dreyfus provides, or arranges for one or more third
parties to provide, investment advisory, administrative, custody, fund
accounting and transfer agency services to the Funds. Dreyfus may waive all or a
portion of its fees payable by a Fund from time to time.
For the last three years, each Fund had the following management fees:
2000 1999 1998
Municipal Fund $477,384 $435,019 $263,445
Massachusetts Municipal $500,682 $402,864 $291,477
Fund
Distributor. The Distributor, a wholly-owned subsidiary of Dreyfus located
at 200 Park Avenue, New York, New York 10166, serves as the Fund's distributor
on a best efforts basis pursuant to an agreement with the Fund which is
renewable annually. Dreyfus may pay the Distributor for shareholder services
from Dreyfus' own assets, including past profits but not including the
management fee paid by a Fund. The Distributor may use part or all of such
payments to pay certain banks, securities brokers or dealers and other financial
institutions ("Agents") for these services. The Distributor also acts as
sub-administrator for the Funds and as distributor for the other funds in the
Dreyfus Family of Funds.
From August 23, 1994 through March 21, 2000, Premier Mutual Fund Services,
Inc., located at 60 State Street, Boston, MA 02109, ("Premier") served as the
Fund's distributor. Therefore, the disclosure below of amounts retained on the
sale of the Fund for the fiscal years ended June 30, 1998 and 1999, and for the
period from July 1, 1999 through March 21, 2000 refers to amounts retained by
Premier and for the period from March 22, 2000 through June 30, 2000 refers to
amounts retained by the Distributor from sales loads with respect to Class A,
and from contingent deferred sales charges ("CDSCs") with respect to Class B and
Class C, of each Fund. The disclosure below of amounts retained on the sale of
the Fund for the fiscal year ended June 30, 2000 refers to the aggregate amount
retained by the Distributor and Premier from sales loads with respect to Class
A, and from CDSCs with respect to Class B and Class C for that period.
Name of Fund Class A
Period from Period from
Fiscal Fiscal July 1, 1999 March 22,
Year Year Through 2000 Fiscal
Ended Ended March 21, through Year
----------
1998 1999 2000 June 30, 2000 Ended 2000
--------- -------- ---- ------------- ----------
Massachusetts
Municipal Fund $0 $1,524 $44 $826 $870
Municipal Fund 0 (76) 402 326
3,888
Class B
Period Period From
Fiscal Fiscal From July March 22,
Year Year 1, 1999 2000 through Fiscal
Ended Ended through June 30, 2000 Year
-------------
1998 1999 March 21, Ended
-------- ------- ---------- -----
2000 2000
---- ----
Massachusetts
Municipal Fund $900 $1,822 $2,676 $562 $3,238
Municipal Fund 3,143 5,368 4,784 8,357 13,141
Class C
Fiscal Fiscal Fiscal
Year Year July 1, 1999 March 22, Year
Ended Ended through 2000 through Ended
1998 1999 March 21, 2000 June 30, 2000 2000
---- ---- -------------- ------------- ----
Massachusetts
Municipal Fund $75 $256 $0 $0 $0
Municipal Fund 313 326 646 5,087 5,733
Transfer and Dividend Disbursing Agent and Custodian. Dreyfus Transfer,
Inc., (the "Transfer Agent") a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, RI 02940-9671, is each Fund's transfer and dividend disbursing
agent. Under a transfer agency agreement with the Trust, the Transfer Agent
arranges for the maintenance of shareholder account records for the Trust, the
handling of certain communications between shareholders and the Fund and the
payment of dividends and distributions payable by the Fund. For these services,
the Transfer Agent receives a monthly fee computed on the basis of the number of
shareholder accounts it maintains for the Trust during the month, and is
reimbursed for certain out-of-pocket expenses.
Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as the custodian of the Fund's investments.
Under a custody agreement with the Trust, Mellon Bank holds the Fund's portfolio
securities and keeps all necessary accounts and records. Dreyfus Transfer, Inc.
and Mellon Bank, as custodian, have no part in determining the investment
policies of a Fund or which securities are to be purchased or sold by the Fund.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the sections in the Funds' Prospectuses entitled "Account Policies,"
"Services for Fund Investors," and "Instructions for Regular Accounts."
General. Class A, Class B and Class C shares may be purchased only by
clients of Agents, except that full-time or part-time employees of Dreyfus or
any of its affiliates or subsidiaries, directors of Dreyfus, Board members of a
fund advised by Dreyfus, including members of the Trust's Board, or the spouse
or minor child of any of the foregoing may purchase Class A shares directly
through the Distributor. Subsequent purchases may be sent directly to the
Transfer Agent or your Agent.
Class R shares are sold primarily to bank trust departments and other
financial service providers (including Mellon Bank and its affiliates) acting on
behalf of customers having a qualified trust or investment account or
relationship at such institution, or to customers who have received and hold
shares of the Fund distributed to them by virtue of such an account or
relationship. In addition, holders of Class R shares of a Fund who have held
their shares since April 4, 1994, may continue to purchase Class R shares of the
Fund, whether or not they otherwise would be eligible to do so. Institutions
effecting transactions in Class R shares for the accounts of their clients may
charge their clients direct fees in connection with such transactions.
When purchasing Fund shares, you must specify which Class is being
purchased. Stock certificates are issued only upon your written request. No
certificates are issued for fractional shares. Each Fund reserves the right to
reject any purchase order.
Agents may receive different levels of compensation for selling different
Classes of shares. Management understands that some Agents may impose certain
conditions on their clients which are different from those described in the
respective Fund's Prospectus, and, to the extent permitted by applicable
regulatory authority may charge their clients direct fees which would be in
addition to any amounts which might be received under the Distribution and
Service Plans. Each Agent has agreed to transmit to its clients a schedule of
such fees. You should consult your Agent in this regard.
The minimum initial investment is $1,000. Subsequent investments must be
at least $100. The initial investment must be accompanied by the respective
Fund's Account Application. Each Fund reserves the right to vary the initial and
subsequent investment minimum requirements at any time.
Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See
"Dividends, Other Distributions and Taxes" and the respective Fund's Account
Application for further information concerning this requirement. Failure to
furnish a certified TIN to the Fund could subject you to a $50 penalty imposed
by the Internal Revenue Service ("IRS").
Net Asset Value Per Share. An investment portfolio's NAV refers to the
worth of one share. The NAV for shares of each Class of each Fund is computed by
adding, with respect to such Class of shares, the value of the Fund's
investments, cash, and other assets attributable to that Class, deducting
liabilities of the Class and dividing the result by the number of shares of that
Class outstanding. Shares of each Class of each Fund are offered on a continuous
basis. For purposes of determining NAV for each Fund, bonds are valued by an
independent pricing service approved by the Trust's Board of Trustees at fair
value as determined by the pricing service. See "Determination of Net Asset
Value." Options and financial futures on municipal and U.S. treasury securities
are valued at the last sales price on the securities exchange on which such
securities are primarily traded or at the last sales price on the national
securities market on each business day. Investments not listed on an exchange or
the national securities market, or securities for which there were no
transactions, are valued at the average of the most recent bid and asked prices.
Bid price is used when no asked price is available.
NAV is determined as of the close of business of trading on the floor of
the NYSE (currently 4 p.m., New York Time) on each day the NYSE is open for
business. For purposes of determining NAV, options and futures contracts will be
valued 15 minutes after the close of trading on the floor of the NYSE. Orders
received in proper form by the Transfer Agent or other entity authorized to
receive orders on behalf of the Fund before the close of trading on the floor of
the NYSE are effective on, and will receive the public offering price determined
on, that day. Except in the case of certain orders transmitted by dealers as
described in the following paragraph, orders received after such close of
business are effective on, and receive the share price determined on, the next
business day.
Orders for the purchase of Fund shares received by dealers by the close of
trading on the floor of the NYSE on any business day and transmitted to the
Distributor or its designee by the close of its business day (normally 5:15
p.m., New York time) will be based on the public offering price per share
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, the orders will be based on the next determined public offering
price. It is the dealers' responsibility to transmit orders so that they will be
received by the Distributor or its designee before the close of its business
day. For certain institutions that have entered into Agreements with the
Distributor, payment for the purchase of Fund shares may be transmitted, and
must be received by the Transfer Agent, within three business days after the
order is placed. If such payment is not received within three business days
after the order is placed, the order may be canceled and the institution could
be held liable for resulting fees and/or losses.
Class A Shares. The public offering price for Class A shares of each Fund
is the NAV of that Class, plus a sales load as shown below:
Total Sales Load
As a % of As a % of Dealers'
Offering Net Asset Reallowance
Amount of Transaction Price Value as a % of
---------------------
Per Share Per Share Offering Price
Less than $100,000............... 3.00 3.10 2.75
$100,000 to less than 2.75 2.80 2.50
$250,000...............
$250,000 to less than 2.25 2.30 2.00
$500,000
$500,000 to less than 2.00 2.00 1.75
$1,000,000
Sales Loads--Class A . The scale of sales loads applies to purchases of
Class A shares made by any "purchaser," which term includes an individual and/or
spouse purchasing securities for his, her or their own account or for the
account of any minor children, or a trustee or other fiduciary purchasing
securities for a single trust estate or a single fiduciary account (including a
pension, profit-sharing or other employee benefit trust created pursuant to a
plan qualified under Section 401 of the Code although more than one beneficiary
is involved) or a group of accounts established by or on behalf of the employees
of an employer or affiliated employers pursuant to an employee benefit plan or
other program (including accounts established pursuant to Sections 403(b),
408(k), and 457 of the Code); or an organized group which has been in existence
for more than six months, provided that it is not organized for the purpose of
buying redeemable securities of a registered investment company and provided
that the purchases are made through a central administration or a single dealer,
or by other means which result in economy of sales effort or expense
Set forth below is an example of the method of computing the offering
price of the Class A shares. The example assumes a purchase of Class A shares
aggregating less than $100,000 subject to the schedule of sales charges set
forth in the relevant Fund's Prospectus at a price based upon the NAV of a Class
A share on June 30, 2000.
Municipal Massachusetts
Fund Municipal Fund
Net Asset Value per share $11.94 $11.89
Per Share Sales Charge - 3.00%
of offering price (3.10% of
net asset value per share) $0.37 $0.37
Per Share Offering Price to
the Public $12.31 $12.26
Holders of Class A accounts of a Fund as of December 28, 1994 may continue
to purchase Class A shares of that Fund at NAV. However, investments by such
holders in other funds advised by Dreyfus will be subject to the applicable
front-end sales load.
With respect to each Fund, there is no initial sales charge on purchases
of $1,000,000 or more of Class A shares. However, if you purchase Class A shares
without an initial sales charge as part of an investment of at least $1,000,000
and redeem all or a portion of those shares within one year after purchase, a
CDSC of 1.00% will be imposed at the time of redemption. 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 below under "Redemption
of Shares-Contingent Deferred Sales Charge-Class B Shares" (other than the
amount of the CDSC and time periods) and "Redemption of Shares-Waiver Of CDSC"
are applicable to the Class A shares subject to a CDSC. Letter of Intent and
Right of Accumulation apply to such purchases of Class A shares.
Full-time employees of NASD member firms and full-time employees of other
financial institutions which have entered into an agreement with the Distributor
pertaining to the sale of Fund shares (or which otherwise have a brokerage
related or clearing arrangement with an NASD member firm or financial
institution with respect to the sale of such shares) may purchase Class A shares
for themselves directly or pursuant to an employee benefit plan or other
program, or for their spouses or minor children, at NAV, provided that they have
furnished the Distributor with such information as it may request from time to
time in order to verify eligibility for this Privilege. This privilege also
applies to full-time employees of financial institutions affiliated with NASD
member firms whose full-time employees are eligible to purchase Class A shares
at NAV. In addition, Class A shares are offered at NAV to full-time or part-time
employees of Dreyfus or any of its affiliates or subsidiaries, directors of
Dreyfus, and Board members of a fund advised by Dreyfus, including members of
the Trust's Board, or the spouse or minor child of any of the foregoing.
Class A shares may be purchased at NAV through certain broker-dealers and
other financial institutions which have entered into an agreement with the
Distributor, which includes a requirement that such shares be sold for the
benefit of clients participating in a "wrap account" or a similar program under
which such clients pay a fee to such broker-dealer or other financial
institution.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, through a broker-dealer or other financial institution with the
proceeds from the redemption of shares of a registered open-end management
investment company not managed by Dreyfus or its affiliates. The purchase of
Class A shares of a Fund must be made within 60 days of such redemption and the
shareholder must have either (i) paid an initial sales charge or a CDSC or (ii)
been obligated to pay at any time during the holding period, but did not
actually pay on redemption, a deferred sales charge with respect to such
redeemed shares.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, by (i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United States,
(ii) a State, county or city or instrumentality thereof, (iii) a charitable
organization (as defined in Section 501(c)(3) of the Code) investing $50,000 or
more in Fund shares, and (iv) a charitable remainder trust (as defined in
Section 501(6)(3) of the Code).
The dealer reallowance may be changed from time to time but will remain
the same for all dealers. The Distributor, at its expense, may provide
additional promotional incentives to dealers that sell shares of funds advised
by Dreyfus which are sold with a sales load, such as the Funds. In some
instances, those incentives may be offered only to certain dealers who have sold
or may sell significant amounts of shares.
Class B Shares. The public offering price for Class B shares is the NAV of
that Class. No initial sales charge is imposed at the time of purchase. A CDSC
is imposed, however, on certain redemptions of Class B shares as described in
each Fund's Prospectus.
Approximately six years after the date of purchase, Class B shares
automatically will convert to Class A shares, based on the relative NAVs for
shares of each such Class. Class B shares that have been acquired through the
reinvestment of dividends and distributions will be converted on a pro rata
basis together with other Class B shares, in the proportion that a shareholder's
Class B shares converting to Class A shares bears to the total Class B shares
not acquired through the reinvestment of dividends and distributions.
Class C Shares. The public offering price for Class C shares is the NAV of
that Class. No initial sales charge is imposed at the time of purchase. A CDSC
is imposed, however, on redemptions of Class C shares made within the first year
of purchase. See "Class B shares" above and "How to Redeem Shares."
Class B and C Shares. The Distributor compensates certain Agents for
selling Class B and Class C shares at the time of purchase from its own assets.
The proceeds of the CDSC and the distribution fee, in part, are used to defray
these expenses.
Class R Shares. The public offering price for Class R shares is the NAV
--------------
of that Class.
Right of Accumulation- Class A shares. Reduced sales loads apply to any
purchase of Class A shares, shares of other funds in the Dreyfus Premier Family
of Funds which are sold with a sales load, shares of certain other funds advised
by Dreyfus or Founders Asset Management LLC ("Founders"), an affiliate of
Dreyfus, which are sold with a sales load and shares acquired by a previous
exchange of such shares (hereinafter referred to as "Eligible Funds"), by you
and any related "purchaser" as defined above, where the aggregate investment,
including such purchase, is $100,000 or more. If, for example, you previously
purchased and still hold Class A shares, or shares of any other Eligible Fund or
combination thereof, with an aggregate current market value of $80,000 and
subsequently purchase Class A shares or shares of an Eligible Fund having a
current value of $40,000, the sales load applicable to the subsequent purchase
would be reduced to 2.75% of the offering price. All present holdings of
Eligible Funds may be combined to determine the current offering price of the
aggregate investment in ascertaining the sales load applicable to each
subsequent purchase.
To qualify for reduced sales loads, at the time of purchase you or your
Agent must notify the Distributor if orders are made by wire, or the Transfer
Agent if orders are made by mail. The reduced sales load is subject to
confirmation of your holdings through a check of appropriate records.
TeleTransfer Privilege. You may purchase Fund shares (minimum $500 and
maximum $150,000 per day) by telephone through the TeleTransfer Privilege if you
have checked the appropriate box and supplied the necessary information on the
Account Application or have filed a Shareholder Services Form with the Transfer
Agent. The proceeds will be transferred between the bank account designated in
one of these documents and your Fund account. Only a bank account maintained in
a domestic financial institution that is an ACH member may be so designated.
TeleTransfer purchase orders may be made at any time. Purchase orders received
by 4:00 p.m., New York time, on any business day that the Transfer Agent and the
NYSE are open for business will be credited to the shareholder's Fund account on
the next bank business day following such purchase order. Purchase orders made
after 4:00 p.m., New York time, on any business day the Transfer Agent and the
NYSE are open for business, or orders made on Saturday, Sunday or any Fund
holiday (e.g., when the NYSE is not open for business), will be credited to the
shareholder's Fund account on the second bank business day following such
purchase order. To qualify to use the TeleTransfer Privilege, the initial
payment for purchase of Fund shares must be drawn on, and redemption proceeds
paid to, the same bank and account as are designated on the Account Application
or Shareholder Services Form on file. If the proceeds of a particular redemption
are to be wired to an account at any other bank, the request must be in writing
and signature-guaranteed. See "Redemption of Shares - TeleTransfer Privilege."
Each Fund may modify or terminate this Privilege at any time or charge a service
fee upon notice to shareholders. No such fee currently is contemplated by either
Fund.
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the calendar
year the account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.
In-Kind Purchases. If the following conditions are satisfied, a Fund may
at its discretion, permit the purchase of shares through an "in-kind" exchange
of securities. Any securities exchanged must meet the investment objective,
policies and limitations of the applicable Fund, must have a readily
ascertainable market value, must be liquid and must not be subject to
restrictions on resale. The market value of any securities exchanged, plus any
cash, must be at least equal to $25,000. Shares purchased in exchange for
securities generally cannot be redeemed for fifteen days following the exchange
in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative NAVs of the shares
purchased and securities exchanged. Securities accepted by a Fund will be valued
in the same manner as the Fund values its assets. Any interest earned on the
securities following their delivery to a Fund and priors to the exchange will be
considered in valuing the securities. All interest, dividends, subscription or
other rights attached to the securities become the property of the Fund, along
with the securities. For further information about "in-kind" purchases, call
1-800-554-4611.
DISTRIBUTION AND SERVICE PLANS
The following information supplements and should be read in conjunction
with the section in the Funds' Prospectuses entitled "Your Investment."
Class A, Class B and Class C shares are subject to annual fees for
distribution and shareholder services.
The SEC has adopted Rule 12b-1 under the 1940 Act ("Rule") regulating the
circumstances under which investment companies such as the Trust may, directly
or indirectly, bear the expenses of distributing their shares. The Rule defines
distribution expenses to include expenditures for "any activity which is
primarily intended to result in the sale of fund shares." The Rule, among other
things, provides that an investment company may bear such expenses only pursuant
to a plan adopted in accordance with the Rule.
Distribution Plan--Class A shares. With respect to the Class A shares of
each Fund, the Trust has adopted a Distribution Plan pursuant to the Rule (the
"Class A Plan"), whereby Class A shares of a Fund may spend annually up to 0.25%
of the average of its net assets to compensate Mellon Bank and its affiliates
(including but not limited to Dreyfus and the Distributor) for shareholder
servicing activities and the Distributor for shareholder servicing activities
and expenses primarily intended to result in the sale of Class A shares of the
Fund. The Class A Plan allows the Distributor to make payments from the Rule
12b-1 fees it collects from a Fund to compensate Agents that have entered into
Selling Agreements ("Agreements") with the Distributor. Under the Agreements,
the Agents are obligated to provide distribution related services with regard to
the Funds and/or shareholder services to the Agent's clients that own Class A
shares of the Funds. The Trust's Board of Trustees believes that there is a
reasonable likelihood that the Class A Plan will benefit each Fund and the
holders of its Class A shares.
The Class A Plan provides that a report of the amounts expended under the
Class A Plan, and the purposes for which such expenditures were incurred, must
be made to the Trust's Trustees for their review at least quarterly. In
addition, the Class A Plan provides that it may not be amended to increase
materially the costs which a Fund may bear for distribution pursuant to the
Class A Plan without approval of a Fund's shareholders, and that other material
amendments of the Class A Plan must be approved by the vote of a majority of the
Trustees and of the Trustees who are not "interested persons" of the Trust (as
defined in the 1940 Act) and who do not have any direct or indirect financial
interest in the operation of the Plan, cast in person at a meeting called for
the purpose of considering such amendments. The Class A Plan is subject to
annual approval by the entire Board of Trustees and by the Trustees who are
neither interested persons nor have any direct or indirect financial interest in
the operation of the Class A Plan, by vote cast in person at a meeting called
for the purpose of voting on the Class A Plan. The Class A Plan is terminable,
as to a Fund's Class A shares, at any time by vote of a majority of the Trustees
who are not interested persons and have no direct or indirect financial interest
in the operation of the Class A Plan or by vote of the holders of a majority of
the outstanding shares of such class of the Fund.
Distribution and Service Plans -- Class B and C Shares. In addition to the
above described Class A Plan for Class A shares, the Board of Trustees has
adopted a Service Plan (the "Service Plan") under the Rule for Class B and Class
C shares, pursuant to which the Fund pays the Distributor, and/or any of its
affiliates, a fee at the annual rate of 0.25% of the value of the average daily
net assets of Class B and Class C shares for the provision of certain services
to the holders of Class B and Class C shares. The services provided may include
personal services relating to shareholder accounts, such as answering
shareholder inquiries regarding the Fund and providing reports and other
information, and providing services related to the maintenance of such
shareholder accounts. With regard to such services, each Agent is required to
disclose to its clients any compensation payable to it by the Fund and any other
compensation payable by its clients in connection with the investment of their
assets in Class B and Class C shares. The Distributor may pay one or more Agents
in respect of services for these Classes of shares. The Distributor determines
the amounts, if any, to be paid to Agents under the Service Plan and the basis
on which such payments are made. The Trust's Board of Trustees has also adopted
a Distribution Plan pursuant to the Rule with respect to Class B and Class C
shares (the "Distribution Plan") pursuant to which the Fund pays the Distributor
for distributing the Fund's Class B and Class C shares at an aggregate annual
rate of 0.50% of the value of the average daily net assets of Class B and Class
C shares. The Trust's Board of Trustees believes that there is a reasonable
likelihood that the Distribution and Service Plan (the "Plans") will benefit the
Fund and the holders of Class B and Class C shares.
A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the Trustees
for their review. In addition, each Plan provides that it may not be amended to
increase materially the cost which holders of Class B or Class C shares may bear
pursuant to the Plan without the approval of the holders of such Classes and
that other material amendments of the Plan must be approved by the Board of
Trustees and by the Trustees who are not interested persons of the Fund and have
no direct or indirect financial interest in the operation of the Plan or in any
agreements entered into in connection with the Plan, by vote cast in person at a
meeting called for the purpose of considering such amendments. Each Plan is
subject to annual approval by such vote of the Trustees cast in person at a
meeting called for the purpose of voting on the Plan. Each Plan may be
terminated at any time by vote of a majority of the Trustees who are not
interested persons and have no direct or indirect financial interest in the
operation of the Plan or in any agreements entered into in connection with the
Plan or by vote of the holders of a majority of Class B and Class C shares.
An Agent entitled to receive compensation for selling and servicing a
Fund's shares may receive different compensation with respect to one Class of
shares over another. Potential investors should read this SAI in light of the
terms governing Agreements with their Agents. The fees payable under each plan
described above are payable without regard to actual expenses incurred. Each
Fund and the Distributor may suspend or reduce payments under any of the plans
at any time, and payments are subject to the continuation of the Fund's plans
and the Agreements described above. From time to time, the Agents, the
Distributor and each Fund may voluntarily agree to reduce the maximum fees
payable under the plans.
For the period from July 1, 1999 through March 21, 2000, each Fund paid
Premier, and for the period from March 22, 2000 through June 30, 2000, each Fund
paid the Distributor, and for the fiscal year ended June 30, 2000, each Fund
paid Premier and the Distributor, in the aggregate, the following distribution
fees:
Amount Paid by Amount Paid by
Class A to Class A to the Total Amount Paid by
Premier for Distributor for Class A to both Premier
Period from July Period from March and the Distributor for
1, 1999 through 22, 2000 through fiscal year ended
Name of Fund March 21, 2000 June 30, 2000 June 30, 2000
------------ ---------------- ----------------- ----------------------
Massachusetts
Municipal Fund $3,027 $30,825 $33,852
Municipal Fund 46,010 62,143
16,133
Amount Paid by Amount Paid by
Class B to Class B to the Total Amount Paid by
Premier for Distributor for Class B to both Premier
Period from July Period from March and the Distributor for
1, 1999 through 22, 2000 through fiscal year ended
Name of Fund March 21, 2000 April 30, 2000 June 30, 2000
------------ ---------------- ----------------- ----------------------
Massachusetts
Municipal Fund $ 3,080 $1,216 $4,296
Municipal Fund 10,371 6,389 16,760
Amount Paid by Amount Paid by
Class C to Class C to the Total Amount Paid by
Premier for Distributor for Class C to both Premier
Period from July Period from March and the Distributor for
1, 1999 through 22, 2000 through fiscal year ended
Name of Fund March 21, 2000 June 30, 2000 June 30, 2000
------------ ---------------- ----------------- ----------------------
Massachusetts
Municipal Fund $927 $143 $1,070
Municipal Fund 1,395 5,924
4,529
<TABLE>
<CAPTION>
For the period from July 1, 1999 through March 21, 2000, each Fund paid
Premier, and for the period from March 22, 2000 through June 30, 2000, each Fund
paid the Distributor, and for the fiscal year ended June 30, 2000, each Fund
paid Premier and the Distributor, in the aggregate, with respect to Class B and
C shares, the following service fees:
Amount Paid to Amount Paid to the
Premier for Distributor for Total Amount Paid to
Period from July Period from March both Premier and the
1, 1999 through 22, 2000 through Distributor for fiscal year
March 21, 2000 June 30, 2000 with ended June 30, 2000 with
respect to respect to respect to
Class B Class B Class B
---------------- ----------------- ----------------------
Massachusetts
<S> <C> <C> <C>
Municipal Fund $935 $1,213 $2,148
Municipal Fund 3,431 4,949 8,380
Amount Paid to Amount Paid to the
Premier for Distributor for Total Amount Paid to
Period from July Period from March both Premier and the
1, 1999 through 22, 2000 through Distributor for fiscal year
March 21, 2000 June 30, 2000 with ended June 30, 2000 with
respect to respect to respect to
Class C Class C Class C
---------------- ----------------- ----------------------
Massachusetts
Municipal Fund $463 $72 $535
Municipal Fund 2,396 566 2,962
</TABLE>
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Account Policies,"
"Services For Fund Investors," and "Instructions for Regular Accounts."
General. If you hold Fund shares of more than one Class, any request for
redemption must specify the Class of shares being redeemed. If you fail to
specify the Class of shares to be redeemed or if you own fewer shares of the
Class than specified to be redeemed, the redemption request may be delayed until
the Transfer Agent receives further instructions from you or your Agent.
The Funds impose no charges (other than any applicable CDSC) when shares
are redeemed. Agents or other institutions may charge their clients a fee for
effecting redemptions of Fund shares. Any certificates representing Fund shares
being redeemed must be submitted with the redemption request. The value of the
shares redeemed may be more or less than their original cost, depending upon the
Fund's then-current NAV.
Procedures. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or, if you have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent, through the
TeleTransfer Privilege. If you are a client of a Selected Dealer, you may redeem
Fund shares through the Selected Dealer. Other redemption procedures may be in
effect for clients of certain Agents and institutions. Each Fund makes available
to certain large institutions the ability to issue redemption instructions
through compatible computer facilities. Each Fund reserves the right to refuse
any request made by telephone, including requests made shortly after a change of
address, and may limit the amount involved or the number of such requests. Each
Fund may modify or terminate any redemption privilege at any time or charge a
service fee upon notice to shareholders. No such fee currently is contemplated.
Shares for which certificates have been issued are not eligible for the
TeleTransfer Privilege.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Account Application or have filed a Shareholder Services
Form with the Transfer Agent. If you select the TeleTransfer Privilege or
Telephone Exchange Privilege, which is granted automatically unless you refuse
it, you authorize the Transfer Agent to act on telephone instructions (including
over The Dreyfus Touch(R) automated telephone system) from any person
representing himself or herself to be you, or a representative of your Agent,
and reasonably believed by the Transfer Agent to be genuine. Each Fund will
require the Transfer Agent to employ reasonable procedures, such as requiring a
form of personal identification, to confirm that instructions are genuine and,
if it does not follow such procedures, the Fund or the Transfer Agent may be
liable for any losses due to unauthorized or fraudulent instructions. Neither
the Fund nor the Transfer Agent will be liable for following telephone
instructions reasonably believed to be genuine.
The Fund ordinarily will make payment for all shares redeemed within seven
days after receipt by the Transfer Agent of a redemption request in proper form,
except as provided by the rules of the SEC. However, if you have purchased Fund
shares by check or by the TeleTransfer Privilege and subsequently submit a
written redemption request to the Transfer Agent, the redemption proceeds will
be transmitted to you promptly upon bank clearance of the purchase check or
TeleTransfer purchase order, which may take up to eight business days or more.
In addition, the Fund will reject requests to redeem shares by wire or telephone
or pursuant to the TeleTransfer Privilege for a period of eight business days
after receipt by the Transfer Agent of the purchase check or the TeleTransfer
purchase order against which such redemption is requested. These procedures will
not apply if your shares were purchased by wire payment, or you otherwise have a
sufficient collected balance in your account to cover the redemption request.
Prior to the time any redemption is effective, dividends on such shares will
accrue and be payable, and you will be entitled to exercise all other rights of
beneficial ownership. Fund shares will not be redeemed until the Transfer Agent
has received your Account Application.
During times of drastic economic or market conditions, you may experience
difficulty in contacting the Transfer Agent by telephone to request a
TeleTransfer redemption or an exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if TeleTransfer redemption had
been used. During the delay, the Fund's NAV may fluctuate.
TeleTransfer Privilege. You may request by telephone that redemption
proceeds (minimum $500 per day) be transferred between your Fund account and
your bank account. Only a bank account maintained in a domestic financial
institution which is an ACH member may be designated. Redemption proceeds will
be on deposit in the your account at an ACH member bank ordinarily two business
days after receipt of the redemption request. Investors should be aware that if
they have selected the TeleTransfer Privilege, any request for a wire redemption
will be effected as a TeleTransfer transaction through the ACH system unless
more prompt transmittal specifically is requested. Holders of jointly registered
Fund or bank accounts may redeem through the TeleTransfer Privilege for transfer
to their bank account only up to $500,000 within any 30-day period. See
"Purchase of Shares-- TeleTransfer Privilege."
Redemption Through a Selected Dealer. Customers of Selected Dealers, may
make redemption requests to their Selected Dealer. If the Selected Dealer
transmits the redemption request so that it is received by the Transfer Agent
prior to the close of trading on the floor of the NYSE (currently 4:00 p.m., New
York time), the redemption request will be effective on that day. If a
redemption request is received by the Transfer Agent after the close of trading
on the floor of the NYSE, the redemption request will be effective on the next
business day. It is the responsibility of the Selected Dealer to transmit a
request so that it is received in a timely manner. The proceeds of the
redemption are credited to your account with the Selected Dealer. See "Purchase
of Shares" for a discussion of additional conditions or fees that may be imposed
upon redemption.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of Fund shares held by shareholders. Repurchase orders received by
dealers by the close of trading on the floor of the NYSE on any business day and
transmitted to the Distributor or its designee prior to the close of its
business day (normally 5:15 p.m., New York time) are effected at the price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, the Fund shares will be redeemed at the next determined NAV. It is
the responsibility of the Selected Dealer to transmit orders on a timely basis.
The Selected Dealer may charge the shareholder a fee for executing the order.
This repurchase arrangement is discretionary and may be withdrawn at any time.
Reinvestment Privilege. Upon written request, you may reinvest up to the
number of Class A or Class B shares you have redeemed, within 45 days of
redemption, at the then-prevailing NAV without a sales load, or reinstate your
account for the purpose of exercising the Fund Exchanges. Upon reinstatement,
with respect to Class B shares, or Class A shares if such shares were subject to
a CDSC, your account will be credited with an amount equal to the CDSC
previously paid upon redemption of the shares reinvested. The Reinvestment
Privilege may be exercised only once.
Share Certificates; Signatures. Any certificates representing Fund shares
to be redeemed must be submitted with the redemption request. Written redemption
requests must be signed by each shareholder, including each holder of a joint
account, and each signature must be guaranteed. Signatures on endorsed
certificates submitted for redemption also must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations
as well as from participants in the NYSE Medallion Signature Program, the
Securities Transfer Agents Medallion Program ("STAMP") and the Stock Exchanges
Medallion Program. Guarantees must be signed by an authorized signatory of the
guarantor and "Signature- Guaranteed" must appear with the signature. The
Transfer Agent may request additional documentation from corporations,
executors, administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular verification.
For more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
Redemption Commitment. The Trust has committed itself to pay in cash all
redemption requests by any shareholder of record of a Fund, limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the value of the
Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the SEC. In the case of requests for
redemption in excess of such amount, the Board of Trustees reserves the right to
make payments in whole or in part in securities or other assets in case of an
emergency or any time a cash distribution would impair the liquidity of the Fund
to the detriment of the existing shareholders. In such event, the securities
would be valued in the same manner as each Fund's portfolio is valued. If the
recipient sold such securities, brokerage charges might be incurred.
Suspension of Redemptions. The right to redeem Fund shares may be
suspended or the date of payment postponed (a) during any period when the NYSE
is closed (other than customary weekend and holiday closings); (b) when trading
in the markets a Fund ordinarily utilizes is restricted or when an emergency
exists as determined by the SEC so that disposal of the Fund's investments or
determination of its NAV is not reasonably practicable, or (c) for such other
periods as the SEC, by order, may permit to protect a Fund's shareholders.
Contingent Deferred Sales Charge - Class B shares. A CDSC is payable to
the Distributor on any redemption of Class B shares which reduces the current
NAV of your Class B shares to an amount below the dollar amount of all payments
by you for purchase of your Class B shares at the time of redemption. No CDSC
will be imposed to the extent that the NAV of the Class B shares redeemed does
not exceed (i) the current NAV of Class B shares acquired through reinvestment
of dividends or other distributions, plus (ii) increases in the NAV of your
Class B shares above the dollar amount of all your payments for the purchase of
Class B shares held by you at the time of redemption.
If the aggregate value of Class B shares redeemed has declined below their
original cost as a result of a Fund's performance, a CDSC may be applied to the
then-current NAV rather than the purchase price.
In circumstances where the CDSC is imposed, the amount of the charge will
depend on the number of years from the time you purchased the Class B shares
until the time of redemption of such shares. Solely for purposes of determining
the number of years from the time of any payment for the purchase of Class B
shares, all payments during a month will be aggregated and deemed to have been
made on the first day of the month. The following table sets forth the rates of
the CDSC:
Year Since CDSC as a % of
Purchase Payment Amount Invested or
Was Made Redemption Proceeds
First......................... 3.00
Second........................ 3.00
Third......................... 2.00
Fourth........................ 2.00
Fifth......................... 1.00
Sixth......................... 0.00
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible rate.
It will be assumed that the redemption is made first of amounts representing
shares acquired pursuant to the reinvestment of dividends and other
distributions; then of amounts representing the increase in NAV of Class B
shares above the total amount of payments for the purchase of Class B shares
made during the preceding five years; then of amounts representing the cost of
shares purchased five years prior to the redemption; and finally, of amounts
representing the cost of shares held for the longest period of time within the
applicable five-year period.
For example, assume an investor purchased 100 shares at $10 share for a
cost of $1,000. Subsequently, the shareholder acquired five additional shares
through dividend reinvestment. During the second year after the purchase the
investor decided to redeem $500 of his or her investment. Assuming at the time
of the redemption the NAV had appreciated to $12 per share, the value of the
investor's shares would be $1,260 (105 shares at $12 per share). The CDSC would
not be applied to the value of the reinvested dividend shares and the amount
which represents appreciation ($260). Therefore, $240 of the $500 redemption
proceeds ($500 minus $260) would be charged at a rate of 3% (the applicable rate
in the second year after purchase) for a total CDSC of $7.20.
For purposes of determining the applicable CDSC payable with respect to
redemption of Class B shares of a Fund where such shares were acquired through
exchange of Class B shares of another fund advised by Dreyfus, the year since
purchase payment was made is based on the date of purchase of the original Class
B shares of the fund exchanged.
Contingent Deferred Sales Charge - Class C shares. A CDSC of .75% is paid
to the Distributor 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 may be waived in connection with (a) redemptions
made within one year after the death or disability, as defined in Section
72(m)(7) of the Code, of the shareholder, (b) redemptions as a result of a
combination of any investment company with the Funds by merger, acquisition of
assets or otherwise and (c) redemptions pursuant to the Automatic Withdrawal
Plan, as described under "Shareholder Services-Automatic Withdrawal Plan" below.
If the Trust's Board of Trustees determines to discontinue the waiver of the
CDSC, the disclosure in the Funds' Prospectuses will be revised appropriately.
Any Fund shares subject to a CDSC which were purchased prior to the termination
of such waiver will have the CDSC waived as provided in the relevant Fund's
Prospectus at the time of the purchase of such shares.
To qualify for a waiver of the CDSC, at the time of redemption you must
notify the Transfer Agent or your Agent must notify the Distributor. Any such
qualification is subject to confirmation of your entitlement.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the sections in each Fund's Prospectus entitled "Accounts Policies" and
"Services for Fund Investors."
The services and privileges described under this heading may not be
available to clients of certain Agents and some Agents may impose certain
conditions on their clients which are different from those described below. You
should consult your Agent in this regard.
Fund Exchanges. You may purchase, in exchange for shares of a Fund, shares
of the same Class of another fund in the Dreyfus Premier Family of Funds, shares
of the same Class of certain funds advised by Founders, or shares of certain
other funds in the Dreyfus Family of Funds, to the extent such shares are
offered for sale in your state of residence. Shares of the same Class of such
other funds purchased by exchange will be purchased on the basis of relative NAV
per share as follows:
A. Exchanges for shares of funds that are offered without a sales load
will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged for
shares of other funds sold with a sales load, and the applicable
sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged without
a sales load for shares of other funds sold without a sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein as
"Offered Shares"), provided that, if the sales load applicable to
the Offered Shares exceeds the maximum sales load that could have
been imposed in connection with the Purchased Shares (at the time
the Purchased Shares were acquired), without giving effect to any
reduced loads, the difference will be deducted.
E. Shares of funds subject to a CDSC that are exchanged for shares of
another fund will be subject to the higher applicable CDSC of the two
funds, and for purposes of calculating CDSC rates and conversion
periods, if any, will be deemed to have been held since the date the
shares being exchanged were initially purchased.
To accomplish an exchange under item D above, an investor's Agent must
notify the Transfer Agent of the investor's prior ownership of shares with a
sales load and the investor's account number. Any such exchange is subject to
confirmation of a shareholder's holdings through a check of appropriate records.
To request an exchange, an investor or an investor's Agent acting on the
investor's behalf must give exchange instructions to the Transfer Agent in
writing or by telephone. Before any exchange, you must obtain and should review
a copy of the current prospectus of the fund into which the exchange is being
made. Prospectuses may be obtained by calling 1-800-554-4611. The shares being
exchanged must have a current value of at least $500; furthermore, when
establishing a new account by exchange, the shares being exchanged must have a
value of at least the minimum initial investment required for the fund into
which the exchange is being made. The ability to issue exchange instructions by
telephone is given to all Fund shareholders automatically, unless the investor
checks the relevant "No" box on the Account Application, indicating that the
investor specifically refuses this privilege. The Telephone Exchange Privilege
may be established for an existing account by written request signed by all
shareholders on the account, by a separate Shareholder Services Form, available
by calling 1-800-554-4611, or, by oral request from any of the authorized
signatories on the account, also by calling 1-800-554-4611. If you previously
have established the Telephone Exchange Privilege, you may telephone exchange
instructions (including over The Dreyfus Touch(R) Automated Telephone System) by
calling 1-800-554-4611. If calling from overseas, call 516- 794-5452. See "How
to Redeem Fund Shares - Procedures." Upon an exchange into a new account, the
following shareholder services and Privileges, as applicable and where
available, will be automatically carried over to the fund into which the
exchange is made: Telephone Exchange Privilege, TeleTransfer Privilege and the
dividends and distributions payment option (except for Dividend Sweep) selected
by the investor.
By using the Telephone Exchange Privilege, the investor authorizes the
Transfer Agent to act on telephonic instructions (including over The Dreyfus
Touch(R) automated telephone system) from any person representing himself or
herself to be the investor or a representative of the investor's Agent, and
reasonably believed by the Transfer Agent to be genuine. Telephone exchanges may
be subject to limitations as to the amount involved or the number of telephone
exchanges permitted. Shares issued in certificate form are not eligible for
telephone exchange. No fees currently are charged shareholders directly in
connection with exchanges, although each Fund reserves the right, upon not less
than 60 days' written notice, to charge shareholders a nominal fee in accordance
with rules promulgated by the SEC. Each Fund reserves the right to reject any
exchange request in whole or in part. The availability of fund exchanges may be
modified or terminated at any time upon notice to shareholders
Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege permits
you to purchase (on a semi-monthly, monthly, quarterly or annual basis), in
exchange for shares of a Fund, shares of the same Class of another fund in the
Dreyfus Premier Family of Funds, shares of the same Class of certain funds
advised by Founders, or shares of certain other funds in the Dreyfus Family of
Funds, of which you are a shareholder. The amount the investor designates, which
can be expressed either in terms of a specific dollar or share amount ($100
minimum), will be exchanged automatically on the first and/or fifteenth day of
the month according to the schedule the investor has selected. This Privilege is
available only for existing accounts. Shares will be exchanged on the basis of
relative NAV as described above under "Fund Exchanges." Enrollment in or
modification or cancellation of this Privilege is effective three business days
following notification by the investor. An investor will be notified if the
investor's account falls below the amount designated to be exchanged under this
Privilege. In this case, an investor's account will fall to zero unless
additional investments are made in excess of the designated amount prior to the
next Auto-Exchange transaction.
The right to exercise this Privilege may be modified or canceled by each
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to Dreyfus Premier Limited
Term Municipal Fund or Dreyfus Premier Limited Term Massachusetts Municipal Fund
(as applicable), P.O. Box 6587, Providence, Rhode Island 02940-6587. Each Fund
may charge a service fee for the use of this Privilege. No such fee currently is
contemplated. For more information concerning this Privilege and the funds in
the Dreyfus Premier Family of Funds or the Dreyfus Family of Funds eligible to
participate in this Privilege, or to obtain a Dreyfus Auto- Exchange
Authorization Form, please call toll free 1-800-554-4611.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of a fund being acquired may
legally be sold. Shares may be exchanged only between accounts having identical
names and other identifying designations. The exchange of shares of one fund for
shares of another is treated for Federal income tax purposes as a sale of the
shares given in exchange and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-554-4611. The Funds reserve the right to reject any
exchange request in whole or in part. The Fund Exchange service or the
Auto-Exchange Privilege may be modified or terminated at any time upon notice to
shareholders.
Dreyfus-Automatic Asset Builder(R). Dreyfus-Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000 per
transaction) at regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you at your option. Only
an account maintained at a domestic financial institution which is an ACH member
may be so designated. To establish a Dreyfus-Automatic Asset Builder account,
you must file an authorization form with the Transfer Agent. You may obtain the
necessary authorization form by calling 1-800-554-4611. You may cancel your
participation in this Privilege or change the amount of purchase at any time by
mailing written notification to the applicable Fund, P.O. Box 6581, Providence,
Rhode Island 02940-6587 and the notification will be effective three business
days following receipt. Each Fund may modify or terminate this Privilege at any
time or charge a service fee. No such fee currently is contemplated.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the yield on
the shares. If withdrawal payments exceed reinvested dividends and other
distributions, the investor's shares will be reduced and eventually may be
depleted. An Automatic Withdrawal Plan may be established by filing an Automatic
Withdrawal Plan application with the Transfer Agent or by oral request from any
of the authorized signatories on the account by calling 1-800-554-4611.
Automatic Withdrawal may be terminated at any time by the investor, the Fund or
the Transfer Agent. Shares for which certificates have been issued may not be
redeemed through the Automatic Withdrawal Plan.
No CDSC with respect to Class B shares will be imposed on withdrawals made
under the Automatic Withdrawal Plan, provided that the amounts withdrawn under
the plan do not exceed an annual rate of 12% of the greater of the account value
at the time of the first withdrawal under the Automatic Withdrawal Plan ("AWP"),
or the account value at the time of the subsequent withdrawal. Withdrawals with
respect to Class B shares under the AWP that exceed such amounts will be subject
to a CDSC. 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.
Dividend Options. Dreyfus Dividend Sweep allows you to invest
automatically your dividends or dividends and capital gain distributions, if
any, from a Fund in shares of the same Class of another fund in the Dreyfus
Premier Family of Funds, shares of the same Class of certain funds advised by
Founders, or shares of certain other funds in the Dreyfus Family of Funds, of
which you are shareholder. Shares of the same class of other funds purchased
pursuant to this Privilege will be purchased on the basis of relative NAV per
share as follows:
A. Dividends and other distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that are
offered without a sales load.
B. Dividends and other distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds sold
with a sales load, and the applicable sales load will be deducted.
C. Dividends and other distributions paid by a fund which charges a
sales load may be invested in shares of other funds sold with a sales
load (referred to herein as "Offered Shares"), provided that, if the
sales load applicable to the Offered Shares exceeds the maximum sales
load charged by the fund from which dividends or other distributions
are being swept, without giving effect to any reduced loads, the
difference will be deducted.
D. Dividends and other distributions paid by a fund may be invested in
shares of other funds that impose a CDSC and the applicable CDSC, if
any, will be imposed upon redemption of such shares.
Dividend ACH permits you to transfer electronically on the payment date
dividends or dividends and other distributions, if any, from a Fund to a
designated bank account. Only an account maintained at a domestic financial
institution which is an ACH member may be so designated. Banks may charge a fee
for this service.
For more information concerning these Privileges, or to request a Dividend
Options Form, please call toll free 1-800-554-4611. You may cancel these
Privileges by mailing written notification to Dreyfus Premier Limited Term
Massachusetts Municipal Fund or Dreyfus Premier Limited Term Municipal Fund (as
applicable), P.O. Box 6587, Providence, Rhode Island 02940-6587. To select a new
fund after cancellation, you must submit a new Dividend Options Form. Enrollment
in or cancellation of these Privileges is effective three business days
following receipt. These Privileges are available only for existing accounts and
may not be used to open new accounts. Minimum subsequent investments do not
apply for Dreyfus Dividend Sweep. Each may modify or terminate these Privileges
at any time or charge a service fee. No such fee currently is contemplated.
Dreyfus Government Direct Deposit Privilege. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social Security or
certain veterans', military or other payments from the Federal government
automatically deposited into your Fund account. You may deposit as much of such
payments as you elect. To enroll in Dreyfus Government Direct Deposit, you must
file with the Transfer Agent a completed Direct Deposit Sign-Up Form for each
type of payment that you desire to include in this Privilege. The appropriate
form may be obtained from your Agent or by calling 1-800-554-4611. Death or
legal incapacity will terminate your participation in this Privilege. You may
elect at any time to terminate your participation by notifying in writing the
appropriate Federal agency. Further, the respective Fund may terminate your
participation upon 30 days' notice to you.
Letter of Intent - Class A shares. By signing a Letter of Intent form,
available by calling 1-800-554-4611, you become eligible for the reduced sales
load applicable to the total number of Eligible Fund shares purchased in a
13-month period pursuant to the terms and conditions set forth in the Letter of
Intent. A minimum initial purchase of $5,000 is required. To compute the
applicable sales load, the offering price of shares you hold (on the date of
submission of the Letter of Intent) in any Eligible Fund that may be used toward
"Right of Accumulation" benefits described above may be used as a credit toward
completion of the Letter of Intent. However, the reduced sales load will be
applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in the
Letter of Intent for payment of a higher sales load if you do not purchase the
full amount indicated in the Letter of Intent. The escrow will be released when
you fulfill the terms of the Letter of Intent by purchasing the specified
amount. If your purchases qualify for a further sales load reduction, the sales
load will be adjusted to reflect your total purchase at the end of 13 months. If
total purchases are less than the amount specified, you will be requested to
remit an amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If such
remittance is not received within 20 days, the Transfer Agent, as
attorney-in-fact pursuant to the terms of the Letter of Intent, will redeem an
appropriate number of Class A shares of the Funds held in escrow to realize the
difference. Signing a Letter of Intent does not bind you to purchase, or the
Funds to sell, the full amount indicated at the sales load in effect at the time
of signing, but you must complete the intended purchase to obtain the reduced
sales load. At the time you purchase Class A shares, you must indicate your
intention to do so under a Letter of Intent. Purchases pursuant to a Letter of
Intent will be made at the then-current NAV plus the applicable sales load in
effect at the time such Letter of Intent was executed.
ADDITIONAL INFORMATION ABOUT PURCHASES,
EXCHANGES AND REDEMPTIONS
The Funds are intended to be long-term investment vehicles and are not
designed to provide investors with a means of speculation on short-term market
movements. A pattern of frequent purchases and exchanges can be disruptive to
efficient portfolio management and, consequently, can be detrimental to a Fund's
performance and its shareholders. Accordingly, if a Fund's management determines
that an investor is engaged in excessive trading, the Fund, with or without
prior notice, may temporarily or permanently terminate the availability of Fund
Exchanges, or reject in whole or part any purchase or exchange request, with
respect to such investor's account. Such investors also may be barred from
purchasing other funds in the Dreyfus Family of Funds. Generally, an investor
who makes more than four exchanges out of a Fund during any calendar year or who
makes exchanges that appear to coincide with an active market-timing strategy
may be deemed to be engaged in excessive trading. Accounts under common
ownership or control will be considered as one account for purposes of
determining a pattern of excessive trading. In addition, a Fund may refuse or
restrict purchase or exchange requests by any person or group if, in the
judgment of the Fund's management, the Fund would be unable to invest the money
effectively in accordance with its investment objective and policies or could
otherwise be adversely affected or if the Fund receives or anticipates receiving
simultaneous orders that may significantly affect the Fund (e.g., amounts equal
to 1% or more of the Fund's total assets). If an exchange request is refused, a
Fund will take no other action with respect to the shares until it receives
further instructions from the investor. A Fund may delay forwarding redemption
proceeds for up to seven days if the investor redeeming shares is engaged in
excessive trading or if the amount of the redemption request otherwise would be
disruptive to efficient portfolio management or would adversely affect the Fund.
A Fund's policy on excessive trading applies to investors who invest in the Fund
directly or through financial intermediaries, but does not apply to the Dreyfus
Auto-Exchange Privilege, or to any automatic investment or withdrawal privilege
described herein.
During times of drastic economic or market conditions, a Fund may suspend
Fund Exchanges temporarily without notice and treat exchange requests based on
their separate components - redemption orders with a simultaneous request to
purchase the other fund's shares. In such a case, the redemption request would
be processed at the Fund's next determined NAV but the purchase order would be
effective only at the NAV next determined after the fund being purchased
receives the proceeds of the redemption, which may result in the purchase being
delayed.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Funds' Prospectuses entitled "Account Policies."
The Funds' investments are valued by Dreyfus, after consultation with an
independent pricing service (the "Service") approved by the Trustees. When, in
the judgment of the Service, quoted bid prices for investments are readily
available and are representative of the bid side of the market, these
investments are valued at the mean between the quoted bid prices (as obtained by
the Service from dealers in such securities) and asked prices (as calculated by
the service based upon it evaluation of the marker for such securities).
Investments for which, in the judgment of the Service, there are no readily
obtainable market quotations (which constitute a majority of each Fund's
portfolio securities) are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of municipal
securities of comparable quality, coupon, maturity and type; indications as to
value from dealers; and general market conditions. The procedures of the Service
are reviewed periodically by Dreyfus under the general supervision and
responsibility of the Trustees, which may replace any such Service at any time
if they determine it to be in the best interests of the Trust to do so.
NYSE Closings. The holidays (as observed) on which the NYSE is
-------------
currently scheduled to be closed are: New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Funds' Prospectuses entitled "Distributions and Taxes."
General. Each Fund declares daily and pays dividends monthly from its net
investment income, if any, and distributes any net realized capital gains on an
annual basis, but it may make distributions on a more frequent basis to comply
with the distribution requirements of the Code, in all events in a manner
consistent with the provisions of the 1940 Act. Neither Fund will make
distributions from net realized capital gains unless all capital loss
carryovers, if any, have been utilized or have expired. All expenses are accrued
daily and deducted before declaration of dividends to investors. Shares
purchased on a day on which a Fund calculates its NAV will begin to accrue
dividends on that day, and redemption orders effected on any particular day will
receive dividends declared only through the business day prior to the day of
redemption. Dividends paid by each Class are calculated at the same time and in
the same manner and are in the same amount, except that the expenses
attributable solely to a particular Class will be borne exclusively by that
Class. Class B and C shares will receive lower per share dividends than Class A
shares which will receive lower per share dividends than Class R shares, because
of the higher expenses borne by the relevant Class.
Investors may choose whether to receive dividends and other distributions
in cash, to receive dividends in cash, and reinvest other distributions in
additional Fund shares at NAV, or to reinvest both dividends and other
distributions in additional Fund shares at NAV.
Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the net asset value of the
shares below the cost of his or her investment. Such a dividend or other
distribution would be a return on investment in an economic sense, although
taxable as stated under "Dividends, Other Distributions and Taxes" in the Funds'
Prospectuses. In addition, if a shareholder sells shares of a Fund held for six
months or less and receives a capital gain distribution with respect to those
shares, any loss incurred on the sale of those shares will be treated as a
long-term capital loss to the extent of the capital gain distribution received.
Dividends and other distributions declared by a Fund in October, November
or December of any year and payable to shareholders of record on a date in any
of those months are deemed to have been paid by a Fund and received by the
shareholders on December 31 of that year if the distributions are paid by a Fund
during the following January. Accordingly, those distributions will be taxed to
shareholders for the year in which that December 31 falls.
It is expected that the Funds will qualify for treatment as a "regulated
investment company" ("RIC") under the Code so long as such qualification is in
the best interests of its shareholders. Such qualification will relieve the
Funds of any liability for Federal income tax to the extent its earnings and
realized gains are distributed in accordance with applicable provisions of the
Code. To qualify for treatment as a RIC under the Code, each Fund (1) must
distribute to its shareholders each year at least 90% of its investment company
taxable income (generally consisting of net investment income ("Distribution
Requirements), net short-term capital gains and net gains from certain foreign
currency transactions), (2) must derive at least 90% of its annual gross income
from specified sources ("Income Requirement"), and (3) must meet certain asset
diversification and other requirements.
The term "regulated investment company" does not imply the supervision of
management or investment practices or policies by any government agency.
Because each Fund will distribute exempt-interest dividends, interest on
indebtedness incurred by a shareholder to purchase or carry Fund shares is not
deductible for Federal income tax purposes. If a shareholder receives an
exempt-interest dividend with respect to shares of a Fund and if such shares are
held by the shareholder for six months or less, then any loss on the redemption
or exchange of such shares will, to the extent of such exempt-interest
dividends, be disallowed. In addition, the Code may require a shareholder, if he
or she receives exempt-interest dividends, to treat as taxable income a portion
of certain otherwise non-taxable social security and railroad retirement benefit
payments. Furthermore, that portion of an exempt-interest dividend paid by a
Fund which represents income from private activity bonds may not retain its
tax-exempt status in the hands of a shareholder who is a "substantial user" of a
facility financed by such bonds, or a "related person" thereof. Moreover, as
noted in the Funds' Prospectuses, some or all of a Fund's dividends may be a
specific preference item, or a component of an adjustment item, for purposes of
the Federal individual and corporate alternative minimum taxes. In addition, the
receipt of Fund dividends and distributions may affect a foreign corporate
shareholder's Federal "branch profits" tax liability and a Subchapter S
corporation shareholder's Federal "excess net passive income" tax liability.
Shareholders should consult their own tax advisers as to whether they are (1)
substantial users with respect to a facility or related to such users within the
meaning of the Code or (2) subject to a Federal alternative minimum tax, any
applicable state alternative minimum tax, the Federal branch profits tax, or the
Federal excess net passive income tax.
Dividends derived from taxable investments, together with distributions
from net realized short-term capital gains and all or a portion of any gains
realized from the sale or other disposition of certain market discount bonds
(collectively "dividends distributions") paid by the Funds are taxable to U.S.
shareholders as ordinary income, to the extent of the Fund's earnings and
profits, whether received in cash or reinvested in Fund shares. Distributions
from the Funds' capital gain (the excess of net long-term capital gain over
short-term capital loss) are taxable to such shareholders as long-term capital
gains, regardless of how long the shareholders have held their Fund shares and
whether such distributions are received in cash or reinvested in additional Fund
shares. The Code provides that an individual generally will be taxed on his or
her net capital gain at a maximum rate of 20% with respect to capital gain from
securities held for more than one year. Dividends and other distributions also
may be subject to state and local taxes.
Dividends derived by the Funds from tax-exempt interest are designated as
tax-exempt in the same percentage of the day's dividend as the actual tax-
exempt income earned that day. Thus, the percentage of the dividend designated
as tax-exempt may vary from day to day. Similarly, dividends derived by the
Funds from interest on relevant state Municipal Obligations will be designated
as exempt from that state's taxation in the same percentage of the day's
dividend as the actual interest on that state's Municipal Obligations earned on
that day.
Notice as to the tax status of your dividends and distributions other will
be mailed to you annually. You also will receive periodic summaries of your
account that will include information as to dividends and distributions from net
capital gains, if any, paid during the year.
The Code provides for the "carryover" of some or all of the sales load
imposed on Class A shares if (1) a shareholder redeems those shares or exchanges
those shares for shares of another fund advised or administered by Dreyfus
within 91 days of purchase and (2) in the case of a redemption, acquires other
Fund Class A shares through exercise of the Reinvestment Privilege or, in the
case of an exchange, such other fund reduces or eliminates its otherwise
applicable sales load for the purpose of the exchange. In these cases, the
amount of the sales load charged or the purchase of the original Class A shares,
up to the amount of the reduction of the sales load pursuant to the Reinvestment
Privilege or on the exchange, as the case may be, is not included in the basis
of such shares for purposes of computing, gain or loss on the redemption or the
exchange and instead is added to the basis of the shares acquired pursuant to
the Reinvestment Privilege or the exchange.
The Funds must withhold and remit to the U.S. Treasury ("backup
withholding") 31 % of taxable dividends, capital gain distributions and
redemption proceeds, regardless of the extent to which gain or loss may be
realized, paid to an individual or certain other non-corporate shareholders if
the shareholder fails to certify that the TIN furnished to the Fund is correct.
Backup withholding at that rate also is required from dividends and capital gain
distributions payable to such a shareholder if (1) that shareholder fails to
certify that he or she has not received notice from the IRS that the shareholder
is subject to backup withholding as a result of a failure to properly report
taxable dividend or interest income on a Federal income tax return, or (2) the
IRS notifies the Funds to institute backup withholding because the IRS
determines the shareholder's TIN is incorrect or that the shareholder has failed
to properly report such income.
A TIN is either the Social Security number, IRS individual taxpayer
identification number or employer identification number of the record owner of
the account. Any tax withheld as a result of backup withholding does not
constitute an additional tax imposed on the record owner of the account and may
be claimed as a credit on the record owner's Federal income tax return.
The Funds may be subject to a non-deductible 4% excise tax, measured with
respect to certain undistributed amounts of taxable investment income and
capital gains.
While the Funds do not expect to realize a significant amount of net
long-term capital gains, any such gains realized will be distributed annually as
described in the Funds' Prospectuses. Such distributions ("capital gain
dividends"), if any, will be taxable to the shareholders as long- term capital
gains, regardless of how long a shareholder has held a Fund's shares, and will
be designated as capital gain dividends in a written notice mailed by the Funds
to the shareholders after the close of the Funds' prior taxable year. If a
shareholder receives a capital gain dividend with respect to any share and if
such share is held by the shareholder for six months or less, then any loss (to
the extent not disallowed pursuant to the other six month rule described above)
on the sale or exchange of such share, to the extent of the capital gain
dividend, shall be treated as a long-term capital loss.
A portion of the dividends paid by a Fund, whether received in cash or
reinvested in additional Fund shares, may be eligible for the dividends-
received deduction allowed to corporations. The eligible portion may not exceed
the aggregate dividends received by a Fund from U.S. corporations. However,
dividends received by a corporate shareholder and deducted by it pursuant to the
dividends-received deduction are subject indirectly to the alternative minimum
tax.
Dividends and interest received by a Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors.
Gains from the sale or other disposition of foreign currencies (except
certain gains therefrom that may be excluded by future regulations), and gains
from options, futures and forward contracts derived by the Fund with respect to
its business of investing in securities or foreign currencies, will qualify as
permissible income under the Income Requirement.
Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gain and loss. However, a portion of the gain or loss from
the disposition of foreign currencies and non-U.S. dollar denominated securities
(including debt instruments, certain financial forward, futures and option
contracts and certain preferred stock) may be treated as ordinary income or loss
under Section 988 of the Code. In addition, all or a portion of any gain
realized from the sale or other disposition of certain market discount bonds
will be treated as ordinary income. Moreover, all or a portion of the gain
realized from engaging in "conversion transactions" may be treated as ordinary
income under Section 1258. "Conversion transactions" are defined to include
certain forward, futures, option and straddle transactions, transactions
marketed or sold to produce capital gains, or transactions described in Treasury
regulations to be issued in the future.
Under Section 1256 of the Code, any gain or loss realized by a Fund from
certain futures and forward contracts and options transactions will be treated
as 60% long-term capital gain or loss and 40% short-term capital gain or loss.
Gain or loss will arise upon exercise or lapse of such contracts and options as
well as from closing transactions. In addition, any such contracts or options
remaining unexercised at the end of a Fund's taxable year will be treated as
sold for their then fair market value (a process known as "marking to market"),
resulting in additional gain or loss to the Fund characterized in the manner
described above.
Offsetting positions held by a Fund involving certain foreign currency
forward contracts or options may constitute "straddles." "Straddles" are defined
to include "offsetting positions" in actively traded personal property. The tax
treatment of straddles is governed by Sections 1092 and 1258 of the Code, which,
in certain circumstances, override or modify Sections 1256 and 988. As such, all
or a portion of any short-term or long- term capital gain from certain straddle
transactions may be recharacterized ordinary income. If the Fund were treated as
entering into "straddles" by reason of its engaging in certain forward contracts
or options transactions, such "straddles" would be characterized as "mixed
straddles" if the forward contracts or options transactions comprising a part of
such straddles were governed by Section 1256. Each Fund may make one or more
elections with respect to mixed straddles. Depending on which election is made,
if any, the results to a Fund may differ. If no election is made, then to the
extent the "straddle" and conversion transaction rules apply to positions
established by a Fund, losses realized by a Fund will be deferred to the extent
of unrealized gain in the offsetting position. Moreover, as a result of the
"straddle" and conversion transaction rules, short-term capital loss on
"straddle" positions may be recharacterized as long-term capital loss, and
long-term capital gains may be treated as short-term capital gains or ordinary
income.
The Taxpayer Relief Act of 1997 included constructive sale provisions that
generally will apply if the Fund either (1) holds an appreciated financial
position with respect to stock, certain debt obligations, or partnership
interests ("appreciated financial position") and then enters into a short sale,
futures, forward, or offsetting notional principal contract (collectively, a
"Contract") respecting the same or substantially identical property or (2) holds
an appreciated financial position that is a Contract and then acquires property
that is the same as, or substantially identical to, the underlying property. In
each instance, with certain exceptions, the Fund generally will be taxed as if
the appreciated financial position were sold at its fair market value on the
date the Fund enters into the financial position or acquires the property,
respectively. Transaction that are identified hedging or straddle transactions
of the Code can be subject to the constructive sale provisions.
Investment by a Fund in securities issued or acquired at a discount (for
example, zero coupon securities) could, under special tax rules, affect the
amount and timing of distributions to shareholders by causing the Fund to
recognize income prior to the receipt of cash payments. For example, a Fund
could be required to take into gross income annually a portion of the discount
(or deemed discount) at which the securities were issued and to distribute such
income to satisfy the Distribution Requirement and avoid the 4% excise tax
discussed above. In such case, the Fund may have to dispose of securities it
might otherwise have continued to hold in order to generate cash to satisfy
these distribution requirements.
State and Local Taxes. Depending upon the extent of a Fund's activities in
states and localities in which it is deemed to be conducting business, the Fund
may be subject to the tax laws of such states or localities. Shareholders are
advised to consult their tax advisers concerning the application of state and
local taxes to them.
Foreign Shareholders U.S. Federal Income Taxation. U.S. federal income
taxation of a shareholder who, as to the United States, is a nonresident alien
individual, a foreign trust or estate, a foreign corporation or a foreign
partnership (a "foreign shareholder") depends on whether the income from a Fund
is "effectively connected" with a U.S. trade or business carried on by the
shareholder, as discussed generally below. Special U.S. federal income tax rules
that differ from those described below may apply to certain foreign persons who
invest in a Fund, such as a foreign shareholder entitled to claim the benefits
of an applicable tax treaty. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of an
investment in a Fund.
Foreign Shareholders - Dividends. Dividends (other than exempt- interest
dividends) distributed to a foreign shareholder whose ownership of Fund shares
is not effectively connected with a U.S. trade or business carried on by the
foreign shareholder ("effectively connected") generally will be subject to a
U.S. federal withholding tax of 30% (or lower treaty rate). If a foreign
shareholder's ownership of Fund shares is effectively connected, however, then
all distributions to that shareholder will not be subject to such withholding
and instead will be subject to U.S. federal income tax at the graduated rates
applicable to U.S. citizens and domestic corporations, as the case may be.
Foreign shareholders also may be subject to the branch profits tax.
Capital gains realized by foreign shareholders on the sale of Fund shares
and distributions to them of net capital gain (the excess of long- term capital
gain over short-term capital loss), generally will not be subject to U.S.
federal income tax unless the foreign shareholder is a nonresident alien
individual and is physically present in the United States for more than 182 days
during the taxable year. In the case of certain foreign shareholders, the Fund
may be required to withhold U.S. Federal income tax at a rate of 31% of capital
gain distributions and of the gross proceeds from a redemption of Fund shares
unless the shareholder furnishes the Fund with a certificate regarding the
shareholder's foreign status.
Distributions paid by the Funds to a non-resident foreign investor, as
well as the proceeds of any redemptions by such an investor, regardless of the
extent to which gain or loss may be realized, generally are not subject to US.
withholding tax. However, such distributions may be subject to backup
withholding, unless the foreign investor certifies his non-U.S. residency
status.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
---------------------------------
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of the Funds, that they own at the time of their death. Certain
credits against that tax and relief under applicable tax treaties may be
available.
The foregoing is only a summary of certain tax considerations generally
affecting the Funds and their shareholders, and is not intended as a substitute
for careful tax planning. Investors are urged to consult their tax advisers with
specific reference to their own tax situations.
PORTFOLIO TRANSACTIONS
All portfolio transactions of a Fund are placed on behalf of each Fund by
Dreyfus. Debt securities purchased and sold by a Fund are generally traded on a
net basis (i.e., without commission) through dealers acting for their own
account and not as brokers, or otherwise involve transactions directly with the
issuer of the instrument. This means that a dealer (the securities firm or bank
dealing with a Fund) makes a market for securities by offering to buy at one
price and sell at a slightly higher price. The difference between the prices is
known as a spread. Other portfolio transactions may be executed through brokers
acting as agent. Each Fund will pay a spread or commissions in connection with
such transactions. Dreyfus uses its best efforts to obtain execution of
portfolio transactions at prices which are advantageous to each Fund and at
spreads and commission rates, if any, which are reasonable in relation to the
benefits received. Dreyfus also places transactions for other accounts that it
provides with investment advice.
Brokers and dealers involved in the execution of portfolio transactions on
behalf of a Fund are selected on the basis of their professional capability and
the value and quality of their services. In selecting brokers or dealers,
Dreyfus will consider various relevant factors, including, but not limited to,
the size and type of the transaction; the nature and character of the markets
for the security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer; the broker-dealer's
execution services rendered on a continuing basis; and the reasonableness of any
spreads (or commissions, if any). Any spread, commission, fee or other
remuneration paid to an affiliated broker-dealer is paid pursuant to the
Company's procedures adopted in accordance with Rule 17e-1 under the 1940 Act.
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, 2000, 1999 and 1998.
Portfolio Turnover. While securities are purchased for the Funds on the
basis of potential for current income and not for short-term trading profits, a
Fund's portfolio turnover rate may exceed 100%. A portfolio turnover rate of
100% would occur, for example, if all the securities held by a Fund were
replaced once in a period of one year. A higher rate of portfolio turnover
involves correspondingly greater brokerage commissions and other expenses that
must be borne directly by the Funds and, thus, indirectly by their shareholders.
In addition, a higher rate of portfolio turnover may result in the realization
of larger amounts of short-term and/or long-term capital gains that, when
distributed to the Fund's shareholders, are taxable to them at the then current
rate. Nevertheless, securities transactions for the Funds will be based only
upon investment considerations and will not be limited by any other
considerations when Dreyfus deems its appropriate to make changes in the Funds'
assets. The portfolio turnover rate for the Fund is calculated by dividing the
lesser of the Fund's annual sales or purchases of portfolio securities
(exclusive of purchases and sales of securities whose maturities at the time of
acquisition were one year or less) by the monthly average value of securities in
the Fund during the year. Portfolio turnover may vary from year to year as well
as within a year. The portfolio turnover rates for the fiscal years ended June
30, 1998, 1999 and 2000 for the Municipal Fund were 14.62%, 28.19% and 45.65%,
respectively. The portfolio turnover rates for the fiscal years ended June 30,
1998, 1999 and 2000 for the Massachusetts Municipal Fund were 6.63%, 16.35% and
31.89%, 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, 2000 was 4.38%, 4.02%, 4.06% and 4.77%, 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, 2000 was 4.21%, 3.84%, 3.86% and 4.59% for its
Class A, Class B, Class C and Class R shares, respectively. The Massachusetts
Municipal Fund's equivalent taxable yield* for the 30-day period ended June 30,
2000 was 7.70%, 7.07%, 7.14% and 8.39% 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, 2000 was 6.97%, 6.36%, 6.39% and 7.60% for its
Class A, Class B, Class C and Class R shares, respectively. Current yield is
computed pursuant to a formula which operates, with respect to each Class, as
follows: the amount of the Fund's expenses with respect to such Class accrued
for the 30-day period (net of reimbursements) is subtracted from the amount of
the dividends and interest earned (computed in accordance with regulatory
requirements) by the Fund with respect to such Class during the period. That
result is then divided by the product of: (a) the average daily number of shares
outstanding during the period that were entitled to receive dividends, and (b)
the maximum offering price per share in the case of Class A or the net asset
value per share in the case of Class B, Class C and Class R on the last day of
the period less any undistributed earned income per share reasonably expected to
be declared as a dividend shortly thereafter. The quotient is then added to 1,
and that sum is raised to the 6th power, after which 1 is subtracted. The
current yield is then arrived at by multiplying the result by 2.
The Massachusetts Municipal Fund's average annual total returns for Class
A shares for the 1, 5 and 10 year periods ended June 30, 2000 were 0.12%, 3.90%
and 5.77%, respectively. The average annual total returns for Class B shares for
the 1 and 5 year periods ended June 30, 2000 and for the period December 28,
1994 (inception of Class B) through June 30, 2000 were -0.27%, 3.90% and 4.83%,
respectively. The average annual total returns for Class C shares for the 1 and
5 year periods ended June 30, 2000 and for the period December 28, 1994
(inception of Class C) through June 30, 2000 were 1.89%, 4.09% and 4.85%,
respectively. The average annual total returns for Class R shares for the 1 and
5 year periods ended June 30, 2000 and for the period February 1, 1993
(inception of Class R) through June 30, 2000 were 3.37%, 4.79% and 4.98%,
respectively.
The Municipal Fund's average annual total returns for Class A shares for
the 1, 5 and 10 year periods ended June 30, 2000 were 0.58%, 4.16% and 5.86%,
respectively. The average annual total returns for Class B shares for the 1 and
5 year periods ended June 30, 2000 and for the period December 28, 1994
(inception of Class B) through June 30, 2000 were 0.26%, 4.11 and 5.08%,
respectively. The average annual total returns for Class C shares for the 1 and
5 year periods ended June 30, 2000 and for the period December 28, 1994
(inception of Class C) through June 30, 2000 were 2.51%, 4.37% and 5.16%,
respectively. The average annual total returns for Class R for the 1 and 5 year
periods ended June 30, 2000 and for the period February 1, 1993 (inception of
Class R) through June 30, 2000 were 4.01%, 5.07% and 5.18%, respectively.
--------
* Examples assume a Federal marginal tax rate of 39.6% for the Municipal Fund
and a Federal marginal tax rate of 39.6% and a Massachusetts marginal tax
rate of 5.85% (combined effective rate of 43.13% for the Massachusetts
Municipal Fund].
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, 2000 for Class A was
166.34%. Without giving effect to the applicable front-end sales load, the total
return for Class A was 174.59%. 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, 2000 was 29.68% and 29.84%, 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, 2000 was 43.33%.
The Municipal Fund's total return for Class A shares for the period
October 1, 1985 (commencement of operations) through June 30, 2000 was 187.95%.
Without giving effect to the applicable front-end sales load, the total return
for Class A was 196.87%. 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, 2000 was 31.42% and 31.98%, respectively. The Municipal Fund's total
return for Class R shares for the period February 1, 1993 (inception of Class R)
to June 30, 2000 was 45.40%.
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, a Fund's advertising materials may refer to Morningstar
ratings, and the related analyses supporting the rating.
From time to time, advertising material for a Fund may including
biographical information relating to its portfolio manager and may refer to, or
include commentary by the portfolio manager relating to investment strategy,
asset growth, current or past business, political, economic or financial
conditions and other matters of general interest to investors.
From time to time, advertising materials may refer to studies performed by
Dreyfus or its affiliates, such as "The Dreyfus Tax Informed Investing Study" or
"The Dreyfus Gender Investment Comparison Study (1996-1997)" or other such
studies.
Yield information is useful in reviewing the Funds' performance, but
because yields fluctuate, such information cannot necessarily be used to compare
an investment in a Fund's shares with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that yield
is a function of the kind and quality of the instruments in the Funds'
portfolios, portfolio maturity, operating expenses and market conditions. The
Funds' yields and total returns will also be affected if Dreyfus waives any
portion of its investment management fees.
The Funds' net investment income changes in response to fluctuations in
interest rates and the expenses of the Funds. Consequently, any given
performance quotation should not be considered as representative of the Funds'
performance for any specified period in the future.
For the purpose of determining the interest earned on debt obligations
that were purchased by a Fund at a discount or premium, the formula generally
calls for amortization of the discount or premium; the amortization schedule
will be adjusted monthly to reflect changes in the market values of the debt
obligations.
A Fund's equivalent taxable yield is computed by dividing that portion of
the Fund's yield which is tax-exempt by one minus a stated income tax rate and
adding the product to that portion, if any, of the Fund's yield that is not
tax-exempt.
Investors should recognize that in periods of declining interest rates a
Fund's yield will tend to be somewhat higher than prevailing market rates, and
in periods of rising interest rates a Fund's yield will tend to be somewhat
lower. Also, when interest rates are falling, the inflow of net new money to a
Fund from the continuous sale of its shares will likely be invested in portfolio
instruments producing lower yields than the balance of the Fund's portfolio,
thereby reducing the current yield of the Fund. In periods of rising interest
rates, the opposite can be expected to occur.
INFORMATION ABOUT THE FUNDS/TRUST
Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. Fund shares
have equal rights in liquidation. 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, or, where matters affect different classes of a portfolio
differently, by class. 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.
COUNSEL AND INDEPENDENT AUDITORS
Kirkpatrick & Lockhart, LLP, 1800 Massachusetts Avenue, N. W., Second
Floor, Washington, D.C., 20036-1800 has passed upon the legality of the
shares offered by the Funds' Prospectuses and this SAI.
KPMG LLP, 757 Third Avenue, New York, NY 10017, was appointed by the
Trustees to serve as the Funds' independent auditors for the year ending June
30, 2001, providing audit services including (1) examination of the annual
financial statements (2) assistance, review and consultation in connection with
SEC filings (3) and review of the annual Federal income tax return filed on
behalf of each Fund.
<PAGE>
APPENDIX A
RISK FACTORS - INVESTING
IN MASSACHUSETTS MUNICIPAL OBLIGATIONS
The following information constitutes only a brief summary, does not
purport to be a complete description, and is based on information drawn from
official statements relating to securities offerings of the Commonwealth of
Massachusetts available as of the date of this SAI. 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.
Between 1982 and 1988, the economies of Massachusetts and New England were
among the strongest performers in the nation, with growth rates considerably
higher than those for the national economy as a whole. Between 1989 and 1992,
however, both Massachusetts and New England experienced growth rates
significantly below the national average. Since then, growth rates in
Massachusetts and New England have improved to levels on par with the rest of
the nation. In 1997, the economies of both Massachusetts and New England grew at
a faster pace than the nation as a whole for the first time since 1988. The
Massachusetts economy has been the strongest in New England, making up an
average of 47.7% of New England's total Gross Product and an average of 2.8% of
the nation's economy over the decade and a half.
In 1998, employment levels in every industry increased or remained
constant. The most rapid growth in 1998 came in the construction sector and the
services sector, which grew at rates of 7.6% and 2.8%, respectively. Total
non-agricultural employment in Massachusetts grew at a rate of 1.9% in 1998.
While the Massachusetts unemployment rate was significantly lower than the
national average between 1979 and 1989, the economic recession of the early
1990s caused unemployment rates in Massachusetts to rise significantly above the
national average. However, the economic recovery that began in 1993 has caused
unemployment rates in Massachusetts to decline faster than the national average.
As a result, since 1994 the unemployment rate in Massachusetts has been below
the national average. The unemployment rate in Massachusetts fell from 3.4% in
June 1998 to 3.1% in June 1999 and the United States unemployment rate remained
the same between June 1998 and June 1999. In 1998, average annual pay levels in
Massachusetts were the fourth highest in the nation, and the personal income
growth rate was the eight highest in the nation.
Massachusetts ended each of the fiscal years 1995 through 1999 with a
positive closing fund balance in its budgeted operating funds, and expects to do
so again at the close of fiscal 2000. Year-to-date tax collections through May
totaled approximately $13.909 billion, an increase of approximately $1.165
billion, or 9.1%, over the same period in fiscal 1999. Taking into account
expected reversions (i.e., appropriations that will not be spent in fiscal
2000), the Executive Office for Administration and Finance projected in June
2000 fiscal 2000 spending of approximately $31.259 billion, a 5.0% increase over
fiscal 1999 spending.
A cash flow projection for the balance of fiscal 2000 was released by the
State Treasurer and the Secretary of Administration and Finance on March 7,
2000. Fiscal 2000 was projected to end with a cash balance of $776.6 million,
excluding any fiscal 2000 activity that will occur after June 30, 2000 and
excluding the Stabilization Fund. Bond issues of $250 million each were
projected to occur in April and June, 2000. Federal grant anticipation note and
note issues of $450 million and $150 million were projected to occur in April
and June 2000, respectively. (These bond and note issues did not occur as
projected. It is now anticipated that the Commonwealth will issue approximately
$650 million of general obligation bonds in June, 2000 and $600 million of
federal grant anticipation notes in August, 2000.)
In recent years, health related costs have risen dramatically in
Massachusetts and across the nation, and the increase in Massachusetts' Medicaid
and group health insurance costs reflects this trend. In fiscal 1993, Medicaid
was the largest item in Massachusetts' budget and has been one of the fastest
growing budget items. However the rate of increase has abated in recent years,
due to a number of savings and cost-cutting initiatives, such as managed care
and utilization review. During fiscal years 1995, 1996, 1997, 1998 and 1999,
Medicaid expenditures were $3.398 billion, $3.416 billion, $3.456 billion,
$3.666 billion and $3.856 billion, respectively. The average annual growth rate
from fiscal 1995 to fiscal 1999 was 3.3%. It is estimated that in fiscal 2000,
Medicaid expenditures will be $4.092 billion, an increase of 6.1% from fiscal
1999.
On June 15, 2000 the federal Health Care Financing Administration
(HCFA) sent a letter to nine states, including Massachusetts, New York and
Florida, indicating that portions of their Medicaid programs may be funded with
impermissible taxes on health care providers, jeopardizing federal
reimbursements collected on any Medicaid program expenditures funded with such
taxes. If HCFA makes a final determination that the Commonwealth has imposed an
impermissible provider tax, HCFA will undertake an audit of the Commonwealth's
uncompensated care pool program and seek retroactive repayment of federal
Medicaid reimbursements. Under federal regulations recoupment of federal
Medicaid reimbursements is generally accomplished by withholding a portion of
future Medicaid reimbursements to the state owing the repayment. States can
appeal a request for repayment to an appeals panel within the U.S. Department of
Health and Human Services and then to a federal district court. Since 1993, the
Commonwealth has received an estimated $920 million in federal Medicaid
reimbursements related to the expenditures in question. Clarification of the law
surrounding permissible provider taxes is a national issue and resolution could
take several years.
Massachusetts' pension costs had risen dramatically as the Commonwealth
appropriated funds to address in part the unfunded liabilities that had
accumulated over several decades. Total pension costs increased an aggregate
rate of 3.54% from $908.9 million in fiscal 1994 to $1.07 billion in fiscal
1998. Since fiscal 1998, total pension costs have decreased to $990.2 million in
fiscal 1999 and are estimated to be $987.4 million in fiscal 2000. As
recommended by the Governor, the Senate and House fiscal 2001 budget
appropriates $922 million for the state's pension funding schedule and an
additional $100 million related to increased pension liabilities due to the
conversion to a new actuarial software.
Payments for debt service on Massachusetts general obligation bonds and
notes have risen at an average annual rate of 1.11% from $1.15 billion in fiscal
1994 to $1.21 billion in fiscal 1998. Payments for debt service in fiscal 1999
amounted to $1.17 billion. State law generally imposes a 10% limit on the total
appropriations in any fiscal year that may be expended for payment of interest
and principal on general obligation debt. As of January 1, 2000 the State had
approximately $9.9 billion of long-term general obligation debt outstanding and
short-term direct obligations of the Commonwealth totaled $175.0 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. Massachusetts' 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. Massachusetts 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, as amended
to date, 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 two-thirds of their member cities and towns. During the 1980's,
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 2000, approximately 21.7% of Massachusetts'
budgeted expenditures were allocated to Local Aid.
Many factors affect the financial condition of the Commonwealth and its
cities, towns and public bodies, such as social, environmental, and economic
conditions, many of which are not within the control of such entities. As is the
case with most urban states, the continuation of many of Massachusetts'
programs, particularly its human services programs, is in significant part
dependent upon continuing Federal reimbursements which have been steadily
declining. The loss of grants to Massachusetts and its cities and towns could
further slow economic development. To the extent that such factors may exist,
they could have an adverse effect on economic conditions in Massachusetts,
although what effects, if any, such factors would have on Massachusetts'
Municipal Obligations cannot be predicted.
<PAGE>
APPENDIX B
Municipal Bond, Municipal Note, Bond, Note and Commercial Paper Ratings
S&P
Municipal Bond and Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA An obligation rated `AA' differs from the highest rated issues only in
small degree. The obligors capacity to meet its financial commitment on
the obligation is very strong.
A An obligation rated `A' is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity to
meet its financial commitment on the obligation is still strong.
BBB An obligation rated `BBB' exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
The ratings from `AA' to `BBB' may be modified by the addition of a plus (+) or
a minus (-) sign to show relative standing within the major rating categories
Municipal Note and Note Ratings
SP-1 Strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the term of the
notes.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the likelihood
of timely payment of debt having an original maturity of no more than 365 days.
A-1 This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issuers designated `A-1.'
A-3 Issues carrying this designation have an adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher
designations.
Moody's
Municipal Bond and Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and generally are referred to as
"gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long- term risks appear
somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment some time in
the future.
Baa Bonds which are rated Baa are considered as medium grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within each generic rating classification from Aa through Baa.
The modifier 1 indicates a ranking for the security in the higher end of a
rating category; the modifier 2 indicates a midrange ranking; and the
modifier 3 indicates a ranking in the lower end of a rating category.
Municipal Note, Note and other Short-Term Obligations
There are four rating categories for short-term obligations that define an
investment grade situation. These are designated Moody's Investment Grade as MIG
1 (best quality) through MIG 4 (adequate quality). Short-term obligations of
speculative quality are designated SG.
In the case of variable rate demand obligations (VRDOs), a two component
rating is assigned. The first element represents an evaluation of the degree of
risk associated with scheduled principal and interest payments, and the other
represents an evaluation of the degree of risk associated with the demand
feature. The short-term rating assigned to the demand feature of VRDOs is
designated as VMIG. When either the long- or short-term aspect of a VRDO is not
rated, that piece is designated NR, e.g., Aaa/NR or NR/VMIG 1.
MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG-2/
MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/
VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow
and market access for refinancing is likely to be less well
established.
MIG 4/
VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
Commercial Paper Rating
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated issuers:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics:
1 Leading market positions in well-established industries.
2 High rates of return on funds employed.
3 Conservative capitalization structure with moderate reliance on
debt and ample asset protection.
4 Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
5 Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited above
but to a lesser agree. Earnings trends and coverage ratios, while
sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of
industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require
relatively high financial leverage. Adequate alternative liquidity is
maintained.
Duff & Phelps Inc.
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.
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. Filed herewith.
F Not Applicable.
G(1) Custody and Fund Accounting Agreement between the Registrant
and Mellon Bank, N.A., dated April 4, 1994, incorporated by
reference to Post-Effective Amendment No. 29, filed on April
1, 1994.
G(2) Sub-Custodian Agreement between Mellon Bank, N.A. and Boston
Safe Deposit and Trust Company, dated April 4, 1994,
incorporated by reference to Post-Effective Amendment No. 30,
filed on October 11, 1994.
G(3) Amendment to Custody and Fund Accounting Agreement, dated
August 1, 1994,incorporated by reference to Post-Effective
Amendment No. 30, filed on October 11, 1994.
H Not applicable.
I(1) Opinion of counsel is incorporated by reference to the
Registration Statement and to Post-Effective Amendment Number
34 filed on December 28, 1994.
I(2) Consent of counsel. Filed herewith.
J(1) Consent of Coopers & Lybrand L.L.P. is incorporated by
reference to Post-Effective Amendment No 36.
J(2) Consent of KPMG LLP. Filed herewith.
M(1) Restated Distribution Plan (relating to Investor Shares and
Class A Shares). Incorporated by reference to Post-Effective
Amendment No. 33 filed on December 19, 1994.
M(2) Distribution and Service Plans (relating to Class B Shares
and Class C Shares). Incorporated by reference to
Post-Effective Amendment No. 33 filed on December 19, 1994.
M(3) Amended and Restated Distribution and Service Plans. Filed
herewith.
0 18f-3 Plan, incorporated by reference to Post-Effective
Amendment No. 45, filed on October 30, 1996.
P Code of Ethics adopted by the Registrant. Filed herewith.
Other Exhibits
______________
(a) Power of Attorney of Stephen E. Canter and Joseph W. Connolly
dated March 22, 2000. Filed herewith.
(b) Power of Attorney of the Trustees dated March 16, 2000.
Filed herewith.
(c) Certificate of Incumbency dated October 24, 2000. Filed
herewith.
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.
------- ----------------------------------------------------
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 and manager 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 and distributor of other investment companies advised
and administered by Dreyfus. Dreyfus Investment Advisors, Inc.,
another wholly-owned subsidiary, provides investment management
services to various pension plans, institutions and individuals.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ITEM 26. Business and Other Connections of Investment Adviser (continued)
----------------------------------------------------------------------------------
Officers and Directors of Investment Adviser
Name and Position
With Dreyfus Other Businesses Position Held Dates
CHRISTOPHER M. CONDRON Franklin Portfolio Associates, Director 1/97 - Present
Chairman of the Board and LLC*
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
Director 4/95 - 1/98
Franklin Portfolio Holdings, Inc.* Director 1/97 - Present
Certus Asset Advisors Corp.** Director 6/95 - Present
Mellon Capital Management Director 5/95 - Present
Corporation***
Mellon Bond Associates, LLP+ Executive Committee 1/98 - Present
Member
Mellon Bond Associates+ Trustee 5/95 - 1/98
Mellon Equity Associates, LLP+ Executive Committee 1/98 - Present
Member
Mellon Equity Associates+ Trustee 5/95 - 1/98
Boston Safe Advisors, Inc.* Director 5/95 - Present
President 5/95 - Present
Mellon Bank, N.A. + Director 1/99 - Present
Chief Operating Officer 3/98 - Present
President 3/98 - Present
Vice Chairman 11/94 - 3/98
Mellon Financial Corporation+ Chief Operating Officer 1/99 - Present
President 1/99 - Present
Director 1/98 - Present
Vice Chairman 11/94 - 1/99
Founders Asset Management, Chairman 12/97 - Present
LLC**** Director 12/97 - Present
The Boston Company, Inc.* Vice Chairman 1/94 - Present
Director 5/93 - Present
Laurel Capital Advisors, LLP+ Executive 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 - 1/97
Strategies, Inc. * Director 6/89 - 1/97
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 Financial 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, Director 2/99 - Present
LLC*
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***
Founders Asset Management, Member, Board of 12/97 - Present
LLC**** Managers
Acting Chief Executive 7/98 - 12/98
Officer
The Dreyfus Trust Company+++ Director 6/95 - Present
Chairman 1/99 - Present
President 1/99 - Present
Chief Executive Officer 1/99 - Present
THOMAS F. EGGERS Dreyfus Service Corporation++ Chief Executive Officer 3/00 - Present
Vice Chairman - Institutional and Chairman of the
and Director Board
Executive Vice President 4/96 - 3/00
Director 9/96 - Present
Founders Asset Management, Member, Board of 2/99 - Present
LLC**** Managers
Dreyfus Investment Advisors, Inc. Director 1/00 - Present
Dreyfus Service Organization, Director 3/99 - Present
Inc.++
Dreyfus Insurance Agency of Director 3/99 - Present
Massachusetts, Inc. +++
Dreyfus Brokerage Services, Inc. Director 11/97 - 6/98
401 North Maple Avenue
Beverly Hills, CA.
STEVEN G. ELLIOTT Mellon Financial 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 Executive Officer 8/87 - Present
Director 8/87 - Present
President 8/87 - Present
Mellon Overseas Investments Director 4/88 - Present
Corporation+
Mellon Financial Services Treasurer 12/87 - Present
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 - 12/99
Vice Chairman Advisors, Inc.++
Dreyfus Brokerage Services, Inc. Chairman 11/97 - 2/99
401 North Maple Ave. Chief Executive Officer 11/97 - 2/98
Beverly Hills, CA
Dreyfus Service Corporation++ Director 1/95 - 2/99
President 9/96 - 3/99
Dreyfus Precious Metals, Inc.+++ Director 3/96 - 12/98
President 10/96 - 12/98
Dreyfus Service Director 12/94 - 3/99
Organization, Inc.++ President 1/97 - 3/99
Seven Six Seven Agency, Inc. ++ Director 1/97 - 4/99
Dreyfus Insurance Agency of Chairman 5/97 - 3/99
Massachusetts, Inc.++++ President 5/97 - 3/99
Director 5/97 - 3/99
The Dreyfus Trust Company+++ Chairman 1/97 - 1/99
President 2/97 - 1/99
Chief Executive Officer 2/97 - 1/99
Director 12/94 - Present
The Dreyfus Consumer Credit Chairman 5/97 - 6/99
Corporation++ President 5/97 - 6/99
Director 12/94 - 6/99
Founders Asset Management, Member, Board of 12/97 - 12/99
LLC**** Managers
The Boston Company Advisors, Chairman 12/95 - 1/99
Inc. Chief Executive Officer 12/95 - 1/99
Wilmington, DE President 12/95 - 1/99
The Boston Company, Inc.* Director 5/93 - 1/99
President 5/93 - 1/99
Mellon Bank, N.A.+ Executive Vice President 6/92 - Present
Laurel Capital Advisors, LLP+ Chairman 1/98 - 8/98
Executive Committee 1/98 - 8/98
Member
Chief Executive Officer 1/98 - 8/98
President 1/98 - 8/98
Laurel Capital Advisors, Inc. + Trustee 12/91 - 1/98
Chairman 9/93 - 1/98
President and CEO 12/91 - 1/98
Boston Group Holdings, Inc.* Director 5/93 - Present
President 5/93 - Present
Boston Safe Deposit and Trust Director 6/93 - 1/99
Company+ Executive Vice President 6/93 - 4/98
MARTIN G. MCGUINN Mellon Financial 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
J. DAVID OFFICER Dreyfus Service Corporation++ President 3/00 - Present
Vice Chairman Executive Vice President 5/98 - 3/00
and Director Director 3/99 - Present
Dreyfus Service Organization, Director 3/99 - Present
Inc.++
Dreyfus Insurance Agency of Director 5/98 - Present
Massachusetts, Inc.++++
Dreyfus Brokerage Services, Inc. Chairman 3/99 - Present
401 North Maple Avenue
Beverly Hills, CA
Seven Six Seven Agency, Inc.++ Director 10/98 - Present
Mellon Residential Funding Corp. + Director 4/97 - Present
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 - 1/99
Corporation*
RECO, Inc.* President 11/96 - Present
Director 11/96 - Present
The Boston Company Financial President 8/96 - 6/99
Services, Inc.* Director 8/96 - 6/99
Boston Safe Deposit and Trust Director 7/96 - Present
Company* President 7/96 - 1/99
Mellon Trust of New York Director 6/96 - Present
1301 Avenue of the Americas
New York, NY 10019
Mellon Trust of California Director 6/96 - Present
400 South Hope Street
Suite 400
Los Angeles, CA 90071
Mellon 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, President 12/98 - Present
Director LLC**** Chief Executive Officer 12/98 - Present
Prudential Securities Senior Vice President 07/91 - 11/98
New York, NY Regional Director 07/91 - 11/98
RICHARD F. SYRON Thermo Electron President 6/99 - Present
Director 81 Wyman Street Chief Executive Officer 6/99 - Present
Waltham, MA 02454-9046
American Stock Exchange Chairman 4/94 - 6/99
86 Trinity Place Chief Executive Officer 4/94 - 6/99
New York, NY 10006
RONALD P. O'HANLEY Franklin Portfolio Holdings, Inc.* Director 3/97 - Present
Vice Chairman
Franklin Portfolio Associates, Director 3/97 - Present
LLC*
Boston Safe Deposit and Trust Executive Committee 1/99 - Present
Company* Member
Director 1/99 - Present
The Boston Company, Inc.* Executive Committee 1/99 - Present
Member 1/99 - Present
Director
Buck Consultants, Inc.++ Director 7/97 - Present
Newton Asset Management LTD Executive Committee 10/98 - Present
(UK) Member
London, England Director 10/98 - Present
Mellon Asset Management Non-Resident Director 11/98 - Present
(Japan) Co., LTD
Tokyo, Japan
TBCAM Holdings, Inc.* Director 10/97 - Present
The Boston Company Asset Director 1/98 - Present
Management, LLC*
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 2/97 -Present
Corporation***
Certus Asset Advisors Corp.** Director 2/97 - Present
Mellon Bond Associates, LLP+ Trustee 1/98 - Present
Chairman 1/98 - Present
Mellon Equity Associates, LLP+ Trustee 1/98 - Present
Chairman 1/98 - Present
Mellon-France Corporation+ Director 3/97 - Present
Laurel Capital Advisors+ Trustee 3/97 - Present
STEPHEN R. BYERS Dreyfus Service Corporation++ Senior Vice President 3/00 - Present
Director of Investments and
Senior Vice President
Gruntal & Co., LLC Executive Vice President 5/97 - 11/99
New York, NY Partner 5/97 - 11/99
Executive Committee 5/97 - 11/99
Member
Board of Directors 5/97 - 11/99
Member
Treasurer 5/97 - 11/99
Chief Financial Officer 5/97 - 6/99
PATRICE M. KOZLOWSKI None
Senior Vice President - Corporate
Communications
MARK N. JACOBS Dreyfus Investment Director 4/97 - Present
General Counsel, Advisors, Inc.++ Secretary 10/77 - 7/98
Vice President, and
Secretary The Dreyfus Trust Company+++ Director 3/96 - Present
The TruePenny Corporation++ President 10/98 - Present
Director 3/96 - Present
Dreyfus Service Director 3/97 - 3/99
Organization, Inc.++
WILLIAM H. MARESCA The Dreyfus Trust Company+++ Chief Financial Officer 3/99 - Present
Controller Treasurer 9/98 - Present
Director 3/97 - Present
Dreyfus Service Corporation++ Chief Financial Officer 12/98 - Present
Director 8/00 - 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 Treasurer 3/99 - Present
Organization, Inc.++ Assistant Treasurer 3/93 - 3/99
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 - 8/00
Executive Vice President 2/97 - Present
Chief Financial Officer 2/97 - 12/98
Dreyfus Investment Director 1/96 - Present
Advisors, Inc.++ Treasurer 1/96 - 10/98
Dreyfus-Lincoln, Inc. Director 12/96 - Present
4500 New Linden Hill Road President 1/97 - Present
Wilmington, DE 19808
Seven Six Seven Agency, Inc.++ Director 1/96 - 10/98
Treasurer 10/96 - 10/98
The Dreyfus Consumer Director 1/96 - Present
Credit Corp.++ Vice President 1/96 - Present
Treasurer 1/97 - 10/98
The Dreyfus Trust Company +++ Director 1/96 - Present
Dreyfus Service Organization, Treasurer 10/96 - 3/99
Inc.++
Dreyfus Insurance Agency of Director 5/97 - 3/99
Massachusetts, Inc.++++ Treasurer 5/97 - 3/99
Executive Vice President 5/97 - 3/99
DIANE P. DURNIN Dreyfus Service Corporation++ Senior Vice President - 5/95 - 3/99
Vice President - Product Marketing and Advertising
Development Division
MARY BETH LEIBIG None
Vice President -
Human Resources
THEODORE A. SCHACHAR Dreyfus Service Corporation++ Vice President -Tax 10/96 - Present
Vice President - Tax
The Dreyfus Consumer Credit Chairman 6/99 - Present
Corporation ++ President 6/99 - Present
Dreyfus Investment Advisors, Vice President - Tax 10/96 - Present
Inc.++
Dreyfus Precious Metals, Inc. +++ Vice President - Tax 10/96 - 12/98
Dreyfus Service Organization, Vice President - Tax 10/96 - Present
Inc.++
WENDY STRUTT None
Vice President
RAYMOND J. VAN COTT Mellon Financial Corporation+ Vice President 7/98 - Present
Vice President -
Information Systems
Computer Sciences Corporation Vice President 1/96 - 7/98
El Segundo, CA
JAMES BITETTO The TruePenny Corporation++ Secretary 9/98 - Present
Assistant Secretary
Dreyfus Service Corporation++ Assistant Secretary 8/98 - Present
Dreyfus Investment Assistant Secretary 7/98 - Present
Advisors, Inc.++
Dreyfus Service Assistant Secretary 7/98 - Present
Organization, Inc.++
STEVEN F. NEWMAN Dreyfus Transfer, Inc. Vice President 2/97 - Present
Assistant Secretary One American Express Plaza Director 2/97 - Present
Providence, RI 02903 Secretary 2/97 - Present
Dreyfus Service Secretary 7/98 - Present
Organization, Inc.++ Assistant Secretary 5/98 - 7/98
* The address of the business so indicated is One Boston Place, Boston, Massachusetts, 02108.
** The address of the business so indicated is One Bush Street, Suite 450, San Francisco, California 94104.
*** The address of the business so indicated is 595 Market Street, Suite 3000, San Francisco, California 94105.
**** The address of the business so indicated is 2930 East Third Avenue, Denver, Colorado 80206.
+ The address of the business so indicated is One Mellon Bank Center, Pittsburgh, Pennsylvania 15258.
++ The address of the business so indicated is 200 Park Avenue, New York, New York 10166.
+++ The address of the business so indicated is 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144.
++++ The address of the business so indicated is 53 State Street, Boston, Massachusetts 02109.
</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) Dreyfus A Bonds Plus, Inc.
2) Dreyfus Appreciation Fund, Inc.
3) Dreyfus Balanced Fund, Inc.
4) Dreyfus BASIC GNMA Fund
5) Dreyfus BASIC Money Market Fund, Inc.
6) Dreyfus BASIC Municipal Fund, Inc.
7) Dreyfus BASIC U.S. Government Money Market Fund
8) Dreyfus California Intermediate Municipal Bond Fund
9) Dreyfus California Tax Exempt Bond Fund, Inc.
10) Dreyfus California Tax Exempt Money Market Fund
11) Dreyfus Cash Management
12) Dreyfus Cash Management Plus, Inc.
13) Dreyfus Connecticut Intermediate Municipal Bond Fund
14) Dreyfus Connecticut Municipal Money Market Fund, Inc.
15) Dreyfus Florida Intermediate Municipal Bond Fund
16) Dreyfus Florida Municipal Money Market Fund
17) Dreyfus Founders Funds, Inc.
18) The Dreyfus Fund Incorporated
19) Dreyfus Global Bond Fund, Inc.
20) Dreyfus Global Growth Fund
21) Dreyfus GNMA Fund, Inc.
22) Dreyfus Government Cash Management Funds
23) Dreyfus Growth and Income Fund, Inc.
24) Dreyfus Growth and Value Funds, Inc.
25) Dreyfus Growth Opportunity Fund, Inc.
26) Dreyfus Debt and Equity Funds
27) Dreyfus Index Funds, Inc.
28) Dreyfus Institutional Money Market Fund
29) Dreyfus Institutional Preferred Money Market Funds
30) Dreyfus Institutional Short Term Treasury Fund
31) Dreyfus Insured Municipal Bond Fund, Inc.
32) Dreyfus Intermediate Municipal Bond Fund, Inc.
33) Dreyfus International Funds, Inc.
34) Dreyfus Investment Grade Bond Funds, Inc.
35) Dreyfus Investment Portfolios
36) The Dreyfus/Laurel Funds, Inc.
37) The Dreyfus/Laurel Funds Trust
38) Dreyfus LifeTime Portfolios, Inc.
39) Dreyfus Liquid Assets, Inc.
40) Dreyfus Massachusetts Intermediate Municipal Bond Fund
41) Dreyfus Massachusetts Municipal Money Market Fund
42) Dreyfus Massachusetts Tax Exempt Bond Fund
43) Dreyfus MidCap Index Fund
44) Dreyfus Money Market Instruments, Inc.
45) Dreyfus Municipal Bond Fund, Inc.
46) Dreyfus Municipal Cash Management Plus
47) Dreyfus Municipal Money Market Fund, Inc.
48) Dreyfus New Jersey Intermediate Municipal Bond Fund
49) Dreyfus New Jersey Municipal Bond Fund, Inc.
50) Dreyfus New Jersey Municipal Money Market Fund, Inc.
51) Dreyfus New Leaders Fund, Inc.
52) Dreyfus New York Municipal Cash Management
53) Dreyfus New York Tax Exempt Bond Fund, Inc.
54) Dreyfus New York Tax Exempt Intermediate Bond Fund
55) Dreyfus New York Tax Exempt Money Market Fund
56) Dreyfus U.S. Treasury Intermediate Term Fund
57) Dreyfus U.S. Treasury Long Term Fund
58) Dreyfus 100% U.S. Treasury Money Market Fund
59) Dreyfus U.S. Treasury Short Term Fund
60) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
61) Dreyfus Pennsylvania Municipal Money Market Fund
62) Dreyfus Premier California Municipal Bond Fund
63) Dreyfus Premier Equity Funds, Inc.
64) Dreyfus Premier International Funds, Inc.
65) Dreyfus Premier GNMA Fund
66) Dreyfus Premier Opportunity Funds
67) Dreyfus Premier Worldwide Growth Fund, Inc.
68) Dreyfus Premier Municipal Bond Fund
69) Dreyfus Premier New York Municipal Bond Fund
70) Dreyfus Premier State Municipal Bond Fund
71) Dreyfus Premier Value Equity Funds
72) Dreyfus Short-Intermediate Government Fund
73) Dreyfus Short-Intermediate Municipal Bond Fund
74) The Dreyfus Socially Responsible Growth Fund, Inc.
75) Dreyfus Stock Index Fund
76) Dreyfus Tax Exempt Cash Management
77) The Dreyfus Premier Third Century Fund, Inc.
78) Dreyfus Treasury Cash Management
79) Dreyfus Treasury Prime Cash Management
80) Dreyfus Variable Investment Fund
81) Dreyfus Worldwide Dollar Money Market Fund, Inc.
82) General California Municipal Bond Fund, Inc.
83) General California Municipal Money Market Fund
84) General Government Securities Money Market Funds, Inc.
85) General Money Market Fund, Inc.
86) General Municipal Bond Fund, Inc.
87) General Municipal Money Market Funds, Inc.
88) General New York Municipal Bond Fund, Inc.
89) General New York Municipal Money Market Fund
<TABLE>
<CAPTION>
<S> <C> <C>
(b)
Positions and
Name and principal Offices with
Business address Positions and offices with the Distributor Registrant
---------------- ------------------------------------------ ----------
Thomas F. Eggers * Chief Executive Officer and Chairman of the Board None
J. David Officer * President and Director None
Stephen Burke * Executive Vice President and Director None
Charles Cardona * Executive Vice President and Director None
Anthony DeVivio ** Executive Vice President and Director None
Michael Millard ** Executive Vice President and Director None
David K. Mossman ** Executive Vice President None
Jeffrey N. Nachman *** Executive Vice President and Chief Operations Officer None
William T. Sandalls, Jr. * Executive Vice President None
William H. Maresca * Chief Financial Officer and Director None
James Book **** Senior Vice President None
Ken Bradle ** Senior Vice President None
Stephen R. Byers * Senior Vice President None
Joseph Connolly * Senior Vice President Vice President
and Treasurer
Joseph Eck + Senior Vice President None
William Glenn * Senior Vice President None
Bradley Skapyak * Senior Vice President None
Jane Knight * Chief Legal Officer and Secretary None
Stephen Storen * Chief Compliance Officer None
Jeffrey Cannizzaro * Vice President - Compliance None
John Geli ** Vice President None
Maria Georgopoulos * Vice President - Facilities Management None
William Germenis * Vice President - Compliance None
Walter T. Harris * Vice President None
Janice Hayles * Vice President None
Hal Marshall * Vice President - Compliance None
Paul Molloy * Vice President None
B.J. Ralston ** Vice President None
Theodore A. Schachar * Vice President - Tax None
James Windels * Vice President None
James Bitetto * Assistant Secretary None
Ronald Jamison * Assistant Secretary None
* Principal business address is 200 Park Avenue, New York, NY 10166.
** Principal business address is 144 Glenn Curtiss Blvd., Uniondale, NY 11556-0144.
*** Principal business address is 401 North Maple Avenue, Beverly Hills, CA 90210.
**** Principal business address is One Mellon Bank Center, Pittsburgh, PA 15258
+ Principal business address is One Boston Place, Boston, MA 02108
</TABLE>
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
------- ------------
None
SIGNATURES
__________
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement under Rule
485(b) under the Securities Act and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, and State of New York on the 24th day
of October, 2000.
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
BY: /s/Stephen E. Canter*
______________________________________
Stephen E. Canter, 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/Stephen E. Canter* President, Chief Operating Officer, 10/24/00
--------------------------- Chief Investment Officer and
Stephen E. Canter Director
/s/Joseph W. Connolly* Vice President and Treasurer 10/24/00
---------------------------
Joseph W. Connolly
/s/Joseph S. DiMartino* Trustee, Chairman of the Board 10/24/00
---------------------------
Joseph S. DiMartino
/s/James M. Fitzgibbons* Trustee 10/24/00
---------------------------
James M. Fitzgibbons
/s/Kenneth A. Himmel* Trustee 10/24/00
---------------------------
Kenneth A. Himmel
/s/Stephen J. Lockwood* Trustee 10/24/00
---------------------------
Stephen J. Lockwood
/s/Roslyn M. Watson* Trustee 10/24/00
---------------------------
Roslyn M. Watson
/s/J. Tomlinson Fort* Trustee 10/24/00
---------------------------
J. Tomlinson Fort
/s/Arthur L. Goeschel* Trustee 10/24/00
---------------------------
Arthur L. Goeschel
/s/Benaree Pratt Wiley* Trustee 10/24/00
---------------------------
Benaree Pratt Wiley
*By: /s/Jeff Prusnofsky
---------------------------
Jeff Prusnofsky
Attorney-in-Fact
Exhibit Index
-------------
E Distribution Agreement.
I(2) Consent of counsel.
J(2) Consent of KPMG LLP.
M(3) Amended and Restated Distribution and Service Plans.
P Code of Ethics adopted by the Registrant.
Other Exhibits
______________
(a) Power of Attorney of Stephen E. Canter and Joseph W. Connolly
dated March 22, 2000.
(b) Power of Attorney of the Trustees dated March 16, 2000.
(c) Certificate of Incumbency dated October 24, 2000.
