File Nos. 2-83429
811-3726
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. 24 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 24 [ X ]
(Check appropriate box or boxes.)
DREYFUS NEW YORK TAX EXEMPT BOND FUND, INC.
(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.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box)
immediately upon filing pursuant to paragraph (b)
----
on (date) pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(i)
----
X on October 1, 1999 pursuant to paragraph (a)(i)
----
75 days after filing pursuant to paragraph (a)(ii)
----
on (date) pursuant to paragraph (a)(ii) of Rule 485
----
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
----
Dreyfus New York
Tax Exempt
Funds
Three investment choices for income exempt from federal, New York state and New
York city income taxes
PROSPECTUS October 1, 1999
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
Contents
THE FUNDS
- ------------------------------------------------------
1 Introduction
2 Goal/Approach
4 Main Risks
6 Past Performance
9 Expenses
12 Management
14 Financial Highlights
YOUR INVESTMENT
- --------------------------------------------------------------------
17 Account Policies
20 Distributions and Taxes
21 Services for Fund Investors
24 Instructions for Regular Accounts
FOR MORE INFORMATION
- -------------------------------------------------------------------------------
Back Cover
Each fund's investment approach, risks, performance, expenses and related
information
Information for managing your fund account
Where to learn more about these and other Dreyfus funds
<PAGE>
The Funds
Dreyfus New York Tax Exempt Money Market Fund
- -------------------------------
Ticker Symbol: DNYXX
Dreyfus New York Tax Exempt Intermediate Bond Fund
- ------------------------------
Ticker Symbol: DRNIX
Dreyfus New York Tax Exempt Bond Fund
- -------------------------------
Ticker Symbol: DRNYX
This combined prospectus has been prepared for your convenience so that you can
consider three investment choices in one document. Each fund is a separate
entity with a separate investment portfolio. The operations and results of a
fund are unrelated to those of each other fund. The funds differ in their
average portfolio maturity, which affects their level of income and degree of
share price fluctuation.
Each fund seeks as high a level of current income exempt from federal, New York
state and New York city income taxes as is consistent with the preservation of
capital and, for the Money Market Fund only, the maintenance of liquidity. To
pursue this goal, each fund normally invests substantially all of its assets in
New York municipal obligations.
Each fund is non-diversified, which means that a relatively high percentage of
its assets may be invested in a limited number of issuers. Therefore, each
fund's performance may be more vulnerable to changes in the market value of a
single issuer or a group of issuers.
INFORMATION ON EACH FUND'S RECENT PERFORMANCE CAN BE FOUND IN ITS CURRENT
ANNUAL/SEMIANNUAL REPORT (SEE BACK COVER).
Introduction
<PAGE 1>
Dreyfus New York Tax Exempt Funds
GOAL/APPROACH
Dreyfus New York Tax Exempt Money Market Fund
THE MONEY MARKET FUND seeks as high a level of current income exempt from
federal, New York state and New York city income taxes as is consistent with the
preservation of capital and the maintenance of liquidity. As a money market
fund, the fund is subject to maturity, quality and diversification requirements
designed to help it maintain a stable share price.
To pursue this goal, the fund normally invests substantially all net assets in
short-term, high quality municipal obligations that provide income exempt from
federal, New York state and New York city income taxes. When the fund manager
believes that acceptable New York municipal obligations are unavailable for
investment, the fund may invest temporarily in municipal obligations that may be
subject to New York state and New York city income taxes, but are free from
federal income tax.
Dreyfus New York Tax Exempt Intermediate Bond Fund
THE INTERMEDIATE BOND FUND seeks as high a level of income exempt from federal,
New York state and New York city income taxes as is consistent with the
preservation of capital. To pursue its goal, the fund normally invests
substantially all of its assets in municipal bonds that provide income exempt
from federal, New York state and New York city personal income taxes. Concepts
to understand
MUNICIPAL OBLIGATIONS: debt securities that provide income free from federal
income taxes. Municipal bonds are typically divided into two types:
* GENERAL OBLIGATION BONDS, which are secured by the full faith and credit
of the issuer and its taxing power
* REVENUE BONDS, which are payable from the revenues derived from a specific
revenue source, such as charges for water and sewer service or highway tolls
<PAGE 2>
The fund's dollar-weighted average portfolio maturity ranges between three and
ten years. Although the fund currently intends to invest only in investment
grade municipal bonds, or the unrated equivalent as determined by Dreyfus, it
has the ability to invest up to 20% of net assets in bonds of below investment
grade credit quality.
Dreyfus New York Tax Exempt Bond Fund
THE BOND FUND seeks a higher level of current income than the Intermediate Bond
Fund exempt from federal, New York state and New York city income taxes as is
consistent with the preservation of capital. To pursue this goal, the fund
normally invests substantially all of its assets in municipal bonds that provide
income exempt from federal, New York state and New York city income taxes. The
dollar-weighted average maturity of the fund normally exceeds ten years, but the
fund is not subject to any maturity restrictions.
The fund will invest at least 80% of its assets in investment grade municipal
bonds or the unrated equivalent as determined by Dreyfus. The fund may invest up
to 20% of its assets in municipal bonds rated below investment grade ("high
yield" or "junk" bonds) or the unrated equivalent as determined by Dreyfus.
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.
The Funds
<PAGE 3>
MAIN RISKS
Dreyfus New York Tax Exempt Money Market Fund
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.
While the fund has maintained a constant share price since inception and will
continue to try to do so, 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
* New York's economy and revenues underlying its
municipal obligations may decline
* the fund's portfolio securities may be more
sensitive to risks that are specific to investing primarily in a single 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 New
York state and city income taxes, interest from some of its holdings may be
subject to the federal alternative minimum tax. In addition, the fund
occasionally may invest in taxable obligations and/or municipal obligations that
pay income exempt only from federal income tax.
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 or the unrated equivalent
as determined by Dreyfus, with the remainder invested in securities with the
second-highest credit rating.
<PAGE 4>
Dreyfus New York Tax Exempt Intermediate Bond Fund and Dreyfus New York Tax
Exempt Bond Fund
Prices of bonds tend to move inversely with changes in interest rates. While a
rise in rates may allow a fund to invest for higher yields, the most immediate
effect is usually a drop in bond prices, and therefore in a fund's share price
as well. As a result, the value of your investment in a fund could go up and
down, which means that you could lose money.
Other risk factors could have an effect on each fund's performance:
* if an issuer fails to make timely interest or
principal payments, or there is a decline in the credit quality of a bond, or
perception of a decline, the bond's value could fall, potentially lowering a
fund's share price
* New York's economy and revenues underlying its
municipal bonds may decline
* investing primarily in a single state may make a
fund's portfolio securities more sensitive to risks specific to the state
* any of these funds' holdings could have its credit
rating downgraded or could default
Although each fund's objective is to generate income exempt from federal, New
York state and New York city income taxes, interest from some of a fund's
holdings may be subject to the federal alternative minimum tax. In addition,
each fund occasionally may invest in municipal bonds that pay income exempt only
from federal income tax.
Other potential risks
The Intermediate Bond Fund and Bond Fund may invest in certain derivatives, such
as futures, options and inverse floaters. Derivatives can be 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 a fund's performance. These funds may use
derivatives to:
* increase yield
* hedge against a decline in principal value
* invest with greater efficiency and lower cost than is possible through
direct investment
* adjust the fund's duration
* provide daily liquidity
The Funds
<PAGE 5>
PAST PERFORMANCE
Dreyfus New York Tax Exempt Money Market Fund
The two tables below show some of the risks of investing in the fund. The first
table shows the changes in the fund's performance from year to year. The second
table averages the fund's performance over time. Both tables assume reinvestment
of dividends. Of course, past performance is no guarantee of future results.
--------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
[Exhibit A]
BEST QUARTER: Q2 '89 +1.44%
WORST QUARTER: Q1 '93 +0.38%
THE FUND'S YEAR-TO-DATE RETURN AS OF 6/30/99 WAS 1.16%.
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Average annual total return AS OF 12/31/98
1 Year 5 Years 10 Years
- -------------------------------------------------------------------------------
2.75% 2.78% 3.23%
The fund's 7-day yield on 12/31/98 was 2.99%. For the fund's current yield, call
toll-free 1-800-645-6561.
What these funds are -- and aren't
These funds are mutual funds: pooled investments that are professionally managed
and give you the opportunity to participate in financial markets. They strive to
reach their stated goals, although as with all mutual funds, they cannot offer
guaranteed results.
An investment in these funds 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 these funds, but you also have the
potential to make money.
<PAGE 6>
Dreyfus New York Tax Exempt Intermediate Bond Fund
The two tables below show some of the risks of investing in the fund. The first
table shows the changes in the fund's performance from year to year. The second
table compares the fund's performance over time to that of the Lehman Brothers
10-Year Municipal Bond Index. Both tables assume reinvestment of dividends. Of
course, past performance is no guarantee of future results.
--------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
[Exhibit B]
BEST QUARTER: Q1 '95 +5.68%
WORST QUARTER: Q1 '94 -4.45%
THE FUND'S YEAR-TO-DATE TOTAL RETURN AS OF 6/30/99 WAS -1.95%.
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<TABLE>
<CAPTION>
Average annual total return AS OF 12/31/98
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FUND 6.05% 5.28% 7.36%
LEHMAN BROTHERS
10-YEAR
MUNICIPAL BOND INDEX 6.76% 6.35% 8.33%
</TABLE>
UNLIKE THE FUND, THE LEHMAN INDEX IS NOT COMPOSED OF BONDS OF A SINGLE STATE.
The Funds
<PAGE 7>
PAST PERFORMANCE (CONTINUED)
Dreyfus New York Tax Exempt Bond Fund
The two tables below show some of the risks of investing in the fund. The first
table shows the changes in the fund's performance from year to year. The second
table compares the fund's performance over time to that of the Lehman Brothers
Municipal Bond Index. Both tables assume reinvestment of dividends. Of course,
past performance is no guarantee of future results.
--------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
[Exhibit C]
BEST QUARTER: Q1 '95 +6.59%
WORST QUARTER: Q1 '94 -5.52%
THE FUND'S YEAR-TO-DATE TOTAL RETURN AS OF 6/30/99 WAS -1.74%.
--------------------------------------------------------
<TABLE>
<CAPTION>
Average annual total return AS OF 12/31/98
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FUND 6.70% 5.24% 7.41%
LEHMAN BROTHERS
MUNICIPAL BOND INDEX 6.48% 6.22% 8.22%
</TABLE>
UNLIKE THE FUND, THE LEHMAN INDEX IS NOT COMPOSED OF BONDS OF A SINGLE STATE.
<PAGE 8>
EXPENSES
Dreyfus New York Tax Exempt Money Market Fund
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the following table. 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.
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Fee table
ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.50%
Shareholder services fee x.xx%
Other expenses x.xx%
-------------------------------------------------------
TOTAL 0.65%
--------------------------------------------------------
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$66 $208 $362 $810
</TABLE>
This example shows what you could pay in expenses over
time. It uses the same hypothetical conditions other
funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in
expenses. The figures shown would be the same whether
you sold your shares at the end of a period or kept
them. Because actual return and expenses will be
different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to the investment adviser for managing the fund's
portfolio and assisting in all aspects of the fund's operations.
SHAREHOLDER SERVICES FEE: a fee of up to 0.25% used to reimburse Dreyfus Service
Corporation for shareholder account service and maintenance.
OTHER EXPENSES: fees paid by the fund for miscellaneous items such as transfer
agency, custody, professional and registration fees.
The Funds
<PAG 9E>
EXPENSES (CONTINUED)
Dreyfus New York Tax Exempt Intermediate Bond Fund
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the following table. 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).
--------------------------------------------------------
Fee table
SHAREHOLDER TRANSACTION FEES
% OF TRANSACTION AMOUNT
Maximum redemption fee 1.00%
CHARGED ONLY WHEN SELLING SHARES YOU
HAVE OWNED FOR LESS THAN 15 DAYS
--------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.60%
Rule 12b-1 fee 0.25%
Other expenses 0.09%
-------------------------------------------------------
TOTAL 0.94%
--------------------------------------------------------
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$96 $300 $520 $1,155
</TABLE>
This example shows what you could pay in expenses over
time. It uses the same hypothetical conditions other
funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in
expenses. The figures shown would be the same whether
you sold your shares at the end of a period or kept
them. Because actual return and expenses will be
different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to the investment adviser for managing the fund's
portfolio and assisting in all aspects of the fund's operations. During the past
fiscal year, Dreyfus waived receipt of a portion of its fee so that the
effective management fee paid by the fund was 0.44%, reducing total expenses
from 0.94% to 0.80%. This waiver was subject to termination at any time.
RULE 12B-1 FEE: a fee paid to reimburse the fund's distributor for distributing
fund shares and servicing shareholder accounts, and to pay Dreyfus for
advertising and shareholder account service and maintenance. 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.
<PAGE 10>
Dreyfus New York Tax Exempt Bond Fund
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the following table. 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
% OF TRANSACTION AMOUNT
Maximum redemption fee 0.10%
CHARGED ONLY WHEN SELLING SHARES YOU
HAVE OWNED FOR LESS THAN 15 DAYS
--------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.60%
Shareholder services fee x.xx%
Other expenses x.xx%
-------------------------------------------------------
TOTAL 0.76%
--------------------------------------------------------
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$78 $243 $422 $942
</TABLE>
This example shows what you could pay in expenses over
time. It uses the same hypothetical conditions other
funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in
expenses. The figures shown would be the same whether
you sold your shares at the end of a period or kept
them. Because actual return and expenses will be
different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to the investment adviser for managing the fund's
portfolio and assisting in all aspects of the fund's operations. During the past
fiscal year, Dreyfus waived receipt of a portion of its fee so that the
effective management fee paid by the fund was 0.59%, reducing total expenses
from 0.76% to 0.75%. This waiver was subject to termination at any time.
SHAREHOLDER SERVICES FEE: a fee of up to 0.25% used to reimburse Dreyfus Service
Corporation for shareholder account service and maintenance.
OTHER EXPENSES: fees paid by the fund for miscellaneous items such as transfer
agency, custody, professional and registration fees.
The Funds
<PAGE 11>
MANAGEMENT
The investment adviser for each fund is The Dreyfus Corporation, 200 Park
Avenue, New York, New York 10166. Founded in 1947, Dreyfus manages more than
$120 billion in over 160 mutual fund portfolios. For the past fiscal year,
Dreyfus New York Tax Exempt Money Market Fund, Dreyfus New York Tax Exempt
Intermediate Bond Fund and Dreyfus New York Tax Exempt Bond Fund each paid
Dreyfus a management fee at the annual rate of 0.50%, 0.44%, and 0.59%,
respectively, of the fund's average daily net assets.
Dreyfus is the primary mutual fund business of Mellon Bank Corporation, a
broad-based financial services company with a bank at its core. With more than
$389 billion of assets under management and $1.9 trillion of assets under
administration and custody, Mellon provides a full range of banking, investment
and trust products and services to individuals, businesses and institutions.
Mellon is headquartered in Pittsburgh, Pennsylvania.
Monica S. Wieboldt has managed Dreyfus New York Tax Exempt Intermediate Bond
Fund since May 1987 and has been employed by Dreyfus since 1983.
Samuel J. Weinstock has managed Dreyfus New York Tax Exempt Bond Fund since May
1997 and has been employed by Dreyfus since 1987.
Concepts to understand
YEAR 2000 ISSUES: these funds could be adversely affected if the computer
systems used by Dreyfus and the funds' other service providers do not properly
process and calculate date-related information from and after January 1, 2000.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which a fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of a fund's investments and its yield and share price.
<PAGE 12>
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
The Funds
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables describe each fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in a fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been independently audited by
Ernst & Young LLP, whose report for each fund, along with each fund's financial
statements, is included in the fund's annual report.
<TABLE>
<CAPTION>
Dreyfus New York Tax Exempt Money Market Fund
YEAR ENDED MAY 31,
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations:
Investment income -- net .025 .029 .028 .030 .027
Distributions:
Dividends from investment
income -- net (.025) (.029) (.028) (.030) (.027)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 2.54 2.97 2.83 3.05 2.76
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses
to average net assets (%) .65 .67 .68 .64 .68
Ratio of net investment income
to average net assets (%) 2.50 2.93 2.79 3.00 2.71
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 295,790 281,274 291,529 298,768 317,840
<PAGE 14>
Dreyfus New York Tax Exempt Intermediate Bond Fund
YEAR ENDED MAY 31,
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 18.62 18.06 17.83 18.05 17.71
Investment operations:
Investment income -- net .80 .82 .83 .85 .86
Net realized and unrealized gain
(loss) on investments (.10) .65 .41 (.22) .34
Total from investment operations .70 1.47 1.24 .63 1.20
Distributions:
Dividends from investment
income -- net (.80) (.82) (.83) (.85) (.86)
Dividends from net realized gain
on investments (.21) (.09) (.18) -- --
Total distributions (1.01) (.91) (1.01) (.85) (.86)
Net asset value, end of period 18.31 18.62 18.06 17.83 18.05
Total investment return (%) 3.75 8.25 7.12 3.52 7.04
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .80 .80 .80 .84 .96
Ratio of net investment income
to average net assets (%) 4.28 4.44 4.64 4.69 4.91
Decrease reflected in above
expense ratios due to
actions by the manager (%) .14 .15 .16 .12 --
Portfolio turnover rate (%) 33.08 42.40 45.29 47.48 29.78
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 366,526 365,481 357,530 365,148 359,199
The Funds
<PAGE 15>
FINANCIAL HIGHLIGHTS (CONTINUED)
Dreyfus New York Tax Exempt Bond Fund
YEAR ENDED MAY 31,
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 15.47 14.97 14.64 15.19 15.06
Investment operations:
Investment income -- net .74 .75 .76 .79 .84
Net realized and unrealized gain
(loss) on investments (.06) .63 .41 (.51) .23
Total from Investment operations .68 1.38 1.17 .28 1.07
Distributions:
Dividends from investment
income -- net (.74) (.74) (.76) (.79) (.84)
Dividends from net realized gain
on investments (.14) (.14) (.08) (.04) (.08)
Dividends in excess of net realized
gain on investments -- -- -- -- (.02)
Total distributions (.88) (.88) (.84) (.83) (.94)
Net asset value, end of period 15.27 15.47 14.97 14.64 15.19
Total return (%) 4.47 9.36 8.14 1.84 7.55
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .75 .73 .74 .71 .72
Ratio of net investment income
to average net assets (%) 4.77 4.86 5.10 5.24 5.70
Decrease reflected in above expense
ratios due to actions by the manager (%) .01 .00* -- -- --
Portfolio turnover rate (%) 20.77 35.86 74.46 81.93 49.03
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 1,602,113 1,672,193 1,702,686 1,698,678 1,879,197
</TABLE>
* AMOUNT REPRESENTS LESS THAN .01%
<PAGE 16>
Your Investment
ACCOUNT POLICIES
Buying shares
YOU PAY NO SALES CHARGES to invest in these funds. Your price for fund shares is
the net asset value per share (NAV), which is generally calculated at 12:00 noon
Eastern time for the Money Market Fund, and at the close of trading on the New
York Stock Exchange (usually 4:00 p.m. Eastern time) for the Intermediate Bond
Fund and the Bond Fund, 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 Money Market Fund uses the
amortized cost method of valuing its securities. The other funds are valued at
fair value by an independent pricing service approved and supervised by the
fund's board.
--------------------------------------------------------
Minimum investments
Initial Additional
--------------------------------------------------------
REGULAR ACCOUNTS $2,500 $100
$500 FOR
TELETRANSFER
INVESTMENTS
DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS
All investments must be in U.S. dollars. Third-party
checks cannot be accepted. You may be charged a fee for
any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.
Concepts to understand
NET ASSET VALUE (NAV): 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 a fund to maintain a stable net asset
value.
<PAGE 17>
ACCOUNT POLICIES (CONTINUED)
Selling shares
YOU MAY SELL (REDEEM) SHARES AT ANY TIME. Your shares will be sold at the next
NAV calculated after your order is accepted by the fund's transfer agent or
other authorized entity. Any certificates representing fund shares being sold
must be returned with your redemption request. Your order will be processed
promptly and you will generally receive the proceeds within a week.
BEFORE SELLING OR WRITING A CHECK for recently purchased shares, please note
that:
* if a fund has not yet collected payment for the
shares you are selling, it may delay sending the proceeds for up to eight
business days or until it has collected payment
* if you are selling or exchanging shares of the
Intermediate Bond Fund or Bond Fund that you have owned for less than 15
days, the fund may deduct a redemption fee (not charged on shares sold
through the Automatic Withdrawal Plan or Dreyfus Auto-Exchange Privilege, or
on shares acquired through dividend reinvestment): the Intermediate Bond Fund
charges a 1% redemption fee and the Bond Fund charges a 0.10% redemption fee
--------------------------------------------------------
Limitations on selling shares by phone
Proceeds
sent by Minimum Maximum
--------------------------------------------------------
CHECK NO MINIMUM $150,000 PER DAY
WIRE $1,000 $250,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
TELETRANSFER $500 $250,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days
* requests to send the proceeds to a different payee or address
Written sell orders of $100,000 or more must also be signature guaranteed.
A SIGNATURE GUARANTEE helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.
<PAGE 18>
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.
EACH FUND (EXCEPT AS NOTED BELOW) RESERVES THE RIGHT TO:
* refuse any purchase or exchange request
including, particularly for the Intermediate Bond Fund
and the Bond Fund, those from any individual or group
who, in the fund's view, has or is likely to engage in
excessive trading (usually defined as more than four
exchanges out of the fund within a calendar year)
* refuse any purchase or exchange request in excess of
1% of a fund's total assets (applies mainly to the Intermediate Bond Fund and
the Bond Fund only)
* 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)
Each 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 a fund's assets).
Small account policies
To offset the relatively higher costs of servicing smaller accounts, the Money
Market Fund and the Intermediate Bond Fund each charge 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 $500, your 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.
Your Investment
<PAGE 19>
DISTRIBUTIONS AND TAXES
EACH FUND USUALLY PAYS ITS SHAREHOLDERS dividends from its net investment income
once a month, and distributes any net capital gains it has realized once a year.
Your dividends and distributions will be reinvested in your fund unless you
instruct the fund otherwise. There are no fees or sales charges on
reinvestments.
EACH FUND ANTICIPATES THAT VIRTUALLY ALL OF ITS INCOME DIVIDENDS will be exempt
from federal, New York state and New York city income taxes. However, any
dividends paid from interest on taxable investments or short-term capital gains
will be taxable as ordinary income. Any distributions of long-term capital gains
will be taxable as such. The tax status of any distribution is the same
regardless of how long you have been in the fund and whether you reinvest your
distributions or take them in cash. In general, distributions are federally
taxable as follows:
--------------------------------------------------------
Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
--------------------------------------------------------
INCOME GENERALLY GENERALLY
DIVIDENDS TAX EXEMPT TAX EXEMPT
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
The tax status of your dividends and distributions will be detailed in your
annual tax statement from the fund.
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Any sale or exchange of fund shares, including through the checkwriting
privilege, may generate a tax liability.
The table at right also can provide a guide for your 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.
<PAGE 20>
SERVICES FOR FUND INVESTORS
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 1-800-645-6561.
--------------------------------------------------------
For investing
DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.
DREYFUS PAYROLL For making automatic investments
SAVINGS PLAN through a payroll deduction.
DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.
DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another
(not available for IRAs).
--------------------------------------------------------
For exchanging shares
DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
--------------------------------------------------------
For selling shares
DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds.
Dreyfus Financial Centers
Through a nationwide network of Dreyfus Financial Centers, Dreyfus offers a full
array of investment services and products. This includes information on mutual
funds, brokerage services, tax-advantaged products and retirement planning.
Experienced financial consultants can help you make informed choices and provide
you with personalized attention in handling account transactions. The Financial
Centers also offer informative seminars and events. To find the Financial Center
nearest you, call 1-800-499-3327.
Your Investment
<PAGE 21>
SERVICES FOR FUND INVESTORS (CONTINUED)
Checkwriting privilege
YOU MAY WRITE REDEMPTION CHECKS against your account in amounts of $500 or more.
These checks are free; however, a fee will be charged 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 $500 OR MORE from one Dreyfus fund into another (no minimum for
retirement accounts). You can request your exchange in writing or by phone. Be
sure to read the current prospectus for any fund into which you are exchanging.
Any new account established through an exchange will have the same privileges as
your original account (as long as they are available). There is currently no fee
for exchanges, although you may be charged a sales load when exchanging into any
fund that has one.
Third-party investments
If you invest through a third party (rather than directly with Dreyfus), the
policies and fees may be different than those described here. Banks, brokers,
financial advisers and financial supermarkets may charge transaction fees and
may set different minimum investments or limitations on buying or selling
shares. Consult a representative of your plan or financial institution if in
doubt.
<PAGE 22>
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.
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.
Your Investment
<PAGE 23>
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 Bank of New York, with these instructions:
* ABA# 021000018
* Dreyfus New York Tax Exempt
Money Market Fund DDA# 8900052007
* Dreyfus New York Tax Exempt
Intermediate Bond Fund DDA# 8900052236
* Dreyfus New York Tax Exempt Bond Fund
DDA# 8900052422
* 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 Bank of New York, with these
instructions:
* ABA# 021000018
* Dreyfus New York Tax Exempt
Money Market Fund DDA# 8900052007
* Dreyfus New York Tax Exempt
Intermediate Bond Fund DDA# 8900052236
* Dreyfus New York Tax Exempt Bond Fund
DDA# 8900052422
* your account number
* name(s) of investor(s)
ELECTRONIC CHECK Same as wire, but insert "1111" before your account number.
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 to request a form to add any automatic investing service
(see "Services for Fund Investors"). Complete and return the forms along with
any other required materials.
Via the Internet
COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.
<PAGE 24>
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 and share class
* 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
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
$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.
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.
DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us 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.
Your Investment
<PAGE 25>
For More Information
Dreyfus New York Tax Exempt Money Market Fund
----------------------------
SEC file number: 811-5160
Dreyfus New York Tax Exempt Intermediate Bond Fund
---------------------------
SEC file number: 811-5161
Dreyfus New York Tax Exempt Bond Fund
----------------------------
SEC file number: 811-3726
More information on these funds is available free upon
request, including the following:
Annual/Semiannual Report
Describes a fund's performance, lists portfolio holdings
and contains a letter from the fund's 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 a fund and its policies. A
current SAI is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference (is
legally considered part of this prospectus).
To obtain information:
BY TELEPHONE Call 1-800-645-6561
BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request to [email protected]
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from:
SEC
http://www.sec.gov
DREYFUS
http://www.dreyfus.com
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 1999 Dreyfus Service Corporation NYTEFP1099
<PAGE>
DREYFUS NEW YORK TAX EXEMPT FUNDS
STATEMENT OF ADDITIONAL INFORMATION
FOR
DREYFUS NEW YORK TAX EXEMPT MONEY MARKET FUND
DREYFUS NEW YORK TAX EXEMPT INTERMEDIATE BOND FUND
DREYFUS NEW YORK TAX EXEMPT BOND FUND, INC.
OCTOBER 1, 1999
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current combined
Prospectus of Dreyfus New York Tax Exempt Money Market Fund (the "Money
Market Fund"), Dreyfus New York Tax Exempt Intermediate Bond Fund (the
"Intermediate Bond Fund"), and Dreyfus New York Tax Exempt Bond Fund, Inc.
(the "Bond Fund") (collectively, the "Funds"), dated October 1, 1999, as it
may be revised from time to time. To obtain a copy of the Prospectus,
please write to the Funds 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
Each Fund's most recent Annual Report and Semi-Annual Report to
Shareholders are separate documents supplied with this Statement of
Additional Information, and the financial statements, accompanying notes and
report of independent auditors appearing in the Annual Report are
incorporated by reference into this Statement of Additional Information.
Each Fund is a separate entity with a separate portfolio. The
operations and investment results of one Fund are unrelated to those of each
other Fund. This combined Statement of Additional Information has been
prepared for your convenience to provide you the opportunity to consider
three investment choices in one document.
TABLE OF CONTENTS
Page
Description of the Funds B-3
Management of the Funds B-21
Management Arrangements B-25
How to Buy Shares B-28
Service Plan and Shareholder Services Plans B-31
How to Redeem Shares B-33
Shareholder Services B-36
Determination of Net Asset Value B-39
Portfolio Transactions B-40
Dividends, Distributions and Taxes B-41
Performance Information B-43
Information About the Funds B-45
Counsel and Independent Auditors B-47
Appendix A B-48
Appendix B B-62
DESCRIPTION OF THE FUNDS
Each of the Money Market Fund and the Intermediate Bond Fund is a
Massachusetts business trust that commenced operations on June 9, 1987 and
June 12, 1987, respectively. The Bond Fund is a Maryland corporation formed
on April 26, 1983. Each Fund is an open-end, management investment company,
known as a mutual fund. The Intermediate Bond Fund and Bond Fund are
referred to as the "Longer Term Funds."
The Dreyfus Corporation (the "Manager") serves as each Fund's
investment adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of each Fund's shares.
Certain Portfolio Securities
The following information supplements and should be read in conjunction
with the Funds' Prospectus.
Municipal Obligations. (All Funds) Each Fund will invest primarily in
debt securities of the State of New York, its political subdivisions,
authorities and corporations, and certain other specified securities, the
interest from which, in the opinion of bond counsel to the issuer , is
exempt from Federal, New York State and New York City income taxes
(collectively, "New York Municipal Obligations"). To the extent acceptable
New York Municipal Obligations are at any time unavailable for investment by
a Fund, the Fund will invest temporarily in other debt securities the
interest from which, in the opinion of bond counsel to the issuer, is exempt
from Federal, but not New York State and New York City, income tax. Each
Fund will invest at least 80% of the value of its net assets (except when
maintaining a temporary defensive position) in Municipal Obligations.
Municipal Obligations are debt obligations issued by states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, or multistate
agencies or authorities, the interest from which, in the opinion of bond
counsel to the issuer, is exempt from Federal income tax. Municipal
Obligations generally include debt obligations issued to obtain funds for
various public purposes as well as certain industrial development bonds
issued by or on behalf of public authorities. Municipal Obligations are
classified as general obligation bonds, revenue bonds and notes. General
obligation bonds are secured by the issuer's pledge of its faith, credit and
taxing power for the payment of principal and interest. Revenue bonds are
payable from the revenue derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source, but not from the general taxing power. Tax exempt
industrial development bonds, in most cases, are revenue bonds that do not
carry the pledge of the credit of the issuing municipality, but generally
are guaranteed by the corporate entity on whose behalf they are issued.
Notes are short-term instruments which are obligations of the issuing
municipalities or agencies and are sold in anticipation of a bond sale,
collection of taxes or receipt of other revenues. Municipal Obligations
include municipal lease/purchase agreements which are similar to installment
purchase contracts for property or equipment issued by municipalities.
Municipal Obligations bear fixed, floating or variable rates of interest.
The Longer Term Funds may purchase Municipal Obligations with interest rates
that are determined by formulas under which the rate will change directly or
inversely to changes in interest rates or an index, or multiples thereof, in
many cases subject to a maximum and minimum. Certain Municipal Obligations
purchased by the Longer Term Funds are subject to redemption at a date
earlier than their stated maturity pursuant to call options, which may be
separated from the related Municipal Obligation and purchased and sold
separately.
The yields on Municipal Obligations are dependent on a variety of
factors, including general economic and monetary conditions, money market
factors, conditions in the Municipal Obligations market, size of a
particular offering, maturity of the obligation and rating of the issue.
Certain Tax Exempt Obligations. (All Funds) Each Fund may purchase
floating and variable rate demand notes and bonds, which are tax exempt
obligations ordinarily having stated maturities in excess of one year, but
which permit the holder to demand payment of principal at any time or at
specified intervals, which for the Money Market Fund will not exceed 13
months, and in each case will be upon not more than 30 days' notice.
Variable rate demand notes include master demand notes which are obligations
that permit the Fund to invest fluctuating amounts, at varying rates of
interest, pursuant to direct arrangements between the Fund, as lender, and
the borrower. These obligations permit daily changes in the amount
borrowed. Because these obligations are direct lending arrangements between
the lender and borrower, it is not contemplated that such instruments
generally will be traded, and there generally is no established secondary
market for these obligations, although they are redeemable at face value,
plus accrued interest. Accordingly, where these obligations are not secured
by letters of credit or other credit support arrangements, the Fund's right
to redeem is dependent on the ability of the borrower to pay principal and
interest on demand. Each obligation purchased by the Fund will meet the
quality criteria established for the purchase of Municipal Obligations.
Tax Exempt Participation Interests. (All Funds) Each Fund may purchase
from financial institutions participation interests in Municipal Obligations
(such as industrial development bonds and municipal lease/purchase
agreements). A participation interest gives the Fund 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.
These instruments may have fixed, floating or variable rates of interest
and, in the case of the Money Market Fund, will have remaining maturities of
13 months or less. If the participation interest is unrated, it will be
backed by an irrevocable letter of credit or guarantee of a bank that the
Fund's Board has determined meets prescribed quality standards for banks, or
the payment obligation otherwise will be collateralized by U.S. Government
securities. For certain participation interests, the Fund will have the
right to demand payment, on not more than seven days' notice, for all or any
part of the Fund's participation interest in the Municipal Obligation, plus
accrued interest. As to these instruments, each Fund intends to exercise
its right to demand payment only upon a default under the terms of the
Municipal Obligation, as needed to provide liquidity to meet redemptions, or
to maintain or improve the quality of its investment portfolio.
Municipal lease obligations or installment purchase contract
obligations (collectively, "lease obligations") have special risks not
ordinarily associated with Municipal Obligations. Although lease
obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation
ordinarily is backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation. However,
certain lease obligations contain "non-appropriation" clauses which provide
that the municipality has no obligation to make lease or installment
purchase payments in future years unless money is appropriated for such
purpose on a yearly basis. Although "non-appropriation" lease obligations
are secured by the leased property, disposition of the property in the event
of foreclosure might prove difficult. The Money Market Fund will invest
only in those lease obligations that (1) are rated in one of the two highest
rating categories for debt obligations by at least two nationally recognized
statistical rating organizations (or one rating organization if the lease
obligation was rated only by one such organization); or (2) if unrated, are
purchased principally from the issuer or domestic banks or other responsible
third parties, in each case only if the seller shall have entered into an
agreement with the Money Market Fund providing that the seller or other
responsible third party will either remarket or repurchase the lease
obligation within a short period after demand by the Fund. The staff of the
Securities and Exchange Commission currently considers certain lease
obligations to be illiquid. With regard to the Longer Term Funds,
determination as to the liquidity of such securities is made in accordance
with guidelines established by each Fund's Board. Pursuant to such
guidelines, each Board has directed the Manager to monitor carefully each
Fund's investment in such securities with particular regard to (1) the
frequency of trades and quotes for the lease obligation; (2) the number of
dealers willing to purchase or sell the lease obligation and the number of
other potential buyers; (3) the willingness of dealers to undertake to make
a market in the lease obligation; (4) the nature of the marketplace trades,
including the time needed to dispose of the lease obligation, the method of
soliciting offers and the mechanics of transfer; and (5) such other factors
concerning the trading market for the lease obligation as the Manager may
deem relevant. In addition, in evaluating the liquidity and credit quality
of a lease obligation that is unrated, each Fund's Board has directed the
Manager to consider (a) whether the lease can be cancelled; (b) what
assurance there is that the assets represented by the lease can be sold; (c)
the strength of the lessee's general credit (e.g., its debt, administrative,
economic, and financial characteristics); (d) the likelihood that the
municipality will discontinue appropriating funding for the leased property
because the property is no longer deemed essential to the operations of the
municipality (e.g., the potential for an "event of nonappropriation"); (e)
the legal recourse in the event of failure to appropriate; and (f) such
other factors concerning credit quality as the Manager may deem relevant.
Tender Option Bonds. (All Funds) Each Fund may purchase 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.
The Manager, on behalf of the Fund, will consider on an ongoing basis the
creditworthiness of the issuer of the underlying Municipal Obligations, of
any custodian and of 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 Money Market Fund will not purchase tender option bonds unless (a)
the demand feature applicable thereto is exercisable by the Fund within 13
months of the date of such purchase upon no more than 30 days' notice and
thereafter is exercisable by the Fund no less frequently than annually upon
no more than 30 days' notice and (b) at the time of such purchase, the
Manager reasonably expects (i) based upon its assessment of current and
historical interest rate trends, that prevailing short-term tax exempt rates
will not exceed the stated interest rate on the underlying Municipal
Obligations at the time of the next tender fee adjustment and (ii) that the
circumstances which might entitle the grantor of a tender option to
terminate the tender option would not occur prior to the time of the next
tender opportunity. At the time of each tender opportunity, the Fund will
exercise the tender option with respect to any tender option bonds unless
the Manager reasonably expects, (x) based upon its assessment of current and
historical interest rate trends, that prevailing short-term tax exempt rates
will not exceed the stated interest rate on the underlying Municipal
Obligations at the time of the next tender fee adjustment, and (y) that the
circumstances which entitle the grantor of a tender option to terminate the
tender option would not occur prior to the time of the next tender
opportunity. The Fund will exercise the tender feature with respect to
tender option bonds, or otherwise dispose of its tender option bonds, prior
to the time the tender option is scheduled to expire pursuant to the terms
of the agreement under which the tender option is granted. The Money Market
Fund otherwise will comply with the provisions of Rule 2a-7 under the
Investment Company Act of 1940, as amended (the "1940 Act"), in connection
with the purchase of tender option bonds, including, without limitation, the
requisite determination by the Money Market Fund's Board that the tender
option bonds in question meet the quality standards described in Rule 2a-7,
which, in the case of a tender option bond subject to a conditional demand
feature, would include a determination that the security has received both
the required short-term and long-term quality rating or is determined to be
of comparable quality. In the event of a default of the Municipal
Obligation underlying a tender option bond, or the termination of the tender
option agreement, the Money Market Fund would look to the maturity date of
the underlying security for purposes of compliance with Rule 2a-7 and, if
its remaining maturity was greater than 13 months, the Fund would sell the
security as soon as would be practicable.
Each Fund will purchase tender option bonds only when the Fund is
satisfied that the custodial and tender option arrangements, including the
fee payment arrangements, will not adversely affect the tax exempt status of
the underlying Municipal Obligations and that payment of any tender fees
will not have the effect of creating taxable income for such Fund. Based on
the tender option bond agreement, the Fund expects to be able to value the
tender option bond at par; however, the value of the instrument will be
monitored to assure that it is valued at fair value.
Custodial Receipts. (Longer Term Funds only) Each of these Funds may
purchase custodial receipts representing the right to receive certain future
principal and interest payments on Municipal Obligations which underlie the
custodial receipts. A number of different arrangements are possible. In a
typical custodial receipt arrangement, an issuer or a third party owner of
Municipal Obligations deposits such obligations with a custodian in exchange
for two classes of custodial receipts. The two classes have different
characteristics, but, in each case, payments on the two classes are based on
payments received on the underlying Municipal Obligations. One class has
the characteristics of a typical auction rate security, where at specified
intervals its interest rate is adjusted, and ownership changes, based on an
auction mechanism. This class's interest rate 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
adjustments. The second class bears interest at a rate that exceeds the
interest rate typically borne by a security of comparable quality and
maturity; this rate also is adjusted, but in this case inversely to changes
in the rate of interest of the first class. In no event will the aggregate
interest paid with respect to the two classes exceed the interest paid by
the underlying Municipal Obligations. The value of the second class and
similar securities should be expected to fluctuate more than the value of a
Municipal Obligation of comparable quality and maturity and their purchase
by the Fund should increase the volatility of its net asset value and, thus,
its price per share. 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 characteristics similar to
custodial receipts. These securities may be issued as part of a multi-class
offering and the interest rate on certain classes may be subject to a cap or
floor.
Stand-By Commitments. (All Funds) Each Fund may acquire "stand-by
commitments" with respect to Municipal Obligations held in its portfolio.
Under a stand-by commitment, the Fund obligates a broker, dealer or bank to
repurchase, at the Fund's option, specified securities at a specified price
and, in this respect, stand-by commitments are comparable to put options.
The exercise of a stand-by commitment, therefore, is subject to the ability
of the seller to make payment on demand. Each Fund will acquire stand-by
commitments solely to facilitate its portfolio liquidity and does not intend
to exercise its rights thereunder for trading purposes. Each Fund may pay
for stand-by commitments if such action is deemed necessary, thus increasing
to a degree the cost of the underlying Municipal Obligation and similarly
decreasing such security's yield to investors. Gains realized in connection
with stand-by commitments will be taxable. The Longer Term Funds also may
acquire call options on specific Municipal Obligations. A Longer Term Fund
generally would purchase these call options to protect the Fund from the
issuer of the related Municipal Obligation redeeming, or other holder of the
call option from calling away, the Municipal Obligation before maturity.
The sale by a Longer Term Fund of a call option that it owns on a specific
Municipal Obligation could result in the receipt of taxable income by the
Fund.
Ratings of Municipal Obligations. (All Funds) Each of the Longer Term
Funds will invest at least 80% of the value of its net assets in Municipal
Obligations which, in the case of bonds, are rated no lower than Baa by
Moody's Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's
Ratings Group ("S&P") or Fitch IBCA, Inc. ("Fitch" and, together with
Moody's and S&P, the "Rating Agencies"). Each Longer Term Fund may invest
up to 20% of the value of its net assets in Municipal Obligations which, in
the case of bonds, are rated lower than Baa by Moody's and BBB by S&P and
Fitch and as low as the lowest rating assigned by the Rating Agencies. Each
Longer Term Fund also may invest in securities which, while not rated, are
determined by the Manager to be of comparable quality to the rated
securities in which the Fund may invest; for purposes of the 80% requirement
described in this paragraph, such unrated securities will be considered to
have the rating so determined.
The Money Market Fund may invest only in those Municipal Obligations
which are rated in one of the two highest rating categories for debt
obligations by at least two Rating Agencies (or one Rating Agency if the
instrument was rated by only one Rating Agency) or, if unrated, are of
comparable quality as determined in accordance with procedures established
by the Money Market Fund's Board.
The average distribution of investments (at value) in Municipal
Obligations by ratings for the fiscal year ended May 31, 1999, computed on a
monthly basis, for each Fund was as follows:
Percentage of Value
Money Intermediate
Fitch or Moody's or S&P Market Bond Bond
Fund Fund Fund
AAA Aaa AAA _% _% _%
AA Aa AA N/A _% _%
A A A N/A _% _%
BBB Baa BBB N/A% _% _%
BB Ba BB N/A% _% _%
F-1 VMIG1/MIG1,P-1 SP-1,A-1 _% _%* _%*
F-2 VMIG2/MIG2,P-2 SP-2,A-2 _% _% _%
Not Not Rated Not Rated _%** _%*** _%****
Rated
100.0% 100.0% 100.0%
_______________________________
* Includes notes rated within the highest grades by Moody's, S&P or
Fitch, which, together with Municipal Obligations rated Baa/BBB, are
taken into account at the time of a purchase to ensure that the
portfolios of the Longer Term Funds meet the 80% minimum quality
standard referred to above.
** Includes securities comprising _% of the Money Market Fund's market
value which, while not rated, have been determined by the Manager to be
of comparable quality to securities rated MIG1.
*** Includes securities comprising _% of the Intermediate Bond Fund's
market value which, while not rated, have been determined by the
Manager to be of comparable quality to securities in the following
rating categories: __________.
**** Includes securities comprising _% of the Bond Fund's market value
which, while not rated, have been determined by the Manager to be of
comparable quality to securities in the following rating categories:
If, subsequent to being purchased by the Money Market Fund, (a) an
issue of rated Municipal Obligations ceases to be rated in the highest
rating category by at least two rating organizations (or one rating
organization if the instrument was rated by only one organization), or the
Money Market Fund's Board determines that it is no longer of comparable
quality; or (b) the Manager becomes aware that any portfolio security not so
highly rated or any unrated security has been given a rating by any rating
organization below the rating organization's second highest rating category,
the Money Market Fund's Board will reassess promptly whether such security
presents minimal credit risk and will cause the Fund to take such action as
it determines is in the best interest of the Fund and its shareholders,
provided that the reassessment required by clause (b) is not required if the
portfolio security is disposed of or matures within five business days of
the Manager becoming aware of the new rating and the Fund's Board is
subsequently notified of the Manager's actions. Subsequent to being
purchased by the Longer Term Funds, an issue of rated Municipal Obligations
may cease to be rated or its rating may be reduced below the minimum
required for purchase by such Funds. Neither event will require the sale of
such Municipal Obligations by a Longer Term Fund, but the Manager will
consider such event in determining whether the Fund should continue to hold
the Municipal Obligations.
To the extent the ratings by Moody's, S&P or Fitch for Municipal
Obligations may change as a result of changes in such organizations or their
rating systems, the Funds will attempt to use comparable ratings as
standards for its investments in accordance with the investment policies
contained in the Prospectus and this Statement of Additional Information.
The ratings of Moody's, S&P and Fitch represent their opinions as to the
quality of the Municipal Obligations which they undertake to rate. It
should be emphasized, however, that ratings are relative and subjective and
are not absolute standards of quality. Although these ratings may be an
initial criterion for selection of portfolio investments, the Manager also
will evaluate these securities and the creditworthiness of the issuers of
such securities.
Taxable Investments. (All Funds) From time to time, on a temporary
basis other than for temporary defensive purposes (but not to exceed 20% of
the value of the Fund's net assets) or for temporary defensive purposes, a
Fund may invest in taxable short-term investments ("Taxable Investments")
consisting of: notes of issuers having, at the time of purchase, a quality
rating within the two highest grades of the Rating Agencies; obligations of
the U.S. Government, its agencies or instrumentalities; commercial paper
rated not lower than P-2 by Moody's, A-2 by S&P or F-2 by Fitch;
certificates of deposit of U.S. domestic banks, including foreign branches
of domestic banks, with assets of one billion dollars or more; time
deposits; bankers' acceptances and other short-term bank obligations; and
repurchase agreements in respect of any of the foregoing. Dividends paid by
a Fund that are attributable to income earned by the Fund from Taxable
Investments will be taxable to investors. See "Dividends, Distributions and
Taxes." Except for temporary defensive purposes, at no time will more than
20% of the value of the Fund's net assets be invested in Taxable Investments
and Municipal Obligations the interest from which gives rise to a preference
item for the purpose of the alternative minimum tax. If the Money Market
Fund purchases Taxable Investments, it will value them using the amortized
cost method and comply with Rule 2a-7 relating to purchases of taxable
instruments. When a Fund has adopted a temporary defensive position,
including when acceptable New York Municipal Obligations are unavailable for
investment by the Fund, in excess of 35% of its net assets may be invested
in securities that are not exempt from New York State and New York City
income taxes. Under normal market conditions, each Fund anticipates that
not more than 5% of the value of its total assets will be invested in any
one category of Taxable Investments.
Zero Coupon Securities. (Longer Term Funds only) Each of these Funds
may invest in zero coupon securities which are debt securities issued or
sold at a discount from their face value which do not entitle the holder to
any periodic payment of interest prior to maturity or a specified redemption
date (or cash payment date). The amount of the discount varies depending on
the time remaining until maturity or cash payment date, prevailing interest
rates, liquidity of the security and perceived credit quality of the issuer.
Zero coupon securities also may take the form of debt securities that have
been stripped of their unmatured interest coupons, the coupons themselves
and receipts or certificates representing interests in such stripped debt
obligations and coupons. The market prices of zero coupon securities
generally are more volatile than the market prices of securities that pay
interest periodically and are likely to respond to a greater degree to
changes in interest rates than non-zero coupon securities having similar
maturities and credit qualities. Each Longer Term Fund may invest up to 5%
of its assets in zero coupon bonds which are rated below investment grade.
Illiquid Securities. (All Funds) Each Fund may invest up to 15% (10%
in the case of the Money Market Fund) of the value of its net assets in
securities as to which a liquid trading market does not exist, provided such
investments are consistent with the Fund's investment objective. These
securities may include securities that are not readily marketable, such as
securities that are subject to legal or contractual restrictions on resale,
and repurchase agreements providing for settlement in more than seven days
after notice. As to these securities, the Fund is subject to a risk that
should the Fund desire to sell them when a ready buyer is not available at a
price the Fund deems representative of their value, the value of the Fund's
net assets could be adversely affected.
Investment Techniques
The following information supplements and should be read in conjunction
with the Prospectus. A Fund's use of certain of the investment techniques
described below may give rise to taxable income.
Borrowing Money. (All Funds) Each Longer Term Fund is permitted to
borrow to the extent permitted under the 1940 Act, which permits an
investment company to borrow in an amount up to 33-1/3% of the value of its
total assets. Each Longer Term Fund currently intends to, and the Money
Market Fund may, borrow money only for temporary or emergency (not
leveraging) purposes, in an amount up to 15% of the value of its total
assets (including the amount borrowed) valued at the lesser of cost or
market, less liabilities (not including the amount borrowed) at the time the
borrowing is made. While borrowings exceed 5% of a Fund's total assets, the
Fund will not make any additional investments.
Lending Portfolio Securities. (Longer Term Funds only) Each Longer
Term Fund may lend securities from its portfolio to brokers, dealers and
other financial institutions needing to borrow securities to complete
certain transactions. The Fund continues to be entitled to payments in
amounts equal to the interest or other distributions payable on the loaned
securities which affords the Fund an opportunity to earn interest on the
amount of the loan and on the loaned securities' collateral. Loans of
portfolio securities may not exceed 33-1/3% of the value of the Fund's total
assets, and the Fund will receive collateral consisting of cash, U.S.
Government securities or irrevocable letters of credit which will be
maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. Such loans are terminable by the
Fund at any time upon specified notice. A Fund might experience risk of
loss if the institution with which it has engaged in a portfolio loan
transaction breaches its agreement with the Fund. In connection with its
securities lending transactions, a Fund may return to the borrower or a
third party which is unaffiliated with the Fund, and which is acting as a
"placing broker," a part of the interest earned from the investment of
collateral received for securities loaned.
Derivatives. (Longer Term Funds only) Each Longer Term Fund may
invest in, or enter into derivatives, such as options and futures, for a
variety of reasons, including to hedge certain market risks, to provide a
substitute for purchasing or selling particular securities or to increase
potential income gain. Derivatives may provide a cheaper, quicker or more
specifically focused way for the Fund to invest than "traditional"
securities would.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular derivative and
the portfolio as a whole. Derivatives permit a Fund to increase or decrease
the level of risk, or change the character of the risk, to which its
portfolio is exposed in much the same way as the Fund can increase or
decrease the level of risk, or change the character of the risk, of its
portfolio by making investments in specific securities. However,
derivatives may entail investment exposures that are greater than their cost
would suggest, meaning that a small investment in derivatives could have a
large potential impact on the Fund's performance.
If a Fund invests in derivatives at inopportune times or judges market
conditions incorrectly, such investments may lower the Fund's return or
result in a loss. A Fund also could experience losses if its derivatives
were poorly correlated with its other investments, or if the Fund were
unable to liquidate its position because of an illiquid secondary market.
The market for many derivatives is, or suddenly can become, illiquid.
Changes in liquidity may result in significant, rapid and unpredictable
changes in the prices for derivatives.
Although neither Longer Term Fund will be a commodity pool, certain
derivatives subject each of these Funds to the rules of the Commodity
Futures Trading Commission which limit the extent to which the Fund can
invest in such derivatives. Each Longer Term Fund may invest in futures
contracts and options with respect thereto for hedging purposes without
limit. However, neither Fund may invest in such contracts and options for
other purposes if the sum of the amount of initial margin deposits and
premiums paid for unexpired options with respect to such contracts, other
than for bona fide hedging purposes, exceeds 5% of the liquidation value of
the Fund's assets, after taking into account unrealized profits and
unrealized losses on such contracts and options; provided, however, that in
the case of an option that is in-the-money at the time of purchase, the in-
the-money amount may be excluded in calculating the 5% limitation.
Derivatives may be purchased on established exchanges or through
privately negotiated transactions referred to as over-the-counter
derivatives. Exchange-traded derivatives generally are guaranteed by the
clearing agency which is the issuer or counterparty to such derivatives.
This guarantee usually is supported by a daily variation margin system
operated by the clearing agency in order to reduce overall credit risk. As
a result, unless the clearing agency defaults, there is relatively little
counterparty credit risk associated with derivatives purchased on an
exchange. By contrast, no clearing agency guarantees over-the-counter
derivatives. Therefore, each party to an over-the-counter derivative bears
the risk that the counterparty will default. Accordingly, the Manager will
consider the creditworthiness of counterparties to over-the-counter
derivatives in the same manner as it would review the credit quality of a
security to be purchased by the Fund. Over-the-counter derivatives are less
liquid than exchange-traded derivatives since the other party to the
transaction may be the only investor with sufficient understanding of the
derivative to be interested in bidding for it.
Futures Transactions--In General. (Longer Term Funds only) Each of these
Funds may enter into futures contracts in U.S. domestic markets. Engaging
in these transactions involves risk of loss to the Fund which could
adversely affect the value of the Fund's net assets. Although the Funds
intend to purchase or sell futures contracts only if there is an active
market for such contracts, no assurance can be given that a liquid market
will exist for any particular contract at any particular time. Many futures
exchanges and boards of trade limit the amount of fluctuation permitted in
futures contract prices during a single trading day. Once the daily limit
has been reached in a particular contract, no trades may be made that day at
a price beyond that limit or trading may be suspended for specified periods
during the trading day. Futures contract prices could move to the limit for
several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and potentially
subjecting the Fund to substantial losses.
Successful use of futures by each of these Funds also is subject to the
Manager's ability to predict correctly movements in the direction of the
relevant market and, to the extent the transaction is entered into for
hedging purposes, to ascertain the appropriate correlation between the
securities being hedged and the price movements of the futures contract.
For example, if a Fund uses futures to hedge against the possibility of a
decline in the market value of securities held in its portfolio and the
prices of such securities instead increase, such Fund will lose part or all
of the benefit of the increased value of securities which it has hedged
because it will have offsetting losses in its futures positions.
Furthermore, if in such circumstances the Fund has insufficient cash, it may
have to sell securities to meet daily variation margin requirements. The
Fund may have to sell such securities at a time when it may be
disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities
and Exchange Commission, the Fund may be required to segregate permissible
liquid assets to cover its obligations relating to its transactions in
derivatives. To maintain this required cover, the Fund may have to sell
portfolio securities at disadvantageous prices or times since it may not be
possible to liquidate a derivative position at a reasonable price. In
addition, the segregation of such assets will have the effect of limiting
the Fund's ability otherwise to invest those assets.
Specific Futures Transactions. Each Longer Term Fund may purchase and sell
interest rate futures contracts. An interest rate future obligates the Fund
to purchase or sell an amount of a specific debt security at a future date
at a specific price.
Options--In General. (Longer Term Funds only) Each of these Funds may
invest up to 5% of its assets, represented by the premium paid, in the
purchase of call and put options. The Fund may write (i.e., sell) covered
call and put option contracts to the extent of 20% of the value of its net
assets at the time such option contracts are written. A call option gives
the purchaser of the option the right to buy, and obligates the writer to
sell, the underlying security or securities at the exercise price at any
time during the option period, or at a specific date. Conversely, a put
option gives the purchaser of the option the right to sell, and obligates
the writer to buy, the underlying security or securities at the exercise
price at any time during the option period, or at a specific date.
A covered call option written by the Fund is a call option with respect
to which the Fund owns the underlying security or otherwise covers the
transaction by segregating permissible liquid assets. A put option written
by the Fund is covered when, among other things, the Fund segregates
permissible liquid assets having a value equal to or greater than the
exercise price of the option to fulfill the obligation undertaken. The
principal reason for writing covered call and put options is to realize,
through the receipt of premiums, a greater return than would be realized on
the underlying securities alone. The Fund receives a premium from writing
covered call or put options which it retains whether or not the option is
exercised.
There is no assurance that sufficient trading interest to create a
liquid secondary market on a securities exchange will exist for any
particular option or at any particular time, and for some options no such
secondary market may exist. A liquid secondary market in an option may
cease to exist for a variety of reasons. In the past, for example, higher
than anticipated trading activity or order flow, or other unforeseen events,
at times have rendered certain of the clearing facilities inadequate and
resulted in the institution of special procedures, such as trading
rotations, restrictions on certain types of orders or trading halts or
suspensions in one or more options. There can be no assurance that similar
events, or events that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such event, it might not be possible
to effect closing transactions in particular options. If, as a covered call
option writer, the Fund is unable to effect a closing purchase transaction
in a secondary market, it will not be able to sell the underlying security
until the option expires or it delivers the underlying security upon
exercise or it otherwise covers its position.
Successful use of options by these Funds will be subject to the
Manager's ability to predict correctly movements in interest rates. To the
extent the Manager's predictions are incorrect, the Funds may incur losses.
Future Developments. (Longer Term Funds only) Each Longer Term Fund
may take advantage of opportunities in the area of options and futures
contracts and options on futures contracts and any other derivatives which
are not presently contemplated for use by the Funds or which are not
currently available but which may be developed, to the extent such
opportunities are both consistent with the Fund's investment objective and
legally permissible for the Fund. Before entering into such transactions or
making any such investment, appropriate disclosure will be provided in the
Funds' Prospectus or this Statement of Additional Information.
Forward Commitments. (All Funds) Each Fund may purchase or sell
Municipal Obligations and other securities on a forward commitment, when-
issued or delayed delivery basis, which means that delivery and payment take
place a number of days after the date of the commitment to purchase. The
payment obligation and the interest rate receivable on a forward commitment
or when-issued security are fixed when the Fund enters into the commitment,
but the Fund does not make payment until it receives delivery from the
counterparty. A Fund will commit to purchase such securities only with the
intention of actually acquiring the securities, but the Fund may sell these
securities before the settlement date if it is deemed advisable. The Fund
will segregate permissible liquid assets at least equal at all times to the
amount of the Fund's purchase commitments.
Municipal Obligations and other securities purchased on a forward
commitment or when-issued basis are subject to changes in value (generally
changing in the same way, i.e., appreciating when interest rates decline and
depreciating when interest rates rise) based upon the public's perception of
the creditworthiness of the issuer and changes, real or anticipated, in the
level of interest rates. Securities purchased on a forward commitment or
when-issued basis may expose the Fund to risks because they may experience
such fluctuations prior to their actual delivery. Purchasing securities on
a when-issued basis can involve the additional risk that the yield available
in the market when the delivery takes place actually may be higher than that
obtained in the transaction itself. Purchasing securities on a forward
commitment or when-issued basis when the Fund is fully or almost fully
invested may result in greater potential fluctuation in the value of the
Fund's net assets and its net asset value per share.
Investment Considerations and Risks
General. (All Funds) Even though interest-bearing securities are
investments which promise a stable stream of income, the prices of such
securities are inversely affected by changes in interest rates and,
therefore, are subject to the risk of market price fluctuations. Certain
securities that may be purchased by a Longer Term Fund, such as those with
interest rates that fluctuate directly or indirectly based on multiples of a
stated index, are designed to be highly sensitive to changes in interest
rates and can subject the holders thereof to extreme reductions of yield and
possibly loss of principal. The values of fixed-income securities also may
be affected by changes in the credit rating or financial condition of the
issuing entities. Once the rating of a Longer Term Fund portfolio security
has been changed, the Fund will consider all circumstances deemed relevant
in determining whether to continue to hold the security. The Money Market
Fund seeks to maintain a stable $1.00 share price, while the net asset value
of each Longer Term Fund generally will not be stable and should fluctuate
based upon changes in the value of its respective portfolio securities.
Securities in which the Longer Term Funds invest may earn a higher level of
current income than certain shorter-term or higher quality securities which
generally have greater liquidity, less market risk and less fluctuation in
market value.
Investing in Municipal Obligations. (All Funds) Each Fund may invest
more than 25% of the value of its total assets in Municipal Obligations
which are related in such a way that an economic, business or political
development or change affecting one such security also would affect the
other securities; for example, securities the interest upon which is paid
from revenues of similar types of projects. As a result, each Fund may be
subject to greater risk as compared to a fund that does not follow this
practice.
Certain municipal lease/purchase obligations in which a Fund may invest
may contain "non-appropriation" clauses which provide that the municipality
has no obligation to make lease payments in future years unless money is
appropriated for such purpose on a yearly basis. Although "non-
appropriation" lease/purchase obligations are secured by the leased
property, disposition of the leased property in the event of foreclosure
might prove difficult. In evaluating the credit quality of a municipal
lease/purchase obligation that is unrated, the Manager will consider, on an
ongoing basis, a number of factors including the likelihood that the issuing
municipality will discontinue appropriating funding for the leased property.
Certain provisions in the Internal Revenue Code of 1986, as amended
(the "Code"), relating to the issuance of Municipal Obligations may reduce
the volume of Municipal Obligations qualifying for Federal tax exemption.
One effect of these provisions could be to increase the cost of the
Municipal Obligations available for purchase by the Fund and thus reduce
available yield. Shareholders should consult their tax advisers concerning
the effect of these provisions on an investment in a Fund. Proposals that
may restrict or eliminate the income tax exemption for interest on Municipal
Obligations may be introduced in the future. If any such proposal were
enacted that would reduce the availability of Municipal Obligations for
investment by a Fund so as to adversely affect Fund shareholders, the Fund
would reevaluate its investment objective and policies and submit possible
changes in the Fund's structure to shareholders for their consideration. If
legislation were enacted that would treat a type of Municipal Obligation as
taxable, the Funds would treat such security as a permissible Taxable
Investment within the applicable limits set forth herein.
Investing in New York Municipal Obligations. (All Funds) [To be
updated] You should consider carefully the special risks inherent in the
Fund's investment in New York Municipal Obligations. These risks result
from the financial condition of New York State and certain of its public
bodies and municipalities, including New York City. Beginning in early
1975, New York State, New York City and other State entities faced serious
financial difficulties which jeopardized the credit standing and impaired
the borrowing abilities of such entities and contributed to high interest
rates on, and lower market prices for, debt obligations issued by them. A
recurrence of such financial difficulties or a failure of certain financial
recovery programs could result in defaults or declines in the market values
of various New York Municipal Obligations in which the Fund may invest. If
there should be a default or other financial crisis relating to New York
State, New York City, a State or City agency, or a State municipality, the
market value and marketability of outstanding New York Municipal Obligations
in the Fund's portfolio and the interest income to the Fund could be
adversely affected. Moreover, the national recession and the significant
slowdown in the New York and regional economies in the early 1990's added
substantial uncertainty to estimates of the State's tax revenues, which, in
part, caused the State to incur cash-basis operating deficits in the General
Fund and issued deficit notes during the fiscal periods 1989 through 1992.
For its fiscal year periods 1993 through 1997, the State recorded balanced
budgets on a cash basis, with substantial fund balances in the General Fund
in fiscal 1992-93 and 1993-94 and smaller fund balances in fiscal 1994-95
and 1995-96. The State completed its 1996-97 fiscal year in balance on a
cash basis with a General Fund cash surplus of approximately $1.4 billion.
In January 1992, Moody's lowered from A to Baa1 its ratings of certain
appropriation-backed debt of New York State and its agencies. The State's
general obligation, State-guaranteed and New York State Local Government
Assistance Corporation bonds continued to be rated A by Moody's. In January
1992, S&P lowered from A to A- ratings of New York State general obligation
bonds and stated that it continued to assess the ratings outlook as
negative. S&P also lowered its ratings of various agency debts, State moral
obligations, contractual obligations, lease purchase obligations and State
guarantees. In February 1991, Moody's lowered its rating of New York City's
general obligation bonds from A to Baa1. The rating changes reflected the
rating agencies' concerns about the financial condition of New York State
and City, the heavy debt load of the State and City, and economic
uncertainties in the region. In March 1998, Moody's changed its rating on
New York City's general obligation bonds from Baa1 to A3. You should review
"Appendix A" which more fully sets forth these and other risk factors.
Lower Rated Bonds. This section applies only to the Longer Term Funds.
Lower rated bonds as described herein are not eligible investments for the
Money Market Fund. Each Longer Term Fund may invest up to 20% of the value
of its net assets in higher yielding (and, therefore, higher risk) debt
securities such as those rated below investment grade by the Rating Agencies
(commonly known as junk bonds). They may be subject to certain risks with
respect to the issuing entity and to greater market fluctuations than
certain lower yielding, higher rated Municipal Obligations. See "Appendix
B" for a general description of the Rating Agencies' ratings of Municipal
Obligations. Although ratings may be useful in evaluating the safety of
interest and principal payments, they do not evaluate the market value risk
of these bonds. Each Fund will rely on the Manager's judgment, analysis and
experience in evaluating the creditworthiness of an issuer.
You should be aware that the market values of many of these bonds tend
to be more sensitive to economic conditions than are higher rated
securities. These bonds generally are considered by the Rating Agencies to
be, on balance, predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation
and generally will involve more credit risk than securities in the higher
rating categories.
Because there is no established retail secondary market for many of
these securities, each Fund anticipates that such securities could be sold
only to a limited number of dealers or institutional investors. To the
extent a secondary trading market for these bonds does exist, it generally
is not as liquid as the secondary market for higher rated securities. The
lack of a liquid secondary market may have an adverse impact on market price
and yield and a Fund's ability to dispose of particular issues when
necessary to meet its liquidity needs or in response to a specific economic
event such as a deterioration in the creditworthiness of the issuer. The
lack of a liquid secondary market for certain securities also may make it
more difficult for a Fund to obtain accurate market quotations for purposes
of valuing its portfolio and calculating its net asset value. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of these securities. In
such cases, judgment may play a greater role in valuation because less
reliable, objective data may be available.
These bonds may be particularly susceptible to economic downturns. It
is likely that any economic recession would disrupt severely the market for
such securities and may have an adverse impact on the value of such
securities, and could adversely affect the ability of the issuers of such
securities to repay principal and pay interest thereon which would increase
the incidence of default of such securities.
Each of these Funds may acquire these bonds during an initial offering.
Such securities may involve special risks because they are new issues.
Neither Fund has any arrangements with any person concerning the acquisition
of such securities, and the Manager will review carefully the credit and
other characteristics pertinent to such new issues.
The credit risk factors pertaining to lower rated securities also apply
to lower rated zero coupon bonds and pay-in-kind bonds. Zero coupon bonds
and pay-in-kind bonds carry an additional risk in that, unlike bonds which
pay interest throughout the period to maturity, a Fund will realize no cash
until the cash payment date unless a portion of such securities are sold
and, if the issuer defaults, the Fund may obtain no return at all on its
investment. See "Zero Coupon Securities" below and "Dividends,
Distributions and Taxes."
Zero Coupon Securities. (Longer Term Funds) Each of these Funds may
invest in zero coupon securities and pay-in-kind bonds (bonds which pay
interest through the issuance of additional bonds). Federal income tax law
requires the holder of a zero coupon security or of certain pay-in-kind
bonds to accrue income with respect to these securities prior to the receipt
of cash payments. To maintain its qualification as a regulated investment
company and avoid liability for Federal income taxes, the Fund may be
required to distribute such income accrued with respect to these securities
and may have to dispose of portfolio securities under disadvantageous
circumstances in order to generate cash to satisfy these distribution
requirements.
Simultaneous Investments. (All Funds) Investment decisions for each
Fund are made independently from those of other investment companies advised
by the Manager. If, however, such other investment companies desire to
invest in, or dispose of, the same securities as a Fund, available
investments or opportunities for sales will be allocated equitably to each
investment company. In some cases, this procedure may adversely affect the
size of the position obtained for or disposed of by the Fund or the price
paid or received by the Fund.
Investment Restrictions
Money Market Fund. The Fund's investment objective is a fundamental
policy, which cannot be changed without approval by the holders of a
majority (as defined in the 1940 Act) of the Fund's outstanding voting
shares. In addition, the Fund has adopted investment restrictions numbered
1 through 9 as fundamental policies. Investment restrictions numbered 10
and 11 are not fundamental policies and may be changed by vote of a majority
of the Fund's Board members at any time. The Fund may not:
1. Purchase securities other than Municipal Obligations and Taxable
Investments as those terms are defined above and in the
Prospectus.
2. Borrow money, except from banks for temporary or emergency (not
leveraging) purposes in an amount up to 15% of the value of the
Fund's total assets (including the amount borrowed) based on the
lesser of cost or market, less liabilities (not including the
amount borrowed) at the time the borrowing is made. While
borrowings of the Money Market Fund exceed 5% of the value of the
Money Market Fund's total assets, it will not make any additional
investments.
3. Sell securities short or purchase securities on margin.
4. Underwrite the securities of other issuers, except that the Money
Market Fund may bid separately or as part of a group for the
purchase of Municipal Obligations directly from an issuer for its
own portfolio to take advantage of the lower purchase price
available.
5. Purchase or sell real estate, real estate investment trust
securities, commodities or commodity contracts, or oil and gas
interests, but this shall not prevent the Fund from investing in
Municipal Obligations secured by real estate or interests therein.
6. Make loans to others except through the purchase of qualified debt
obligations and the entry into repurchase agreements referred to
above and in the Prospectus.
7. Invest more than 25% of its total assets in the securities of
issuers in any single industry; provided that there shall be no
such limitation on the purchase of Municipal Obligations and, for
temporary defensive purposes, securities issued by domestic banks
and obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
8. Purchase more than 10% of the voting securities of any issuer or
invest in companies for the purpose of exercising control.
9. Invest in securities of other investment companies, except as they
may be acquired as part of a merger, consolidation or acquisition
of assets.
10. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except to the extent necessary to secure permitted borrowings.
11. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are
illiquid, if, in the aggregate, more than 10% of the value of the
Fund's net assets would be so invested.
Intermediate Bond Fund and Bond Fund. Each Longer Term Fund's
investment objective is a fundamental policy, which cannot be changed
without approval by the holders of a majority (as defined in the 1940 Act)
of the Fund's outstanding voting shares. In addition, each of these Funds
has adopted investment restrictions numbered 1 through 7 as fundamental
policies. Investment restrictions numbered 8 through 12 are not fundamental
policies and may be changed, as to a Fund, by vote of a majority of such
Fund's Board members at any time. Neither of these Funds may:
1. Invest more than 25% of its total assets in the securities of
issuers in any single industry; provided that there shall be no
such limitation on the purchase of Municipal Obligations and, for
temporary defensive purposes, securities issued by domestic banks
and obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
2. Borrow money, except to the extent permitted under the 1940 Act
(which currently limits borrowing to no more than 33-1/3% of the
value of the Fund's total assets). For purposes of this
investment restriction, the entry into options, forward contracts,
futures contracts, including those relating to indices, and
options on futures contracts or indices shall not constitute
borrowing.
3. Purchase or sell real estate, commodities or commodity contracts,
or oil and gas interests, but this shall not prevent the Fund from
investing in Municipal Obligations secured by real estate or
interests therein, or prevent the Fund from purchasing and selling
options, forward contracts, futures contracts, including those
relating to indices, and options on futures contracts or indices.
4. Underwrite the securities of other issuers, except that the Fund
may bid separately or as part of a group for the purchase of
Municipal Obligations directly from an issuer for its own
portfolio to take advantage of the lower purchase price available,
and except to the extent the Fund may be deemed an underwriter
under the Securities Act of 1933, as amended, by virtue of
disposing of portfolio securities.
5. Make loans to others, except through the purchase of debt
obligations and the entry into repurchase agreements; however, the
Fund may lend its portfolio securities in an amount not to exceed
33-1/3% of the value of its total assets. Any loans of portfolio
securities will be made according to guidelines established by the
Securities and Exchange Commission and the Fund's Board.
6. Issue any senior security (as such term is defined in Section
18(f) of the 1940 Act), except to the extent that the activities
permitted in Investment Restrictions numbered 2, 3 and 10 may be
deemed to give rise to a senior security.
7. Sell securities short or purchase securities on margin, but the
Fund may make margin deposits in connection with transactions in
options, forward contracts, futures contracts, including those
relating to indices, and options on futures contracts or indices.
8. Purchase securities other than Municipal Obligations and Taxable
Investments and those arising out of transactions in futures and
options or as otherwise provided in the Prospectus.
9. Invest in securities of other investment companies, except to the
extent permitted under the 1940 Act.
10. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except to the extent necessary to secure permitted borrowings and
to the extent related to the deposit of assets in escrow in
connection with the purchase of securities on a when-issued or
delayed-delivery basis and collateral and initial or variation
margin arrangements with respect to options, futures contracts,
including those related to indices, and options on futures
contracts or indices.
11. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are
illiquid (which securities could include participation interests
(including municipal lease/purchase agreements) that are not
subject to the demand feature described in the Prospectus, and
floating and variable rate demand obligations as to which the Fund
cannot exercise the demand feature as described in the Prospectus
on less than seven days' notice and as to which there is no
secondary market), if, in the aggregate, more than 15% of its net
assets would be so invested.
12. Invest in companies for the purpose of exercising control.
All Funds. For purposes of Investment Restriction No. 7 with respect
to the Money Market Fund, and Investment Restriction No. 1 with respect to
the Longer Term Funds, industrial development bonds, where the payment of
principal and interest is the ultimate responsibility of companies within
the same industry, are grouped together as an "industry." If a percentage
restriction is adhered to at the time of investment, a later increase or
decrease in percentage resulting from a change in values or assets will not
constitute a violation of such restriction.
MANAGEMENT OF THE FUNDS
Each Fund's Board is responsible for the management and supervision of
the Fund. The Board approves all significant agreements between the Fund
and those companies that furnish services to the Fund. These companies are
as follows:
The Dreyfus Corporation Investment Adviser
Premier Mutual Fund Services, Inc. Distributor
Dreyfus Transfer, Inc. Transfer Agent
The Bank of New York Custodian
Board members and officers of each Fund, together with information as
to their principal business occupations during at least the last five years,
are shown below.
Board Members of the Funds
JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman of
the Board of various funds in the Dreyfus Family of Funds. He also is a
director of The Noel Group, Inc., a venture capital company (for which,
from February 1995 until November 1997, he was Chairman of the Board),
The Muscular Dystrophy Association, HealthPlan Services Corporation, a
provider of marketing, administrative and risk management services to
health and other benefit programs, Carlyle Industries, Inc. (formerly,
Belding Heminway Company, Inc.), a button packager and distributor,
Career Blazers Inc. (formerly, Staffing Resources, Inc.), a temporary
placement agency and Century Business Services, Inc. (formerly,
International Alliance Services, Inc.), a provider of various
outsourcing functions for small and medium size companies. For more
than five years prior to January 1995, he was President, a director
and, until August 1994, Chief Operating Officer of the Manager and
Executive Vice President and a director of Dreyfus Service Corporation,
a wholly-owned subsidiary of the Manager and, until August 24, 1994,
the Fund's distributor. From August 1994 to December 31, 1994, he was
a director of Mellon Bank Corporation. He is 55 years old and his
address is 200 Park Avenue, New York, New York 10166.
DAVID W. BURKE, Board Member. Board member of various funds in the Dreyfus
Family of Funds. Chairman of the Broadcasting Board of Governors, an
independent board within the United States Information Agency, from
August 1994 to November 1998. From August 1994 to December 1994, Mr.
Burke was a Consultant to the Manager and, from October 1990 to August
1994, he was Vice President and Chief Administrative Officer of the
Manager. From 1977 to 1990, Mr. Burke was involved in the management
of national television news, as Vice-President and Executive Vice
President of ABC News, and subsequently as President of CBS News. He
is 62 years old and his address is Box 654, Eastham, Massachusetts
02642.
SAMUEL CHASE, Board Member. Retired. From 1982 to 1996, Mr. Chase was
President of Samuel Chase & Company, Ltd., an economic consulting firm.
He is 67 years old and his address is 10380 Springhill Road, Belgrade,
Montana 59714.
GORDON J. DAVIS, Board Member. Since October 1994, a senior partner with
the law firm of LeBoeuf, Lamb, Greene & MacRae. From 1983 to September
1994, Mr. Davis was a senior partner with the law firm of Lord Day &
Lord, Barrett Smith. From 1978 to 1983, he was Commissioner of Parks
and Recreation for the City of New York. He is also a director of
Consolidated Edison, a utility company, and Phoenix Home Life Insurance
Company and a member of various other corporate and not-for-profit
boards. He is 57 years old and his address is 241 Central Park West,
New York, New York 10023.
JONI EVANS, Board Member. Senior Vice President of the William Morris
Agency since September 1993. From September 1987 to May 1993,
Executive Vice President of Random House, Inc. and, from January 1991
to May 1993, President and Publisher of Turtle Bay Books; from January
1987 to December 1990, Publisher of Random House--Adult Trade Division;
and from 1985 to 1987, President of Simon & Schuster--Trade Division.
She is 56 years old and her address is 1325 Avenue of the Americas,
16th Floor, New York, New York 10019.
ARNOLD S. HIATT, Board Member. Chairman of the Stride Rite Foundation.
From 1969 to June 1992, Chairman of the Board, President or Chief
Executive Officer of The Stride Rite Corporation, a multidivisional
footwear manufacturing and retailing company. Mr. Hiatt is also a
Director of the Cabot Corporation. He is 71 years old and his address
is 400 Atlantic Avenue, Boston, Massachusetts 02110.
BURTON N. WALLACK, Board Member. President and co-owner of Wallack
Management Company, a real estate management company managing real
estate in the New York City area. He is 48 years old and his address
is 18 East 64th Street, Suite 3D, New York, New York 10021.
Each Fund has a standing nominating committee comprised of its Board
members who are not "interested persons" of the Fund, as defined in the 1940
Act. The function of the nominating committee is to select and nominate all
candidates who are not "interested persons" of the Fund for election to the
Fund's Board.
Each Fund typically pays its Board members an annual retainer and a per
meeting fee and reimburses them for their expenses. The Chairman of the
Board receives an additional 25% of such compensation. Emeritus Board
members are entitled to receive an annual retainer and per meeting fee of
one-half the amount paid to them as Board members. The aggregate amount of
compensation paid to each Board member by each Fund for the fiscal year
ended May 31, 1999, and by all funds in the Dreyfus Family of Funds for which
such person was a Board member (the number of which is set forth in
parenthesis next to each Board member's total compensation)* for the year
ended December 31, 1998,
was as follows:
Total
Compensation
From Funds and
Fund Complex
Name of Board Paid to Board
Member Aggregate Compensation From Fund** Member
Money Interm.
Market Fund Bond Fund Bond Fund
Joseph S. $___ $___ $___ $___ (__)
DiMartino
David W. Burke $___ $___ $___ $___ (__)
Samuel Chase $___ $___ $___ $___ (__)
Gordon J. $___ $___ $___ $___ (__)
Davis
Joni Evans $___ $___ $___ $___ (__)
Arnold S. $___ $___ $___ $___ (__)
Hiatt
Burton N. $___ $___ $___ $___ (__)
Wallack
____________________
* Represents the number of separate portfolios comprising the investment
companies in the Fund Complex, including the Funds, for which the Board
member serves.
** Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $____, $____ and $____ for the Money Market
Fund, Intermediate Bond Fund and Bond Fund, respectively, for all Board
members as a group.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President, Chief Executive
Officer, Chief Compliance Officer and a director of the Distributor and
Funds Distributor, Inc., the ultimate parent of which is Boston
Institutional Group, Inc., and an officer of other investment companies
advised or administered by the Manager. She is 41 years old.
MARGARET W. CHAMBERS, Vice President and Secretary. Senior Vice President
and General Counsel of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
August 1996 to March 1998, she was Vice President and Assistant General
Counsel for Loomis, Sayles & Company, L.P. From January 1986 to July
1996, she was an associate with the law firm of Ropes & Gray. She is
38 years old.
*FREDERICK C. DEY, Vice President, Assistant Treasurer and Assistant
Secretary. Vice President, New Business Development of Funds
Distributor, Inc. since September 1994, and an officer of other
investment companies advised or administered by the Manager. He is 37
years old.
STEPHANIE D. PIERCE, Vice President, Assistant Secretary and Assistant
Treasurer. Vice President of the Distributor and Funds Distributor,
Inc., and an officer of other investment companies advised or
administered by the Manager. From April 1997 to March 1998, she was
employed as a Relationship Manager with Citibank, N.A. From August
1995 to April 1997, she was an Assistant Vice President with Hudson
Valley Bank, and from September 1990 to August 1995, she was Second
Vice President with Chase Manhattan Bank. She is 30 years old.
*JOHN P. COVINO, Vice President and Assistant Treasurer. Vice President and
Treasury Group Manager of Treasury Servicing and Administration of
Funds Distributor, Inc. since December 1998. From December 1995 to
November 1998, he was employed by Fidelity Investments where he held
multiple positions in their Institutional Brokerage Group. Prior to
joining Fidelity, he was employed by SunGard Brokerage Systems where he
was responsible for the technology and development of the accounting
product group. He is 35 years old.
MARY A. NELSON, Vice President and Assistant Treasurer. Vice President of
the Distributor and Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. She is 34
years old.
*GEORGE A. RIO, Vice President and Assistant Treasurer. Executive Vice
President and Client Service Director of Funds Distributor, Inc., and
an officer of other investment companies advised or administered by the
Manager. From June 1995 to March 1998, he was Senior Vice President
and Senior Key Account Manager for Putnam Mutual Funds. From May 1994
to June 1995, he was Director of Business Development for First Data
Corporation. He is 43 years old.
JOSEPH F. TOWER, III, Vice President and Assistant Treasurer. Senior Vice
President, Treasurer, Chief Financial Officer and a director of the
Distributor and Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From July
1988 to August 1994, he was employed by The Boston Company, Inc. where
he held various management positions in the Corporate Finance and
Treasury areas. He is 36 years old.
DOUGLAS C. CONROY, Vice President and Assistant Secretary. Assistant Vice
President of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
April 1993 to January 1995, he was a Senior Fund Accountant for
Investors Bank & Trust Company. He is 29 years old.
*KAREN JACOPPO-WOOD, Vice President and Assistant Secretary. Vice President
and Senior Counsel of Funds Distributor, Inc. since February 1997, and
an officer of other investment companies advised or administered by the
Manager. From June 1994 to January 1996, she was Manager of SEC
Registration at Scudder, Stevens & Clark, Inc. She is 32 years old.
CHRISTOPHER J. KELLEY, Vice President and Assistant Secretary. Vice
President and Senior Associate General Counsel of Funds Distributor,
Inc., and an officer of other investment companies advised or
administered by the Manager. From April 1994 to July 1996, he was
Assistant Counsel at Forum Financial Group. From October 1992 to March
1994, he was employed by Putnam Investments in legal and compliance
capacities. He is 33 years old.
KATHLEEN K. MORRISEY, Vice President and Assistant Secretary. Manager of
Treasury Services Administration of Funds Distributor, Inc., and an
officer of other investment companies advised or administered by the
Manager. From July 1994 to November 1995, she was a Fund Accountant
for Investors Bank & Trust Company. She is 26 years old.
ELBA VASQUEZ, Vice President and Assistant Secretary. Assistant Vice
President of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
March 1990 to May 1996, she was employed by U.S. Trust Company of New
York where she held various sales and marketing positions. She is 37
years old.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166, except those officers indicated by an (*), whose address is
60 State Street, Boston, Massachusetts 02109.
Each Fund's Board members and officers, as a group, owned less than 1%
of such Fund's shares outstanding as of , 1999.
The following shareholder is known by the Fund to own of record 5% or
more of the indicated Fund's shares of beneficial interest outstanding on
, 1999: ____________________.
MANAGEMENT ARRANGEMENTS
Investment Adviser. The Manager is a wholly-owned subsidiary of Mellon
Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). Mellon is a publicly owned multibank holding company
incorporated under Pennsylvania law in 1971 and registered under the Federal
Bank Holding Company Act of 1956, as amended. Mellon provides a
comprehensive range of financial products and services in domestic and
selected international markets. Mellon is among the twenty-five largest
bank holding companies in the United States based on total assets.
The Manager provides management services pursuant to separate
Management Agreements (respectively, the "Agreement") with each Fund dated
August 24, 1994. As to each Fund, its Agreement is subject to annual
approval by (i) the Fund's Board, or (ii) vote of a majority (as defined in
the 1940 Act) of the Fund's outstanding voting securities, provided that in
either event the continuance of the Agreement also is approved by a majority
of such Fund's Board members who are not "interested persons" (as defined in
the 1940 Act) of the Fund or of the Manager, by vote cast in person at a
meeting called for the purpose of voting on such approval. Each Agreement
was approved by shareholders on August 2, 1994, and was last approved by
each Fund's Board, including a majority of the Board members who are not
"interested persons" of any party to the Agreement, at a meeting held on
_______, 1999. As to each Fund, the Agreement is terminable without
penalty, on 60 days' notice, by the Fund's Board or by vote of the holders
of a majority of its shares, or, upon not less than 90 days' notice, by the
Manager. Each Agreement will terminate automatically, as to the relevant
Fund, in the event of its assignment (as defined in the 1940 Act).
The following persons are officers and/or directors of the Manager:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment
Officer and a director; Lawrence S. Kash, Vice Chairman and a director; J.
David Officer, Vice Chairman and a director; Thomas F. Eggers, Vice Chairman-
- -Institutional and a director; Ronald P. O'Hanley III, Vice Chairman;
William T. Sandalls, Jr., Executive Vice President; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Diane P. Durnin, Vice President--
Product Development; Patrice M. Kozlowski, Vice President--Corporate
Communications; Mary Beth Leibig, Vice President--Human Resources; Andrew S.
Wasser, Vice President--Information Systems; Theodore A. Schachar, Vice
President; Wendy Strutt, Vice President; Richard Terres, Vice President;
William H. Maresca, Controller; James Bitetto, Assistant Secretary; Steven
F. Newman, Assistant Secretary; and Mandell L. Berman, Burton C. Borgelt,
Steven G. Elliot, Martin C. McGuinn, Richard W. Sabo and Richard F. Syron,
directors.
The Manager manages each Fund's portfolio of investments in accordance
with the stated policies of the Fund, subject to the approval of the Fund's
Board. The Manager is responsible for investment decisions and provides
each Fund with portfolio managers who are authorized by its Board to execute
purchases and sales of securities. Each Fund's portfolio managers are
Richard J. Moynihan, Joseph P. Darcy, A. Paul Disdier, Douglas J. Gaylor,
Stephen C. Kris, W. Michael Petty, Jill C. Shaffro, Samuel J. Weinstock and
Monica S. Wieboldt. The Manager also maintains a research department with a
professional staff of portfolio managers and securities analysts who provide
research services for each Fund and for other funds advised by the Manager.
All expenses incurred in the operation of a Fund are borne by that
Fund, except to the extent specifically assumed by the Manager. The
expenses borne by each Fund include: taxes, interest, brokerage fees and
commissions, if any, fees of Board members who are not officers, directors,
employees or holders of 5% or more of the outstanding voting securities of
the Manager, Securities and Exchange Commission fees, state Blue Sky
qualification fees, advisory fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of maintaining
the Fund's existence, costs of independent pricing services, costs
attributable to investor services (including, without limitation, telephone
and personnel expenses), costs of shareholders' reports and meetings, costs
of preparing and printing prospectuses and statements of additional
information for regulatory purposes and distribution to existing
shareholders, and any extraordinary expenses. Pursuant to the Service Plan
of the Intermediate Bond Fund, such Fund bears expenses for advertising,
marketing and distributing the Fund's shares and servicing shareholder
accounts. Pursuant to separate Shareholder Services Plans, the Money Market
Fund and Bond Fund bear certain allocated expenses for shareholder
servicing. See "Service Plan and Shareholder Services Plans."
The Manager maintains office facilities on behalf of each Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager may pay the Distributor for shareholder
services from the Manager's own assets, including past profits but not
including the management fee paid by the Fund. The Distributor may use part
or all of such payments to pay Service Agents (as defined below) in respect
of these services. The Manager also may make such advertising and
promotional expenditures, using its own resources, as it from time to time
deems appropriate.
As compensation for the Manager's services, the Money Market Fund has
agreed to pay the Manager a monthly management fee at the annual rate of
.50% of the value of the Fund's average daily net assets. As compensation
for the Manager's services, each Longer Term Fund has agreed to pay the
Manager a monthly management fee at the annual rate of .60% of the value of
its average daily net assets. All fees and expenses for each Fund are
accrued daily and deducted before the declaration of dividends to investors.
For the last three fiscal years of the Funds, the management fees payable by
each Fund, the amounts waived by the Manager and the net fee paid by the
Fund were as follows:
<TABLE>
<CAPTION>
Management Fee Reduction Fee Net Fee Paid
Payable
Name of Fund 1997 1998 1999 1997 1998 1999 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money $1,487,343 $1,470,427 $_______ N/A N/A $_______ $1,487,343 $1,470,427 $_______
Market Fund
Intermediate $2,167,648 $2,175,985 $_______ $574,292 $47,047 $_______ $1,593,356 $1,628,938 $_______
Bond Fund
Bond Fund $10,336,018 $10,080,981 $_______ N/A $78,731 $_______ $10,336,018 $10,002,250 $_______
</TABLE>
The Manager has agreed that if, in any fiscal year, a Fund's aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and (with
the prior written consent of the necessary state securities commissions)
extraordinary expenses, but including the management fee, exceed 1 1/2% of the
value of such Fund's average net assets for the fiscal year, the Fund may
deduct from the payment to be made to the Manager under the Agreement, or
the Manager will bear, the excess expense. Such deduction or payment, if
any, will be estimated daily, and reconciled and effected or paid, as the
case may be, on a monthly basis.
The aggregate of the fees payable to the Manager by a Fund is not
subject to reduction as the value of the Fund's net assets increase.
Distributor. The Distributor, located at 60 State Street, Boston,
Massachusetts 02109, serves as each Fund's distributor on a best efforts
basis pursuant to an agreement which is renewable annually.
Transfer and Dividend Disbursing Agent and Custodian. Dreyfus
Transfer, Inc. (the "Transfer Agent"), a wholly-owned subsidiary of the
Manager, P.O. Box 9671, Providence, Rhode Island 02940-9671, is each Fund's
transfer and dividend disbursing agent. Under a separate transfer agency
agreement with each Fund, the Transfer Agent arranges for the maintenance of
shareholder account records for the Fund, the handling of certain
communications between shareholders and the Fund and the payment of
dividends and distributions payable by the Fund. For these services, the
Transfer Agent receives a monthly fee computed on the basis of the number of
shareholder accounts it maintains for the Fund during the month, and is
reimbursed for certain out-of-pocket expenses.
The Bank of New York (the "Custodian"), 90 Washington Street, New York,
New York 10286, is each Fund's custodian. The Custodian has no part in
determining the investment policies of the Funds or which securities are to
be purchased or sold by the Funds. Under a separate custody agreement with
each Fund, the Custodian holds the Fund's securities and keeps all necessary
accounts and records. For its custody services, the Custodian receives a
monthly fee based on the market value of the Fund's assets held in custody
and receives certain securities transactions charges.
HOW TO BUY SHARES
General. Fund shares are sold through the Distributor or certain
financial institutions, securities dealers ("Selected Dealers") and other
industry professionals (collectively, "Service Agents") that have entered
into service agreements with the Distributor. Share certificates are issued
only upon your written request. No certificates are issued for fractional
shares. It is not recommended that any Fund be used as a vehicle for Keogh,
IRA or other qualified plans. Each Fund reserves the right to reject any
purchase order.
The minimum initial investment in each Fund is $2,500, or $1,000 if you
are a client of a Service Agent which maintains an omnibus account in the
Fund and has made an aggregate minimum initial purchase for its customers of
$2,500. Subsequent investments must be at least $100. The initial
investment must be accompanied by the Account Application. For full-time or
part-time employees of the Manager or any of its affiliates or subsidiaries,
directors of the Manager, Board members of a fund advised by the Manager,
including members of a Fund's Board, or the spouse or minor child of any of
the foregoing, the minimum initial investment is $1,000. For full-time or
part-time employees of the Manager or any of its affiliates or subsidiaries
who elect to have a portion of their pay directly deposited into their Fund
accounts, the minimum initial investment is $50. Each Fund reserves the
right to vary the initial and subsequent investment minimum requirements at
any time.
Fund shares also are offered without regard to the minimum initial
investment requirements through Dreyfus-Automatic Asset Builderr, Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan pursuant
to the Dreyfus Step Program described under "Shareholder Services." These
services enable you to make regularly scheduled investments and may provide
you with a convenient way to invest for long-term financial goals. You
should be aware, however, that periodic investment plans do not guarantee a
profit and will not protect an investor against loss in a declining market.
Management understands that some Service Agents may impose certain
conditions on their clients which are different from those described in the
Funds' Prospectus and this Statement of Additional Information, and, to the
extent permitted by applicable regulatory authority, may charge their
clients direct fees. You should consult your Service Agent in this regard.
Shares of the Money Market Fund are sold on a continuous basis at the
net asset value per share next determined after an order in proper form and
Federal Funds (monies of member banks within the Federal Reserve System
which are held on deposit at a Federal Reserve Bank) are received by the
Transfer Agent or other entity authorized to receive orders on behalf of the
Fund. If you do not remit Federal Funds, your payment must be converted
into Federal Funds. This usually occurs within one business day of receipt
of a bank wire or within two business days of receipt of a check drawn on a
member bank of the Federal Reserve System. Checks drawn on banks which are
not members of the Federal Reserve System may take considerably longer to
convert into Federal Funds. Prior to receipt of Federal Funds, your money
will not be invested.
The Money Market Fund's net asset value per share is determined as of
12:00 Noon, New York time, on each day that the New York Stock Exchange is
open for business. Net asset value per share is computed by dividing the
value of the Money Market Fund's net assets (i.e., the value of its assets
less liabilities) by the total number of shares outstanding. See
"Determination of Net Asset Value."
If your payments into the Money Market Fund are received in or
converted into Federal Funds by 12:00 Noon, New York time, by the Transfer
Agent, you will receive the dividend declared that day. If your payments
are received in or converted into Federal Funds after 12:00 Noon, New York
time, by the Transfer Agent, you will begin to accrue dividends on the
following business day.
Qualified institutions may telephone orders for the purchase of Money
Market Fund shares. These orders will become effective at the price
determined at 12:00 Noon, New York time, and the shares purchased will
receive the dividend on Fund shares declared on that day if the telephone
order is placed by 12:00 Noon, New York time, and Federal Funds are received
by 4:00 p.m., New York time, on that day.
Shares of each Longer Term Fund are sold on a continuous basis at the
net asset value per share next determined after an order in proper form is
received by the Transfer Agent or other entity authorized to receive orders
on behalf of the Fund. Each Longer Term Fund's net asset value per share is
determined as of the close of trading on the floor of the New York Stock
Exchange (currently 4:00 p.m., New York time) on each day the New York Stock
Exchange is open for business. For purposes of computing net asset value
per share of each Longer Term Fund, options and futures contracts will be
valued 15 minutes after the close of trading on the floor of the New York
Stock Exchange. Net asset value per share is computed by dividing the value
of the Fund's net assets (i.e., the value of its assets less liabilities) by
the total number of shares outstanding. The investments of each Longer Term
Fund are valued by an independent pricing service approved by the Fund's
Board and are valued at fair value as determined by the pricing service.
The pricing service's procedures are reviewed under the general supervision
of the Fund's Board. For further information regarding the methods employed
in valuing each Longer Term Fund's investments, see "Determination of Net
Asset Value."
Using Federal Funds. The following information is applicable only to
shares of the Money Market Fund. The Transfer Agent or the Fund may
attempt to notify you upon receipt of checks drawn on banks that are not
members of the Federal Reserve System as to the possible delay in conversion
into Federal Funds and may attempt to arrange for a better means of
transmitting the money. If you are a customer of a Selected Dealer and your
order to purchase Fund shares is paid for other than in Federal Funds, the
Selected Dealer, acting on your behalf, will complete the conversion into,
or itself advance, Federal Funds generally on the business day following
receipt of your order. The order is effective only when so converted and
received by the Transfer Agent. An order for the purchase of Fund shares
placed by you with sufficient Federal Funds or cash balance in your
brokerage account with a Selected Dealer will become effective on the day
that the order, including Federal Funds, is received by the Transfer Agent.
Dreyfus TeleTransfer Privilege. (All Funds) You may purchase shares
by telephone 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
which is an Automated Clearing House ("ACH") member may be so designated.
Dreyfus TeleTransfer purchase orders may be made at any time. Purchase
orders received by 4:00 p.m., New York time, on any day the Transfer Agent
and the New York Stock Exchange 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
day the Transfer Agent and the New York Stock Exchange are open for business
or orders made on Saturday, Sunday or any holiday (e.g., when the New York
Stock Exchange is not open for business) will be credited to the
shareholder's Fund account 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 "How to Redeem
Shares--Dreyfus TeleTransfer Privilege."
Reopening an Account. You 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.
SERVICE PLAN AND SHAREHOLDER SERVICES PLANS
The Intermediate Bond Fund has adopted a Service Plan pursuant to Rule
12b-1 under the 1940 Act and the Money Market Fund and Bond Fund have
adopted separate Shareholder Services Plans.
Service Plan (Intermediate Bond Fund only) Rule l2b-1 (the "Rule")
adopted by the Securities and Exchange Commission under the 1940 Act
provides, among other things, that an investment company may bear expenses
of distributing its shares only pursuant to a plan adopted in accordance
with the Rule. The Fund's Board has adopted such a plan (the "Service
Plan"), pursuant to which the Fund (a) reimburses the Distributor for
payments to certain Service Agents for distributing the Fund's shares and
servicing shareholder accounts ("Servicing") and (b) pays the Manager,
Dreyfus Service Corporation and any affiliates of either of them
(collectively, "Dreyfus") for advertising and marketing relating to the Fund
and for Servicing at an aggregate annual rate of .25% of the value of the
Fund's average daily net assets. The Fund's Board believes that there is a
reasonable likelihood that the Service Plan adopted will benefit the Fund
and its shareholders.
Each of the Distributor and Dreyfus may pay one or more Service Agents
a fee in respect of Fund shares owned by shareholders with whom the Service
Agent has a Servicing relationship or for whom the Service Agent is the
dealer or holder of record. The Distributor and Dreyfus determine the
amount, if any, to be paid to Service Agents under the Service Plan and the
basis on which such payments are made. The fees payable under the Service
Plan are payable without regard to actual expenses incurred.
The Fund also bears the costs of preparing and printing prospectuses
and statements of additional information used for regulatory purposes and
for distribution to existing shareholders. Under the Service Plan, the Fund
bears (a) the costs of preparing, printing and distributing prospectuses and
statements of additional information used for other purposes, and (b) the
costs associated with implementing and operating the Service Plan (such as
costs of printing and mailing service agreements), the aggregate of such
amounts not to exceed in any fiscal year of the Fund the greater of $100,000
or .005 of 1% of the value of its average daily net assets for such fiscal
year.
A quarterly report of the amounts expended under the Service Plan, and
the purposes for which such expenditures were incurred, must be made to the
Fund's Board for its review. In addition, the Service Plan provides that it
may not be amended to increase materially the costs which the Fund may bear
for distribution pursuant to the Service Plan without shareholder approval
and that other material amendments of the Service Plan must be approved by
the Board, and by the Board members who are not "interested persons" (as
defined in the 1940 Act) of the Fund or the Manager and have no direct or
indirect financial interest in the operation of the Service Plan or in the
related service agreements, by vote cast in person at a meeting called for
the purpose of considering such amendments. The Service Plan and the
related service agreements are subject to annual approval by such vote of
the Board members cast in person at a meeting called for the purpose of
voting on the Service Plan. The Service Plan was last so approved at a
meeting held on _______, 1999. The Service Plan is terminable at any time
by vote of a majority of the Fund's Board members who are not "interested
persons" and have no direct or indirect financial interest in the operation
of the Service Plan or in any of the related service agreements or by vote
of the holders of a majority of such Fund's shares. Any service agreement
is terminable without penalty, at any time, by such vote of the Board
members or, upon not more than 60 days' written notice to the Service Agent,
by vote of the holders of a majority of Fund's shares, or, upon 15 days'
notice, by the Distributor. A service agreement will terminate
automatically in the event of its assignment (as defined in the 1940 Act).
For the fiscal year ended May 31, 1999, the total amount payable by the
Fund pursuant to the Service Plan was $______, of which $______ was paid to
the Distributor as reimbursement for payments made by the Distributor to
Service Agents for distributing Fund shares, $_______, was paid to Dreyfus
for advertising and marketing and Servicing, and $_______ was paid for
preparing, printing and distributing prospectuses and statements of
additional information and for costs associated with implementing and
operating the Service Plan.
Shareholder Services Plans. (Money Market Fund and Bond Fund only)
Each of these Funds has adopted a separate Shareholder Services Plan,
pursuant to which the Fund reimburses Dreyfus Service Corporation an amount
not to exceed an annual rate of .25% of the value of the Fund's average
daily net assets for certain allocated expenses for the provision of certain
services to such Fund's shareholders. 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 services related to the maintenance of shareholder
accounts.
A quarterly report of the amounts expended under the Shareholder
Services Plan, and the purposes for which such expenditures were incurred,
must be made to the respective Fund's Board for its review. In addition,
the Shareholder Services Plan provides that material amendments of the Plan
must be approved by the Board, and by the Board members who are not
"interested persons" (as defined in the 1940 Act) of the Fund and have no
direct or indirect financial interest in the operation of the Shareholder
Services Plan, by vote cast in person at a meeting called for the purpose of
considering such amendments. The Shareholder Services Plan is subject to
annual approval by such vote of the Board members cast in person at a
meeting called for the purpose of voting on the Shareholder Services Plan.
Each Shareholder Services Plan was last so approved on __________, 1999.
The Shareholder Services Plan is terminable at any time by vote of a
majority of the Board members who are not "interested persons" and who have
no direct or indirect financial interest in the operation of the Shareholder
Services Plan.
For the fiscal year ended May 31, 1999, the Money Market Fund paid
$_______, and the Bond Fund paid $__________, pursuant to the Fund's
Shareholder Services Plan.
HOW TO REDEEM SHARES
Redemption Fee. (Longer Term Funds only) The Intermediate Bond Fund
and Bond Fund will deduct a redemption fee equal to 1% and .10%,
respectively, of the net asset value of Fund shares redeemed (including
redemptions through the use of the Fund Exchanges service) less than 15 days
following the issuance of such shares. The redemption fee will be deducted
from the redemption proceeds and retained by the Fund. For the fiscal year
ended May 31, 1999, the Bond Fund retained $_________ and the Intermediate
Bond Fund retained $________ in redemption fees.
No redemption fee will be charged on the redemption or exchange of
shares (1) through the Fund's Check Redemption Privilege, Automatic
Withdrawal Plan or Dreyfus Auto-Exchange Privilege, (2) through accounts
that are reflected on the records of the Transfer Agent as omnibus accounts
approved by Dreyfus Service Corporation, (3) through accounts established by
Service Agents approved by Dreyfus Service Corporation that utilize the
National Securities Clearing Corporation's networking system, or (4)
acquired through the reinvestment of dividends or distributions. The
redemption fee may be waived, modified or terminated at any time, or from
time to time.
Check Redemption Privilege. (All Funds) Each Fund provides Redemption
Checks ("Checks") automatically upon opening an account, unless you
specifically refuse the Check Redemption Privilege by checking the
applicable "No" box on the Account Application. The Check Redemption
Privilege may be established for an existing account by a separate signed
Shareholder Services Form. Checks will be sent only to the registered
owner(s) of the account and only to the address of record. The Account
Application or Shareholder Services Form must be manually signed by the
registered owner(s). Checks are drawn on your Fund account and may be made
payable to the order of any person in an amount of $500 or more. Potential
fluctuations in the net asset value of a Longer Term Fund's shares should be
considered in determining the amount of any Check drawn on an account in a
Longer Term Fund. When a Check is presented to the Transfer Agent for
payment, the Transfer Agent, as your 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. Dividends are earned until the Check clears.
After clearance, a copy of the Check will be returned to you. You 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.
You should date your Checks with the current date when you write them.
Please do not postdate your Checks. If you do, 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.
Checks are free, but the Transfer Agent will impose a fee for stopping
payment of a Check upon your request or if the Transfer Agent cannot honor a
Check due to insufficient funds or other valid reason. If the amount of
the Check is greater than the value of the shares in your account, the Check
will be returned marked insufficient funds. Checks should not be used to
close an account. This Privilege will be terminated immediately, without
notice, with respect to any Longer Term Fund account which is, or becomes,
subject to backup withholding on redemptions. Any Check written on a Longer
Term Fund account which has become subject to backup withholding on
redemptions will not be honored by the Transfer Agent.
Wire Redemption Privilege. (All Funds) By using this Privilege, you
authorize the Transfer Agent to act on wire, telephone or letter redemption
instructions from any person representing himself or herself to be you or a
representative of your Service Agent, and reasonably believed by the
Transfer Agent to be genuine. Ordinarily, the Money Market Fund will
initiate payment for shares redeemed pursuant to this Privilege on the same
business day if the Transfer Agent receives the redemption request in proper
form prior to Noon on such day; otherwise the Money Market Fund will
initiate payment on the next business day. The Longer Term Funds ordinarily
will initiate payment for shares redeemed pursuant to this privilege on the
next business day after receipt by the Transfer Agent of a redemption
request in proper form. Redemption proceeds ($1,000 minimum) will be
transferred by Federal Reserve wire only to the commercial bank account
specified by you on the Account Application or the Shareholder Services
Form, or to a correspondent bank if your bank is not a member of the Federal
Reserve System. Fees ordinarily are imposed by such bank and borne by the
investor. Immediate notification by the correspondent bank to your bank is
necessary to avoid a delay in crediting the funds to your bank account.
If you have access to telegraphic equipment, you 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
If you do not have direct access to telegraphic equipment, you may have
the wire transmitted by contacting a TRT Cables operator at 1-800-654-7171,
toll free. You 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."
Dreyfus TeleTransfer Privilege. (All Funds) You may request by
telephone that redemption proceeds 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. Holders of
jointly registered Fund or bank accounts may redeem through the Dreyfus
TeleTransfer Privilege for transfer to their bank account not more than
$250,000 within any 30-day period. You should be aware that if you 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.
See "How to Buy Shares--Dreyfus TeleTransfer Privilege."
Redemption Through a Selected Dealer. (Intermediate Bond Fund only)
If you are a shareholder of the Intermediate Bond Fund and a customer of a
Selected Dealer, you may make redemption requests to your Selected Dealer.
If the Selected Dealer transmits the redemption request so that it is
received by the Transfer Agent by the close of trading on the floor of the
New York Stock Exchange (currently 4:00 p.m., New York time) on a given day,
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 New York Stock Exchange, 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.
Share Certificates; Signatures. (All Funds) 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 New York Stock Exchange 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. (All Funds) Each Fund has committed itself to
pay in cash all redemption requests by any shareholder of record, 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 Securities and Exchange
Commission and is a fundamental policy of the Fund which may not be changed
without shareholder approval. In the case of requests for redemption in
excess of such amount, each Fund's Board reserves the right to make payments
in whole or in part in securities or other assets of the Fund 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 sells such securities, brokerage charges might be
incurred.
Suspension of Redemptions. (All Funds) The right of redemption may be
suspended or the date of payment postponed (a) during any period when the
New York Stock Exchange is closed (other than customary weekend and holiday
closings), (b) when trading in the markets the Fund ordinarily utilizes is
restricted, or when an emergency exists as determined by the Securities and
Exchange Commission so that disposal of a Fund's investments or
determination of its net asset value is not reasonably practicable, or (c)
for such other periods as the Securities and Exchange Commission by order
may permit to protect a Fund's shareholders.
SHAREHOLDER SERVICES
Fund Exchanges. (All Funds) You may purchase, in exchange for shares
of a Fund, shares of certain other funds managed or administered by the
Manager, to the extent such shares are offered for sale in your state of
residence. The Intermediate Bond Fund and Bond Fund will deduct a
redemption fee equal to 1% and .10%, respectively, of the net asset value of
Fund shares exchanged where the exchange is made less than 15 days after the
issuance of such shares. Shares of other funds purchased by exchange will
be purchased on the basis of relative net asset value per share as follows:
A. Exchanges for shares of funds 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 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"), but 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, you must notify the
Transfer Agent of your prior ownership of fund shares and your account
number.
To request an exchange, you, or your Service Agent acting on your
behalf, must give exchange instructions to the Transfer Agent in writing or
by telephone. The ability to issue exchange instructions by telephone is
given to all Fund shareholders automatically, unless you check the
applicable "No" box on the Account Application, indicating that you
specifically refuse this Privilege. By using the Telephone Exchange
Privilege, you authorize the Transfer Agent to act on telephonic
instructions (including over The Dreyfus Touchr automated telephone system)
from any person representing himself or herself to be you, or a
representative of your Service Agent, and reasonably believed by the
Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchanges. 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
administrative fee in accordance with rules promulgated by the Securities
and Exchange Commission.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made.
Dreyfus Auto-Exchange Privilege. (All Funds) Dreyfus Auto-Exchange
Privilege permits you to purchase, in exchange for shares of a Fund, shares
of another fund in the Dreyfus Family of Funds of which you are a
shareholder. This Privilege is available only for existing accounts.
Shares will be exchanged on the basis of relative net asset value as
described above under "Fund Exchanges." Enrollment in or modification or
cancellation of this Privilege is effective three business days following
notification by you. You will be notified if your account falls below the
amount designated to be exchanged under this Privilege. In this case, your
account will fall to zero unless additional investments are made in excess
of the designated amount prior to the next Auto-Exchange transaction.
Shares held under IRA and other retirement plans are eligible for this
Privilege. Exchanges of IRA shares may be made between IRA accounts and
from regular accounts to IRA accounts, but not from IRA accounts to regular
accounts. With respect to all other retirement accounts, exchanges may be
made only among those accounts.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. Each Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchanges service or the
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time by
a Fund upon notice to its shareholders.
Dreyfus-Automatic Asset Builderr. (All Funds) 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.
Dreyfus Government Direct Deposit Privilege. (All Funds) 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 U.S. Government automatically deposited into your Fund account.
You may deposit as much of such payments as you elect.
Dreyfus Payroll Savings Plan. (All Funds) Dreyfus Payroll Savings
Plan permits you to purchase Fund shares (minimum of $100 per transaction)
automatically on a regular basis. Depending upon your employer's direct
deposit program, you may have part or all of your paycheck transferred to
your existing Dreyfus account electronically through the ACH system at each
pay period. To establish a Dreyfus Payroll Savings Plan account, you must
file an authorization form with your employer's payroll department. It is
the sole responsibility of your employer to arrange for transactions under
the Dreyfus Payroll Savings Plan.
Dreyfus Step Program. (All Funds) Dreyfus Step Program enables you to
purchase Fund shares without regard to the Fund's minimum initial investment
requirements through Dreyfus-Automatic Asset Builderr, Dreyfus Government
Direct Deposit Privilege or Dreyfus Payroll Savings Plan. To establish a
Dreyfus Step Program account, you must supply the necessary information on
the Account Application and file the required authorization form(s) with the
Transfer Agent. For more information concerning this Program, or to request
the necessary authorization form(s), please call toll free 1-800-782-6620.
You may terminate your participation in this Program at any time by
discontinuing your participation in Dreyfus-Automatic Asset Builder, Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan, as the
case may be, as provided under the terms of such Privilege(s). Each Fund
may modify or terminate this Program at any time.
Dreyfus Dividend Options. (All Funds) Dreyfus Dividend Sweep allows
you to invest automatically your dividends or dividends and capital gain
distributions, if any, from a Fund in shares of another fund in the Dreyfus
Family of Funds of which you are a shareholder. Shares of other funds
purchased pursuant to this privilege will be purchased on the basis of
relative net asset value per share as follows:
A. Dividends and distributions paid by a fund may be invested without
imposition of a sales load in shares of other funds offered
without a sales load.
B. Dividends and distributions paid by a fund which does not charge a
sales load may be invested in shares of other funds sold with a
sales load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund that charges a sales
load may be invested in shares of other funds sold with a sales
load (referred to herein as "Offered Shares"), but if the sales
load applicable to the Offered Shares exceeds the maximum sales
load charged by the fund from which dividends or distributions are
being swept (without giving effect to any reduced loads), the
difference will be deducted
D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be imposed
upon redemption of such shares.
Dreyfus Dividend ACH permits you to transfer electronically dividends
or dividends and capital gain 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.
Automatic Withdrawal Plan. (All Funds) The Automatic Withdrawal Plan
permits you to request withdrawal of a specified dollar amount (minimum of
$50) on either a monthly or quarterly basis if you have a $5,000 minimum
account. Withdrawal payments are the proceeds from sales of Fund shares,
not the yield on the shares. If withdrawal payments exceed reinvested
dividends and distributions, your shares will be reduced and eventually may
be depleted. Automatic Withdrawal may be terminated at any time by you, the
Fund or the Transfer Agent. Shares for which certificates have been issued
may not be redeemed through the Automatic Withdrawal Plan.
DETERMINATION OF NET ASSET VALUE
Amortized Cost Pricing. The information contained in this section is
applicable only to the Money Market Fund. The valuation of the Fund's
portfolio securities is based upon their amortized cost, which does not take
into account unrealized capital gains or losses. This involves valuing an
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
value, as determined by amortized cost, is higher or lower than the price
the Fund would receive if it sold the instrument.
The Fund's Board has established, as a particular responsibility within
the overall duty of care owed to the Fund's investors, procedures reasonably
designed to stabilize the Fund's price per share as computed for the purpose
of purchases and redemptions at $1.00. Such procedures include review of
the Fund's portfolio holdings by the Board, at such intervals as it deems
appropriate, to determine whether the Fund's net asset value calculated by
using available market quotations or market equivalents deviates from $1.00
per share based on amortized cost. Market quotations and market equivalents
used in such review are obtained from an independent pricing service (the
"Service") approved by the Board. The Service values the Fund's investments
based on methods which include consideration of: yields or prices of
municipal bonds of comparable quality, coupon, maturity and type;
indications of values from dealers; and general market conditions. The
Service also may employ electronic data processing techniques and/or a
matrix system to determine valuations.
The extent of any deviation between the Fund's net asset value based
upon available market quotations or market equivalents and $1.00 per share
based on amortized cost will be examined by the Board. If such deviation
exceeds 1/2 of 1%, the Board promptly will consider what action, if any,
will be initiated. In the event the Board determines that a deviation
exists which may result in material dilution or other unfair results to
investors or existing shareholders, it has agreed to take such corrective
action as it regards as necessary and appropriate, including: selling
portfolio instruments prior to maturity to realize capital gains or losses
or to shorten average portfolio maturity; withholding dividends or paying
distributions from capital or capital gains; redeeming shares in kind; or
establishing a net asset value per share by using available market
quotations or market equivalents.
Valuation of Portfolio Securities. The information contained in this
section is applicable only to the Longer Term Funds. The investments of
each Fund are valued each business day by an independent pricing service
(the "Service") approved by such Fund's Board. 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 its evaluation of the market for such securities). Other
investments (which constitute a majority of the portfolio securities) are
carried at fair value as determined by the Service, based on methods which
include consideration of: yields or prices of municipal bonds of comparable
quality, coupon, maturity and type; indications as to values from dealers;
and general market conditions. The Service may employ electronic data
processing techniques and/or a matrix system to determine valuations. The
Service's procedures are reviewed by the Fund's officers under the general
supervision of the relevant Fund's Board. As to each Fund, expenses and
fees, including the management fees (reduced by the expense limitation, if
any) and fees pursuant to the Service Plan or Shareholder Services Plan, as
the case may be, are accrued daily and are taken into account for the
purpose of determining the net asset value of such Fund's shares.
New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day, Martin
Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
PORTFOLIO TRANSACTIONS
Portfolio securities ordinarily are purchased from and sold to parties
acting as either principal or agent. Newly-issued securities ordinarily are
purchased directly from the issuer or from an underwriter; other purchases
and sales usually are placed with those dealers from which it appears that
the best price or execution will be obtained. Usually no brokerage
commissions, as such, are paid by any Fund for such purchases and sales,
although the price paid usually includes an undisclosed compensation to the
dealer acting as agent. The prices paid to underwriters of newly-issued
securities usually include a concession paid by the issuer to the
underwriter, and purchases of after-market securities from dealers
ordinarily are executed at a price between the bid and asked price. No
brokerage commissions have been paid by any Fund to date.
Transactions are allocated to various dealers by the portfolio managers
of a Fund in their best judgment. The primary consideration is prompt and
effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected for research, statistical or
other services to enable the Manager to supplement its own research and
analysis with the views and information of other securities firms and may be
selected based upon their sales of shares of a Fund or other funds advised
by the Manager or its affiliates.
Research services furnished by brokers through which a Fund effects
securities transactions may be used by the Manager in advising other funds
it advises and, conversely, research services furnished to the Manager by
brokers in connection with other funds the Manager advises may be used by
the Manager in advising each Fund. Although it is not possible to place a
dollar value on these services, it is the opinion of the Manager that the
receipt and study of such services should not reduce the overall expenses of
its research department.
DIVIDENDS, DISTRIBUTIONS AND TAXES
All Funds. Management believes that each Fund has qualified for the
fiscal year ended May 31, 1999 as a "regulated investment company" under the
Code. Each Fund intends to continue to so qualify if such qualification is
in the best interests of its shareholders. Such qualification relieves the
Fund of any liability for Federal income tax to the extent its earnings are
distributed in accordance with applicable provisions of the Code. If the
Fund did not qualify as a regulated investment company, it would be treated
for tax purposes as an ordinary corporation subject to Federal income tax.
Each Fund ordinarily declares dividends from its net investment income
on each day the New York Stock Exchange is open for business. Earnings for
Saturdays, Sundays and holidays are declared as dividends on the preceding
business day for the Money Market Fund and on the next business day for the
Longer Term Funds. With respect to the Longer Term Funds, Fund shares begin
earning income dividends on the day following the date of purchase.
Dividends usually are paid on the last business day (calendar day in the
case of the Money Market Fund) of each month, and automatically are
reinvested in additional shares at net asset value or, at your option, paid
in cash. If you redeem all shares in your account at any time during the
month, all dividends to which you are entitled will be paid to you along
with the proceeds of the redemption. If you are an omnibus accountholder
and indicate in a partial redemption request that a portion of any accrued
dividends to which such account is entitled belongs to an underlying
accountholder who has redeemed all shares in his or her account, such
portion of the accrued dividends will be paid to you along with the proceeds
of the redemption.
If you elect to receive dividends and distributions in cash, and your
dividend or distribution check is returned to the Fund as undeliverable or
remains uncashed for six months, the Fund reserves the right to reinvest
such dividends or distributions and all future dividends and distributions
payable to you in additional Fund shares at net asset value. No interest
will accrue on amounts represented by uncashed distribution or redemption
checks.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain or loss. However, all or portion of any gain
realized from the sale or other disposition of certain market discount bonds
will be treated as ordinary income under Section 1276 of the Code.
Longer Term Funds Only. The Code provides that if a shareholder has
not held his Fund shares for more than six months (or such shorter period as
the Internal Revenue Service may prescribe by regulation) and has received
an exempt-interest dividend with respect to such shares, any loss incurred
on the sale of such shares will be disallowed to the extent of the
exempt-interest dividend received. In addition, any dividend or
distribution paid shortly after an investor's purchase may have the effect
of reducing the net asset value of his shares below the cost of his
investment. Such a distribution would be a return on investment in an
economic sense although taxable as stated under "Distributions and Taxes" in
the Prospectus.
In addition, all or a portion of the gain realized from engaging in
"conversion transactions" may be treated as ordinary income under Section
1258 of the Code. "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, gain or loss realized by the Fund from
certain financial futures 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 futures and options
as well as from closing transactions. In addition, any such futures or
options remaining unexercised at the end of the Fund's taxable year will be
treated as sold for their then fair market value, resulting in additional
gain or loss to the Fund characterized as described above.
Offsetting positions held by the Fund involving certain financial
futures contracts or options transactions may be considered, for tax
purposes, to 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 the provisions of
Sections 1256 and 988 of the Code. As such, all or a portion of any short-
or long-term capital gain from certain "straddle" and/or conversion
transactions may be recharacterized as ordinary income.
If the Fund were treated as entering into "straddles" by reason of its
engaging in financial futures contracts or options transactions, such
"straddles" would be characterized as "mixed straddles" if the futures or
options comprising a part of such "straddles" were governed by Section 1256
of the Code. The Fund may make one or more elections with respect to "mixed
straddles." Depending on which election is made, if any, the results to the
Fund may differ. If no election is made, to the extent the straddle and
conversion transaction rules apply to positions established by the Fund,
losses realized by the Fund will be deferred to the extent of unrealized
gain in the offsetting position. Moreover, as a result of the straddle and
the conversion transaction rules, short-term capital losses on straddle
positions may be recharacterized as long-term capital losses, and long-term
capital gains on straddled positions may be recharacterized as short-term
capital gains or ordinary income.
The Taxpayer Relief Act of 1997 included constructive sale provisions
that generally 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. Transactions that are
identified as hedging or straddle transactions under other provisions of the
Code can be subject to the constructive sale provisions.
Investment by the Funds in securities issued at a discount or providing
for deferred interest or for payment of interest in the form of additional
obligations could, under special tax rules, affect the amount, timing and
character of distributions to shareholders. For example, a Fund could be
required to take into account annually a portion of the discount (or deemed
discount) at which such securities were issued and to distribute such
portion in order to maintain its qualification as a regulated investment
company. In that case, the Fund may have to dispose of securities which it
might otherwise have continued to hold in order to generate cash to satisfy
these distribution requirements.
PERFORMANCE INFORMATION
Money Market Fund. For the seven-day period ended May 31, 1999, the
Fund's yield was ____% and its effective yield was ____%. The Fund's yield
is computed in accordance with a standardized method which involves
determining the net change in the value of a hypothetical pre-existing Fund
account having a balance of one share at the beginning of a seven calendar
day period for which yield is to be quoted, dividing the net change by the
value of the account at the beginning of the period to obtain the base
period return, and annualizing the results (i.e., multiplying the base
period return by 365/7). The net change in the value of the account
reflects the value of additional shares purchased with dividends declared on
the original share and any such additional shares and fees that may be
charged to shareholder accounts, in proportion to the length of the base
period and the Fund's average account size, but does not include realized
gains and losses or unrealized appreciation and depreciation. Effective
yield is computed by adding 1 to the base period return (calculated as
described above), raising that sum to a power equal to 365 divided by 7, and
subtracting 1 from the result.
Based upon a combined 1999 Federal, New York State and New York City
personal income tax rate of _____%, the Fund's tax equivalent yield for the
seven-day period ended May 31, 1999 was _____%.
Longer Term Funds. The Intermediate Bond Fund's and Bond Fund's yields
for the 30-day period ended May 31, 1999 were ____% and ____%, respectively.
These yields reflect the waiver of a portion of the management fee and/or
absorption of certain expense by the Manager, without which the Intermediate
Bond Fund's and Bond Fund's 30-day yields for the period ended May 31, 1999
would have been ____% and ____%, respectively. Current yield for a Longer
Term Fund is computed pursuant to a formula which operates as follows: the
amount of a Fund's expenses accrued for a 30-day period is subtracted from
the amount of the dividends and interest earned (computed in accordance with
regulatory requirements) by it 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
distributions, and (b) the net asset value per share 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.
Based upon a combined 1999 Federal, New York State and New York City
personal income tax rate of _____%, the Intermediate Bond Fund's tax
equivalent yield for the 30-day period ended May 31, 1999 was ____%, and the
Bond Fund's tax equivalent yield for such period was ____%. Without the
above-referenced absorption by the Manager, the Intermediate Bond Fund's
tax equivalent yield for the 30-day period ended May 31, 1999 would have
been ____% and the Bond Fund's tax equivalent yield for the 30-day period
ended May 31, 1999 would have been ____%.
The Intermediate Bond Fund's average annual total return for the one,
five and ten year periods ended May 31, 1999 was ____%, ____% and ____%,
respectively. The Bond Fund's average annual total return for the one, five
and ten year periods ended May 31, 1999 was ____%, ____% and ____%,
respectively. Average annual total return is calculated by determining the
ending redeemable value of an investment purchased with a hypothetical
$1,000 payment made at the beginning of the period (assuming the
reinvestment of dividends and 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.
The Intermediate Bond Fund's total return for the period June 12, 1987
(commencement of operations) to May 31, 1999 was ____%. The Bond Fund's
total return for the period July 26, 1983 (commencement of operations) to
May 31, 1999 was ____%. Total return is calculated by subtracting the
amount of the Fund's net asset value per share at the beginning of a stated
period from the net asset value per share at the end of the period (after
giving effect to the reinvestment of dividends and distributions during the
period), and dividing the result by the net asset value per share at the
beginning of the period.
All Funds. Tax equivalent yield is computed by dividing that portion
of the current yield (calculated as described above) which is tax exempt by
1 minus a stated tax rate and adding the quotient to that portion, if any,
of the yield of the Fund that is not tax exempt. The tax equivalent yields
noted above represent the application of the highest Federal, New York State
and New York City marginal personal income tax rates presently in effect.
For Federal income tax purposes, a 39.6% tax rate has been used. For New
York State and New York City personal income tax purposes, tax rates of
____% and ____%, respectively, have been used. The tax equivalent figure,
however, does not reflect the potential effect of local (including, but not
limited to, county, district or city) taxes, including applicable
surcharges. In addition, there may be pending legislation which could
affect such stated tax rates or yield. Each investor should consult its tax
adviser, and consider its own factual circumstances and applicable tax laws,
in order to ascertain the relevant tax equivalent yield.
Yields will fluctuate and are not necessarily representative of future
results. You should remember that yield is a function of the type and
quality of the instruments in the portfolio, portfolio maturity and
operating expenses. Your principal in the Fund is not guaranteed. See
"Determination of Net Asset Value" for a discussion of the manner in which
the Fund's price per share is determined.
From time to time, each Fund may use hypothetical tax equivalent yields
or charts in their advertising. These hypothetical yields or charts will be
used for illustrative purposes only and are not indicative of the Fund's
past or future performance.
From time to time, advertising materials for a Fund also may refer to
or discuss then-current or past economic conditions, developments, and/or
events, actual or proposed tax legislation, or to statistical or other
information concerning trends relating to investment companies, as compiled
by industry associations such as the Investment Company Institute. From
time to time, advertising materials for the Longer Term Funds also may refer
to Morningstar ratings and related analyses supporting such ratings.
Comparative performance information may be used from time to time in
advertising or marketing shares of the Funds, including data from CDA
Investment Technologies, Inc., Lipper Analytical Services, Inc., Bank Rate
MonitorT, IBC's Money Fund ReportT, Moody's Bond Survey Bond Index, Lehman
Brothers Municipal Bond Index, Morningstar, Inc. and other industry
publications.
INFORMATION ABOUT THE FUNDS
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.
Each Fund share is of one class and has equal rights as to dividends and in
liquidation. Shares have no preemptive, subscription or conversion rights
and are freely transferable.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for a Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Board members
or the appointment of auditors. However, the holders of at least 10% of the
shares outstanding and entitled to vote may require the Fund to hold a
special meeting of shareholders for purposes of removing a Board member from
office. Fund shareholders may remove a Board member by the affirmative vote
of a majority, in the case of the Bond Fund, or two-thirds, in the case of
the Money Market Fund and Intermediate Bond Fund, of the Fund's outstanding
voting shares. In addition, the Board will call a meeting of shareholders
for the purpose of electing Board members if, at any time, less than a
majority of the Board members then holding office have been elected by
shareholders.
The Money Market Fund and Intermediate Bond Fund are organized as
unincorporated business trusts under the laws of the Commonwealth of
Massachusetts. Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Money
Market Fund and Intermediate Bond Funds of which they are shareholders.
However, each Fund's Agreement and Declaration of Trust ("Trust Agreement")
disclaims shareholder liability for acts or obligations of the Fund and
requires that notice of such disclaimer be given in each agreement,
obligation or instruments entered into or executed by the Fund or a Trustee.
The Trust Agreement provides for indemnification from the Fund's property
for all losses and expenses of any shareholder held personally liable for
the obligations of the Fund. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its
obligations, a possibility which management believes is remote. Upon
payment of any liability incurred by a Fund, the shareholder paying such
liability will be entitled to reimbursement from the general assets of the
Fund. Each of these Funds intends to conduct its operations in such a way
so as to avoid, as far as possible, ultimate liability of the shareholders
for liabilities of the Fund.
The following information applies to the Intermediate Bond Fund and
Bond Fund only. Each Fund is intended to be a long-term investment vehicle
and is not designed to provide investors with a means of speculating 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 the Fund's performance and its shareholders. Accordingly,
if the Fund's management determines that an investor is following a market-
timing strategy or is otherwise engaging 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 the
Fund during any calendar year or who makes exchanges that appear to coincide
with a 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, the 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, the Fund will take
no other action with respect to the shares until it receives further
instructions from the investor. The 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. Each 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, to any automatic
investment or withdrawal privilege described herein, or to participants in
employer-sponsored retirement plans.
During times of drastic economic or market conditions, the Intermediate
Bond Fund and Bond 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 net asset value but the purchase order would be
effective only at the net asset value next determined after the fund being
purchased receives the proceeds of the redemption, which may result in the
purchase being delayed.
Each Fund sends annual and semi-annual financial statements to all its
respective shareholders.
COUNSEL AND INDEPENDENT AUDITORS
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York
10038-4982, as counsel for each Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the
shares being sold pursuant to the Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as independent auditors of each
Fund.
APPENDIX A
INVESTING IN NEW YORK MUNICIPAL OBLIGATIONS
RISK FACTORS--INVESTING IN NEW YORK MUNICIPAL OBLIGATIONS
[To be updated]
The financial condition of New York State (the "State") and certain of
its public bodies (the "Agencies") and municipalities, particularly New York
City (the "City"), could affect the market values and marketability of New
York Municipal Obligations which may be held by the Fund. The following
information constitutes only a brief summary, does not purport to be a
complete description, and is based on information drawn from official
statements relating to securities offerings of the State, the City and the
Municipal Assistance Corporation for the City of New York ("MAC") available
as of the date of this Statement of Additional Information. While the Fund
has not independently verified such information, it has no reason to believe
that such information is not correct in all material respects.
The State's budget for the 1997-98 fiscal year was enacted by the
Legislature on August 4, 1997, more than four months after the start of the
fiscal year on April 1. Prior to adoption of the budget, the Legislature
enacted appropriations for disbursements considered to be necessary for
State operations and other purposes, including all necessary appropriations
for debt service.
For 1997-98, total revenues in the General Fund are projected at $33.37
billion, total expenditures are projected at $34.66 billion, and net
operating sources and uses are projected to contribute $331 million. For
all government funds, total revenues are projected at $67.48 billion, total
expenditures are projected at $68.24 billion, and financing uses are
projected to exceed financing sources by $220 million.
After adjustments for comparability between fiscal years, the adopted
1997-98 budget projects an increase in General Fund disbursements of $1.7
billion or 5.2% over 1996-97 levels. The average annual growth rate over
the last three fiscal years has been 1.2%. Adjusted State Funds (excluding
Federal grants) disbursements are projected to increase by 5.4% from the
1996-97 fiscal year. All Governmental Funds disbursements are projected to
increase by 7.0% over the prior fiscal year, after adjustments for
comparability.
The State revised the cash-basis 1997-98 State Financial plan on
January 20, 1998, in conjunction with the release of the Executive Budget
for the 1998-99 fiscal year. The changes reflect actual results through
December 1997, as well as modified economic and spending projections for the
balance of the current fiscal year.
The 1997-98 General Fund Financial Plan continues to be balanced, with
a projected cash surplus of $1.83 billion, an increase of $1.3 billion over
the surplus estimate of $530 million in the October 1997 update. The
increase in the surplus results primarily from higher-than-expected tax
receipts, which are forecast to exceed the October estimate by $1.28
billion.
In order to make the surplus available to help finance 1998-99
requirements, the State plans to accelerate $1.18 billion in income tax
refund payments into 1997-98, or provide reserves for such payments. The
balance in the refund reserve on March 31, 1998 is projected to be $1.647
billion.
Personal income tax collections for 1997-98 are now projected at $18.50
billion, or $363 million less than projected in October after accounting for
the refund reserve transaction. Business tax receipts are projected at $4.98
billion, an increase of $158 million. User tax collections are estimated at
$7.06 billion, or $52 million higher than the prior update, and reflected a
projected loss of $20 million in sales tax receipts from an additional week
of sales tax exemption for clothing and footwear costing less than $500,
which was authorized and implemented in January 1998. Other tax receipts
are projected to increase by $103 million over the prior update and total
$1.09 billion for the fiscal year. Miscellaneous receipts and transfers
from other funds are projected to reach $3.57 billion, or $153 million
higher than the mid-year update.
The State projects that disbursements will increase by $565 million
over the mid-year update, with nearly the entire increase attributable to
one-time disbursements of $561 million that pre-pay expenditures previously
scheduled for 1998-99. In the absence of these accelerated payments,
projected General Fund spending in the current year would have remained
essentially unchanged from the mid-year update. The Governor is proposing
legislation to use a portion of the current year surplus to transfer $425
million to pay for capital projects authorized under the Community
Enhancement Facilities Assistance Program (CEFAP) that were previously
planned to be financed with bond proceeds in 1998-99 and thereafter, and
$136 million in costs for an additional Medicaid payment originally schedule
for 1998-99.
The 1997-98 State Financial Plan is projected to be balanced on a cash
basis. The Financial Plan projections include a reserve for future needs of
$530 million. As compared to the Governor's Executive Budget as amended in
February 1997, the State's adopted budget for 1997-98 increases General
Fund spending by $1.7 billion, primarily from increases for local assistance
($1.3 billion). Resources used to fund these additional expenditures
include increased revenues projected for the 1997-98 fiscal year, increased
resources produced in the 1996-97 fiscal year that will be utilized in 1997-
98, reestimates of social service, fringe benefit and other spending, and
certain non-recurring resources. Total non-recurring resources included in
the 1997-98 Financial Plan are projected by State Division of the Budget
("DOB") to be $270 million, or 0.7% of total General Fund receipts.
The 1997-98 adopted budget includes multi-year tax reductions,
including a State funded property and local income tax reduction program,
estate tax relief, utility gross receipts tax reductions, permanent
reductions in the State sales tax on clothing, and elimination of
assessments on medical providers. These reductions are intended to reduce
the overall level of State and local taxes in New York and to improve the
State's competitive position vis-a-vis other states. The various elements
of the State and local tax and assessment reductions have little or no
impact on the 1997-98 Financial Plan, and do not begin to materially affect
the outyear projections until the State's 1999-2000 fiscal year.
The 1997-98 Financial Plan also includes: a projected General Fund
reserve of $465 million; a projected balance of $400 million in the Tax
Stabilization Reserve Fund; and a projected $65 million balance in the
Contingency Reserve Fund.
The State Financial Plan was based upon forecasts of national and State
economic activity. Economic forecasts have frequently failed to predict
accurately the timing and magnitude of changes in the national and the State
economies. Many uncertainties exist in forecasts of both the national and
State economies, including consumer attitudes toward spending, Federal
financial and monetary policies, the availability of credit and the
condition of the world economy, which could have an adverse effect on the
State. There can be no assurance that the State economy will not experience
worse-than-predicted results, with corresponding material and adverse
effects on the State's projections of receipts and disbursements.
The Governor presented his 1998-99 Executive Budget to the Legislature
on January 20, 1998. The Executive Budget contains financial projections
for the State's 1997-98 through 2000-01 fiscal years, detailed estimates of
receipts and a proposed Capital Program and Financing Plan for the 1997-98
through 2002-03 fiscal years. It is expected that the Governor will prepare
amendments to his Executive Budget as permitted under law and that these
amendments will be reflected in a revised Financial Plan to be released on
or before February 19, 1998.
The 1998-99 Financial Plan is projected to be balanced on a cash basis
in the General Fund. Total General Fund receipts, including transfers from
other funds, are projected to be $36.22 billion, an increase of $1.02
billion over projected receipts in the current fiscal year. Total General
Fund disbursements, including transfers to other funds, are projected to be
$36.18 billion, an increase of $1.02 billion over the projected expenditures
(including prepayments) for the current fiscal year. As compared to the
1997-98 State Financial Plan, the Executive Budget proposes year-to-year
growth in General Fund spending of 2.89%. State Funds spending (i.e.,
General Fund plus other dedicated funds, with the exception of federal aid)
is projected to grow by 8.5%. Spending from All Governmental Funds
(excluding transfers) is proposed to increase by 7.6% from the prior fiscal
year.
There can be no assurance that the State will not face substantial
potential budget gaps in future years resulting from a significant disparity
between tax revenues projected from a lower recurring receipts base and the
spending required to maintain State programs at current levels. To address
any potential budgetary imbalance, the State may need to take significant
actions to align recurring receipts and disbursements in future fiscal
years.
On June 6, 1990, Moody's changed its ratings on all the State's
outstanding general obligation bonds from A1 to A. On March 26, 1990 and
January 13, 1992, S&P changed its ratings on all of the State's outstanding
general obligation bonds from "AA- to A" and from "A to A-", respectively.
In February 1991, Moody's lowered its rating on the City's general
obligation bonds from A to Baa1 and in July 1995, S&P lowered its rating on
such bonds from "A- to BBB+". Ratings reflect only the respective views of
such organizations, and their concerns about the financial condition of New
York State and City, the debt load of the State and City and any economic
uncertainties about the region. There is no assurance that a particular
rating will continue for any given period of time or that any such rating
will not be revised downward or withdrawn entirely if, in the judgment of
the agency originally establishing the rating, circumstances so warrant.
(1) The State, Agencies and Other Municipalities. During the mid-
1970s, some of the Agencies and municipalities (in particular, the City)
faced extraordinary financial difficulties, which affected the State's own
financial condition. These events, including a default on short-term notes
issued by the New York State Urban Development Corporation ("UDC") in
February 1975, which default was cured shortly thereafter, and a
continuation of the financial difficulties of the City, created substantial
investor resistance to securities issued by the State and by some of its
municipalities and Agencies. For a time, in late 1975 and early 1976, these
difficulties resulted in a virtual closing of public credit markets for
State and many State related securities.
In response to the financial problems confronting it, the State
developed and implemented programs for its 1977 fiscal year that included
the adoption of a balanced budget on a cash basis (a deficit of $92 million
that actually resulted was financed by issuing notes that were paid during
the first quarter of the State's 1978 fiscal year). In addition,
legislation was enacted limiting the occurrence of additional so-called
"moral obligation" and certain other Agency debt, which legislation does
not, however, apply to MAC debt.
GAAP-Basis Results--1996-97 Fiscal Year. The State completed its 196-97
fiscal year with a combined Governmental Funds operating surplus of $2.1
billion, which included an operating surplus in the General Fund of $1.9
billion, in Capital Projects Funds of $98 million and in the Special Revenue
Funds of $65 million, offset in part by an operating deficit of $37 million
in the Debt Service Funds.
GAAP-Basis Results--1995-96 Fiscal Year. The State completed its 1995-96
fiscal year with a combined Governmental Funds operating surplus of $432
million, which included an operating surplus in the General Fund of $380
million, in the Capital Projects Funds of $276 million and in the Debt
Service Funds of $185 million. There was an operating deficit of $409
million in the Special Revenue Funds.
GAAP-Basis Results--1994-95 Fiscal Year. The State's Combined Balance Sheet
as of March 31, 1995 showed an accumulated deficit in its combined
Governmental Funds of $1.666 billion reflecting liabilities of $14.778
billion and assets of $13.112 billion. This accumulated Governmental Funds
deficit includes a $3.308 billion accumulated deficit in the General Fund,
as well as accumulated surpluses in the Special Revenue and Debt Service
Fund types of $877 million and $1.753 billion, respectively, and a $988
million accumulated deficit in the Capital Projects Fund type.
The State completed its 1994-95 fiscal year with a combined
Governmental Funds operating deficit of $1.791 billion, which included
operating deficits in the General Fund of $1.426 billion, in the Capital
Projects Funds of $366 million, and in the Debt Service Funds of $38
million. There was an operating surplus in the Special Revenue Funds of $39
million.
State Financial Plan--Cash-Basis Results--General Fund. The General
Fund is the principal operating fund of the State and is used to account for
all financial transactions, except those required to be accounted for in
another fund. It is the State's largest fund and receives almost all State
taxes and other resources not dedicated to particular purposes. General
Fund moneys are also transferred to other funds, primarily to support
certain capital projects and debt service payments in other fund types.
In the State's 1997-98 fiscal year, the General Fund is expected to
account for approximately 48% of total Governmental Funds disbursements and
71% of total State Funds disbursements. The General Fund is projected to be
balanced on a cash basis for the 1997-98 fiscal year. Total receipts and
transfers from other funds are projected to be $35.20 billion, an increase
of $2.16 billion from the prior fiscal year. Total General Fund
disbursements and transfers to other funds are projected to be $35.17
billion, an increase of $2.23 billion from the total in the prior fiscal
year.
The State ended its 1996-97 fiscal year on March 31, 1997 in balance on
a cash basis, with a General Fund cash surplus as reported by DOB of
approximately $1.4 billion. The cash surplus was derived primarily from
higher-than-expected revenues and lower-than-expected spending for social
services programs. The Governor in his Executive Budget applied $1.05
billion of the cash surplus amount to finance the 1997-98 Financial Plan,
and the additional $373 million is available for use in financing the 1997-
98 Financial Plan when enacted by the State Legislature.
The General Fund closing fund balance was $433 million. Of that
amount, $317 million was in the Tax Stabilization Reserve Fund ("TSRF"),
after a required deposit of $15 million and an additional deposit of $65
million in 1996-97. The TSRF can be used in the event of any future General
Fund deficit, as provided under the State Constitution and State Finance
Law. In addition, $41 million remains on deposit in the Contingency Reserve
Fund ("CRF"). This fund assists the State in financing any extraordinary
litigation costs during the fiscal year. The remaining $75 million reflects
amounts on deposit in the Community Projects Fund. This fund was created to
fund certain legislative initiatives. The General Fund closing fund balance
does not include $1.86 billion in the tax refund reserve account, of which
$521 million was made available as a result of the Local Government
Assistance Corporation ("LGAC") financing program as was required to be on
deposit as of March 31, 1997.
General Fund receipts and transfers from other funds for the 1996-97
fiscal year totaled $33.04 billion, and increase of 0.7% from the previous
fiscal year (excluding deposits into the tax refund reserve account).
General Fund disbursements and transfers to other funds totaled $32.90
billion for the 1996-97 fiscal year, an increase of 0.7% from the 1995-96
fiscal year.
The State ended its 1995-96 fiscal year on March 31, 1996 with a
General Fund cash surplus, as reported by DOB, of $445 million. Of that
amount, $65 million was deposited into the TSRF, and $380 million was used
to reduce 1996-97 Financial Plan liabilities by accelerating 1996-97
payments, deferring 1995-96 revenues, and making a deposit to the tax refund
reserve account.
The General Fund closing fund balance was $287 million, an increase of
$129 million from 1994-95 levels. The $129 million change in fund balance
is attributable to the $65 million voluntary deposit to the TSRF, a $15
million required deposit to the TSRF, a $40 million deposit to the CRF, and
a $9 million deposit to the Revenue Accumulation Fund. The closing fund
balance includes $237 million on deposit in the TSRF, to be used in the
event of any future General Fund deficit as provided under the State
Constitution and State Finance Law. In addition, $41 million is on deposit
in the CRF. The CRF was established in State fiscal year 1993-94 to assist
the State in financing the costs of extraordinary litigation. The remaining
$9 million reflects amounts on deposit in the Revenue Accumulation Fund.
This fund was created to hold certain tax receipts temporarily before their
deposit to other accounts. In addition, $678 million was on deposit in the
tax refund reserve account, of which $521 million was necessary to complete
the restructuring of the State's cash flow under the LGAC program.
General Fund receipts totaled $32.81 billion, a decrease of 1.1% from
1994-95 levels. This decrease reflects the impact of tax reductions enacted
and effective in both 1994 and 1995. General Fund disbursements totaled
$32.68 billion for the 1995-96 fiscal year, a decrease of 2.2% from 1994-95
levels.
The State ended its 1994-95 fiscal year with the General Fund in
balance. The $241 million decline in the fund balance reflects the planned
use of $264 million from the CRF, partially offset by the required deposit
of $23 million to the TSRF. In addition, $278 million was on deposit in the
tax refund reserve account, $250 million of which was deposited to continue
the process of restructuring the State's cash flow as part of the LGAC
program. The closing fund balance of $158 million reflects $157 million in
the TSRF and $1 million in the CRF.
General Fund receipts totaled $33.16 billion, an increase of 2.9% from
1993-94 levels. General Fund disbursements totaled $33.40 billion for the
1994-95 fiscal year, an increase of 4.7% from the previous fiscal year.
Cash-Basis Results--Other Governmental Funds. Activity in the three other
governmental funds has remained relatively stable over the last three fiscal
years ended March 31, 1997, with Federally-funded programs comprising
approximately two-thirds of these funds. The most significant change in the
structure of these funds has been the redirection of a portion of
transportation-related revenues from the General Fund to two new dedicated
funds in the Special Revenue and Capital Projects Fund types. These
revenues are used to support the capital programs of the Department of
Transportation and the Metropolitan Transportation Authority ("MTA").
The Special Revenue Funds are used to account for the proceeds of
specific revenue sources such as federal agents that are legally restricted,
either by the legislative or outside parties, to expenditures for specified
purposes. Disbursements from Special Revenue Funds increased from $24.38
billion to $26.02 billion over the last three years, primarily as a result
of increased costs for the federal share of Medicaid. Other activity
reflected dedication of taxes to a new fund for mass transportation, new
lottery games, and new fees for criminal justice programs. Although
activity in this fund type is expected to comprise approximately 42% of
total governmental funds receipts in the 1997-98 fiscal year, three-quarters
of that activity relates to federally-funded programs. Projected receipts
in this fund type for the 1997-98 fiscal year total $28.22 billion, an
increase of $2.51 billion (9.7%) over the prior year. Projected
disbursements in this fund type total $28.45 billion, an increase of $2.43
billion (9.3%) over 1996-97 levels. Disbursements from federal funds,
primarily the federal share of Medicaid and other social services programs,
are projected to total $21.19 billion in the 1997-98 fiscal year. Remaining
projected spending of $7.26 billion primarily reflects aid to SUNY supported
by tuition and dormitory fees, education aid funded from lottery receipts,
operating aid payments to the MTA funded from the proceeds of dedicated
transportation taxes, and costs of a variety of self-supporting programs
which deliver services financed by user fees.
The Capital Projects Funds are used to finance the acquisition,
construction or rehabilitation of major state capital facilities and to aid
local government units and Agencies in financing capital construction.
Disbursements in the Capital Projects Funds declined from $3.62 billion to
$3.54 billion over the last three years, as spending for miscellaneous
capital programs decreased, partially offset by increases for mental
hygiene, health and environmental programs. The composition of this fund
type's receipts also changed as the dedicated transportation taxes began to
be deposited, general obligation bond proceeds declined substantially,
federal grants remained stable, and reimbursements from public authority
bonds (primarily transportation related) increased. The increase in the
negative fund balance in 1994-95 resulted from delays in reimbursements
caused by delays in the timing of public authority bond sales.
In the 1997-98 fiscal year, activity in these funds is expected to
comprise 5% of total governmental receipts.
Total receipts in this fund type for the 1997-98 fiscal year are
projected at $3.30 billion. Bond and note proceeds are expected to provide
$605 million in other financing sources. Disbursements from this fund type
are projected to be $3.70 billion, an increase of $154 million (4.3%) over
prior-year levels. The Dedicated Highway and Bridge Trust Fund is the
single largest dedicated fund, comprising an estimated $982 million (27%) of
the activity in this fund type. Total spending for capital projects will be
financed through a combination of sources: federal grants (29%), public
authority bond proceeds (31%), general obligation bond proceeds (15%), and
pay-as-you-go revenues (25%).
The Debt Service Funds are used to account for the payment of principal
of, and interest on, long-term debt of the State and to meet commitments
under lease-purchase and other contractual-obligation financing
arrangements.
Activity in the Debt Service Funds reflected increased use of bonds
during the three-year period for improvements to the State's capital
facilities and the continued implementation of the LGAC fiscal reform
program. The increases were moderated by the refunding savings achieved by
the State over the last several years using strict present value savings
criteria. The growth in LGAC debt service was offset by reduced short-term
borrowing costs reflected in the General Fund. This fund type is expected
to comprise 4% of total governmental fund receipts and 4.7% of total
government disbursements in the 1997-98 fiscal year. Receipts in these
funds in excess of debt service requirements may be transferred to the
General Fund and Special Revenue Funds, pursuant to law.
The Debt Service fund type consists of the General Debt Service Fund,
which is supported primarily by tax receipts transferred from the General
Fund, and other funds established to accumulate moneys for the payment of
debt service. In the 1997-998 fiscal year, total disbursements in this fund
type are projected at $3.17 billion, an increase of $641 million or 25.3%,
most of which is explained by increases in the General Fund transfer as
discussed earlier. The projected transfer from the General Fund of $2.07
billion is expected to finance 65% of these payments.
The remaining payments are expected to be financed by pledged revenues,
including $2.03 billion in taxes and $601 million in dedicated fees and
other miscellaneous receipts. After required impoundment for debt service,
$3.77 billion is expected to be transferred to the General Fund and other
funds in support of State operations. The largest transfer-$1.86 billion-is
made to the Special Revenue fund type in support of operations of the mental
hygiene agencies. Another $1.47 billion in excess sales taxes is expected
to be transferred to the General Fund, following payments of projected debt
service on LGAC bonds.
State Borrowing Plan. The State anticipates that its capital programs
will be financed, in part, through borrowings by the State and public
authorities in the 1997-98 fiscal year. The State expects to issue $605
million in general obligation bonds (including $140 million for purposes of
redeeming outstanding BANs) and $140 million in general obligation
commercial paper. The Legislature has also authorized the issuance of $83
million in COPs during the State's 1997-98 fiscal year for equipment
purchases, and approximately $1.8 billion in borrowing by public authorities
pursuant to lease purchase and contractual obligation financing for capital
programs of the state. The projection of the State regarding its borrowings
for the 1997-98 fiscal year may change if circumstances require.
State Agencies. The fiscal stability of the State is related, at least
in part, to the fiscal stability of its localities and various of its
Agencies. Various Agencies have issued bonds secured, in part, by
non-binding statutory provisions for State appropriations to maintain
various debt service reserve funds established for such bonds (commonly
referred to as "moral obligation" provisions).
At September 30, 1996, there were 17 Agencies that had outstanding debt
of $100 million or more. The aggregate outstanding debt, including
refunding bonds, of these 17 Agencies was $75.4 billion as of September 30,
1996. As of March 31, 1997, aggregate Agency debt outstanding as State-
supported debt was $32.8 billion and as State-related was $37.1 billion.
Debt service on the outstanding Agency obligations normally is paid out of
revenues generated by the Agencies' projects or programs, but in recent
years the State has provided special financial assistance, in some cases on
a recurring basis, to certain Agencies for operating and other expenses and
for debt service pursuant to moral obligation indebtedness provisions or
otherwise. Additional assistance is expected to continue to be required in
future years.
Several Agencies have experienced financial difficulties in the past.
Certain Agencies continue to experience financial difficulties requiring
financial assistance from the State. Failure of the State to appropriate
necessary amounts or to take other action to permit certain Agencies to meet
their obligations could result in a default by one or more of such Agencies.
If a default were to occur, it would likely have a significant effect on the
marketability of obligations of the State and the Agencies. These Agencies
are discussed below.
The New York State Housing Finance Agency ("HFA") provides financing
for multifamily housing, State University construction, hospital and nursing
home development, and other programs. In general, HFA depends upon
mortgagors in the housing programs it finances to generate sufficient funds
from rental income, subsidies and other payments to meet their respective
mortgage repayment obligations to HFA, which provide the principal source of
funds for the payment of debt service on HFA bonds, as well as to meet
operating and maintenance costs of the projects financed. From January 1,
1976 through March 31, 1987, the State was called upon to appropriate a
total of $162.8 million to make up deficiencies in the debt service reserve
funds of HFA pursuant to moral obligation provisions. The State has not
been called upon to make such payments since the 1986-87 fiscal year.
UDC has experienced, and expects to continue to experience, financial
difficulties with the housing programs it had undertaken prior to 1975,
because a substantial number of these housing program mortgagors are unable
to make full payments on their mortgage loans. Through a subsidiary, UDC is
currently attempting to increase its rate of collection by accelerating its
program of foreclosures and by entering into settlement agreements. UDC has
been, and will remain, dependent upon the State for appropriations to meet
its operating expenses. The State also has appropriated money to assist in
the curing of a default by UDC on notes which did not contain the State's
moral obligation provision.
The MTA oversees New York City's subway and bus lines by its
affiliates, the New York City Transit Authority and the Manhattan and Bronx
Surface Transit Operating Authority (collectively, the "TA"). Through MTA's
subsidiaries, the Long Island Rail Road Company, the Metro-North Commuter
Railroad Company and the Metropolitan Suburban Bus Authority, the MTA
operates certain commuter rail and bus lines in the New York metropolitan
area. In addition, the Staten Island Rapid Transit Authority, an MTA
subsidiary, operates a rapid transit line on Staten Island. Through its
affiliated agency, the Triborough Bridge and Tunnel Authority (the "TBTA"),
the MTA operates certain toll bridges and tunnels. Because fare revenues
are not sufficient to finance the mass transit portion of these operations,
the MTA has depended and will continue to depend for operating support upon
a system of State, local government and TBTA support and, to the extent
available, Federal operating assistance, including loans, grants and
subsidies. If current revenue projections are not realized and/or operating
expenses exceed current projections, the TA or commuter railroads may be
required to seek additional State assistance, raise fares or take other
actions.
Since 1980, the State has enacted several taxes including a surcharge
on the profits of banks, insurance corporations and general business
corporations doing business in the 12-county region (the "Metropolitan
Transportation Region") served by the MTA and a special .25% regional sales
and use tax that provide additional revenues for mass transit purposes,
including assistance to the MTA. In addition, since 1987, State law has
required that the proceeds of .25% mortgage recording tax paid on certain
mortgages in the Metropolitan Transportation Region be deposited in a
special MTA fund for operating or capital expenses. Further, in 1993, the
State dedicated a portion of certain additional State petroleum business tax
receipts to fund operating or capital assistance to the MTA. For the 1997-
98 State fiscal year, total State assistance to the MTA is estimated at
approximately $1.2 billion, an increase of $76 million over the 1996-97
fiscal year.
In 1981, the State Legislature authorized procedures for the adoption,
approval and amendment of a five-year plan for the capital program designed
to upgrade the performance of the MTA's transportation systems and to
supplement, replace and rehabilitate facilities and equipment, and also
granted certain additional bonding authorization therefor.
State legislation accompanying the 1996-97 adopted State budget
authorized the MTA, TBTA and TA to issue an aggregate of $6.5 billion in
bonds to finance a portion of the $2.17 billion MTA capital plan for the
1995 through 1999 calendar years (the "1995-99 Capital Program"). In July
1997, the Capital Program Review Board approved the 1995-99 Capital Program,
which supersedes the overlapping portion of the MTA's 1992-96 Capital
Program. This is the fourth capital plan since the Legislature authorized
procedures for the adoption, approval and amendment of MTA capital programs
and is designed to upgrade the performance of the MTA's transportation
systems by investing in new rolling stock, maintaining replacement schedules
for existing assets and bringing the MTA system into a state of good repair.
The 1995-99 Capital Program assumes the issuance of an estimated $5.1
billion in bonds under this $6.5 billion aggregate bonding authority. The
remainder of the plan is projected to be financed through assistance from
the State, the Federal government, and the City of New York, and from
various other revenues generated from actions taken by the MTA.
There can be no assurance that such governmental actions will be taken,
that sources currently identified will not be decreased or eliminated, or
that the 1995-1999 Capital Program will not be delayed or reduced. If the
MTA capital program is delayed or reduced because of funding shortfalls or
other factors, ridership and fare revenues may decline, which could, among
other things, impair the MTA's ability to meet its operating expenses
without additional State assistance.
The cities, towns, villages and school districts of the State are
political subdivisions of the State with the powers granted by the State
Constitution and statutes. As the sovereign, the State retains broad powers
and responsibilities with respect to the government, finances and welfare of
these political subdivisions, especially in education and social services.
In recent years the State has been called upon to provide added financial
assistance to certain localities.
Other Localities. Certain localities in addition to the City could
have financial problems leading to requests for additional State assistance
during the last several State fiscal years. The potential impact on the
State of such actions by localities is not included in the projections of
the State receipts and disbursements in the State's 1997-98 fiscal year.
Fiscal difficulties experienced by the City of Yonkers resulted in the
re-establishment of the Financial Control Board for the City of Yonkers by
the State in 1984. That Board is charged with oversight of the fiscal
affairs of Yonkers. Future actions taken by the State to assist Yonkers
could result in increased State expenditures for extraordinary local
assistance.
Beginning in 1990, the City of Troy experienced a series of budgetary
deficits that resulted in the establishment of a Supervisory Board for the
City of Troy in 1994. The Supervisory Board's powers were increased in
1995, when Troy MAC was created to help Troy avoid default on certain
obligations. The legislation creating Troy MAC prohibits the City of Troy
from seeking federal bankruptcy protection while Troy MAC bonds are
outstanding.
Eighteen municipalities received extraordinary assistance during the
1996 legislative session through $50 million in special appropriations
targeted for distressed cities, and that was largely continued in 1997.
Twenty-eight municipalities are scheduled to share the more than $32 million
in targeted unrestricted aid allocated in the 1997-98 budget.
Municipalities and school districts have engaged in substantial
short-term and long-term borrowings. In 1995, the total indebtedness of all
localities in the State, other than the City, was approximately $19 billion.
A small portion (approximately $102.3 million) of this indebtedness
represented borrowing to finance budgetary deficits and was issued pursuant
to enabling State legislation. State law requires the Comptroller to review
and make recommendations concerning the budgets of those local government
units other than the City authorized by State law to issue debt to finance
deficits during the period that such deficit financing is outstanding.
Eighteen localities had outstanding indebtedness for deficit financing at
the close of their fiscal year ending in 1995.
From time to time, Federal expenditure reductions could reduce, or in
some cases eliminate, Federal funding of some local programs and accordingly
might impose substantial increased expenditure requirements on affected
localities to increase local revenues to sustain those expenditures. If the
State, the City or any of the Agencies were to suffer serious financial
difficulties jeopardizing their respective access to the public credit
markets, the marketability of notes and bonds issued by localities within
the State could be adversely affected. Localities also face anticipated and
potential problems resulting from certain pending litigation, judicial
decisions and long-range economic trends. Long-range, potential problems of
declining urban population, increasing expenditures and other economic
trends could adversely affect localities and require increasing State
assistance in the future.
Certain litigation pending against the State or its officers or
employees could have a substantial or long-term adverse effect on State
finances. Among the more significant of these litigations are those that
involve: (i) the validity and fairness of agreements and treaties by which
various Indian tribes transferred title to the State of approximately six
million acres of land in central New York; (ii) certain aspects of the
State's Medicaid rates and regulations, including reimbursements to
providers of mandatory and optional Medicaid services; (iii) contamination
in the Love Canal area of Niagara Falls; (iv) a challenge to the State's
practice of reimbursing certain Office of Mental Health patient-care
expenses with clients' Social Security benefits; (v) a challenge to the
methods by which the State reimburses localities for the administrative
costs of food stamp programs; (vi) a challenge to the State's possession of
certain funds taken pursuant to the State's Abandoned Property law; (vii)
alleged responsibility of State officials to assist in remedying racial
segregation in the City of Yonkers; (viii) an action, in which the State is
a third party defendant, for injunctive or other appropriate relief,
concerning liability for the maintenance of stone groins constructed along
certain areas of Long Island's shoreline; (ix) actions challenging the
constitutionality of legislation enacted during the 1990 legislative session
which changed the actuarial funding methods for determining contributions to
State employee retirement systems; (x) an action against State and City
officials alleging that the present level of shelter allowance for public
assistance recipients is inadequate under statutory standards to maintain
proper housing; (xi) an action challenging legislation enacted in 1990 which
had the effect of deferring certain employer contributions to the State
Teachers' Retirement System and reducing State aid to school districts by a
like amount; (xii) a challenge to the constitutionality of financing
programs of the Thruway Authority authorized by Chapters 166 and 410 of the
Laws of 1991 (described below in this Part); (xiii) a challenge to the
constitutionality of financing programs of the Metropolitan Transportation
Authority and the Thruway Authority authorized by Chapter 56 of the Laws of
1993 (described below in this Part); (xiv) challenges to the delay by the
State Department of Social Services in making two one-week Medicaid payments
to the service providers; (xv) challenges by commercial insurers, employee
welfare benefit plans, and health maintenance organizations to provisions of
Section 2807-c of the Public Health Law which impose 13%, 11% and 9%
surcharges on inpatient hospital bills and a bad debt and charity care
allowance on all hospital bills paid by such entities; (xvi) challenges to
the promulgation of the State's proposed procedure to determine the
eligibility for and nature of home care services for Medicaid recipients;
(xvii) a challenge to State implementation of a program which reduces
Medicaid benefits to certain home-relief recipients; and (xviii) challenges
to the rationality and retroactive application of State regulations
recelebrating nursing home Medicaid rates.
(2) New York City. In the mid-1970s, the City had large accumulated
past deficits and until recently was not able to generate sufficient tax and
other ongoing revenues to cover expenses in each fiscal year. However, the
City has achieved balanced operating results for each of its fiscal years
since 1981 as reported in accordance with the then-applicable GAAP
standards. The City's ability to maintain balanced operating results in
future years is subject to numerous contingencies and future developments.
In 1975, the City became unable to market its securities and entered a
period of extraordinary financial difficulties. In response to this crisis,
the State created MAC to provide financing assistance to the City and also
enacted the New York State Financial Emergency Act for the City of New York
(the "Emergency Act") which, among other things, created the Financial
Control Board (the "Control Board") to oversee the City's financial affairs
and facilitate its return to the public credit markets. The State also
established the Office of the State Deputy Comptroller ("OSDC") to assist
the Control Board in exercising its powers and responsibilities. On June
30, 1986, the Control Board's powers of approval over the City Financial
Plan were suspended pursuant to the Emergency Act. However, the Control
Board, MAC and OSDC continue to exercise various monitoring functions
relating to the City's financial condition. The City prepares and operates
under a four-year financial plan which is submitted annually to the Control
Board for review and which the City periodically updates.
The City's independently audited operating results for each of its
fiscal years from 1981 through 1995 show a General Fund surplus reported in
accordance with GAAP. The City has eliminated the cumulative deficit in its
net General Fund position.
During the 1990 and 1991 fiscal years, as a result of a slowing
economy, the City has experienced significant shortfalls in almost all of
its major tax sources and increases in social services costs, and was
required to take actions to close substantial budget gaps in order to
maintain balanced budgets in accordance with the Financial Plan.
According to a recent OSDC economic report, the City's economy was slow
to recover from the recession and was expected to have experienced a weak
employment situation, and moderate wage and income growth, during the 1995-
96 period. Also, Financial Plan reports of OSDC, the Control Board, and the
City Comptroller have variously indicated that many of the City's balanced
budgets have been accomplished, in part, through the use of non-recurring
resource, tax and fee increases, personnel reductions and additional State
assistance; that the City has not yet brought its long-term expenditures in
line with recurring revenues; that the City's proposed gap-closing programs,
if implemented, would narrow future budget gaps; that these programs tend to
rely heavily on actions outside the direct control of the City; and that the
City is therefore likely to continue to face futures projected budget gaps
requiring the City to reduce expenditures and/or increase revenues.
According to the most recent staff reports of OSDC, the Control Board and
the City Comptroller during the four-year period covered by the current
Financial Plan, the City is relying on obtaining substantial resources from
initiatives needing approval and cooperation of its municipal labor unions,
Covered Organizations, and City Council, as well as the State and Federal
governments, among others, and there can be no assurance that such approval
can be obtained.
The City requires certain amounts of financing for seasonal and capital
spending purposes. The City issued $1.75 billion of notes for seasonal
financing purposes during the 1994 fiscal year. The City's capital
financing program projects long-term financing requirements of approximately
$17 billion for the City's fiscal years 1995 through 1998 for the
construction and rehabilitation of the City's infrastructure and other fixed
assets. The major capital requirement include expenditures for the City's
water supply system, and waste disposal systems, roads, bridges, mass
transit, schools and housing. In addition, the City and the Municipal Water
Finance Authority issued about $1.8 billion in refunding bonds in the 1994
fiscal year.
State Economic and Demographic Trends. The State historically has been
one of the wealthiest states in the nation. For decades, however, the State
has grown more slowly than the nation as a whole, gradually eroding its
relative economic position. Statewide, urban centers have experienced
significant changes involving migration of the more affluent to the suburbs
and an influx of generally less affluent residents. Regionally, the older
Northeast cities have suffered because of the relative success that the
South and the West have had in attracting people and business. The City has
also had to face greater competition as other major cities have developed
financial and business capabilities which make them less dependent on the
specialized services traditionally available almost exclusively in the City.
During the 1982-83 recession, overall economic activity in the State
declined less than that of the nation as a whole. However, in the calendar
years 1984 through 1991, the State's rate of economic expansion was somewhat
slower than that of the nation. In the 1990-91 recession, the economy of
the State, and that of the rest of the Northeast, was more heavily damaged
than that of the nation as a whole and has been slower to recover. The
total employment growth rate in the State has been below the national
average since 1984. The unemployment rate in the State dipped below the
national rate in the second half of 1981 and remained lower until 1991;
since then, it has been higher. According to data published by the U.S.
Bureau of Economic Analysis, during the past ten years, total personal
income in the State rose slightly faster than the national average only from
1986 through 1988.
At the state level, moderate growth is projected to continue in 1998
and 1999 for employment, wages, and personal income, although the growth
rates will lessen gradually during the course of the two years. Personal
income is estimated to grow by 5.4% in 1997, fueled in part by a continued
large increase in financial sector bonus payment, and is projected to grow
4.7% in 1998 and 4.4% in 1998. Increase in bonus payments at year-end 1998
are projected to be modest, a substantial change from the rate of increase
of the law few years. Overall employment growth is expected to continue at
a modest reflecting the slowing growth in the national economy, continued
spending restraint in government, and restructuring in the health care,
social service, and banking sectors.
APPENDIX B
Description of S&P, Moody's & Fitch ratings:
S&P
Municipal Bond Ratings
An S&P municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable, and will include:
(1) likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; (2) nature and provisions of the obligation; and
(3) protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A
Principal and interest payments on bonds in this category are regarded
as safe. This rating describes the third strongest capacity for payment of
debt service. It differs from the two higher ratings because:
General Obligation Bonds -- There is some weakness in the local
economic base, in debt burden, in the balance between revenues and
expenditures, or in quality of management. Under certain adverse
circumstances, any one such weakness might impair the ability of the issuer
to meet debt obligations at some future date.
Revenue Bonds -- Debt service coverage is good, but not exceptional.
Stability of the pledged revenues could show some variations because of
increased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent. Management performance
appears adequate.
BBB
Of the investment grade, this is the lowest.
General Obligation Bonds -- Under certain adverse conditions, several
of the above factors could contribute to a lesser capacity for payment of
debt service. The difference between "A" and "BBB" rating is that the
latter shows more than one fundamental weakness, or one very substantial
fundamental weakness, whereas the former shows only one deficiency among the
factors considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the pledged
revenues could show substantial variations, with the revenue flow possibly
being subject to erosion over time. Basic security provisions are no more
than adequate. Management performance could be stronger.
BB, B, CCC, CC, C
Debt rated BB, B, CCC, CC or C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and
repay principal. BB indicates the least degree of speculation and C the
highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
BB
Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payment.
B
Debt rated B has a greater vulnerability to default but presently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC
Debt rated CCC has a current identifiable vulnerability to default, and
is dependent upon favorable business, financial and economic conditions to
meet timely payments of interest and repayment of principal. In the event
of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal.
CC
The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.
C
The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating.
D
Bonds rated D are in default, and payment of interest and/or repayment
of principal is in arrears.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by
the addition of a plus or minus designation to show relative standing within
the major ratings categories.
Municipal Note Ratings
SP-1
The issuers of these municipal notes exhibit very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics are given a plus sign (+) designation.
SP-2
The issuers of these municipal notes exhibit satisfactory capacity to
pay principal and interest.
SP-3
The issuers of these municipal notes exhibit speculative capacity to
pay principal and interest.
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. Issues assigned an A rating are regarded as having the
greatest capacity for timely payment. Issues in this category are
delineated with the numbers 1, 2 and 3 to indicate the relative degree of
safety.
A-1
This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus sign (+)
designation.
A-2
Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues
designated A-1.
A-3
Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations.
Moody's
Municipal Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally 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.
Ba
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca
Bonds which are rated Ca present obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
For bond issues in the health care, higher education and other not-for-
profit sectors, Moody's provides numerical modifiers 1, 2 and 3 to the
generic rating categories Aa through B; the modifier 1 indicates that the
issue ranks in the higher end of the generic rating category; the modifier 2
indicates that the issue is in the mid-range of the generic rating category;
and the modifier 3 indicates that the issue is in the low end of the generic
rating category. For all other municipal bonds, Moody's provides either a
generic rating or a rating with the numerical modifier 1 for the rating
categories Aa through B, with the latter indicating that the issue ranks in
the higher end of the rating category.
Municipal Note Ratings
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade (MIG). Such ratings recognize
the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower and short-term cyclical elements are
critical in short-term ratings, while other factors of major importance in
bond risk, long-term secular trends for example, may be less important over
the short run.
A short-term rating may also be assigned on an issue having a demand
feature. Such ratings will be designated as VMIG or, if the demand feature
is not rated, as NR. Short-term ratings on issues with demand features are
differentiated by the use of the VMIG symbol to reflect such characteristics
as payment upon periodic demand rather than fixed maturity dates and payment
relying on external liquidity. Additionally, investors should be alert to
the fact that the source of payment may be limited to the external liquidity
with no or limited legal recourse to the issuer in the event the demand is
not met.
Moody's short-term ratings are designated Moody's Investment Grade as
MIG 1 or VMIG 1 through MIG 4 or VMIG 4. As the name implies, when Moody's
assigns a MIG or VMIG rating, all categories define an investment grade
situation.
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/VMIG 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 Ratings
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Issuers of P-1 paper must have a superior capacity for
repayment of short-term promissory obligations, and ordinarily will be
evidenced by leading market positions in well established industries, high
rates of return on funds employed, conservative capitalization structures
with moderate reliance on debt and ample asset protection, broad margins in
earnings coverage of fixed financial charges and high internal cash
generation, and well established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers (or related supporting institutions) rated Prime-2 (P-2) have a
strong capacity for repayment of short-term promissory obligations. This
ordinarily will be evidenced by many of the characteristics cited above but
to a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
Issuers (or related supporting institutions) rated Prime-3 (P-3) have
an acceptable capacity for repayment of short-term promissory obligations.
The effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes
in the level of debt protection measurements and the requirements for
relatively high financial leverage. Adequate alternate liquidity is
maintained.
Fitch
Municipal Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability to
meet the obligations of a specific debt issue or class of debt. The
ratings take into consideration special features of the issue, its
relationship to other obligations of the issuer, the current financial
condition and operative performance of the issuer and of any guarantor, as
well as the political and economic environment that might affect the
issuer's future financial strength and credit quality.
AAA
Bonds rated AAA are 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 rated AA are 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 rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and 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 rated BBB are considered to be investment grade and of
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 an 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.
BB
Bonds rated BB are considered speculative. The obligor's ability to
pay interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt service
requirements.
B
Bonds rated B are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC
Bonds rated CCC have certain identifiable characteristics, which, if
not remedied, may lead to default. The ability to meet obligations requires
an advantageous business and economic environment.
CC
Bonds rated CC are minimally protected. Default payment of interest
and/or principal seems probable over time.
C
Bonds rated C are in imminent default in payment of interest or
principal.
DDD, DD and D
Bonds rated DDD, DD and D are in actual or imminent default of interest
and/or principal payments. Such bonds are extremely speculative and should
be valued on the basis of their ultimate recovery value in liquidation or
reorganization of the obligor. DDD represents the highest potential for
recovery on these bonds and D represents the lowest potential for recovery.
Plus (+) and minus (-) signs are used with a rating symbol to indicate
the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA category covering 12-36 months
or the DDD, DD or D categories.
Short-Term 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 carrying this rating have a satisfactory
degree of assurance for timely payments, but the margin of safety is not as
great as the F-1+ and F-1 categories.
DREYFUS NEW YORK TAX EXEMPT BOND FUND, INC.
PART C. OTHER INFORMATION
_________________________
Item 23. Exhibits.
_______ _____________________________________________________
(a) Registrant's Articles of Incorporation are incorporated by
reference to Exhibit (1)(a) of Post-Effective Amendment No. 21 to
the Registration Statement on Form N-1A, filed on September 27,
1996. Articles of Amendment are incorporated by reference to
Exhibit (1)(b) of Post-Effective Amendment No. 21 to the
Registration Statement on Form N-1A, filed on September 27, 1996.
(b) Registrant's By-Laws, as amended are incorporated by reference to
Exhibit (2) of Post-Effective Amendment No. 21 to the
Registration Statement on Form N-1A, filed on September 27, 1996.
Registrant's Specimen share certificate is incorporated
by reference to Exhibit (4) of Pre-Effective Amendment No. 1 to
the Registration Statement on Form N-1A, filed on September 26,
1990.
(d) Management Agreement is incorporated by reference to
Exhibit (5) of Post-Effective Amendment No. 20 to the
Registration Statement on Form N-1A, filed on August 31, 1995.
(e) Distribution Agreement is incorporated by reference to Exhibit
(6) of Post-Effective Amendment No. 20 to the Registration
Statement on Form N-1A, filed on August 31, 1995.
(f) Registrant's Custody Agreement with The Bank of New York,
as amended is incorporated by reference to Exhibit (8)(a) of
Post-Effective Amendment No. 21 to the Registration Statement on
Form N-1A, filed on September 27, 1996. Registrant's Forms of
Sub-Custodian Agreements are incorporated by reference to
Exhibit (8)(b) of Post-Effective Amendment No. 21 to the
Registration Statement on Form N-1A, filed on September 27,
1996.
(i) Registrant's Opinion and Consent of Stroock & Stroock & Lavan is
incorporated by reference to Exhibit (10) of Post-Effective
Amendment No. 21 to the Registration Statement on Form N-1A,
filed on September 27, 1996.
(j) Registrant's Consent of Ernst & Young LLP, Independent Auditors.
(m) Shareholder Services Plan is incorporated by reference to Exhibit
(9) of Post-Effective Amendment No. 20 to the Registration
Statement on Form N-1A, filed on August 31, 1995.
Item 24. Persons Controlled by or under Common Control with
Registrants
Not Applicable.
Item 25. Indemnification
Reference is made to Article SEVENTH of the Registrant's Articles
of Incorporation and Articles of Amendment, as amended,
incorporated by reference to Exhibit 1 of Post-Effective Amendment
No. 21 to the Registration Statement on Form N-1A, filed on
September 27, 1996. The application of these provisions is limited
by Article VIII of the Fund's By-Laws, incorporated by reference to
Exhibit 2 of Post-Effective Amendment No. 21 to the Registration
Statement on Form N-1A, filed on September 27, 1996 and by the
following undertaking set forth in the rules promulgated by the
Securities and Exchange Commission. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public
policy as expressed in such Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection
with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed
in such Act and will be governed by the final adjudication of
such issue.
Reference is also made to the Distribution
Agreement filed as Exhibit (6) of Post-Effective
Amendment 20 to the Registration Statement under the
Securities Act of 1933 on August 31, 1995.
Item 26. Business and Other Connections of the Fund's 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, manager and distributor
for sponsored investment companies registered under the
Investment Company Act of 1940 and as an investment adviser to
institutional and individual accounts. Dreyfus also serves as
sub-investment adviser to and/or administrator of other
investment companies. Dreyfus Service Corporation, a wholly-
owned subsidiary of Dreyfus, serves primarily as distributor
of shares of investment companies sponsored by Dreyfus and of
other investment companies for which Dreyfus acts as sub-
investment adviser and administrator. Dreyfus Management,
Inc., another wholly-owned subsidiary, provides investment
management services to various pension plans, institutions and
individuals.
<TABLE>
<CAPTION>
ITEM 26. Business and Other Connections of Investment Adviser (continued)
Officers and Directors of Investment Adviser
<S> <C> <C> <C>
Name and Position
With Dreyfus Other Businesses Position Held Dates
Christopher M. Condron Franklin Portfolio Associates, LLC* Director 1/97 - Present
Chairman of the Board and
Chief Executive Officer
TBCAM Holdings, Inc.* Director 10/97 - Present
President 10/97 - 6/98
Chairman 10/97 - 6/98
The Boston Company Director 1/98 - Present
Asset Management, LLC* Chairman 1/98 - 6/98
President 1/98 - 6/98
The Boston Company President 9/95 - 1/98
Asset Management, Inc.* Chairman 4/95 - 1/98
Pareto Partners Partner Representative 11/95 - 5/97
271 Regent Street
London, England W1R 8PP
Franklin Portfolio Holdings, Inc.* Director 1/97 - Present
Certus Asset Advisors Corp.** Director 6/95 -Present
Mellon Capital Management Director 5/95 -Present
Corporation***
Mellon Bond Associates, LLP+ Executive Committee 1/98 - Present
Member
Mellon Bond Associates+ Trustee 5/95 -1/98
Mellon Equity Associates, LLP+ Executive Committee 1/98 - Present
Member
Mellon Equity Associates+ Trustee 5/95 - 1/98
Boston Safe Advisors, Inc.* Director 5/95 - Present
President 5/95 - Present
Mellon Bank, N.A. + Director 1/99 - Present
Chief Operating Officer 3/98 - Present
President 3/98 - Present
Vice Chairman 11/94 - 3/98
Mellon Bank Corporation+ Chief Operating Officer 1/99 - Present
President 1/99 - Present
Director 1/98 - Present
Vice Chairman 11/94 - 1/99
Christopher M. Condron The Boston Company, Inc.* Vice Chairman 1/94 - Present
Chairman and Chief Director 5/93 - Present
Executive Officer
(Continued) Laurel Capital Advisors, LLP+ Exec. Committee 1/98 - 8/98
Member
Laurel Capital Advisors+ Trustee 10/93 - 1/98
Boston Safe Deposit and Trust Director 5/93 -Present
Company*
The Boston Company Financial President 6/89 - Present
Strategies, Inc. * Director 6/89 - Present
Mandell L. Berman Self-Employed Real Estate Consultant, 11/74 - Present
Director 29100 Northwestern Highway Residential Builder and
Suite 370 Private Investor
Southfield, MI 48034
Burton C. Borgelt DeVlieg Bullard, Inc. Director 1/93 - Present
Director 1 Gorham Island
Westport, CT 06880
Mellon Bank Corporation+ Director 6/91 - Present
Mellon Bank, N.A. + Director 6/91 - Present
Dentsply International, Inc. Director 2/81 - Present
570 West College Avenue
York, PA
Quill Corporation Director 3/93 - Present
Lincolnshire, IL
Stephen E. Canter Dreyfus Investment Chairman of the Board 1/97 - Present
President, Chief Operating Advisors, Inc.++ Director 5/95 - Present
Officer, Chief Investment President 5/95 - Present
Officer, and Director
Newton Management Limited Director 2/99 - Present
London, England
Mellon Bond Associates, LLP+ Executive Committee 1/99 - Present
Member
Mellon Equity Associates, LLP+ Executive Committee 1/99 - Present
Member
Franklin Portfolio Associates, LLC* Director 2/99 - Present
Franklin Portfolio Holdings, Inc.* Director 2/99 - Present
The Boston Company Asset Director 2/99 - Present
Management, LLC*
TBCAM Holdings, Inc.* Director 2/99 - Present
Mellon Capital Management Director 1/99 - Present
Corporation***
Stephen E. Canter Founders Asset Management, LLC Member, Board of 12/97 - Present
President, Chief Operating 2930 East Third Ave. Managers
Officer, Chief Investment Denver, CO 80206 Acting Chief Executive 7/98 - 12/98
Officer, and Director Officer
(Continued)
The Dreyfus Trust Company+++ Director 6/ 95 - Present
Thomas F. Eggers Dreyfus Service Corporation++ Executive Vice President 4/96 - Present
Vice Chairman - Institutional Director 9/96 - Present
and Director
Founders Asset Management, LLC Member, Board of 2/99 - Present
2930 East Third Avenue Managers
Denver, CO 80206
Steven G. Elliott Mellon Bank Corporation+ Senior Vice Chairman 1/99 - Present
Director Chief Financial Officer 1/90 - Present
Vice Chairman 6/92 - 1/99
Treasurer 1/90 - 5/98
Mellon Bank, N.A.+ Senior Vice Chairman 3/98 - Present
Vice Chairman 6/92 - 3/98
Chief Financial Officer 1/90 - Present
Mellon EFT Services Corporation Director 10/98 - Present
Mellon Bank Center, 8th Floor
1735 Market Street
Philadelphia, PA 19103
Mellon Financial Services Director 1/96 - Present
Corporation #1 Vice President 1/96 - Present
Mellon Bank Center, 8th Floor
1735 Market Street
Philadelphia, PA 19103
Boston Group Holdings, Inc.* Vice President 5/93 - Present
APT Holdings Corporation Treasurer 12/87 - Present
Pike Creek Operations Center
4500 New Linden Hill Road
Wilmington, DE 19808
Allomon Corporation Director 12/87 - Present
Two Mellon Bank Center
Pittsburgh, PA 15259
Collection Services Corporation Controller 10/90 - 2/99
500 Grant Street Director 9/88 - 2/99
Pittsburgh, PA 15258 Vice President 9/88 - 2/99
Treasurer 9/88 - 2/99
Mellon Financial Company+ Principal Exec. Officer 1/88 - Present
Chief Financial Officer 8/87 - Present
Director 8/87 - Present
President 8/87 - Present
Mellon Overseas Investments Director 4/88 - Present
Corporation+ Chairman 7/89 - 11/97
President 4/88 - 11/97
Chief Executive Officer 4/88 - 11/97
Mellon International Investment Director 9/89 - 8/97
Corporation+
Steven G. Elliott Mellon Financial Services Treasurer 12/87 - Present
Director (Continued) Corporation # 5+
Mellon Financial Markets, Inc.+ Director 1/99 - Present
Mellon Financial Services Director 1/99 - Present
Corporation #17
Fort Lee, NJ
Mellon Mortgage Company Director 1/99 - Present
Houston, TX
Mellon Ventures, Inc. + Director 1/99 - Present
Lawrence S. Kash Dreyfus Investment Director 4/97 - Present
Vice Chairman Advisors, Inc.++
And Director
Dreyfus Brokerage Services, Inc. Chairman 11/97 - Present
401 North Maple Ave. Chief Executive Officer 11/97 - Present
Beverly Hills, CA
Dreyfus Service Corporation++ Director 1/95 - 2/99
President 9/96 - 3/99
Dreyfus Precious Metals, Inc.++ + Director 3/96 - 12/98
President 10/96 - 12/98
Dreyfus Service Director 12/94 - Present
Organization, Inc.++ President 1/97 - Present
Seven Six Seven Agency, Inc. ++ Director 1/97 - Present
Dreyfus Insurance Agency of Chairman 5/97 - Present
Massachusetts, Inc.++++ President 5/97 - Present
Director 5/97 - Present
The Dreyfus Trust Company+++ Chairman 1/97 - 1/99
President 2/97 - 1/99
Chief Executive Officer 2/97 - 1/99
Director 12/94 - Present
The Dreyfus Consumer Credit Chairman 5/97 - Present
Corporation++ President 5/97 - Present
Director 12/94 - Present
Founders Asset Management, LLC Member, Board of 12/97 - Present
2930 East Third Avenue Managers
Denver, CO. 80206
The Boston Company Advisors, Chairman 12/95 - Present
Inc. Chief Executive Officer 12/95 - Present
Wilmington, DE President 12/95 - Present
The Boston Company, Inc.* Director 5/93 - Present
President 5/93 - Present
Mellon Bank, N.A.+ Executive Vice President 6/92 - Present
Laurel Capital Advisors, LLP+ Chairman 1/98 - 8/98
Executive Committee 1/98 - 8/98
Member
Chief Executive Officer 1/98 - 8/98
President 1/98 - 8/98
Lawrence S. Kash Laurel Capital Advisors, Inc. + Trustee 12/91 - 1/98
Vice Chairman Chairman 9/93 - 1/98
And Director (Continued) President and CEO 12/91 - 1/98
Boston Group Holdings, Inc.* Director 5/93 - Present
President 5/93 - Present
Martin G. McGuinn Mellon Bank Corporation+ Chairman 1/99 - Present
Director Chief Executive Officer 1/99 - Present
Director 1/98 - Present
Vice Chairman 1/90 - 1/99
Mellon Bank, N. A. + Chairman 3/98 - Present
Chief Executive Officer 3/98 - Present
Director 1/98 - Present
Vice Chairman 1/90 - 3/98
Mellon Leasing Corporation+ Vice Chairman 12/96 - Present
Mellon Bank (DE) National Director 4/89 - 12/98
Association
Wilmington, DE
Mellon Bank (MD) National Director 1/96 - 4/98
Association
Rockville, Maryland
Mellon Financial Vice President 9/86 - 10/97
Corporation (MD)
Rockville, Maryland
J. David Officer Dreyfus Service Corporation++ Executive Vice President 5/98 - Present
Vice Chairman Director 3/99 - Present
And Director
Dreyfus Insurance Agency of Director 5/98 - Present
Massachusetts, Inc.++++
Seven Six Seven Agency, Inc.++ Director 10/98 - Present
Mellon Residential Funding Corp. + Director 4/97 - Present
Mellon Trust of Florida, N.A. Director 8/97 - Present
2875 Northeast 191st Street
North Miami Beach, FL 33180
Mellon Bank, NA+ Executive Vice President 7/96 - Present
The Boston Company, Inc.* Vice Chairman 1/97 - Present
Director 7/96 - Present
Mellon Preferred Capital Director 11/96 - Present
Corporation*
RECO, Inc.* President 11/96 - Present
Director 11/96 - Present
The Boston Company Financial President 8/96 - Present
Services, Inc.* Director 8/96 - Present
Boston Safe Deposit and Trust Director 7/96 - Present
Company* President 7/96 - 1/99
J. David Officer Mellon Trust of New York Director 6/96 - Present
Vice Chairman and 1301 Avenue of the Americas
Director (Continued) New York, NY 10019
Mellon Trust of California Director 6/96 - Present
400 South Hope Street
Suite 400
Los Angeles, CA 90071
Mellon Bank, N.A.+ Executive Vice President 2/94 - Present
Mellon United National Bank Director 3/98 - Present
1399 SW 1st Ave., Suite 400
Miami, Florida
Boston Group Holdings, Inc.* Director 12/97 - Present
Dreyfus Financial Services Corp. + Director 9/96 - Present
Dreyfus Investment Services Director 4/96 - Present
Corporation+
Richard W. Sabo Founders Asset Management LLC President 12/98 - Present
Director 2930 East Third Avenue Chief Executive Officer 12/98 - Present
Denver, CO. 80206
Prudential Securities Senior Vice President 07/91 - 11/98
New York, NY Regional Director 07/91 - 11/98
Richard F. Syron American Stock Exchange Chairman 4/94 - Present
Director 86 Trinity Place Chief Executive Officer 4/94 - Present
New York, NY 10006
Ronald P. O'Hanley Franklin Portfolio Holdings, Inc.* Director 3/97 - Present
Vice Chairman
TBCAM Holdings, Inc.* Chairman 6/98 - Present
Director 10/97 - Present
The Boston Company Asset Chairman 6/98 - Present
Management, LLC* Director 1/98 - 6/98
The Boston Company Asset Director 2/97 - 12/97
Management, Inc. *
Boston Safe Advisors, Inc.* Chairman 6/97 - Present
Director 2/97 - Present
Pareto Partners Partner Representative 5/97 - Present
271 Regent Street
London, England W1R 8PP
Mellon Capital Management Director 5/97 -Present
Corporation***
Certus Asset Advisors Corp.** Director 2/97 - Present
Mellon Bond Associates+ Trustee 2/97 - Present
Chairman 2/97 - Present
Mellon Equity Associates+ Trustee 2/97 - Present
Chairman 2/97 - Present
Mellon-France Corporation+ Director 3/97 - Present
Ronald P. O'Hanley Laurel Capital Advisors+ Trustee 3/97 - Present
Vice Chairman (Continued)
Mark N. Jacobs Dreyfus Investment Director 4/97 - Present
General Counsel, Advisors, Inc.++ Secretary 10/77 - 7/98
Vice President, and
Secretary The Dreyfus Trust Company+++ Director 3/96 - Present
The TruePenny Corporation++ President 10/98 - Present
Director 3/96 - Present
Dreyfus Service Director 3/97 - Present
Organization, Inc.++
William H. Maresca The Dreyfus Trust Company+++ Director 3/97 - Present
Controller
Dreyfus Service Corporation++ Chief Financial Officer 12/98 - Present
Dreyfus Consumer Credit Corp. ++ Treasurer 10/98 -Present
Dreyfus Investment Treasurer 10/98 - Present
Advisors, Inc. ++
Dreyfus-Lincoln, Inc. Vice President 10/98 - Present
4500 New Linden Hill Road
Wilmington, DE 19808
The TruePenny Corporation++ Vice President 10/98 - Present
Dreyfus Precious Metals, Inc. +++ Treasurer 10/98 - 12/98
The Trotwood Corporation++ Vice President 10/98 - Present
Trotwood Hunters Corporation++ Vice President 10/98 - Present
Trotwood Hunters Site A Corp. ++ Vice President 10/98 - Present
Dreyfus Transfer, Inc. Chief Financial Officer 5/98 - Present
One American Express Plaza,
Providence, RI 02903
Dreyfus Service Assistant Treasurer 3/93 - Present
Organization, Inc.++
Dreyfus Insurance Agency of Assistant Treasurer 5/98 - Present
Massachusetts, Inc.++++
William T. Sandalls, Jr. Dreyfus Transfer, Inc. Chairman 2/97 - Present
Executive Vice President One American Express Plaza,
Providence, RI 02903
Dreyfus Service Corporation++ Director 1/96 - Present
Executive Vice President 2/97 - Present
Chief Financial Officer 2/97-12/98
Dreyfus Investment Director 1/96 - Present
Advisors, Inc.++ Treasurer 1/96 - 10/98
William T. Sandalls, Jr. Dreyfus-Lincoln, Inc. Director 12/96 - Present
Executive Vice President 4500 New Linden Hill Road President 1/97 - Present
(Continued) Wilmington, DE 19808
Seven Six Seven Agency, Inc.++ Director 1/96 - 10/98
Treasurer 10/96 - 10/98
The Dreyfus Consumer Director 1/96 - Present
Credit Corp.++ Vice President 1/96 - Present
Treasurer 1/97 - 10/98
Dreyfus Partnership President 1/97 - 6/97
Management, Inc.++ Director 1/96 - 6/97
Dreyfus Service Organization, Director 1/96 - 6/97
Inc.++ Executive Vice President 1/96 - 6/97
Treasurer 10/96- Present
Dreyfus Insurance Agency of Director 5/97 - Present
Massachusetts, Inc.++++ Treasurer 5/97- Present
Executive Vice President 5/97 - Present
Diane P. Durnin Dreyfus Service Corporation++ Senior Vice President - 5/95 - 3/99
Vice President - Product Marketing and Advertising
Development Division
Patrice M. Kozlowski None
Vice President - Corporate
Communications
Mary Beth Leibig None
Vice President -
Human Resources
Theodore A. Schachar Dreyfus Service Corporation++ Vice President -Tax 10/96 - Present
Vice President - Tax
Dreyfus Investment Advisors, Inc.++ Vice President - Tax 10/96 - Present
Dreyfus Precious Metals, Inc. +++ Vice President - Tax 10/96 - 12/98
Dreyfus Service Organization, Inc.++ Vice President - Tax 10/96 - Present
Wendy Strutt None
Vice President
Richard Terres None
Vice President
Andrew S. Wasser Mellon Bank Corporation+ Vice President 1/95 - Present
Vice-President -
Information Systems
James Bitetto The TruePenny Corporation++ Secretary 9/98 - Present
Assistant Secretary
Dreyfus Service Corporation++ Assistant Secretary 8/98 - Present
Dreyfus Investment Assistant Secretary 7/98 - Present
Advisors, Inc.++
Dreyfus Service Assistant Secretary 7/98 - Present
Organization, Inc.++
Steven F. Newman Dreyfus Transfer, Inc. Vice President 2/97 - Present
Assistant Secretary One American Express Plaza Director 2/97 - Present
Providence, RI 02903 Secretary 2/97 - Present
Dreyfus Service Secretary 7/98 - Present
Organization, Inc.++ Assistant Secretary 5/98 - 7/98
_______________________________
* The address of the business so indicated is One Boston Place, Boston, Massachusetts, 02108.
** The address of the business so indicated is One Bush Street, Suite 450, San Francisco, California 94104.
*** The address of the business so indicated is 595 Market Street, Suite 3000, San Francisco, California 94105.
+ The address of the business so indicated is One Mellon Bank Center, Pittsburgh, Pennsylvania 15258.
++ The address of the business so indicated is 200 Park Avenue, New York, New York 10166.
+++ The address of the business so indicated is 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144.
++++ The address of the business so indicated is 53 State Street, Boston, Massachusetts 02109.
</TABLE>
Item 27. Principal Underwriters
________ ______________________
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or
exclusive distributor:
1) Comstock Partners Funds, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC GNMA Fund
7) Dreyfus BASIC Money Market Fund, Inc.
8) Dreyfus BASIC Municipal Fund, Inc.
9) Dreyfus BASIC U.S. Government Money Market Fund
10) Dreyfus California Intermediate Municipal Bond Fund
11) Dreyfus California Tax Exempt Bond Fund, Inc.
12) Dreyfus California Tax Exempt Money Market Fund
13) Dreyfus Cash Management
14) Dreyfus Cash Management Plus, Inc.
15) Dreyfus Connecticut Intermediate Municipal Bond Fund
16) Dreyfus Connecticut Municipal Money Market Fund, Inc.
17) Dreyfus Florida Intermediate Municipal Bond Fund
18) Dreyfus Florida Municipal Money Market Fund
19) The Dreyfus Fund Incorporated
20) Dreyfus Global Bond Fund, Inc.
21) Dreyfus Global Growth Fund
22) Dreyfus GNMA Fund, Inc.
23) Dreyfus Government Cash Management Funds
24) Dreyfus Growth and Income Fund, Inc.
25) Dreyfus Growth and Value Funds, Inc.
26) Dreyfus Growth Opportunity Fund, Inc.
27) Dreyfus Debt and Equity Funds
28) Dreyfus Index Funds, Inc.
29) Dreyfus Institutional Money Market Fund
30) Dreyfus Institutional Preferred Money Market Fund
31) Dreyfus Institutional Short Term Treasury Fund
32) Dreyfus Insured Municipal Bond Fund, Inc.
33) Dreyfus Intermediate Municipal Bond Fund, Inc.
34) Dreyfus International Funds, Inc.
35) Dreyfus Investment Grade Bond Funds, Inc.
36) Dreyfus Investment Portfolios
37) The Dreyfus/Laurel Funds, Inc.
38) The Dreyfus/Laurel Funds Trust
39) The Dreyfus/Laurel Tax-Free Municipal Funds
40) Dreyfus LifeTime Portfolios, Inc.
41) Dreyfus Liquid Assets, Inc.
42) Dreyfus Massachusetts Intermediate Municipal Bond Fund
43) Dreyfus Massachusetts Municipal Money Market Fund
44) Dreyfus Massachusetts Tax Exempt Bond Fund
45) Dreyfus MidCap Index Fund
46) Dreyfus Money Market Instruments, Inc.
47) Dreyfus Municipal Bond Fund, Inc.
48) Dreyfus Municipal Cash Management Plus
49) Dreyfus Municipal Money Market Fund, Inc.
50) Dreyfus New Jersey Intermediate Municipal Bond Fund
51) Dreyfus New Jersey Municipal Bond Fund, Inc.
52) Dreyfus New Jersey Municipal Money Market Fund, Inc.
53) Dreyfus New Leaders Fund, Inc.
54) Dreyfus New York Insured Tax Exempt Bond Fund
55) Dreyfus New York Municipal Cash Management
56) Dreyfus New York Tax Exempt Bond Fund, Inc.
57) Dreyfus New York Tax Exempt Intermediate Bond Fund
58) Dreyfus New York Tax Exempt Money Market Fund
59) Dreyfus U.S. Treasury Intermediate Term Fund
60) Dreyfus U.S. Treasury Long Term Fund
61) Dreyfus 100% U.S. Treasury Money Market Fund
62) Dreyfus U.S. Treasury Short Term Fund
63) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
64) Dreyfus Pennsylvania Municipal Money Market Fund
65) Dreyfus Premier California Municipal Bond Fund
66) Dreyfus Premier Equity Funds, Inc.
67) Dreyfus Premier International Funds, Inc.
68) Dreyfus Premier GNMA Fund
69) Dreyfus Premier Worldwide Growth Fund, Inc.
70) Dreyfus Premier Municipal Bond Fund
71) Dreyfus Premier New York Municipal Bond Fund
72) Dreyfus Premier State Municipal Bond Fund
73) Dreyfus Premier Value Equity Funds
74) Dreyfus Short-Intermediate Government Fund
75) Dreyfus Short-Intermediate Municipal Bond Fund
76) The Dreyfus Socially Responsible Growth Fund, Inc.
77) Dreyfus Stock Index Fund, Inc.
78) Dreyfus Tax Exempt Cash Management
79) The Dreyfus Third Century Fund, Inc.
80) Dreyfus Treasury Cash Management
81) Dreyfus Treasury Prime Cash Management
82) Dreyfus Variable Investment Fund
83) Dreyfus Worldwide Dollar Money Market Fund, Inc.
84) Founders Funds, Inc.
85) General California Municipal Bond Fund, Inc.
86) General California Municipal Money Market Fund
87) General Government Securities Money Market Fund, Inc.
88) General Money Market Fund, Inc.
89) General Municipal Bond Fund, Inc.
90) General Municipal Money Market Funds, Inc.
91) General New York Municipal Bond Fund, Inc.
92) General New York Municipal Money Market Fund
(b)
Positions and
Name and principal Positions and offices with offices with
business address the Distributor Registrant
__________________ ___________________________ _____________
Marie E. Connolly+ Director, President, Chief President and
Executive Officer and Chief Treasurer
Compliance Officer
Joseph F. Tower, III+ Director, Senior Vice President, Vice President
Treasurer and Chief Financial and Assistant
Officer Treasurer
Mary A. Nelson+ Vice President Vice President
and Assistant
Treasurer
Jean M. O'Leary+ Assistant Vice President, None
Assistant Secretary and
Assistant Clerk
William J. Nutt+ Chairman of the Board None
Stephanie D. Pierce++ Vice President Vice President,
Assistant Secretary
and Assistant
Treasurer
Patrick W. McKeon+ Vice President None
Joseph A. Vignone+ Vice President None
________________________________
+ Principal business address is 60 State Street, Boston, Massachusetts 02109.
++ Principal business address is 200 Park Avenue, New York, New York 10166.
Item 28. Location of Accounts and Records
_______ ________________________________
1. First Data Investor Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671
2. The Bank of New York
90 Washington Street
New York, New York 10286
3. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02940-9671
4. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 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 duly caused this Amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, and State of New York on
the 28th day of July, 1999.
DREYFUS NEW YORK TAX EXEMPT BOND FUND, INC.
BY: /s/Marie E. Connolly*
__________________________________________
Marie E. Connolly, PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Signatures Title Date
__________________________ __________________________ _______
/s/Marie E. Connolly* President and Treasurer 7/28/99
______________________________ (Principal Executive, Financial
Marie E. Connolly and Accounting Officer)
/s/Joseph Tower* Vice President and Assistant 7/28/99
Joseph Tower Treasurer (Principal Accounting
Officer)
/s/Joseph S. DiMartino* Chairman of the Board 7/28/99
_____________________________
Joseph S. DiMartino
/s/David W. Burke* Board member 7/28/99
______________________________
David W. Burke
/s/Samuel Chase* Board member 7/28/99
_____________________________
Samuel Chase
/s/Gordon J. Davis* Board member 7/28/99
_____________________________
Gordon J. Davis
/s/Joni Evans* Board member 7/28/99
_____________________________
Joni Evans
/s/Arnold S. Hiatt* Board member 7/28/99
_____________________________
Arnold S. Hiatt
/s/Burton N. Wallack* Board member 7/28/99
_____________________________
Burton N. Wallack
BY: /s/Stephanie Pierce*
Stephanie Pierce,
Attorney-in-Fact
INDEX OF EXHIBITS
Exhibit Item No. Exhibit
23 (j) Consent of Ernst & Young LLP, Independent
Auditors
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Counsel and Independent Auditors" and to the use of
our report dated July 1, 1999, which is incorporated by reference, in
this Registration Statement (Form N-1A No. 2-83429) of Dreyfus New York
Tax Exempt Bond Fund, Inc.
ERNST & YOUNG LLP
New York, New York
July 26, 1999
