DREYFUS CONNECTICUT INTERMEDIATE MUNICIPAL BOND FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
AUGUST 1, 1996
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus
of Dreyfus Connecticut Intermediate Municipal Bond Fund (the "Fund"), dated
August 1, 1996 as it may be revised from time to time. To obtain a copy of
the Fund's Prospectus, please write to the Fund at 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144, or call the following numbers:
Call Toll Free 1-800-645-6561
In New York City--Call 1-718-895-1206
Outside the U.S. and Canada--Call 516-794-5452
The Dreyfus Corporation (the "Manager") serves as the Fund's
investment adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies. . . . . . . . . . . B-2
Management of the Fund. . . . . . . . . . . . . . . . . . . . . . B-12
Management Agreement. . . . . . . . . . . . . . . . . . . . . . . B-16
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . B-18
Shareholder Services Plan . . . . . . . . . . . . . . . . . . . . B-19
Redemption of Shares. . . . . . . . . . . . . . . . . . . . . . . B-19
Shareholder Services. . . . . . . . . . . . . . . . . . . . . . . B-22
Determination of Net Asset Value. . . . . . . . . . . . . . . . . B-24
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . B-25
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . . B-25
Performance Information . . . . . . . . . . . . . . . . . . . . . B-27
Information About the Fund. . . . . . . . . . . . . . . . . . . . B-28
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors. . . . . . . . . . . . . . . . B-28
Appendix A. . . . . . . . . . . . . . . . . . . . . . . . . . . . B-30
Appendix B. . . . . . . . . . . . . . . . . . . . . . . . . . . . B-33
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . B-42
Report of Independent Auditors. . . . . . . . . . . . . . . . . . B-54
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the sections in the Fund's Prospectus entitled
"Description of the Fund" and "Appendix."
Portfolio Securities
The average distribution of investments (at value) in Municipal
Obligations (including notes) by ratings for the fiscal year ended March
31, 1996, computed on a monthly basis, was as follows:
Fitch Investors Moody's Investors Standard & Poor's
Service, L.P. Service, Inc. Ratings Group Percent
("Fitch") or ("Moody's") or ("S&P") of Value
AAA Aaa AAA 34.6%
AA Aa AA 35.0%
A A A 17.5%
BBB Baa BBB 6.9%
F-1+/F-1 VMIG1/MIG 1, P-1 SP-1+/SP-1, A-1 .6%
Not Rated Not Rated Not Rated 5.4%*
100.0%
- -------------------
* Included in the Not Rated category are securities comprising 5.4% of
the 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: A/A (.1%), Baa/BBB (5.0%) and Ba/BB (.3%).
Municipal Obligations. The term "Municipal Obligations" generally
includes debt obligations issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities
such as airports, bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer works. Other public
purposes for which Municipal Obligations may be issued include refunding
outstanding obligations, obtaining funds for general operating expenses and
lending such funds to other public institutions and facilities. In
addition, certain types of industrial development bonds are issued by or on
behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated
housing facilities, sports facilities, convention or trade show facilities,
airport, mass transit, industrial, port or parking facilities, air or water
pollution control facilities and certain local facilities for water supply,
gas, electricity, or sewage or solid waste disposal; the interest paid on
such obligations may be exempt from Federal income tax, although current
tax laws place substantial limitations on the size of such issues. Such
obligations are considered to be Municipal Obligations if the interest paid
thereon qualifies as exempt from Federal income tax in the opinion of bond
counsel to the issuer. There are, of course, variations in the security of
Municipal Obligations, both within a particular classification and between
classifications.
Floating and variable rate demand notes and bonds 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. The issuer of such obligations ordinarily has a
corresponding right, after a given period, to prepay in its discretion the
outstanding principal amount of the obligations plus accrued interest upon
a specified number of days' notice to the holders thereof. The interest
rate on a floating rate demand obligation is based on a known lending rate,
such as a bank's prime rate, and is adjusted automatically each time such
rate is adjusted. The interest rate on a variable rate demand obligation
is adjusted automatically at specified intervals.
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.
The imposition of the Fund's management fee, as well as other operating
expenses, will have the effect of reducing the yield to investors.
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 staff of the Securities
and Exchange Commission currently considers certain lease obligations to be
illiquid. Determination as to the liquidity of such securities is made in
accordance with guidelines established by the Fund's Board. Pursuant to
such guidelines, the Board has directed the Manager to monitor carefully
the 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
the 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 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, the 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. The Fund will not invest more than 15% of the
value of its net assets in lease obligations that are illiquid and in other
illiquid securities. See "Investment Restriction No. 11" below.
The Fund will purchase tender option bonds only when it 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 the 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.
Ratings of Municipal Obligations. Subsequent to its purchase by the
Fund, an issue of rated Municipal Obligations may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require the sale of such Municipal Obligations by the
Fund, but the Manager will consider such event in determining whether the
Fund should continue to hold the Municipal Obligations. To the extent that
the ratings given 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 Fund will attempt to use comparable ratings as standards for
its investments in accordance with the investment policies contained in the
Fund's 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.
Illiquid Securities. Where a substantial market of qualified
institutional buyers develops for certain restricted securities purchased
by the Fund pursuant to Rule 144A under the Securities Act of 1933, as
amended, the Fund intends to treat such securities as liquid securities in
accordance with procedures approved by the Fund's Board. Because it is not
possible to predict with assurance how the market for restricted securities
pursuant to Rule 144A will develop, the Fund's Board has directed the
Manager to monitor carefully the Fund's investments in such securities with
particular regard to trading activity, availability of reliable price
information and other relevant information. To the extent that, for a
period of time, qualified institutional buyers cease purchasing restricted
securities pursuant to Rule 144A, the Fund's investing in such securities
may have the effect of increasing the level of illiquidity in the Fund's
portfolio during such period.
Taxable Investments. Securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities include U.S. Treasury
securities, which differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government
agencies and instrumentalities are supported by the full faith and credit
of the U.S. Treasury; others by the right of the issuer to borrow from the
U.S. Treasury; others by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; and others
only by the credit of the agency or instrumentality. These securities bear
fixed, floating or variable rates of interest. While the U.S. Government
provides financial support to such U.S. Government-sponsored agencies or
instrumentalities, no assurance can be given that it will always do so,
since it is not so obligated by law.
Commercial paper consists of short-term, unsecured promissory notes
issued to finance short-term credit needs.
Certificates of deposit are negotiable certificates representing the
obligation of a bank to repay funds deposited with it for a specified
period of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven
days) at a stated interest rate. Investments in time deposits generally
are limited to London branches of domestic banks that have total assets in
excess of one billion dollars. Time deposits which may be held by the Fund
will not benefit from insurance from the Bank Insurance Fund or the Savings
Association Insurance Fund administered by the Federal Deposit Insurance
Corporation.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments
reflect the obligation both of the bank and of the drawer to pay the face
amount of the instrument upon maturity. Other short-term bank obligations
may include uninsured, direct obligations bearing fixed, floating or
variable interest rates.
In a repurchase agreement, the Fund buys, and the seller agrees to
repurchase, a security at a mutually agreed upon time and price (usually
within seven days). The repurchase agreement thereby determines the yield
during the purchaser's holding period, while the seller's obligation to
repurchase is secured by the value of the underlying security. The Fund's
custodian or sub-custodian will have custody of, and will hold in a
segregated account, securities acquired by the Fund under a repurchase
agreement. Repurchase agreements are considered by the staff of the
Securities and Exchange Commission to be loans by the Fund. In an attempt
to reduce the risk of incurring a loss on a repurchase agreement, the Fund
will enter into repurchase agreements only with domestic banks with total
assets in excess of $1 billion, or primary government securities dealers
reporting to the Federal Reserve Bank of New York, with respect to
securities of the type in which the Fund may invest, and will require that
additional securities be deposited with it if the value of the securities
purchased should decrease below resale price. Repurchase agreements could
involve risks in the event of a default or insolvency of the other party to
the agreement, including possible delays or restrictions upon the Fund's
ability to dispose of the underlying securities.
Management Policies
Derivatives. The Fund may invest in Derivatives (as defined in the
Prospectus) 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 a 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 the 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.
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 payment system (i.e.,
variation margin requirements) 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. The Fund may enter into futures
contracts in U.S. domestic markets, such as the Chicago Board of Trade.
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
Fund intends 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 the Fund 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 transaction
being hedged and the price movements of the futures contract. For example,
if the 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, the 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 cash or high
quality money market instruments in connection with its commodities
transactions in an amount generally equal to the value of the underlying
commodity. The segregation of such assets will have the effect of limiting
the Fund's ability otherwise to invest those assets.
Specific Futures Transactions. The 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. The Fund may purchase and write (i.e., sell) call or
put options with respect to specific securities. 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 cash or other securities. A put option
written by the Fund is covered when, among other things, cash or liquid
securities having a value equal to or greater than the exercise price of
the option are placed in a segregated account with the Fund's custodian 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 the 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 by the Fund of options 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 Fund may incur losses.
Future Developments. The 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 Fund 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, the Fund will provide
appropriate disclosure in its Prospectus or Statement of Additional
Information.
Lending Portfolio Securities. In connection with its securities
lending transactions, the 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.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned:
(1) the Fund must receive at least 100% cash collateral from the borrower;
(2) the borrower must increase such collateral whenever the market value of
the securities rises above the level of such collateral; (3) the Fund must
be able to terminate the loan at any time; (4) the Fund must receive
reasonable interest on the loan, as well as any interest or other
distributions payable on the loaned securities, and any increase in market
value; and (5) the Fund may pay only reasonable custodian fees in
connection with the loan.
Short-Selling. Until the Fund replaces a borrowed security in
connection with a short sale, the Fund will: (a) maintain a segregated
account, containing cash or U.S. Government securities, at such a level
that the amount deposited in the account plus the amount deposited with the
broker as collateral always equals the current value of the security sold
short; or (b) otherwise cover its short position.
Forward 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
Investing in Connecticut Municipal Obligations. Investors should
consider carefully the special risks inherent in the Fund's investment in
Connecticut Municipal Obligations. Connecticut's economy relies in part on
activities that may be adversely affected by cyclical change, and recent
declines in defense spending have had an impact on unemployment levels.
Connecticut reported deficits from General Fund operations for the fiscal
years 1988 through 1991. Together with the deficit carried forward from
the State's 1990 fiscal year, the total General Fund deficit for the 1991
fiscal year was $965.7 million. The total deficit was funded by the
issuance of General Obligation Economic Recovery Notes which are scheduled
to be retired in fiscal years 1996-97 and 1997-98. The State Comptroller's
annual reports for the fiscal years ended June 30, 1992, 1993, 1994 and
1995 reflected General Fund operating surpluses on a budgetary basis of
$110 million, $113.5 million, $19.7 million and $80.5 million,
respectively. As a result of recurring budgetary problems, S&P downgraded
the State's general obligation bonds from AA+ to AA in April 1990 and to
AA- in September 1991. Fitch downgraded the State's general obligation
bonds from AA+ to AA in March 1995. Moody's rates Connecticut's bonds Aa.
Investors should review "Appendix A" which more fully sets forth these and
other risk factors.
Lower Rated Bonds. The Fund is permitted to invest in securities
rated Ba or lower by Moody's or BB or lower by S&P and Fitch and as low as
the lowest rating assigned by Moody's, S&P or Fitch. Such bonds, though
higher yielding, are characterized by risk. See "Description of the Fund-
- -Investment Considerations and Risks--Lower Rated Bonds" in the Prospectus
for a discussion of certain risks and "Appendix B" in this Statement of
Additional Information for a general description of Moody's, S&P and Fitch
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. The Fund will rely on the
Manager's judgment, analysis and experience in evaluating the
creditworthiness of an issuer.
Investors 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 S&P, Moody's and
Fitch to be 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, the 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 the Fund's ability to dispose of particular issues when
necessary to meet the Fund's 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 the Fund to obtain accurate market
quotations for purposes of valuing the Fund's 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 could disrupt severely the market for
such securities and may have an adverse impact on the value of such
securities. In addition, it is likely that any such economic downturn
could adversely affect the ability of the issuers of such securities to
repay principal and pay interest thereon and increase the incidence of
default for such securities.
The Fund may acquire these bonds during an initial offering. Such
securities may involve special risks because they are new issues. The Fund
has no arrangement with any persons 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 in which the Fund may invest up to
5% of its net assets. Zero coupon bonds carry an additional risk in that,
unlike bonds which pay interest throughout the period to maturity, the 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 "Dividends, Distributions and Taxes."
Investment Restrictions
The Fund has adopted investment restrictions numbered 1 through 6 as
fundamental policies, which cannot be changed without approval by the
holders of a majority (as defined in the Investment Company Act of 1940, as
amended (the "1940 Act")) of the Fund's outstanding voting shares.
Investment restrictions numbered 7 through 12 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. Borrow money, except to the extent permitted under the 1940 Act
(which currently limits borrowings to no more than 33 1/3% of the Fund's
total assets). For purposes of this investment restriction, the entry into
options, futures contracts, including those relating to indices, and
options on futures contracts or indices shall not constitute borrowing.
2. 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, or prevent the Fund from
purchasing and selling futures contracts, including those relating to
indices, and options on futures contracts or indices.
3. 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.
4. 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.
5. 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, obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
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 Restriction Nos. 1, 2, 8 and 10 may be deemed to give rise to
a senior security.
7. 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 Fund's Prospectus.
8. Purchase securities on margin, but the Fund may make margin
deposits in connection with transactions in futures, including those
relating to indices, and options on futures or indices.
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 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 arrangements with respect to futures contracts, including those
related to indices, and options on futures contracts or indices, and
collateral arrangements with respect to initial or variation margin for
futures contracts, including those relating 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 Fund's Prospectus, and floating and variable rate
demand obligations as to which the Fund cannot exercise the demand feature
described in the Fund's 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.
For purposes of Investment Restriction No. 5, 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.
The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Fund shares in certain states.
Should the Fund determine that a commitment is no longer in the best
interests of the Fund and its shareholders, the Fund reserves the right to
revoke the commitment by terminating the sale of Fund shares in the state
involved.
MANAGEMENT OF THE FUND
Board members and officers of the Fund, together with information as
to their principal business occupations during at least the last five
years, are shown below. Each Board member who is deemed to be an
"interested person" of the Fund, as defined in the 1940 Act, is indicated
by an asterisk.
Board Members of the Fund
*JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman
of the Board of various funds in the Dreyfus Family of Funds. He is
also Chairman of the Board of Directors of Noel Group, Inc., a venture
capital company; and a director of The Muscular Dystrophy Association,
HealthPlan Services Corporation, Belding Heminway Company, Inc., a
manufacturer and marketer of industrial threads, specialty yarns, home
furnishings and fabrics, Curtis Industries, Inc., a national
distributor of security products, chemicals, and automotive and other
hardware, and Staffing Resources, Inc. 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 52 years old and his address is 200
Park Avenue, New York, New York 10166.
*DAVID W. BURKE, Board Member. Chairman of the Broadcasting Board of
Governors, an independent board within the United States Information
Agency, since August 1995. From August 1994 to August 1995, 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 October 1990, Mr. Burke was involved in the management of
national television news, as Vice President and Executive Vice
President at ABC News, and subsequently as President of CBS News. He
is 60 years old and his address is Box 654, Eastham, Massachusetts
02642.
DIANE DUNST, Board Member. Since January 1992, President of Diane Dunst
Promotion, Inc., a full service promotion agency. From January 1989
to January 1992, Director of Promotion Services, Lear's Magazine.
From 1985 to January 1989, she was Sales Promotion Manager of ELLE
Magazine. She is 56 years old and her address is 1172 Park Avenue,
New York, New York 10128.
ROSALIND GERSTEN JACOBS, Board Member. Director of Merchandise and
Marketing for Corporate Property Investors, a real estate investment
company. From 1974 to 1976, she was owner and manager of a
merchandise and marketing consulting firm. Prior to 1974, she was a
Vice President of Macy's, New York. She is 71 years old and her
address is c/o Corporate Property Investors, 305 East 47th Street, New
York, New York 10017.
JAY I. MELTZER, Board Member. Physician engaged in private practice
specializing in internal medicine. He is also a member of the
Advisory Board of the Section of Society and Medicine, College of
Physicians and Surgeons, Columbia University and a Clinical Professor
of Medicine, Department of Medicine, Columbia University College of
Physicians and Surgeons. He is 68 years old and his address is 903
Park Avenue, New York, New York 10021.
DANIEL ROSE, Board Member. President and Chief Executive Officer of Rose
Associates, Inc., a New York based real estate development and
management firm. He is also Chairman of the Housing Committee of The
Real Estate Board of New York, Inc., and a Board member of Corporate
Property Investors, a real estate investment company. Since July
1994, he has served as the Vice Chairman of the U.S. Government
sponsored Baltic-American Enterprise Fund, Inc. He is 66 years old
and his address is c/o Rose Associates, Inc., 200 Madison Avenue, New
York, New York 10016.
WARREN B. RUDMAN, Board Member. Since January 1993, Partner in the law
firm of Paul, Weiss, Rifkind, Wharton & Garrison. From January 1981
to January 1993, Mr. Rudman served as a United States Senator from the
State of New Hampshire. Since May 1995, Mr. Rudman has served as a
director of Collins & Aikman Corporation, a manufacturing company.
Since January 1993, Mr. Rudman has also served as Vice Chairman of the
Federal Reserve Bank of Boston and as a director of Chubb Corporation
and Raytheon Company. Since 1988, Mr. Rudman has also served as a
trustee of Boston College and since 1986 as a member of the Senior
Advisory Board of the Institute of Politics of the Kennedy School of
Government at Harvard University. He also serves as Deputy Chairman
of the President's Foreign Intelligence Advisory Board. He is 65
years old and his address is c/o Paul, Weiss, Rifkind, Wharton &
Garrison, 1615 L Street, N.W., Washington, D.C. 20036.
SANDER VANOCUR, Board Member. Since January 1992, President of Old Owl
Communications, a full-service communications firm. Since November
1989, Mr. Vanocur has served as a Director of the Damon Runyon-Walter
Winchell Cancer Research Fund. Since January 1994, Mr. Vanocur has
served as a Visiting Professional Scholar at the Freedom Forum First
Amendment Center at Vanderbilt University. From June 1986 to December
1991, he was a Senior Correspondent of ABC News and, from October 1977
to December 31, 1991, he was Anchor of the ABC News program "Business
World," a weekly business program on the ABC television network. He
is 68 years old and his address is 2928 P Street, N.W., Washington,
D.C. 20007.
For so long as the Fund's plan described in the section captioned
"Shareholder Services Plan" remains in effect, the Board members of the
Fund who are not "interested persons" of the Fund, as defined in the 1940
Act, will be selected and nominated by the Board members who are not
"interested persons" of the Fund.
Ordinarily, meetings of shareholders for the purpose of electing Board
members will not be held unless and until such time as less than a majority
of the Board members holding office have been elected by shareholders, at
which time the Board members then in office will call a shareholders'
meeting for the election of Board members. Under the 1940 Act,
shareholders of record of not less than two-thirds of the outstanding
shares of the Fund may remove a Board member through a declaration in
writing or by vote cast in person or by proxy at a meeting called for that
purpose. The Board members are required to call a meeting of shareholders
for the purpose of voting upon the question of removal of any such Board
member when requested in writing to do so by the shareholders of record of
not less than 10% of the Fund's outstanding shares.
The 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 a 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 the Fund for the fiscal year
ended March 31, 1996, and by all other funds in the Dreyfus Family of Funds
for which such person is 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, 1995, were as follows:
Total
Compensation From
Aggregate Fund and Fund
Name of Board Compensation from Complex Paid to
Member Fund* Board Member
David W. Burke $4,000 $253,654 (52)
Joseph S. DiMartino $5,000 $448,618 (93)
Diane Dunst $4,000 $ 39,000 (10)
Rosalind Gersten Jacobs $4,000 $ 92,500 (20)
Jay I. Meltzer $4,000 $ 37,500 (10)
Daniel Rose $4,000 $ 80,250 (22)
Warren B. Rudman $4,000 $ 85,500 (18)
Sander Vanocur $4,000 $ 79,750 (22)
_____________________
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $740 for all Board members as a group.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President, Chief Executive
Officer and a director of the Distributor and an officer of other
investment companies advised or administered by the Manager. From
December 1991 to July 1994, she was President and Chief Compliance
Officer of Funds Distributor, Inc., the ultimate parent of which is
Boston Institutional Group, Inc. Prior to December 1991, she served
as Vice President and Controller, and later as Senior Vice President,
of The Boston Company Advisors, Inc. She is 38 years old.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President and
General Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From February 1992
to July 1994, he served as Counsel for The Boston Company Advisors,
Inc. From August 1990 to February 1992, he was employed as an
Associate at Ropes & Gray. He is 32 years old.
ELIZABETH BACHMAN, Vice President and Assistant Secretary. Assistant Vice
President of the Distributor and an officer of other investment
companies advised or administered by the Manager. She is 26 years
old.
JOSEPH S. TOWER, III, Assistant Treasurer. Senior Vice President,
Treasurer and Chief Financial Officer of the Distributor 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 34 years old.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
The Fund's Board members and officers, as a group, owned less than 1%
of the Fund's shares outstanding on July 15, 1996.
MANAGEMENT AGREEMENT
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Management
of the Fund."
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") dated August 24, 1994 with the Fund, which 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 outstanding voting securities
of the Fund, provided that in either event the continuance also is approved
by a majority of the Board members who are not "interested persons" (as
defined in the 1940 Act) of the Fund or the Manager, by vote cast in person
at a meeting called for the purpose of voting on such approval. The
Agreement was approved by shareholders on August 3, 1994, and was last
approved by the 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 May 8, 1996. 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 the Fund's shares, or, on not less than 90 days' notice, by the Manager.
The Agreement will terminate automatically in the event of its assignment
(as defined in the 1940 Act).
The following persons are officers and/or directors of the Manager:
Howard Stein, Chairman of the Board and Chief Executive Officer; W. Keith
Smith, Vice Chairman of the Board; Christopher M. Condron, President, Chief
Operating Officer and a director; Stephen E. Canter, Vice Chairman, Chief
Investment Officer and a director; Lawrence S. Kash, Vice Chairman-
Distribution and a director; Philip L. Toia, Vice Chairman-Operations and
Administration and a director; William T. Sandalls, Jr., Senior Vice
President and Chief Financial Officer; Elie M. Genadry, Vice President-
Institutional Sales; William F. Glavin, Jr., Vice President-Corporate
Development; Mark N. Jacobs, Vice President, General Counsel and Secretary;
Patrice M. Kozlowski, Vice President-Corporate Communications; Mary Beth
Leibig, Vice President-Human Resources; Jeffrey N. Nachman, Vice President-
Mutual Fund Accounting; Andrew S. Wasser, Vice President-Information
Systems; Elvira Oslapas, Assistant Secretary; and Mandell L. Berman, Frank
V. Cahouet, Alvin E. Friedman, Lawrence M. Greene and Julian M. Smerling,
directors.
The Manager manages the 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
the Fund with portfolio managers who are authorized by the Board to execute
purchases and sales of securities. The Fund's portfolio managers are
Richard J. Moynihan, Joseph A. Darcy, A. Paul Disdier, Douglas Gaylor,
Karen M. Hand, Stephen C. Kris, Jill C. Shaffro, L. Lawrence Troutman,
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 the Fund as well as
for other funds advised by the Manager. All purchases and sales are
reported for the Board's review at the meeting subsequent to such
transactions.
The Manager maintains office facilities on behalf of the 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 also may make such advertising and
promotional expenditures, using its own resources, as it from time to time
deems appropriate.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager. The
expenses borne by the Fund include: organizational costs, taxes, interest,
interest on securities sold short, 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 for distribution to existing shareholders, and any
extraordinary expenses.
As compensation for the Manager's services, the Fund has agreed to pay
the Manager a monthly management fee at the annual rate of .60 of 1% of the
value of the Fund's average daily net assets. All fees and expenses are
accrued daily and deducted before the declaration of dividends to
shareholders. For the fiscal year ended March 31, 1994, no management fee
was paid by the Fund pursuant to undertakings by the Manager. For the
fiscal years ended March 31, 1995 and 1996, the management fees payable by
the Fund amounted to $1,505,619 and $797,196, respectively, which amounts
were reduced by $685,192 and $173,101, respectively, pursuant to
undertakings then in effect, resulting in net fees paid to the Manager of
$820,427 in fiscal 1995 and $624,095 in fiscal 1996.
The Manager has agreed that if in any fiscal year the aggregate
expenses of the Fund, 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 the expense limitation of any state having jurisdiction over the
Fund, the Fund may deduct from the payment to be made to the Manager under
the Agreement, or the Manager will bear, such excess expense to the extent
required by state law. 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 is not subject to
reduction as the value of the Fund's net assets increases.
PURCHASE OF SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Shares."
The Distributor. The Distributor serves as the Fund's distributor on
a best efforts basis pursuant to an agreement which is renewable annually.
The Distributor also acts as distributor for the other funds in the Dreyfus
Family of Funds and for certain other investment companies. In some
states, certain financial institutions effecting transactions in Fund
shares may be required to register as dealers pursuant to state law.
Service Charges. There is no sales or service charge by the Fund or
the Distributor, although investment dealers, banks and other institutions
may make reasonable charges to investors for their services. The services
provided and the applicable fees are established by each dealer or other
institution acting independently of the Fund. The Fund has been given to
understand that these fees may be charged for customer services including,
but not limited to, same-day investment of client funds; same-day access to
client funds; advice to customers about the status of their accounts, yield
currently being paid or income earned to date; provision of periodic
account statements showing security and money market positions; other
services available from the dealer, bank or other institution; and
assistance with inquiries related to their investment. Any such fees will
be deducted monthly from the investor's account, which on smaller accounts
could constitute a substantial portion of distributions. Small, inactive,
long-term accounts involving monthly service charges may not be in the best
interest of investors. Investors should be aware that they may purchase
shares of the Fund directly from the Fund without imposition of any
maintenance or service charges, other than those already described herein.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 p.m., New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent") and the New York Stock
Exchange are open for business will be credited to the shareholder's Fund
account on the next bank business day following such purchase order.
Purchase orders made after 4:00 p.m., New York time, on any business day
the Transfer Agent and the New York Stock Exchange are open for business or
orders made on Saturday, Sunday or any Federal 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 in
the Account Application or Shareholder Services Form on file. If the
proceeds of a particular redemption are to be wired to an account at any
other bank, the request must be in writing and signature-guaranteed. See
"Redemption of Shares--Dreyfus TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account with a
minimum investment of $100 without filing a new Account Application during
the calendar year the account is closed or during the following calendar
year, provided the information on the old Account Application is still
applicable.
SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Shareholders Services Plan."
The Fund has adopted a Shareholder Services Plan (the "Plan") pursuant
to which the Fund reimburses the Dreyfus Service Corporation for certain
allocated expenses of providing personal services and/or maintaining
shareholder accounts. 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 Plan, and the
purposes for which such expenditures were incurred, must be made to the
Fund's Board for its review. In addition, the Plan provides that material
amendments of the Plan must be approved 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 Plan by vote
cast in person at a meeting called for the purpose of considering such
amendments. The Plan is subject to annual approval by such vote of the
Board members cast in person at a meeting called for the purpose of voting
on the Plan. The Plan is terminable at any time by vote of a majority of
the Board members who are not "interested persons" and have no direct or
indirect financial interest in the operation of the Plan.
For the fiscal year ended March 31, 1996, $77,459 was chargeable to
the Fund under the Plan.
REDEMPTION OF SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to
Redeem Shares."
Check Redemption Privilege. An investor may indicate on the Account
Application, Shareholder Services Form or by later written request that the
Fund provide Redemption Checks ("Checks") drawn on the investor's Fund
account. Checks will be sent only to the registered owner(s) of the
account and only to the address of record. The Account Application,
Shareholder Services Form or later written request must be manually signed
by the registered owner(s). Checks may be made payable to the order of any
person in an amount of $500 or more. When a Check is presented to the
Transfer Agent for payment, the Transfer Agent, as the investor's agent,
will cause the Fund to redeem a sufficient number of shares in the
investor's account to cover the amount of the Check. Dividends are earned
until the Check clears. After clearance, a copy of the Check will be
returned to the investor. Investors generally will be subject to the same
rules and regulations that apply to checking accounts, although election of
this Privilege creates only a shareholder-transfer agent relationship with
the Transfer Agent.
If the amount of the Check is greater than the value of the shares in
an investor's account, the Check will be returned marked insufficient
funds. Checks should not be used to close an account.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor, and reasonably believed by the Transfer Agent to be genuine.
Ordinarily, the Fund will initiate payment for shares redeemed pursuant to
this Privilege on the next business day after receipt if the Transfer Agent
receives the redemption request in proper form. Redemption proceeds
($1,000 minimum) will be transferred by Federal Reserve wire only to the
commercial bank account specified by the investor on the Account
Application or Shareholder Services Form, or to a correspondent bank if the
investor's bank is not a member of the Federal Reserve System. Fees
ordinarily are imposed by such bank and usually are borne by the investor.
Immediate notification by the correspondent bank to the investor's bank is
necessary to avoid a delay in crediting the funds to the investor's bank
account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at 1-800-654-
7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive wire
redemption proceeds, a written request must be sent to the Transfer Agent.
This must be signed by each shareholder, with each signature guaranteed as
described below under "Share Certificates; Signatures."
Dreyfus TeleTransfer Privilege. Investors should be aware that if
they have selected the Dreyfus TeleTransfer Privilege, any request for a
wire redemption will be effected as a Dreyfus TeleTransfer transaction
through the Automated Clearing House ("ACH") system unless more prompt
transmittal specifically is requested. Redemption proceeds will be on
deposit in the investor's account at an ACH member bank ordinarily two
business days after receipt of the redemption request. See "Purchase of
Shares--Dreyfus TeleTransfer Privilege."
Share Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the 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. The 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. In the case of requests for redemption in excess of such
amount, the Fund's Board reserves the right to make payments in whole or in
part in securities (which may include non-marketable securities) or other
assets in case of an emergency or any time a cash distribution would impair
the liquidity of the Fund to the detriment of the existing shareholders.
In such event, the securities would be valued in the same manner as the
Fund's portfolio is valued. If the recipient sold such securities,
brokerage charges might be incurred.
Suspension of Redemptions. 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 the 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 the Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Shareholder
Services."
Fund Exchanges. Shares of other funds purchased by exchange will be
purchased on the basis of relative net asset value per share as follows:
A. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a
sales load and additional shares acquired through reinvestment of
dividends or distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect
to any reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their
account number.
To request an exchange, an investor must give exchange instructions to
the Transfer Agent in writing or by telephone. The ability to issue
exchange instructions by telephone is given to all Fund shareholders
automatically, unless the investor checks the applicable "NO" box on the
Account Application, indicating that the investor specifically refuses this
Privilege. By using the Telephone Exchange Privilege, the investor
authorizes the Transfer Agent to act on telephonic instructions from any
person representing himself or herself to be the investor, and reasonably
believed by the Transfer Agent to be genuine. Telephone exchanges may be
subject to limitations as to the amount involved or the number of telephone
exchanges permitted. Shares issued in certificate form are not eligible
for telephone exchange.
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.
For Dreyfus-sponsored Keogh Plans, IRAs and IRAs set up under a Simplified
Employee Pension Plan ("SEP-IRAs") with only one participant, the minimum
initial investment is $750. To exchange shares held in corporate plans,
403(b)(7) Plans and SEP-IRAs with more than one participant, the minimum
initial investment is $100 if the plan has at least $2,500 invested among
the funds in the Dreyfus Family of Funds. To exchange shares held in
personal retirement plans, the shares exchanged must have a current value
of at least $100.
Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of the Fund, shares
of another fund in the Dreyfus Family of Funds. This Privilege is
available only for existing accounts. Shares will be exchanged on the
basis of relative net asset value as described above under "Fund
Exchanges." Enrollment in or modification or cancellation of this
Privilege is effective three business days following notification by the
investor. An investor will be notified if his account falls below the
amount designated to be exchanged under this Privilege. In this case, an
investor's account will fall to zero unless additional investments are made
in excess of the designated amount prior to the next Auto-Exchange
transaction. Shares held under 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. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchanges service or
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends
and distributions, the investor's shares will be reduced and eventually may
be depleted. Automatic Withdrawal may be terminated at any time by the
investor, the Fund or the Transfer Agent. Shares for which certificates
have been issued may not be redeemed through the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest automatically their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of another fund in the
Dreyfus Family of Funds of which the investor is 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 that
are offered without a sales load.
B. Dividends and distributions paid by a fund which does not charge
a sales load may be invested in shares of other funds sold with a
sales load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges a sales
load may be invested in shares of other funds sold with a sales
load (referred to herein as "Offered Shares"), provided that, if
the sales load applicable to the Offered Shares exceeds the
maximum sales load charged by the fund from which dividends or
distributions are being swept, without giving effect to any
reduced loads, the difference will be deducted.
D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be imposed
upon redemption of such shares.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Shares."
Valuation of Portfolio Securities. The Fund's investments are valued
by an independent pricing service (the "Service") approved by the 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
Fund's Board. Expenses and fees, including the management fee (reduced by
the expense limitation, if any), are accrued daily and are taken into
account for the purpose of determining the net asset value of Fund 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,
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 the 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 the Fund to date.
Transactions are allocated to various dealers by the Fund's portfolio
managers 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.
Research services furnished by brokers through which the 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 the 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
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Dividends,
Distributions and Taxes."
The Internal Revenue Code of 1986, as amended (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 shall 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 should be a return
on the investment in an economic sense although taxable as stated in
"Dividends, Distributions and Taxes" in the Prospectus.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain or loss. However, all or a portion of any gains
realized from the sale or other disposition of certain market discount
bonds will be treated as ordinary income under Section 1276 of the Code.
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 in the manner 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, overrides or modifies the provisions of
Section 1256 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 to 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." If no election is made, to the extent the straddle
rules apply to positions established by the Fund, losses realized by the
Fund will be deferred to the extent of unrealized gain in any offsetting
positions. Moreover, as a result of the straddle and conversion
transaction rules, short-term capital loss on straddle positions may be
recharacterized as long-term capital loss, and long-term capital gain may
be recharacterized as short-term capital gain or ordinary income.
Investment by the Fund 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, the 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 such 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
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Performance
Information."
For the 30-day period ended March 31, 1996, the Fund's yield was
4.12%. The Fund's yield reflects a waiver of a portion of the management
fee, without which the Fund's yield for the 30-day period ended March 31,
1996 would have been 4.10%. Current yield is computed pursuant to a
formula which operates as follows: The amount of the Fund's expenses
accrued for the 30-day period (net of reimbursements) is subtracted from
the amount of the dividends and interest earned (computed in accordance
with regulatory requirements) by the Fund during the period. That result
is then divided by the product of: (a) the average daily number of shares
outstanding during the period that were entitled to receive dividends, and
(b) the 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 1996 Federal and Connecticut income tax rate of
42.32%, the Fund's tax equivalent yield for the 30-day period ended March
31, 1996 was 7.14%. Absent the expense absorption and/or fee waiver then
in effect, the Fund's tax equivalent yield for such period would have been
7.11%. 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 yield quoted above represents the application of
the highest Federal and State of Connecticut marginal personal income tax
rates presently in effect. For Federal personal income tax purposes, a
39.6% tax rate has been used. For Connecticut personal income tax
purposes, a 4.5% tax rate has been used. The tax equivalent figure,
however, does not include the potential effect of any 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.
For the one-year period ended March 31, 1996 and for the period June
26, 1992 (commencement of operations) through March 31, 1996, the Fund's
average annual total returns were 7.09% and 6.49%, respectively. Absent
any expense absorption and/or fee waiver then in effect, the Fund's return
would have been lower. 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.
For the period June 26, 1992 (commencement of operations) through
March 31, 1996, the Fund's total return was 26.72%. Absent any expense
absorption and/or fee waiver then in effect, the Fund's return would have
been lower. 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 periods), and
dividing the result by the net asset value per share at the beginning of
the period.
From time to time, the Fund may use hypothetical tax equivalent yields
or charts in its 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 the Fund may include
biographical information relating to its portfolio managers and may refer
to, or include commentary by, a portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "General
Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-
assessable. Fund shares are of one class and have equal rights as to
dividends and in liquidation. Shares have no preemptive, subscription or
conversion rights and are freely transferable.
The Fund sends annual and semi-annual financial statements to
shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, P.O.
Box 9671, Providence, Rhode Island 02940-9671, is the Fund's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Fund,
the Transfer Agent arranges for the maintenance of shareholder account
records for the Fund, the handling of certain communications between
shareholders and the Fund and the payment of dividends and distributions
payable by the Fund. For these services, the Transfer Agent receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Fund during the month, and is reimbursed for certain out-
of-pocket expenses. For the period December 1, 1995 (effective date of
transfer agency agreement) through March 31, 1996, the Fund paid the
Transfer Agent $22,401.
The Bank of New York, 90 Washington Street, New York, New York 10286,
is the Fund's custodian.
Neither The Bank of New York nor the Transfer Agent has any part in
determining the investment policies of the Fund or which securities are to
be purchased or sold by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York 10004-
2696, as counsel for the 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 Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, has been selected as auditors of the Fund.
APPENDIX A
RISK FACTORS -- INVESTING IN CONNECTICUT MUNICIPAL OBLIGATIONS
The following information constitutes only a brief summary, does not
purport to be a complete description, and is based on information drawn
from official statements relating to securities offerings of the State
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.
Connecticut had an estimated population of 3,275,000 in 1994. The
State's population growth rate, which exceeded the United States' rate of
population growth during the period 1940 to 1970, slowed substantially
during the 1970s and 1980s. The State's population has declined since
1991. The estimated 1994 population remains below the amount recorded in
the 1990 Federal Census.
Connecticut's economy is diverse, with manufacturing, services and
trade accounting for approximately 70% of total non-agricultural
employment. The State's manufacturing industry is diversified, but from
1985 to 1995 manufacturing employment declined 30.1%. A number of factors,
such as the overvalued dollar of the mid-1980s, heightened foreign
competition, a sharp decrease in defense spending, and improved
productivity played a significant role in affecting the overall level of
manufacturing employment. In Connecticut, the rate of job loss in the
manufacturing sector produced a decline of 3.0% or 8,940 jobs from 1993 to
1994.
Over the past several decades the non-manufacturing sector of the
State's economy has risen in economic importance, from just over 50% of
total State employment in 1950 to approximately 81.5% by 1994. This trend
has decreased the State's dependence on manufacturing. The State's non-
manufacturing sector expanded by 1.7% in 1994 as compared to 1993, and 1.4%
in 1993 as compared to 1992, following three years of decline starting in
1990. During the 1990s Connecticut's growth in non-manufacturing
employment, however, has lagged that of the New England region and the
nation as a whole.
Connecticut has a high level of personal income. According to Bureau
of Economic Analysis figures, personal income of State residents for
calendar year 1994 was $95.1 billion, a 3.3% increase over the previous
year. Total personal income in the State increased 18.0% from 1989 to 1994
and 11.6% from 1991 to 1994. According to U.S. Department of Commerce
projections, the State is expected to continue to rank among the highest in
State per capita income.
After enjoying an extraordinary boom during the mid-1980s,
Connecticut, as well as the rest of the Northeast, experienced an economic
slowdown before the onset of the national recession in the latter half of
1990. Reflecting the downturn, the unemployment rate in the State rose
from a low of 3% in 1988, to just above the national average of 7.4% during
1992. Since 1992, the unemployment rate has declined annually to a rate of
5.6% for 1994.
While the State's General Fund ended fiscal 1984-85, 1985-86 and 1986-
87 with operating surpluses of approximately $365.5 million, $250.1 million
and $365.2 million, respectively, the State recorded operating deficits of
$115.6 million, $28 million, $259.5 million and $808.5 million for fiscal
1987-88, 1988-89, 1989-90 and 1990-91, respectively. Together with the
deficit carried forward from fiscal 1989-90, the total deficit for the
fiscal year 1990-91 was $965.7 million. The total deficit amount was
funded by the issuance of General Obligation Economic Recovery Notes in
late 1991. As of April 4, 1996, $311,055,000 of such Notes remained
outstanding. The Comptroller's annual report for the fiscal year ended
June 30, 1992 reflected a General Fund operating surplus of $110.2 million,
which surplus was used to retire $110.1 million of the States Economic
Recovery Notes. The Comptroller's annual reports for the fiscal years
ended June 30, 1993, 1994 and 1995 reflected a General Fund operating
surplus of $113.5 million, $19.7 million and $80.5 million, respectively.
The unappropriated surplus in the General Fund is deemed to be appropriated
for debt service for the following fiscal year.
Since 1988, the Comptroller's annual report has reported results on
the basis of both the modified cash basis required by State law and the
modified accrual basis used for GAAP financial reporting. On a GAAP basis
the cumulative deficit was $576.9 million for fiscal 1994-95. The modified
cash basis of accounting used for statutory financial reporting and the
modified accrual basis used for GAAP financial reporting are different and,
as a result, often produce varying financial results, primarily because of
differences in the recognition of revenues and expenditures.
The State finances its operations primarily through the General Fund.
All tax and most non-tax revenues of the State, except for motor fuels
taxes and other transportation related taxes, fees and revenues, are paid
into, and substantially all expenditures pursuant to legislative
appropriations are made out of, the General Fund. The State derives over
70% of its revenues from taxes. Miscellaneous fees, receipts, transfers
and Federal grants account for most of the other State revenue. The Sales
and Use Taxes, the corporation business tax and the recently enacted broad
based personal income tax are the major revenue-raising taxes. For fiscal
1995-96 and 1996-97, the adopted budget anticipates General Fund
expenditures of $9.055 billion and $9.201 billion, respectively, and
General Fund revenues of $8.988 billion and $9.203 billion, respectively.
On November 3, 1992, Connecticut voters approved a constitutional
amendment which requires a balanced budget for each year and imposes a cap
on the growth of expenditures. The General Assembly is required by the
constitutional amendment to adopt by three-fifths vote certain spending cap
definitions. The statutory spending cap limits the growth of expenditures
to either (1) the rolling five-year average annual growth in personal
income, or (2) the increase in the consumer price index for urban consumers
during the preceding twelve-month period, whichever is greater.
Expenditures for the payment of bonds, notes and other evidences of
indebtedness are excluded from the constitutional and statutory definitions
of general budget expenditures. To preclude shifting expenditures out of
the General Fund to other funds, the spending cap applies to all
appropriated funds combined.
The State has no constitutional or other organic limit on its power to
issue obligations or incur indebtedness other than that it may borrow only
for public purposes. There are no reported court decisions relating to
State bonded indebtedness other than two cases validating the legislative
determination of the public purpose for improving employment opportunities
and related activities. The State Constitution has never contained
provisions requiring submission of the questions of incurring indebtedness
to a public referendum. Therefore, the authorization and issuance of State
debt, including the purpose, amount and nature thereof, the method and
manner of the incurrence of such debt, the maturity and terms of repayment
thereof, and other related matters are statutory.
The State has established a program of temporary note issuances to
cover periodic cash flow requirements. The maximum volume of cash flow
borrowing is determined based upon the State's actual cash needs on a daily
basis. The State, as of April 17, 1990, commenced a program permitting the
issuance of up to $539 million of General Obligation Temporary Notes (the
"April 1990 Program"). Under the April 1990 Program, the State may issue
notes during a five-year period concluding in April of 1995. Additionally,
a separate $200 million temporary note program commenced as of April 30,
1991 and concluded on October 31, 1991. There are currently no notes
outstanding under either program.
As of April 4, 1996, the General Assembly has empowered, pursuant to
bond acts in effect, the State Bond Commission to authorize general
obligation bonds in the amount of $10.534 billion. As of April 4, 1996,
the State Bond Commission has authorized approximately $9.381 billion in
such bonds and the balance of approximately $1.153 billion was available
for authorization. From such total authorizations of $9.381 billion, bonds
in the aggregate of $8.238 billion have been issued and the balance of
$1.143 billion remained authorized but unissued as of April 4, 1996.
General obligation bonds issued by Connecticut municipalities are
payable primarily from ad valorem taxes on property subject to taxation by
the municipality. Certain Connecticut municipalities have experienced
severe fiscal difficulties and have reported operating and accumulated
deficits in recent years. The most notable of these is the City of
Bridgeport.
S&P, Moody's and Fitch rate Connecticut's municipal bonds AA-, Aa and
AA, respectively.
APPENDIX B
Description of S&P, Moody's and 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 and 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 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 sign 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.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A
Issues assigned this 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.
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.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and
in categories below B. The modifier 1 indicates a ranking for the security
in the higher end of a rating category; the modifier 2 indicates a mid-
range ranking; and the modifier 3 indicates a ranking in the lower end of a
rating category.
Municipal 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.
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 will normally 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
will normally 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.
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.
<TABLE>
DREYFUS CONNECTICUT INTERMEDIATE MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS MARCH 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-95.2% AMOUNT VALUE
_______ _______
<S> <C> <C>
CONNECTICUT-86.6%
Cheshire:
4.75%, 8/15/2003........................................................ $ 530,000 $ 530,137
4.90%, 8/15/2004........................................................ 530,000 531,961
5%, 8/15/2005........................................................... 530,000 532,135
5.10%, 8/15/2006........................................................ 530,000 532,300
Columbia:
5.20%, 6/15/2002........................................................ 265,000 274,571
5.30%, 6/15/2003........................................................ 265,000 275,843
5.40%, 6/15/2004........................................................ 265,000 277,036
State of Connecticut:
5.80%, 11/15/2001....................................................... 1,000,000 1,061,950
6.10%, 3/15/2002........................................................ 3,840,000 4,125,888
5.80%, 11/15/2002....................................................... 1,500,000 1,598,295
5.70%, 8/15/2007........................................................ 1,500,000 1,565,790
Airport, Revenue Refunding (Bradley International Airport):
7.20%, 10/1/1997 (Insured; FGIC)...................................... 1,000,000 1,048,020
7.35%, 10/1/2001 (Insured; FGIC)...................................... 1,000,000 1,128,010
COP (Middletown Courthouse Facilities Project):
5.90%, 12/15/2001 (Insured; MBIA)..................................... 250,000 266,180
6%, 12/15/2002 (Insured; MBIA)........................................ 750,000 805,275
Clean Water Fund Revenue:
5.40%, 4/1/2003....................................................... 1,000,000 1,036,840
5.50%, 4/1/2004....................................................... 1,245,000 1,296,070
5.40%, 6/1/2007....................................................... 1,805,000 1,829,530
5.125%, 7/1/2007 (Insured; MBIA) (a).................................. 2,000,000 1,986,160
Special Tax Obligation Revenue (Transportation Infrastructure):
6.10%, 10/1/2001...................................................... 2,000,000 2,144,960
5.60%, 9/1/2002....................................................... 3,000,000 3,152,310
Refunding:
5.70%, 2/15/2001.................................................. 500,000 524,315
5.125%, 9/1/2005.................................................. 1,000,000 1,011,130
Connecticut Health & Educational Facilities Authority, Revenue:
(Connecticut State University System) 5%, 11/1/2007 (Insured; MBIA)..... 1,820,000 1,792,408
(Greenwich Hospital) 5.75%, 7/1/2006 (Insured; MBIA) (a)................ 1,000,000 1,052,550
(Kent School) 5.10%, 7/1/2007 (Insured; MBIA)........................... 500,000 496,580
(The Griffin Hospital):
5.60%, 7/1/2002....................................................... 500,000 493,220
5.70%, 7/1/2003....................................................... 500,000 492,090
(University of Hartford):
6.20%, 7/1/2001....................................................... 750,000 754,913
6.25%, 7/1/2002....................................................... 700,000 701,708
DREYFUS CONNECTICUT INTERMEDIATE MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) MARCH 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
CONNECTICUT (CONTINUED)
Connecticut Health & Educational Facilities Authority, Revenue (continued):
(William W. Backus Hospital):
5.40%, 7/1/2000....................................................... $ 285,000 $ 288,861
5.80%, 7/1/2004....................................................... 250,000 255,898
Connecticut Higher Education Supplemental Loan Authority, Revenue
(Family Education Loan Program):
5.70%, 11/15/2004..................................................... 1,480,000 1,501,031
5.80%, 11/15/2005..................................................... 2,030,000 2,035,034
5.90%, 11/15/2006..................................................... 2,130,000 2,135,666
Connecticut Housing Finance Authority (Housing Mortgage Finance Program):
6.90%, 11/15/1998....................................................... 2,500,000 2,565,425
5.95%, 11/15/2002....................................................... 2,000,000 2,076,020
6.05%, 11/15/2002....................................................... 350,000 362,901
5.90%, 5/15/2006........................................................ 1,000,000 1,033,500
5.60%, 11/15/2006....................................................... 1,100,000 1,107,700
Connecticut Municipal Electric Energy Cooperative, Power Supply
System Revenue, Refunding 5%, 1/1/2010 (Insured; MBIA).................. 1,820,000 1,737,063
Connecticut Regional School District Number 5:
5.25%, 1/15/2004 (Insured; MBIA)........................................ 400,000 412,216
5.40%, 1/15/2005 (Insured; MBIA)........................................ 400,000 414,844
5.50%, 1/15/2006 (Insured; MBIA)........................................ 400,000 414,780
Connecticut Resources Recovery Authority,
Mid-Connecticut Systems Refunding:
5.60%, 11/15/1999..................................................... 2,500,000 2,576,625
5.75%, 11/15/2000..................................................... 2,000,000 2,076,200
Danbury:
5.10%, 8/15/2003........................................................ 815,000 836,361
5.25%, 8/15/2004........................................................ 815,000 841,430
Derby:
5.40%, 5/15/2004 (Insured; AMBAC)....................................... 420,000 437,489
5.50%, 5/15/2005 (Insured; AMBAC)....................................... 620,000 648,235
Eastern Connecticut Resources Recovery Authority, Solid Waste Revenue
(Wheelabrator Lisbon Project) 5.25%, 1/1/2006........................... 820,000 785,798
East Hampton:
5.25%, 7/15/2004 (Insured; FGIC)........................................ 300,000 309,642
5.40%, 7/15/2005 (Insured; FGIC)........................................ 305,000 316,831
5.50%, 7/15/2006 (Insured; FGIC)........................................ 305,000 317,755
East Haven 5.20%, 11/1/2008 (Insured; FGIC)................................. 790,000 781,626
East Lyme:
5.20%, 8/1/2003......................................................... 425,000 437,368
DREYFUS CONNECTICUT INTERMEDIATE MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) MARCH 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
CONNECTICUT (CONTINUED)
East Lyme (continued):
5.60%, 8/1/2009......................................................... $ 415,000 $ 422,960
Easton:
5.05%, 6/1/2007......................................................... 270,000 266,738
5.15%, 6/1/2008......................................................... 270,000 266,452
5.25%, 6/1/2009......................................................... 245,000 241,207
Glastonbury 6%, 10/15/2006.................................................. 220,000 239,265
Guilford:
5.25%, 1/15/2004........................................................ 300,000 307,200
5.40%, 1/15/2005........................................................ 325,000 334,718
5.50%, 1/15/2006........................................................ 325,000 334,675
Refunding:
5.40%, 10/15/2001..................................................... 1,215,000 1,263,576
5.50%, 10/15/2002..................................................... 1,000,000 1,046,030
Hamden:
5.25%, 10/1/2001........................................................ 445,000 459,912
5.30%, 10/1/2002........................................................ 440,000 455,770
5.40%, 10/1/2003........................................................ 425,000 442,132
Hartford 5.30%, 10/1/2008 (Insured; FGIC)................................... 1,000,000 1,002,130
Manchester 7%, 10/1/2002.................................................... 355,000 400,841
Meriden 5.50%, 11/15/2001 (Insured; MBIA)................................... 1,300,000 1,380,847
Montville 6%, 6/15/2000..................................................... 575,000 607,821
New Britain:
5.375%, 3/1/2003 (Insured; MBIA)........................................ 750,000 778,470
5.50%, 3/1/2004 (Insured; MBIA)......................................... 1,000,000 1,043,960
New Fairfield 4.80%, 3/15/2003 (Insured; MBIA).............................. 550,000 554,037
New Haven:
5.25%, 8/1/2006 (Insured; FGIC)......................................... 1,500,000 1,492,800
6.50%, 12/1/2002........................................................ 1,410,000 1,456,742
6.75%, 12/1/2005........................................................ 845,000 932,238
New London:
5.10%, 10/1/2002 (Insured; MBIA)........................................ 300,000 307,758
5.20%, 10/1/2003 (Insured; MBIA)........................................ 575,000 591,721
New Milford:
5.20%, 8/1/2003......................................................... 550,000 565,323
5.40%, 8/1/2006......................................................... 380,000 393,213
5.50%, 8/1/2007......................................................... 425,000 441,885
Norwalk Maritime Center Authority, Revenue Refunding (Martime Center
Project):
5.40%, 2/1/2002......................................................... 635,000 658,247
DREYFUS CONNECTICUT INTERMEDIATE MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) MARCH 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
CONNECTICUT (CONTINUED)
Norwalk Maritime Center Authority, Revenue Refunding
(Martime Center Project) (continued):
5.50%, 2/1/2003......................................................... $ 670,000 $ 698,013
Norwich 5.75%, 9/15/2005.................................................... 875,000 929,049
Redding:
6.50%, 4/15/2007........................................................ 200,000 224,224
6.55%, 4/15/2008........................................................ 200,000 225,758
6.60%, 4/15/2009........................................................ 200,000 226,784
South Central Connecticut Regional Water Authority, Water Systems Revenue:
5.10%, 8/1/2000 (Insured; FGIC)......................................... 3,000,000 3,078,960
5.50%, 8/1/2003 (Insured; FGIC)......................................... 2,000,000 2,095,040
5.50%, 8/1/2004 (Insured; FGIC)......................................... 540,000 562,864
Southington:
5.40%, 9/15/2005 (Insured; MBIA)........................................ 455,000 471,180
5.50%, 9/15/2006 (Insured; MBIA)........................................ 455,000 472,408
5.60%, 9/15/2007 (Insured; MBIA)........................................ 455,000 471,203
Stamford:
6.625%, 3/15/2004....................................................... 2,750,000 3,087,453
7.75%, 1/15/2005........................................................ 1,650,000 1,988,844
Stratford:
4.60%, 11/1/2004 (Insured; FGIC)........................................ 2,500,000 2,454,175
7%, 6/15/2005 (Insured; FGIC)........................................... 500,000 574,040
5.625%, 11/1/2007 (Insured; FGIC)....................................... 4,365,000 4,507,212
University of Connecticut 4.75%, 2/1/2008 (Insured; FGIC)................... 3,000,000 2,837,130
Vernon:
5.30%, 9/15/2004 (Insured; MBIA)........................................ 360,000 374,292
5.40%, 9/15/2005 (Insured; MBIA)........................................ 360,000 375,566
5.50%, 9/15/2006 (Insured; MBIA)........................................ 360,000 375,498
Wallingford:
5.20%, 6/15/2001........................................................ 400,000 412,380
5.30%, 6/15/2002........................................................ 400,000 414,404
5.40%, 6/15/2003........................................................ 400,000 416,308
4.80%, 6/15/2009........................................................ 1,385,000 1,298,285
Refunding 5.30%, 6/1/2004............................................... 500,000 515,850
Waterbury:
4.90%, 4/15/2002 (Insured; FGIC)........................................ 1,650,000 1,664,124
5%, 4/15/2003 (Insured; FGIC) (b)....................................... 2,060,000 2,078,808
West Haven:
6%, 8/15/2000........................................................... 350,000 355,751
6%, 9/1/2009............................................................ 480,000 504,461
DREYFUS CONNECTICUT INTERMEDIATE MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) MARCH 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
CONNECTICUT (CONTINUED)
Westport:
5.10%, 6/15/2003........................................................ $ 500,000 $ 514,390
5.20%, 6/15/2004........................................................ 500,000 515,970
U.S. RELATED-8.6%
Commonwealth of Puerto Rico, 5.30%, 7/1/2004 (Insured; MBIA)................ 1,000,000 1,035,400
Commonwealth of Puerto Rico Highway and Transportation Authority,
Highway Revenue Refunding 5.875%, 7/1/1999.............................. 1,500,000 1,561,695
Puerto Rico Municipal Finance Agency 5.60%, 7/1/2002........................ 1,800,000 1,859,202
Virgin Islands, Subordinate Tax (Insurance Claims Fund Program-
General Obligation Matching Fund) 5.65%, 10/1/2003...................... 3,345,000 3,443,811
Virgin Islands Public Finance Authority,
Revenue Refunding Matching Fund Loan Notes:
6.90%, 10/1/2001...................................................... 2,000,000 2,109,920
7%, 10/1/2002......................................................... 750,000 795,698
Virgin Islands Water and Power Authority, Water Systems Revenue
7.20%, 1/1/2002......................................................... 400,000 414,180
_______
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $122,186,806)..................................................... $124,653,472
=======
SHORT-TERM MUNICIPAL INVESTMENTS-4.8%
U.S. RELATED:
Commonwealth of Puerto Rico Government Development Bank, Refunding VRDN
2.80% (LOC; Credit Suisse) (c,d)........................................ $ 5,400,000 $ 5,400,000
Puerto Rico Electric Power Authority, Revenue, VRDN
3% (Insured; FSA) (d) .................................................. 900,000 900,000
_______
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $6,300,000)....................................................... $ 6,300,000
=======
TOTAL INVESTMENTS-100.0%
(cost $128,486,806)..................................................... $130,953,472
=======
</TABLE>
<TABLE>
DREYFUS CONNECTICUT INTERMEDIATE MUNICIPAL BOND FUND
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation LOC Letter of Credit
COP Certificate of Participation MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
FSA Financial Security Assurance VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (E) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_____ _____ __________ ____________
<S> <C> <C> <C>
AAA Aaa AAA 43.9%
AA Aa AA 33.2
A A A 9.9
BBB Baa BBB 3.7
F1 M1G1 SP1 4.1
Not Rated (f) Not Rated (f) Not Rated (f) 5.2
____
100.0%
====
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Purchased on a delayed-delivery basis.
(b) Held in a segregated account for the purpose of collateralizing
delayed-delivery security.
(c) Secured by letters of credit.
(d) Security payable on demand. The interest rate, which is subject to
change, is based upon prime rates or an index of market interest rates.
(e) Fitch currently provides creditworthiness information for a limited
number of investments.
(f) Securities which while not rated by Fitch, Moody's, or Standard &
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Fund may invest.
(g) At March 31, 1996, the Fund had $53,957,659 (40.2% of net assets)
invested in securities whose payment of principal and interest is
dependent upon revenues generated from city municipal projects.
See notes to financial statements.
<TABLE>
DREYFUS CONNECTICUT INTERMEDIATE MUNICIPAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $128,486,806)-see statement..................................... $130,953,472
Receivable for investment securities sold............................... 4,374,866
Interest receivable..................................................... 1,996,207
Prepaid expenses........................................................ 8,298
_______
137,332,843
LIABILITIES:
Due to The Dreyfus Corporation and subsidiaries......................... $ 62,360
Payable for investment securities purchased............................. 3,042,924
Payable for shares of Beneficial Interest redeemed...................... 2,790
Accrued expenses and other liabilities.................................. 114,909 3,222,983
______ ______
NET ASSETS ................................................................ $134,109,860
=======
REPRESENTED BY:
Paid-in capital......................................................... $134,074,473
Accumulated undistributed investment income-net......................... 31,010
Accumulated net realized (loss) on investments.......................... (2,462,289)
Accumulated net unrealized appreciation on investments-Note 3........... 2,466,666
_______
NET ASSETS at value applicable to 10,042,551 shares outstanding
(unlimited number of $.001 par value shares of Beneficial Interest
authorized)............................................................. $134,109,860
=======
NET ASSET VALUE, offering and redemption price per share
($134,109,860 / 10,042,551 shares)...................................... $13.35
=======
</TABLE>
See notes to financial statements.
<TABLE>
DREYFUS CONNECTICUT INTERMEDIATE MUNICIPAL BOND FUND
STATEMENT OF OPERATIONS YEAR ENDED MARCH 31, 1996
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $6,886,803
EXPENSES:
Management fee-Note 2(a).............................................. $ 797,196
Shareholder servicing costs-Note 2(b)................................. 186,269
Professional fees..................................................... 40,832
Trustees' fees and expenses-Note 2(c)................................. 35,386
Prospectus and shareholders' reports.................................. 17,404
Custodian fees........................................................ 14,247
Registration fees..................................................... 1,622
Miscellaneous......................................................... 42,680
_____
TOTAL EXPENSES.................................................. 1,135,636
Less-reduction in management fee due to
undertakings-Note 2(a)............................................ 173,101
_____
NET EXPENSES.................................................... 962,535
_____
INVESTMENT INCOME-NET........................................... 5,924,268
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized (loss) on investments-Note 3............................... $ (137,287)
Net unrealized appreciation on investments.............................. 3,330,261
_____
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 3,192,974
_____
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $9,117,242
=====
</TABLE>
See notes to financial statements.
<TABLE>
DREYFUS CONNECTICUT INTERMEDIATE MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED MARCH 31,
________________________________
1995 1996
_______ _______
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 6,944,152 $ 5,924,268
Net realized (loss) on investments...................................... (2,222,394) (137,287)
Net unrealized appreciation on investments for the year................. 1,805,156 3,330,261
_______ _______
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. 6,526,914 9,117,242
_______ _______
DIVIDENDS TO SHAREHOLDERS:
From investment income-net.............................................. (6,944,152) (5,893,258)
In excess of net realized gain on investments........................... (8,171) _
_______ _______
TOTAL DIVIDENDS....................................................... (6,952,323) (5,893,258)
_______ _______
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold........................................... 85,801,823 33,967,263
Dividends reinvested.................................................... 5,437,554 4,556,107
Cost of shares redeemed................................................. (99,937,660) (39,318,248)
_______ _______
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS........ (8,698,283) (794,878)
_______ _______
TOTAL INCREASE (DECREASE) IN NET ASSETS........................... (9,123,692) 2,429,106
NET ASSETS:
Beginning of year....................................................... 140,804,446 131,680,754
_______ _______
End of year (including undistributed investment income-net; $31,010 on
March 31, 1996)....................................................... $131,680,754 $134,109,860
======= =======
SHARES SHARES
_______ _______
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................. 6,728,262 2,530,462
Shares issued for dividends reinvested.................................. 424,237 339,658
Shares redeemed......................................................... (7,897,962) (2,933,585)
_______ _______
NET (DECREASE) IN SHARES OUTSTANDING.................................. (745,463) (63,465)
======= =======
</TABLE>
See notes to financial statements.
DREYFUS CONNECTICUT INTERMEDIATE MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
Reference is made to page __ of the Fund's Prospects
dated August 1, 1996.
See notes to financial statements.
DREYFUS CONNECTICUT INTERMEDIATE MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Connecticut Intermediate Municipal Bond Fund (the "Fund") is
registered under the Investment Company Act of 1940 ("Act") as a
non-diversified open-end management investment company. The Fund's investment
objective is to provide investors with as high a level of current income
exempt from Federal and Connecticut income taxes as is consistent with the
preservation of capital. The Dreyfus Corporation ("Manager") serves as the
Fund's investment adviser. The Manager is a direct subsidiary of Mellon Bank,
N.A. Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares, which are sold to the public without a
sales charge.
(A) PORTFOLIO VALUATION: The Fund's investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the
Board of Trustees. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the
judgment of the Service 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 securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Options
and financial futures on municipal and U.S. treasury securities are valued at
the last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market
on each business day. Investments not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
The Fund follows an investment policy of investing primarily in municipal
obligations of one state. Economic changes affecting the state and certain of
its public bodies and municipalities may affect the ability of issuers within
the state to pay interest on, or repay principal of, municipal obligations
held by the Fund.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain, if any, are normally declared and
paid annually, but the Fund may make distributions on a more frequent basis
to comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, it is the policy of the Fund not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
The Fund has an unused capital loss carryover of approximately $2,454,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to March 31, 1996. If not
applied, $611,000 of the carryover expires in fiscal 2003 and $1,843,000 of
the carryover expires in fiscal 2004.
DREYFUS CONNECTICUT INTERMEDIATE MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .60 of 1% of the value
of the Fund's average daily net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Fund's
aggregate expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Fund for any full fiscal year. However, the Manager had
undertaken from April 1, 1995 through September 30, 1995, to reduce the
management fee paid by the Fund, to the extent that the Fund's aggregate
expenses (exclusive of certain expenses as described above) exceeded
specified annual percentages of the Fund's average daily net assets. The
Manager has currently undertaken from October 1, 1995 through March 31, 1997
to reduce the management fee paid by, or reimburse such excess expenses of
the Fund, to the extent that the Fund's aggregate annual expenses (exclusive
of certain expenses as described above) exceed an annual rate of .80 of 1% of
the value of the Fund's average daily net assets. The reduction in management
fee, pursuant to the undertakings, amounted to $173,101 for the year ended
March 31, 1996.
The undertaking may be modified by the Manager from time to time,
providing that the resulting expense reimbursement would not be less than the
amount required pursuant to the Agreement.
(B) Pursuant to the Fund's Shareholder Services Plan, the Fund reimburses
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager, an
amount not to exceed an annual rate of .25 of 1% of the value of the Fund's
average daily net assets for certain allocated expenses of providing personal
services and/or maintaining shareholder accounts. 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.
During the year ended March 31, 1996, the Fund was charged an aggregate of
$77,459 pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Fund compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a transfer agency agreement
for providing personnel and facilities to perform transfer agency services
for the Fund. Such compensation amounted to $22,401 for the period from
December 1, 1995 through March 31, 1996.
(C) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $1,500 and an attendance fee of $500
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, for the year ended March 31, 1996 amounted
to $25,895,481 and $33,575,794, respectively.
At March 31, 1996, accumulated net unrealized appreciation on investments
was $2,466,666, consisting of $2,973,679 gross unrealized appreciation and
$507,013 gross unrealized depreciation.
At March 31, 1996, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
DREYFUS CONNECTICUT INTERMEDIATE MUNICIPAL BOND FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
DREYFUS CONNECTICUT INTERMEDIATE MUNICIPAL BOND FUND
We have audited the accompanying statement of assets and liabilities of
Dreyfus Connecticut Intermediate Municipal Bond Fund, including the statement
of investments, as of March 31, 1996, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of
the two years in the period then ended and financial highlights for each of
the years indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of March 31, 1996 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Dreyfus Connecticut Intermediate Municipal Bond Fund at March 31,
1996, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the indicated years, in conformity with
generally accepted accounting principles.
[Ernst and Young LLP signature logo]
New York, New York
May 3, 1996
