DREYFUS PENNSYLVANIA INTERMEDIATE MUNICIPAL BOND FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
JUNE 20, 1994
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus
of Dreyfus Pennsylvania Intermediate Municipal Bond Fund (the "Fund"),
dated June 20, 1994 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 toll free
1-800-645-6561.
The Dreyfus Corporation (the "Manager") serves as the Fund's
investment adviser.
Dreyfus Service Corporation (the "Distributor"), a wholly-owned
subsidiary of the Manager, is the distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies. . . B-2
Management of the Fund. . . . . . . . . . . . . . B-10
Management Agreement. . . . . . . . . . . . . . . B-14
Shareholder Services Plan . . . . . . . . . . . . B-16
Purchase of Fund Shares . . . . . . . . . . . . . B-17
Redemption of Fund Shares . . . . . . . . . . . . B-18
Shareholder Services. . . . . . . . . . . . . . . B-20
Determination of Net Asset Value. . . . . . . . . B-23
Portfolio Transactions. . . . . . . . . . . . . . B-23
Dividends, Distributions and Taxes. . . . . . . . B-24
Performance Information . . . . . . . . . . . . . B-25
Information About the Fund. . . . . . . . . . . . B-27
Custodian, Transfer and Dividend Disbursing Agent,
Counsel and Independent Auditors. . . . . . . . B-27
Appendix A. . . . . . . . . . . . . . . . . . . . B-28
Appendix B. . . . . . . . . . . . . . . . . . . . B-35
Financial Statements. . . . . . . . . . . . . . . B-44
Report of Independent Auditors. . . . . . . . . . B-54
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Description
of the Fund."
The average distribution of investments (at value) in Municipal
Obligations (including notes) by ratings for the period from December 16,
1993 (commencement of operations) to March 31, 1994, computed on a monthly
basis, was as follows:
Fitch Moody's Standard
Investors Investors & Poor's
Service, Inc. Service, Inc. Corporation Percentage
("Fitch") or ("Moody's") or ("S&P") of Value
AAA Aaa AAA 33.0%
AA Aa AA 4.8%
A A A 7.4%
BBB Baa BBB 17.6%
BB Ba BB 4.7%
F-1 MIG 1 SP-1 9.5%
F-1 P-1 A-1 13.7%
Not Rated Not Rated Not Rated 9.3%*
100.0%
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* Included in the Not Rated category are securities comprising 4.7%
of the Fund's market value which, while not rated, have been
determined by the Manager to be of comparable quality to
securities rated Ba/BB.
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 investment in such
securities with particular regard to (1) the frequency of trades and quotes
for the lease obligation; (2) the number of dealers willing to purchase or
sell the lease obligation and the number of other potential buyers; (3) the
willingness of dealers to undertake to make a market in the lease
obligation; (4) the nature of the marketplace trades including the time
needed to dispose of the lease obligation, the method of soliciting offers
and the mechanics of transfer; and (5) such other factors concerning the
trading market for the lease obligation as the Manager may deem relevant.
In addition, in evaluating the liquidity and credit quality of a lease
obligation that is unrated, the Fund's Board has directed the Manager to
consider (a) whether the lease can be canceled; (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 tot he operations of the
municipality (e.g., the potential for na 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.
Futures Contracts and Options on Futures Contracts. Upon exercise of
an option on a futures contract, the writer of the option delivers to the
holder of the option the futures position and the accumulated balance in
the writer's futures margin account, which represents the amount by which
the market price of the futures contract exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract. The potential loss related to the purchase of an option
on a futures contract is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed at the time
of sale, there are no daily cash payments to reflect changes in the value
of the underlying contract; however, the value of the option does change
daily and that change would be reflected in the net asset value of the
Fund.
Lending Portfolio Securities. To a limited extent, the Fund may lend
its portfolio securities to brokers, dealers and other financial
institutions, provided it receives cash collateral which at all times is
maintained in an amount equal to at least 100% of the current market value
of the securities loaned. By lending its portfolio securities, the Fund
can increase its income through the investment of the cash collateral. For
purposes of this policy, the Fund considers collateral consisting of U.S.
Government securities or irrevocable letters of credit issued by banks
whose securities meet the standards for investment by the Fund to be the
equivalent of cash. From time to time, 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. These conditions may be subject to future
modification.
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. Treasury Bills have initial maturities of one year or less;
Treasury Notes have initial maturities of one to ten years; and Treasury
Bonds generally have initial maturities of greater than ten years. Some
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, for example, Government National Mortgage Association
pass-through certificates, are supported by the full faith and credit of
the U.S. Treasury; others, such as those of the Federal Home Loan Banks, by
the right of the issuer to borrow from the U.S. Treasury; others, such as
those issued by the Federal National Mortgage Association, by discretionary
authority of the U.S. Government to purchase certain obligations of the
agency or instrumentality; and others, such as those issued by the Student
Loan Marketing Association, only by the credit of the agency or
instrumentality. These securities bear fixed, floating or variable rates
of interest. Principal and interest may fluctuate based on generally
recognized reference rates or the relationship of rates. 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. The Fund will invest in
such securities only when it is satisfied that the credit risk with respect
to the issuer is minimal.
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 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.
Repurchase agreements involve the acquisition by the Fund of an
underlying debt instrument, subject to an obligation of the seller to
repurchase, and the Fund to resell, the instrument at a fixed price usually
not more than one week after its purchase. 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 one billion dollars 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. The Manager will monitor on an ongoing
basis the value of the collateral to assure that it always equals or
exceeds the repurchase price. Certain costs may be incurred by the Fund in
connection with the sale of the securities if the seller does not
repurchase them in accordance with the repurchase agreement. In addition,
if bankruptcy proceedings are commenced with respect to the seller of the
securities, realization on the securities by the Fund may be delayed or
limited. The Fund will consider on an ongoing basis the creditworthiness
of the institutions with which it enters into repurchase agreements.
Risk Factors
Investing in Pennsylvania Municipal Obligations. Investors should
consider carefully the special risks inherent in the Fund's investment in
Pennsylvania Municipal Obligations. These risks result from the financial
condition of the Commonwealth of Pennsylvania. Pennsylvania has been
historically identified as a heavy industry state although that reputation
has recently changed as the coal, steel and railroad industries declined.
A more diversified economy has developed in Pennsylvania as a long-term
shift in jobs, investment and workers away from the northeast part of the
nation took place. The major new sources of growth are in the service
sector, including trade, medical and health services, education and
financial institutions. Pennsylvania is highly urbanized, with
approximately 50% of the Commonwealth's total population contained in the
metropolitan areas which include the cities of Philadelphia and Pittsburgh.
Pennsylvania's fiscal 1993 year closed with revenues $41.5 million
above the budget estimate, totaling $14.633 billion, less than a 1%
increase over 1992 fiscal revenues. A reduction in the personal income tax
rate in July 1992 and revenues from retroactive corporate tax increases
received in fiscal 1992 were responsible for the low rate of revenue
growth. Appropriations less lapses totaled an estimated $13.870 billion, a
1.1% increase over those the previous fiscal year. The low growth in
spending is a result of a low rate of revenue growth, significant one-time
expenses during fiscal 1992, increased tax refund reserves to cushion
against adverse decisions in pending litigations, and the receipt of
federal funds for expenditures previously paid out of Commonwealth funds.
The enacted 1994 fiscal year budget provides for $14.999 billion of
appropriations of Commonwealth funds, primarily for education, correctional
institutions and welfare. The budget estimates revenue growth of 3.7% over
fiscal 1993 actual revenues. Investors should review Appendix A which sets
forth these and other risk factors.
Lower Rated Bonds. The Fund is permitted to invest in securities
rated below Baa by Moody's and below BBB by S&P and Fitch. Such bonds,
though higher yielding, are characterized by risk. See "Description of the
Fund--Risk Factors--Lower Rated Bonds" in the Prospectus for a discussion
of certain risks and "Appendix B" 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. In this evaluation, the Manager will take
into consideration, among other things, the issuer's financial resources,
its sensitivity to economic conditions and trends, the quality of the
issuer's management and regulatory matters. It also is possible that a
rating agency might not timely change the rating on a particular issue to
reflect subsequent events. As stated above, once the rating of a bond in
the Fund's portfolio has been changed, the Manager will consider all
circumstances deemed relevant in determining whether the Fund should
continue to hold the bond.
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 are considered by S&P, Moody's and Fitch, on
balance, as 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 the Distributor or any other persons concerning the
acquisition of such securities, and the Manager will review carefully the
credit and other characteristics pertinent to such new issues.
Lower rated zero coupon securities, in which the Fund may invest up to
5% of its net assets, involve special considerations. The credit risk
factors pertaining to lower rated securities also apply to lower rated zero
coupon bonds. Such 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 below as fundamental policies. These restrictions
cannot be changed without approval by the holders of a majority (as defined
in the Investment Company Act of 1940, as amended (the "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 Trustees at any time. The Fund may not:
1. Borrow money, except to the extent permitted under the Act. For
purposes of this investment restriction, the entry into options, forward
contracts, futures contracts, including those relating to indexes, and
options on futures contracts or indexes 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 options, forward contracts, futures contracts,
including those relating to indexes, and options on futures contracts or
indexes.
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 of Trustees.
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 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 options, forward contracts,
futures, including those relating to indexes, and options on futures
contracts or indexes.
9. Invest in securities of other investment companies, except to the
extent permitted under the Act.
10. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except to the extent necessary to secure borrowings for temporary or
emergency purposes 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 the deposit of assets in escrow in connection
with writing covered put and call options and collateral and initial or
variation margin arrangements with respect to options, forward contracts,
futures contracts, including those relating to indexes, and options on
futures contracts or indexes.
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
Trustees 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 Trustee who is deemed to be an "interested person"
of the Fund, as defined in the Act, is indicated by an asterisk.
Trustees and Officers of the Fund
*DAVID W. BURKE, Trustee. Vice President and Chief
Administrative Officer of the Manager since October 1990 and
an officer, director or trustee of other investment
companies advised or administered by the Manager. From 1977
to 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. His address is 200 Park Avenue, New York, New
York 10166.
DIANE DUNST, Trustee. 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. Her address
is 120 E. 87th Street, New York, New York 10128.
*DAVID P. FELDMAN, Trustee. Chairman and Chief Executive Officer
of AT&T Investment Management Corporation. He also is a
trustee of Corporate Property Investors, a real estate
investment company. His address is One Oak Way, Berkeley
Heights, New Jersey 07922.
JAY I. MELTZER, Trustee. 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. His
address is 903 Park Avenue, New York, New York 10021.
*RICHARD J. MOYNIHAN, President, Investment Officer and Trustee.
An employee of the Manager and an officer, director or
trustee of other investment companies advised and
administered by the Manager. His address is 200 Park
Avenue, New York, New York 10166.
DANIEL ROSE, Trustee. 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 Trustee of Corporate Property Investors, a real
estate investment company. His address is c/o Rose
Associates, Inc., 380 Madison Avenue, New York, New York
10017.
WARREN B. RUDMAN, Trustee. 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. Also, since
January 1993, Mr. Rudman has 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 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. His
address is c/o Paul, Weiss, Rifkind, Wharton & Garrison,
1615 L Street, N.W., Washington, D.C. 20036.
SANDER VANOCUR, Trustee. 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. From
June 1986 to December 1991, he was a Senior Correspondent of
ABC News and, from October 1986 to December 31, 1991, he was
Anchor of the ABC News program "Business World," a weekly
business program on the ABC television network. His address
is 2928 P Street, N.W., Washington, D.C. 20007.
The "non-interested" Trustees and Mr. Feldman are also trustees of
Dreyfus BASIC U.S. Government Money Market Fund, Dreyfus California
Intermediate Municipal Bond Fund, Dreyfus Connecticut Intermediate
Municipal Bond Fund, Dreyfus New Jersey Intermediate Municipal Bond Fund,
Dreyfus Massachusetts Intermediate Municipal Bond Fund, Dreyfus Strategic
Income and Dreyfus Strategic Investing, and directors of Dreyfus BASIC
Money Market Fund, Inc. and Dreyfus Strategic Governments Income, Inc.
Messrs. Feldman, Rose and Vanocur are also directors of Premier Global
Investing and Dreyfus New Jersey Municipal Bond Fund, Inc., managing
general partners of Dreyfus Strategic Growth, L.P. and Dreyfus Global
Growth, L.P., and trustees of Dreyfus Florida Intermediate Municipal Bond
Fund, Dreyfus Florida Municipal Money Market Fund, Dreyfus New York Insured
Tax Exempt Bond Fund, Dreyfus Investors GNMA Fund, Dreyfus 100% U.S.
Treasury Intermediate Term Fund, Dreyfus 100% U.S. Treasury Long Term Fund,
Dreyfus 100% U.S. Treasury Money Market Fund, and Dreyfus 100% U.S.
Treasury Short Term Fund. Mr. Feldman is also a director of Dreyfus Edison
Electric Index Fund, Inc., Dreyfus Stock Index Fund, Dreyfus-Wilshire
Target Funds, Inc., Peoples Index Fund, Inc. and Peoples S&P MidCap Index
Fund, Inc. Mr. Rudman is also a trustee of Dreyfus Cash Management,
Dreyfus Government Cash Management, Dreyfus Municipal Cash Management Plus,
Dreyfus New York Municipal Cash Management, Dreyfus Tax Exempt Cash
Management, Dreyfus Treasury Cash Management and Dreyfus Treasury Prime
Cash Management and a director of Dreyfus Cash Management Plus, Inc.
For so long as the Fund's plan described in the section captioned
"Shareholder Services Plan" remains in effect, the Trustees of the Fund who
are not "interested persons" of the Fund (as defined in the Act) will be
selected and nominated by the Trustees who are not "interested persons" of
the Fund.
The Fund does not pay any remuneration to its officers and Trustees
other than fees and expenses to those Trustees who are not officers,
directors, employees or holders of 5% or more of the outstanding voting
securities of the Manager, which totalled $3,000 for the period December
16, 1993 (commencements of operations) through March 31, 1994 for all such
Trustees as a group.
Ordinarily, meetings of shareholders for the purpose of electing
Trustees will not be held unless and until such time as less than a
majority of the Trustees holding office have been elected by shareholders,
at which time the Trustees then in office will call a shareholders' meeting
for the election of Trustees. Under the Act, shareholders of record of not
less than two-thirds of the outstanding shares of the Fund may remove a
Trustee through a declaration in writing or by vote cast in person or by
proxy at a meeting called for that purpose. Under the Fund's Agreement and
Declaration of Trust, the Trustees are required to call a meeting of
shareholders for the purpose of voting upon the question of removal of any
such Trustee when requested in writing to do so by the shareholders of
record of not less than 10% of the Fund's outstanding shares.
Officers of the Fund Not Listed Above
A. PAUL DISDIER, Vice President and Investment Officer. An
employee of the Manager and an officer of other investment
companies advised and administered by the Manager.
KAREN M. HAND, Vice President and Investment Officer. An
employee of the Manager and an officer of other investment
companies advised and administered by the Manager.
STEPHEN C. KRIS, Vice President and Investment Officer. An
employee of the Manager and an officer of other investment
companies advised and administered by the Manager.
JILL C. SHAFFRO, Vice President and Investment Officer. An
employee of the Manager and an officer of other investment
companies advised and administered by the Manager.
L. LAWRENCE TROUTMAN, Vice President and Investment Officer. An
employee of the Manager and an officer of other investment
companies advised and administered by the Manager.
SAMUEL J. WEINSTOCK, Vice President and Investment Officer. An
employee of the Manager and an officer of other investment
companies advised and administered by the Manager.
MONICA S. WIEBOLDT, Vice President and Investment Officer. An
employee of the Manager and an officer of other investment
companies advised and administered by the Manager.
MARK N. JACOBS, Vice President. Secretary and Deputy General
Counsel of the Manager and an officer of other investment
companies advised or administered by the Manager.
JEFFREY N. NACHMAN, Vice President and Treasurer. Vice
President-Mutual Fund Accounting of the Manager and an
officer of other investment companies advised or
administered by the Manager.
DANIEL C. MACLEAN, Secretary. Vice President and General Counsel
of the Manager, Secretary of the Distributor and an officer
of other investment companies advised or administered by the
Manager.
JEAN FARLEY, Controller. Senior Accounting Manager of the Fund
Accounting Department of the Manager and an officer of other
investment companies advised or administered by the Manager.
STEVEN F. NEWMAN, Assistant Secretary. Associate General Counsel
of the Manager and an officer of other investment companies
advised or administered by the Manager.
CHRISTINE PAVALOS, Assistant Secretary. Assistant Secretary of
he Manager and other investment companies advised or
administered by the Manager.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
Trustees and officers of the Fund, as a group, owned less than 1% of
the Fund's shares of beneficial interest outstanding on May 31, 1994.
As of May 31, 1994, The Dreyfus Corporation, 200 Park Avenue, Floor 7,
New York, New York 10166-0799, beneficially owned 279,823,554 shares
(18.90%) of the Fund. To the Fund's knowledge, no other shareholder owned
5% or more of the Fund's shares of beneficial interest outstanding on that
date.
The following persons are also officers and/or directors of the
Manager: Howard Stein, Chairman of the Board and Chief Executive Officer;
Julian M. Smerling, Vice Chairman of the Board of Directors; Joseph S.
DiMartino, President, Chief Operating Officer and a director; Alan M.
Eisner, Vice President and Chief Financial Officer; Robert F. Dubuss, Vice
President; Elie M. Genadry, Vice President--Institutional Sales; Peter A.
Santoriello, Vice President; Robert H. Schmidt, Vice President; Kirk V.
Stumpp, Vice President--New Products Development; Philip L. Toia, Vice
President; John J. Pyburn and Katherine C. Wickham, Assistant Vice
Presidents; Maurice Bendrihem, Controller; and Mandell L. Berman, Alvin E.
Friedman, Lawrence M. Greene, Abigail Q. McCarthy and David B. Truman,
directors.
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 September 29, 1993 with the Fund, which
is subject to annual approval by (i) the Fund's Board of Trustees or (ii)
vote of a majority (as defined in the Act) of the outstanding voting
securities of the Fund, provided that in either event the continuance also
is approved by a majority of the Trustees who are not "interested persons"
(as defined in the 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 is terminable without penalty, on 60 days' notice, by the Fund's
Board of Trustees 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 Act).
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 of Trustees. The Manager is responsible for investment decisions,
and provides the Fund with Investment Officers who are authorized by the
Board of Trustees to execute purchases and sales of securities. The Fund's
Investment Officers are Richard J. Moynihan, A. Paul Disdier, 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
Trustees' review at the meeting subsequent to such transactions.
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,
brokerage fees and commissions, if any, fees of Trustees 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.
The Manager pays the salaries of all officers and employees employed
by both it and the Fund, maintains office facilities and furnishes
statistical and research data, clerical help, accounting, data processing,
bookkeeping and internal auditing and certain other required services. The
Manager also may make such advertising and promotional expenditures, using
its own resources, as it from time to time deems appropriate.
The Manager may, from time to time, from its own funds, other than the
management fee paid by the Fund, but including past profits, make payments
for shareholder servicing and distribution services to the Distributor.
The Distributor in turn may pay part or all of such compensation to
securities dealers or other persons for their servicing or distribution
assistance.
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 period December 16, 1993 (commencement of
operations) through March 31, 1994, no management fee was paid by the Fund
pursuant to an undertaking by the Manager.
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.
SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Shareholder
Services Plan."
The Fund has adopted a Shareholder Services Plan (the "Plan") pursuant
to which the Fund reimburses the Distributor 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
Trustees for their review. In addition, the Plan provides that material
amendments of the Plan must be approved by the Board of Trustees, and by
the Trustees who are not "interested persons" (as defined in the 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 Trustees 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 Trustees who are not "interested persons" and have no
direct or indirect financial interest in the operation of the Plan.
For the period December 16, 1993 (commencement of operations) through
March 31, 1994, $4,813 was chargeable to the Fund under the Shareholder
Services Plan.
PURCHASE OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Fund Shares."
The Distributor. The Distributor serves as the Fund's distributor
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.
Services 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.
In some states, banks or other financial institutions effecting
transactions in Fund shares may be required to register as dealers pursuant
to state law.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made between the hours of 8:00 a.m. and 4:00 p.m., New York time, on
any business day that The Shareholder Services Group, Inc., the Fund's
transfer and dividend disbursing agent (the "Transfer Agent"), and the New
York Stock Exchange are open. Such purchases will be credited to the
shareholder's Fund account on the next bank business day. 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 Fund
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, provided the information on the old Account Application
is still applicable.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to
Redeem Fund Shares."
Check Redemption Privilege. An investor may indicate on the Account
Application or by later written request that the Fund provide Redemption
Checks ("Checks") drawn on the Fund's account. Checks will be sent only to
the registered owner(s) of the account and only to the address of record.
The Account Application 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 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. Redemption proceeds, if wired, must be in the amount of
$1,000 or more and will be wired to the investor's account at the bank of
record designated in the investor's file at the Transfer Agent, if the
investor's bank is a member of the Federal Reserve System, or to a
correspondent bank if the investor's bank is not a member. 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 request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock 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 that ACH member bank ordinarily two
business days after receipt of the redemption request. See "Purchase of
Fund 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 Transfers 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% or 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 Board of Trustees reserves the right to make payments in whole
or in part in securities or other assets in case of an emergency or any
time a cash distribution would impair the liquidity of the Fund to the
detriment of the existing shareholders. In such event, the securities
would be valued in the same manner as the Fund's portfolio is valued. If
the recipient sold such securities, brokerage charges would 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."
Exchange Privilege. 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 or
transferred 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 or transfer under item D above, shareholders
must notify the Transfer Agent of their prior ownership of fund shares and
their account number.
To use this Privilege, an investor must give exchange instructions to
the Transfer Agent in writing, by wire or by telephone. Telephone
exchanges may be made only if the appropriate "YES" box has been checked on
the Account Application, or a separate signed Shareholder Services Form is
on file with the Transfer Agent. By using this Privilege, the investor
authorizes the Transfer Agent to act on telephonic, telegraphic or written
exchange 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 "Exchange
Privilege." 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. Exchange of IRA shares may be made between IRA
accounts and from regular accounts to IRA accounts, but not from IRA
accounts to regular accounts. With respect to all other retirement
accounts, exchanges may be made only among those accounts.
The Exchange Privilege and 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 from the Distributor, 144 Glenn Curtiss Boulevard, Uniondale, New
York 11556-0144. The Fund reserves the right to reject any exchange
request in whole or in part. The Exchange Privilege 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. An Automatic Withdrawal Plan may be established by completing
the appropriate application available from the Distributor. There is a
service charge of $.50 for each withdrawal check. 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 on the payment date 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
Fund Shares."
Valuation of Portfolio Securities. The Fund's investments are valued
by an independent pricing service (the "Service") approved by the Board of
Trustees. When, in the judgment of the Service, quoted bid prices for
investments are readily available and are representative of the bid side of
the market, these investments are valued at the mean between the quoted bid
prices (as obtained by the Service from dealers in such securities) and
asked prices (as calculated by the Service based upon 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
Board of Trustees. 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 Investment
Officers 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 gain
realized from the sale or other disposition of certain market discount
bonds will be treated as ordinary income under Section 1276 of the Code.
In addition, all or a portion of the gain realized from engaging in
"conversion transactions" may be treated as ordinary income under Section
1258. "Conversion transactions" are defined to include certain forward,
futures, option and "straddle" transactions, transactions marketed or sold
to produce capital gains, or transactions described in Treasury regulations
to be issued in the future.
Under Section 1256 of the Code, 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 Section 1092 and 1258 of the Code,
which, in certain circumstances, overrides or modifies the provisions of
Section 1256. 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 reasons of
its engaging in financial futures contracts or options transactions, such
"straddles" would be characterized as "mixed straddles" if the futures or
options comprising apart 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, 1994, the Fund's yield was
4.53%. The Fund's yield reflects the absorption of certain expenses by the
Manager and the waiver of the management fee without which the Fund's yield
for the 30-day period ended March 31, 1994 would have been 3.04%. 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 1994 Federal and Pennsylvania personal income
tax rate of 41.29%, the Fund's tax equivalent yield for the seven-day
period ended March 31, 1994 was 6.59%. Without the absorption of certain
expenses and the waiver of the management fee, the Fund's tax equivalent
yield for the seven-day period ended March 31, 1994 would have been 4.42%.
Tax equivalent yield is computed by dividing that portion of the yield or
effective 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 noted above represents the application of the
highest Federal and Commonwealth of Pennsylvania marginal personal income
tax rates in effect during 1993. For Federal income tax purposes, a 39.60%
tax rate has been used and, for Pennsylvania personal income tax purposes,
a 2.80% tax rate has been used. The tax equivalent figure, however, does
not reflect 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 period from the Fund's commencement of operations on December
16, 1993 through March 31, 1994, the Fund's total return was .87%. 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.
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.
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 refer to or
discuss then-current or past economic conditions, developments and/or
events, and actual or proposed tax legislation. From time to time,
advertising materials for the Fund may also refer to statistical or other
information concerning trends relating to investment companies, as compiled
by industry associations such as the Investment Company Institute. From
time to time, advertising materials for the Fund also may refer to
Morningstar ratings and related analyses supporting the rating.
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 will send annual and semi-annual financial statements to all
its shareholders.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS
The Bank of New York, 110 Washington Street, New York, New York 10286,
is the Fund's custodian. The Shareholder Services Group, Inc., a
subsidiary of First Data Corporation, P.O. Box 9671, Providence, Rhode
Island 02940-9671, is the Fund's transfer and dividend disbursing agent.
Neither The Bank of New York nor The Shareholder Services Group, Inc. 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 of
beneficial interest being sold pursuant to the Fund's Prospectus.
Ernst & Young, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund.
APPENDIX A
RISK FACTORS - INVESTING IN
PENNSYLVANIA MUNICIPAL OBLIGATIONS
The following information constitutes only a brief summary, does not
purport to be a complete description, and is based on information drawn
from official statements relating to securities offerings of the
Commonwealth of Pennsylvania (the "Commonwealth") and various local
agencies, available as of the date of this Statement of Additional
Information. While the Fund has not independently verified such
information, it has no reason to believe that such information is not
correct in all material respects.
General. Pennsylvania historically has been identified as a heavy
industry state, although that reputation has changed with the decline of
the coal, steel and railroad industries and the resulting diversification
of Pennsylvania's industrial composition. The major new sources of growth
are in the service sector, including trade, medical and health services,
education and financial institutions. Agriculture continues to be an
important component of the Commonwealth's economic structure, with nearly
one-fourth of the Commonwealth's total land area devoted to cropland,
pasture and farm woodlands.
The population of Pennsylvania experienced a slight increase in the
period 1982 through 1992 and has a high proportion of persons 65 or older.
The Commonwealth is highly urbanized, with almost 85% of the 1990 census
population residing in metropolitan statistical areas. The cities of
Philadelphia and Pittsburgh, the Commonwealth's largest metropolitan
statistical areas, together comprise approximately 50% of the
Commonwealth's total population.
Pennsylvania's average annual unemployment rate remained below the
national average between 1986 and 1990. Slower economic growth caused the
rate to rise to 6.9% in 1991 and 7.5% in 1992. Seasonally adjusted data
for July 1993, the most recent month for which data is available, shows an
unemployment rate of 7.3% compared to an unemployment rate of 6.8% for the
United States as a whole.
Financial Accounting. Pennsylvania utilizes the fund method of
accounting and over 140 funds have been established for purposes of
recording receipts and disbursements. The General Fund, the Commonwealth's
largest fund, receives all tax revenues, non-tax revenues, federal grants
and entitlements that are not specified by law to be deposited elsewhere.
Debt service on all bond indebtedness of the Commonwealth, except that
issued for highway purposes or for the benefit of other Special Revenue
Funds, is payable from the General Fund. The General Fund, all Special
Revenue Funds, the Debt Service Funds and the Capital Projects Funds
combine to form the Governmental Fund Types.
Financial information for the funds is maintained on a budgetary basis
of accounting ("Budgetary"). Since 1984, the Commonwealth has also
prepared financial statements in accordance with generally accepted
accounting principles ("GAAP"). The GAAP statements have been audited
jointly by the Auditor General of the Commonwealth and an independent
public accounting firm. The Budgetary information is adjusted at fiscal
year end to reflect appropriate accruals for financial reporting in
conformity with GAAP. The Commonwealth maintains a June 30th fiscal year
end.
Revenue and Expenditures. Tax revenues constituted over 98% of
General Fund revenues in fiscal 1993. The major tax sources for the
General Fund are the sales tax, which accounted for $4.83 billion or 33.0%
of revenues accruing to the General Fund in fiscal 1993; the personal
income tax, which accounted for $4.79 billion or 32.7% of revenues accruing
to the General Fund; and corporate taxes, which accounted for $2.33 billion
or 16.0% of tax revenues. The primary expenditures of the General Fund are
for education ($6.4 billion from Commonwealth funds in fiscal 1993) and for
public health and welfare ($4.8 billion in fiscal 1993).
Governmental Fund Types: Financial Condition/Results of Operations
(GAAP Basis). From fiscal 1984 through fiscal 1989, the Commonwealth
reported a positive unreserved-undesignated fund balance for its
Governmental Fund Types at the fiscal year end. Reduced revenue growth and
increased expenses contributed to negative unreserved-undesignated fund
balances of the Governmental Fund Types at the end of the 1990 and 1991
fiscal years, largely due to operating deficits in the General Fund and
State Lottery Fund during those fiscal years. Actions taken during fiscal
year 1992 to bring the General Fund budget back into balance, including tax
increases and expenditure restraints, resulted in a $1.1 billion
improvement to the unreserved-undesignated fund deficit for combined
Governmental Fund Types and a return to a positive fund balance. At the
end of fiscal 1992, the total fund balance and other credits for the total
Governmental Fund Types was $1.228 billion, an increase of $1.249 billion
from the $20.9 million deficit at the end of fiscal year 1991. During
fiscal 1992, total assets increased by $671.8 million to $5.8 billion,
while liabilities decreased $576.9 million to $4.572 billion.
General Fund: Financial Condition/Results of Operations.
Five Year Overview (GAAP Basis). The five year period from fiscal
1988 through fiscal 1992 was a period of slowing revenue growth and
accelerating expenditure increases as the economy slowed and the national
recession brought a halt to economic growth. Tax revenues during the five
year period, led by a 29.2% increase in fiscal 1992 due to a $2.7 billion
increase from enacted rate increases and base changes, grew at a compounded
annual growth rate of 9.3%. The effect of the economic recession on tax
revenue growth was evident in the 2.7% increase in fiscal 1990 and the 0.5%
decline in fiscal 1991. Expenditures for the five year period increased at
a compounded annual growth rate of 13.6%, led by rising public health and
welfare costs attributable to growing caseloads, expanding client
utilization and cost increases. Corrections program costs also increased
during this period due to rapid population increases and development of new
facilities. Debt service expenditures escalated as the amount of tax
anticipation note borrowing increased in response to fiscal pressures
brought about by slow economic growth and the recession.
Fiscal 1992 Financial Results (GAAP Basis). During fiscal 1992 the
General Fund recorded a $1.1 billion operating surplus through tax rate
increases and tax base broadening measures enacted in August 1991 and by
controlling expenditures through numerous cost reduction measures
implemented throughout the fiscal year. As a result of the fiscal 1992
operating surplus, the fund balance increased to $87.5 million and the
unreserved-undesignated deficit dropped to $138.6 million from its fiscal
1991 level of $1.146 billion.
Fiscal 1993 Financial Results (Budgetary Basis). The 1993 fiscal year
closed with revenues higher than anticipated and expenditures about as
projected, resulting in an ending unappropriated balance surplus of $242.3
million. Cash revenues were $41.5 million above the budget estimate and
totaled $14.633 billion, representing less than a 1% increase over revenue
for the 1992 fiscal year. A reduction in the personal income tax rate in
July 1992 and revenues from retroactive corporate tax increases received in
fiscal 1992 were responsible for the low rate of revenue growth.
Appropriations less lapses totaled an estimated $13.870 billion,
representing a 1.1% increase over those during fiscal 1992. The low growth
in spending was a consequence of a low rate of revenue growth, significant
one-time expenses during fiscal 1992, increased tax refund reserves to
cushion against adverse decisions on pending litigations, and the receipt
of federal funds for expenditures previously paid out of Commonwealth
funds.
By state statute, 10% of the budgetary basis unappropriated surplus at
the end of a fiscal year is to be transferred to the Tax Stabilization
Reserve Fund. The transfer for the fiscal 1993 balance is expected to be
$24.2 million. The remaining unappropriated surplus of $218.0 million will
be carried forward into the 1994 fiscal year.
Fiscal 1994 Budget (Budgetary Basis). The enacted 1994 fiscal year
budget provides for $14.999 billion of appropriations of Commonwealth
funds. The largest increase in appropriations is for the Department of
Public Welfare ($235 million) to meet the increasing costs of medical care
and rising caseloads. Other large increases include $196 million to
education (which includes $129 million to increase state educational
subsidies for the most needy school districts) and $104 million for
correctional institutions (to pay operating costs and lease payments for
five new prisons and to expand the capacity of two existing facilities).
The continuing rise in medical assistance costs cannot be met from the
resources provided by a much slower growing tax revenue base.
Consequently, program and financial changes must be implemented to keep
costs within budget limits. For fiscal 1994, the Commonwealth plans to
save $247 million by receiving federal reimbursement for hospital services
provided to state general assistance recipients. Prior to this time, those
costs were fully paid by the Commonwealth. In addition, the Commonwealth
will continue to use pooled financing for medical assistance costs using
intergovernmental transfers in place of voluntary contributions as was done
in earlier fiscal years. Through the pooled financing, additional federal
reimbursements may be drawn to support the medical assistance program. The
pooled financing is anticipated to replace $68 million of Commonwealth
funds in the 1994 fiscal year budget.
The budget estimates revenue growth of 3.7% over fiscal 1993 actual
revenues. The revenue estimate is based on an expectation of continued
economic recovery, but at a slow rate. Sales tax receipts are projected to
rise 4.4% over 1993 receipts while personal income tax receipts are
projected to increase by 3.3%, a rate that is low because of the tax rate
reduction in July 1992.
Commonwealth Debt. The current constitutional provisions pertaining
to Pennsylvania debt permit the issuance of the following types of debt:
(i) debt to suppress insurrection or rehabilitate areas affected by
disaster, (ii) electorate approved debt, (iii) debt for capital projects
subject to an aggregate debt limit of 1.75 times the annual average tax
revenues of the preceding five fiscal years and (iv) tax anticipation notes
payable in the fiscal year of issuance. All debt except tax anticipation
notes must be amortized in substantial and regular amounts.
Outstanding general obligation debt totalled $5.039 billion on June
30, 1993, an increase of $163.7 million from June 30, 1992. In its current
debt financing plans, Pennsylvania is emphasizing infrastructure investment
to improve and rehabilitate existing capital facilities, such as water
supply systems, and to construct new facilities, such as roads, prisons and
public buildings. As a result of the emphasis on infrastructure
investment, outstanding non-highway debt increased $253.2 million from June
30, 1992 to $3.644 billion on June 30, 1993. Outstanding general
obligation debt for highway purposes was $1.395 billion on June 30, 1993, a
decrease of $89.5 million from June 30, 1992.
Pennsylvania engages in short-term borrowing to fund expenses within a
fiscal year through the sale of tax anticipation notes which must mature
within the fiscal year of issuance. The principal amount issued, when
added to that outstanding, may not exceed in the aggregate 20% of the
revenues estimated to accrue to the appropriate fund in the fiscal year.
The Commonwealth is not permitted to fund deficits between fiscal years
with any form of debt. All year-end deficit balances must be funded within
the succeeding fiscal year's budget. Pennsylvania issued a total of $975.0
million of tax anticipation notes for the account of the General Fund in
fiscal 1993, all of which matured on June 30, 1993, and were paid from
fiscal 1993 General Fund receipts.
Pending the issuance of bonds, Pennsylvania may issue bond
anticipation notes subject to the applicable statutory and constitutional
limitations generally imposed on bonds. The term of such borrowings may
not exceed three years. Currently, there are $39.0 million of bond
anticipation notes outstanding, all of which are to be retired from the
proceeds of recent general obligation bond issues.
State-Related Obligations. Certain state-created agencies have
statutory authorization to incur debt for which no legislation providing
for state appropriations to pay debt service thereon is required. The debt
of these agencies is supported by assets of, or revenues derived from, the
various projects financed; it is not an obligation of the Commonwealth.
Some of these agencies, however, are indirectly dependent on Commonwealth
appropriations. State-related agencies with outstanding debt as of June
30, 1993 included the Delaware River Joint Toll Bridge Commission ($58.4
million), the Delaware River Port Authority ($239.2 million), the
Pennsylvania Economic Development Financing Authority ($336.3 million), the
Pennsylvania Energy Development Authority ($165.0 million), the
Pennsylvania Higher Education Assistance Agency ($1.159 billion), the
Pennsylvania Higher Education Facilities Authority ($1.796 billion), the
State Public School Building Authority ($304.6 million), the Pennsylvania
Turnpike Commission ($1.162 billion), the Pennsylvania Industrial
Development Authority ($266.3 million), and the Pennsylvania Infrastructure
Investment Authority ($142.5 million).
The Commonwealth has a moral, but no legal, obligation to support the
debt issued by (i) the Pennsylvania Housing Finance Agency, a state-created
agency which provides housing for lower and moderate income families in the
Commonwealth, which had $2.08 billion of revenue bonds and $9.5 million of
notes outstanding as of June 30, 1993, and (ii) The Hospitals and Higher
Education Facilities Authority of Philadelphia, a municipal authority
organized by the City of Philadelphia to acquire and prepare sites for use
as intermediate care facilities for the mentally retarded.
Litigation. Certain litigation is pending against the Commonwealth
that could adversely affect the ability of the Commonwealth to pay debt
service on its obligations, including suits relating to the following
matters: (a) approximately 3,500 tort suits are pending against the
Commonwealth pursuant to the General Assembly's 1978 approval of a limited
waiver of sovereign immunity which permits recovery of damages for any loss
up to $250,000 per person and $1,000,000 per accident ($17.5 million
appropriated from the Motor License Fund in fiscal 1993 has been increased
to $32.0 million for fiscal 1994 due to higher and more numerous payments
resulting from recent decisions by the Pennsylvania Supreme Court); (b) the
ACLU filed suit in April 1990 in federal court demanding additional funding
for child welfare services (no available estimates of potential liability),
which the Commonwealth is seeking to have dismissed based on, among other
things, the settlement in a similar Commonwealth court action that provided
for more funding in fiscal 1991 as well as commitment to pay to counties
$30.0 million over five years (on April 12, 1993, the court dismissed all
claims except some of the plaintiffs' constitutional claims and two
Americans with Disabilities Act claims); (c) in 1987, the Supreme Court of
Pennsylvania held that the statutory scheme for county funding of the
judicial system was in conflict with the Pennsylvania Constitution but
stayed judgment pending enactment by the legislature of funding consistent
with the opinion (the legislature has yet to consider legislation
implementing the judgment); (d) several banks have filed suit against the
Commonwealth contesting the constitutionality of a 1989 law imposing a bank
shares tax on banking institutions (potential liability estimated at $1.023
billion through June 1993 plus appropriate statutory interest); (e) in
November 1990, the ACLU brought a class action suit on behalf of the
inmates in thirteen Commonwealth correctional institutions challenging
confinement conditions and including a variety of other allegations, and,
although no damages are sought, if injunctive relief is granted the cost to
the Commonwealth in capital and personnel expenses may be substantial
(trial is scheduled for November 1993); (f) in January 1992, the
Pennsylvania Commonwealth Court ruled that dividends received by a
corporate taxpayer which are accounted for under the equity method of
accounting are not to be included in the tax base for purposes of the
capital stock/franchise tax (the Commonwealth has provided reserves and
revenue estimate reductions to fund the potential $146 million refund and
$30 million annual loss of revenues in the event of an unfavorable outcome
of the Pennsylvania Supreme Court appeal argued in December 1992); (g) in
1991, a consortium of public interest law firms filed a class action suit
alleging that the Commonwealth had failed to comply with the 1989 federal
mandate with respect to certain services for Medicaid-eligible children
under the age of 21, which if the relief requested were granted, would cost
the Commonwealth approximately $98 million; (h) litigation has been filed
in both state and federal court by an association of rural and small
schools and several individual school districts and parents challenging the
constitutionality of the Commonwealth's system for funding local school
districts -- the federal case has been stayed pending resolution of the
state case and the state case is in the pre-trial discovery stage (no
available estimate of potential liability); and (i) approximately 150
hospitals challenged the Commonwealth's fiscal 1989 and 1990 reimbursement
rates for inpatient hospital services provided to needy citizens under the
Medical Assistance Program (these lawsuits were settled in May 1991, with
dismissal of the litigation pending the disposal of one appeal).
Philadelphia. For the fiscal year ending June 30, 1991, Philadelphia
experienced a cumulative General Fund balance deficit of $153.5 million.
The audit findings for the fiscal year ending June 30, 1992 place the
Cumulative General Fund balance deficit at $224.9 million.
Legislation providing for the establishment of the Pennsylvania
Intergovernmental Cooperation Authority ("PICA") to assist first class
cities in remedying fiscal emergencies was enacted by the General Assembly
and approved by the Governor in June 1991. PICA is designed to provide
assistance through the issuance of funding debt to liquidate budget
deficits and to make factual findings and recommendations to the assisted
city concerning its budgetary and fiscal affairs. An intergovernmental
cooperation agreement between Philadelphia and PICA was approved by City
Council on January 3, 1992, and approved by the PICA Board and signed by
the Mayor on January 8, 1992. At this time, Philadelphia is operating
under a five year fiscal plan approved by PICA on April 6, 1992. Full
implementation of the five year plan was delayed due to labor negotiations
that were not completed until October 1992, three months after the
expiration of the old labor contracts. The terms of the new law labor
contracts are estimated to cost approximately $144.0 million more than what
was budgeted in the original five year plan. An amended five year plan was
approved by PICA in May 1993. The amended five year plan projected a
General Fund balance deficit of $6.6 million for the fiscal year ending
June 30, 1993. The fiscal 1994 budget projects no deficit and a balanced
budget for the year ended June 30, 1994.
In June 1992, PICA issued $474.6 million of its Special Tax Revenue
Bonds to provide financial assistance to Philadelphia and to liquidate the
cumulative General Fund balance deficit. In July 1993, PICA issued $643.4
million of Special Tax Revenue Bonds to refund certain general obligation
bonds of the city and to fund additional capital projects.
APPENDIX B
Description of Standard & Poor's Corporation ("S&P"), Moody's
Investors Service, Inc. ("Moody's") and Fitch Investors Service, Inc.
("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>
<CAPTION>
Dreyfus Pennsylvania Intermediate Municipal Bond Fund
Statement of Investments March 31, 1994 (Unaudited)
Principal
Municipal Bonds--73.2% Amount Value
---------- ----------
<S> <C> <C>
Pennsylvania--68.7%
Bucks County 6.05%, 3/1/2002...................................................................... $ 500,000 $ 526,935
Chester County Health and Educational Facilities Authority (Main Line Health System)
4.90%, 5/15/2004................................................................................ 350,000 325,875
Clinton County Industrial Development Authority, PCR, Refunding (International Paper Co. Project)
5.375%, 5/1/2004................................................................................ 500,000 486,890
Delaware County Authority, HR (Crozer-Chester Medical Center)
4.74%, 12/15/2003 (Insured; MBIA)............................................................... 430,000 401,659
Delaware County Industrial Development Authority, Revenue, Refunding
(Martins Run Project) 5.60%, 12/15/2002......................................................... 750,000 712,657
Harrisburg Water Authority, Revenue 5.30%, 7/15/2004 (Insured; FGIC).............................. 300,000 296,928
Lackawanna County, Refunding 4.90%, 12/1/2006 (Insured; AMBAC).................................... 500,000 461,670
Lancaster Higher Educational Authority, College Revenue (Franklin & Marshall College Project)
5.00%, 4/15/2002 (Insured; MBIA)................................................................ 350,000 344,760
Lebanon County Hospital Authority, Revenue (Good Samaritan Hospital Project)
6.00%, 11/15/2009............................................................................... 500,000 459,870
Lehigh County General Purpose Authority, Revenue (Saint Lukes Hospital Project)
4.75%, 11/15/2000 (Insured; AMBAC).............................................................. 345,000 335,623
Northeastern Hospital and Education Authority, University Revenue, Refunding
(Wilkes University) 5.60%, 10/1/2005............................................................ 200,000 189,120
Pennsylvania Economic Development Financing Authority, RRR
(Northampton Generating Project) 6.40%, 1/1/2009.............................................. 500,000 478,880
Pennsylvania GO, 5.00%, 9/1/2007.................................................................. 350,000 325,976
Pennsylvania Turnpike Commission, Turnpike Revenue, Refunding:
5.35%, 12/1/2002 (Insured; FGIC) ............................................................... 255,000 257,091
5.45%, 12/1/2002................................................................................ 500,000 502,015
Philadelphia, Revenue:
Gas Works 4.60%, 8/1/2003 (Insured; MBIA)....................................................... 500,000 460,235
Hospital And Higher Education Facilities Authority, Graduate Health Systems 5.10%, 7/1/1998..... 350,000 343,913
School District 5.75%, 7/1/2007 (Insured; MBIA)................................................. 600,000 590,658
Water and Wastewater, Refunding:
4.25%, 6/15/1996.............................................................................. 500,000 499,765
5.50%, 6/15/2006.............................................................................. 250,000 241,355
Philadelphia Municipal Authority, LR, Refunding:
(Criminal Justice Purpose) 5.40%, 11/15/2006 (Insured; FGIC).................................... 500,000 487,030
6.00%, 7/15/2003................................................................................ 500,000 481,360
Pittsburgh GO, Refunding 4.70%, 9/1/2001 (Insured; AMBAC)......................................... 250,000 241,185
Pittsburgh Water and Sewer Authority, Water and Sewer Systems Revenue
4.70%, 9/1/2004 (Insured; FGIC)................................................................. 300,000 277,998
Scranton-Lackawanna Health and Welfare Authority, Revenue (University of Scranton Project)
5.80%, 3/1/2000................................................................................. 500,000 506,950
Wilkinsburg Joint Water Authority, Water Revenue 6.15%, 8/15/2006 (Prerefunded 8/15/2002) (a)..... 500,000 528,400
U.S. Related--4.5%
Puerto Rico, GO 5.40%, 7/1/2003................................................................... 200,000 197,058
Puerto Rico Highway and Transportation Authority, Highway Revenue, Refunding
5.00%, 7/1/2002................................................................................. 225,000 216,574
Puerto Rico Housing Bank and Finance Agency, Single Family, Refunding 5.00%, 12/1/2002............ 300,000 287,904
-----------
TOTAL MUNICIPAL BONDS (cost $11,929,866).......................................................... $11,466,334
===========
Short-Term Municipal Investments--26.8%
Pennsylvania:
Allegheny Higher Education Building Authority, Revenue, VRDN
(University of Pittsburgh Project) 1.95% (LOC; Union Bank of Switzerland)(b,c).................. $ 300,000 $ 300,000
Allegheny Hospital Development Authority, Revenue, VRDN
(Presbyterian Health Center) 1.80% (BPA; Credit Suisse)(b)...................................... 200,000 200,000
Bucks County Industrial Development Authority, VRDN (Oxford Falls)
2.40% (Guaranteed; Household Finance Corp.)(b).................................................. 300,000 300,000
Erie County Industrial Development Authority, Revenue, VRDN (McInnes Steel Co.)
2.60% (LOC; PNC Bank)(b,c)...................................................................... 300,000 300,000
Pennsylvania Energy Development Authority, Energy Development Revenue, VRDN
(B & W Ebensburg Project) 2.40% (LOC; Swiss Bank Corp.)(b,c).................................... 300,000 300,000
Pennsylvania Higher Education Assistance Agency, Student Loan Revenue, VRDN
2.25% (LOC; Union Bank of Switzerland)(b,c)..................................................... 500,000 500,000
Pennsylvania Higher Educational Facilities Authority, College and University Revenues, VRDN
(Temple University) 2.60% (LOC; Morgan Guaranty)(b,c)........................................... 300,000 300,000
Schuylkill Industrial Development Authority, RRR, VRDN (Northeastern Power Co, Project):
2.60% (LOC; Sumitomo Bank)(b,c)................................................................. 1,800,000 1,800,000
2.45% (LOC; Sumitomo Bank)(b,c)................................................................. 200,000 200,000
-----------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $4,200,000).......................................... $ 4,200,000
===========
TOTAL INVESTMENTS--100.0%
(cost $16,129,866).............................................................................. $15,666,334
===========
</TABLE>
<TABLE>
<CAPTION>
Summary of Abbreviations
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Association LR Lease Revenue
BPA Bond Purchase Agreement MBIA Municipal Bond Insurance Association
FGIC Financial Guaranty Insurance Corporation PCR Pollution Control Revenue
GO General Obligation RRR Resource Recovery Revenue
HR Hospital Revenue VRDN Variable Rate Demand Notes
LOC Letter of Credit
</TABLE>
<TABLE>
<CAPTION>
Summary of Combined Ratings
Fitch (d) or Moody's or Standard & Poor's Percentage of Value
- ----------- ------- ----------------- -------------------
<S> <C> <S> <C>
AAA Aaa AAA 30.0%
AA Aa AA 7.5
A A A 12.3
BBB Baa BBB 13.0
BB Ba BB 3.0
F1 MIG1 SP1 12.2
F1 P1 A1 14.3
Not Rated Not Rated Not Rated 7.7
------
100.0%
Notes to Statement of Investments: ======
(a) Bonds which are prerefunded are collateralized by U.S. Government securities which are held in escrow and are
used to pay principal and interest on the tax-exempt issue and to retire the bonds in full at the earliest refunding date.
(b) Securities payable on demand. The interest rate, which is subject to change, is based upon bank prime rates or an index
of market interest rates.
(c) Secured by letters of credit.
(d) Fitch currently provides creditworthiness information for a limited amount of investments.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Dreyfus Pennsylvania Intermediate Municipal Bond Fund
Statement of Assets and Liabilities March 31, 1994 (Unaudited)
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $16,129,866)--see statement....................................... $15,666,334
Cash...................................................................... 177,186
Interest receivable....................................................... 148,320
Prepaid expenses and other assets--Note 1(e).............................. 47,728
Due from The Dreyfus Corporation.......................................... 38,872
-----------
16,078,440
LIABILITIES:
Payable for investment securities purchased............................... $1,648,783
Payable for shares of Beneficial Interest redeemed........................ 22,735
Accrued expenses and other liabilities.................................... 86,780 1,758,298
---------- -----------
NET ASSETS................................................................... $14,320,142
===========
REPRESENTED BY:
Paid-in capital........................................................... $14,788,396
Accumulated net realized (loss) on investments............................ (4,722)
Accumulated net unrealized (depreciation) on investments--Note 3.......... (463,532)
-----------
NET ASSETS at value applicable to 1,151,255 shares outstanding
(unlimited number of $.001 par value shares of Beneficial
Interest authorized)...................................................... $14,320,142
===========
NET ASSET VALUE, offering and redemption price per share
($14,320,142 / 1,151,255 shares).......................................... $12.44
======
</TABLE>
<TABLE>
<CAPTION>
Dreyfus Pennsylvania Intermediate Municipal Bond Fund
Statement of Operations
from December 16, 1993 (commencement of operations) to March 31, 1994 (Unaudited)
<S> <C> <C>
INVESTMENT INCOME:
Interest Income.................................................. $ 77,657
Expenses:
Management fee--Note 2(a)...................................... $ 10,370
Registration fees.............................................. 7,376
Shareholder servicing costs--Note 2(b)......................... 7,216
Auditing fees.................................................. 6,667
Legal fees..................................................... 5,333
Shareholders' reports.......................................... 4,067
Organization expenses--Note 1(e)............................... 3,100
Trustees' fees and expenses--Note 2(c)......................... 3,000
Custodian fees................................................. 849
Miscellaneous.................................................. 1,264
----------
49,242
Less--expense reimbursement from Manager due to
undertaking--Note 2(a)....................................... 49,242
----------
Total Expenses............................................ --
---------
INVESTMENT INCOME--NET.................................... 77,657
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized (loss) on investments--Note 3....................... $ (4,722)
Net unrealized (depreciation) on investments..................... (463,532)
----------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS......... (468,254)
---------
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.............. $(390,597)
=========
See notes to finacial statements.
</TABLE>
<TABLE>
<CAPTION>
Dreyfus Pennsylvania Intermediate Municipal Bond Fund
Statement of Changes in Net Assets
from December 16, 1993 (commencement of operations) to March 31, 1994 (Unaudited)
<S> <C>
OPERATIONS:
Investment income--net............................................................. $ 77,657
Net realized (loss) on investments................................................. (4,722)
Net unrealized (depreciation) on investments for the period........................ (463,532)
-----------
Net (Decrease) In Net Assets Resulting From Operations........................... (390,597)
-----------
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income--net............................................................. (77,657)
-----------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold...................................................... 15,710,085
Dividends reinvested............................................................... 65,360
Cost of shares redeemed............................................................ (1,087,049)
-----------
Increase In Net Assets From Beneficial Interest Transactions..................... 14,688,396
-----------
Total Increase In Net Assets................................................... 14,220,142
NET ASSETS:
Beginning of period--Note 1........................................................ 100,000
-----------
End of period...................................................................... $14,320,142
===========
Shares
------------
CAPITAL SHARE TRANSACTIONS:
Shares sold........................................................................ 1,223,661
Shares issued for dividends reinvested............................................. 5,176
Shares reedeemed................................................................... (85,582)
------------
Net Increase In Shares Outstanding............................................... 1,143,255
============
See notes to financial statements.
</TABLE>
Dreyfus Pennsylvania Intermediate Municipal Bond Fund
Financial Highlights
Reference is made to Page 2 of the Fund's Prospectus,
dated June 20, 1994.
See notes to financial statements.
Dreyfus Pennsylvania Intermediate Municipal Bond Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus Pennsylvania Intermediate Municipal Bond Fund (the "Fund") was
organized as a Massachusetts business trust on March 12, 1992, and had no
operations until December 16, 1993 (commencement of operations) other
than matters relating to its organization and registration as a
non-diversified open-end management investment company under the Investment
Company Act of 1940 ("Act") and the Securities Act of 1933 and the sale
and issuance of 8,000 shares of Beneficial Interest ("Initial Shares") to
The Dreyfus Corporation ("Manager"). Dreyfus Service Corporation
("Distributor") acts as the exclusive distributor of the Fund's shares,
which are sold to the public without a sales charge. The Distributor is
a wholly-owned subsidiary of the Manager. As of March 31, 1994, the
Manager held 285,618 shares. The Fund's fiscal year ends on November 30.
(a) Portfolio valuation: The Fund's investments are valued each business
day by an independent pricing service ("Service") approved by the Board of
Trustees. Investments for which quoted bid prices in the judgment of
the Service are readily available and are representative of the bid side
of the market 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.
(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, when
appropriate, 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, if any, it is the policy of the Fund not
to distribute such gain.
(d) Federal income taxes: It is the policy of the Fund to qualify as a
regulated investment company, which can distribute tax exempt dividends,
by complying with the provisions available to certain investment companies,
as defined in applicable sections of the Internal Revenue Code, and to make
distributions of income and net realized capital gain sufficient to relieve
it from all, or substantially all, Federal income taxes.
(e) Other: Organization expenses paid by the Fund are included in prepaid
expenses and are being amortized to operations from December 16, 1993, the
date operations commenced, over the period during which it is expected that
a benefit will be realized, not to exceed five years. At March 31, 1994,
the unamortized balance of such expenses amounted to $43,400. In the event
that any of the Initial Shares are redeemed during the amortization period,
the redemption proceeds will be reduced by any unamortized organization
expenses in the same proportion as the number of such shares being redeemed
bears to the number of such shares outstanding at the time of such redemption.
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 average daily value of the Fund's 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 December 16, 1993
through June 30, 1994, or until such time as the net assets of the Fund
exceed $50 million, regardless of whether they remain at that level, to
reimburse all fees and expenses of the Fund. The expense reimbursement,
pursuant to the undertaking, amounted to $49,242 for the period ended
March 31, 1994.
The undertaking may be modified by the Manager from time to time,
provided 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 the Distributor an amount not to exceed an annual rate of
.25 of 1% of the value of the Fund's average daily net assets for
servicing 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 period ended March 31, 1994, the
Fund was charged an aggregate of $4,813 pursuant to the Shareholder
Services Plan.
(c) Certain officers and trustees of the Fund are "affiliated persons,"
as defined in the Act, of the Manager and/or the Distributor. Each trustee
who is not an "affiliated person" receives an annual fee of $1,000 and an
attendance fee of $250 per meeting.
NOTE 3--Securities Transactions:
Purchases and sales of securities amounted to $18,639,303 and
$2,503,393, respectively, for the period ended March 31, 1994, and consisted
entirely of municipal bonds and short-term municipal investments.
At March 31, 1994, accumulated net unrealized depreciation on
investments was $463,532, consisting of $2,380 gross unrealized appreciation
and $465,912 gross unrealized depreciation.
At March 31, 1994, 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 PENNSYLVANIA INTERMEDIATE MUNICIPAL BOND FUND
Statement of Assets and Liabilities
September 24, 1993
ASSETS
Cash $100,000
Deferred organization expenses 53,500
Total Assets 153,500
LIABILITIES
Accrued organization expenses 53,500
NET ASSETS applicable to 8,000 shares of
beneficial interest ($.001 par value) issued
and outstanding (unlimited number of shares
authorized) . . . . . . . . . . . . . . . . . . . . . . . . . . $100,000
=====
NET ASSET VALUE, offering and redemption price per
share ($100,000/8,000 shares) . . . . . . . . . . . . . . . . . .$ 12.50
=====
NOTE - Dreyfus Pennsylvania Intermediate Municipal Bond Fund (the "Fund")
was organized as a Massachusetts business trust on March 12, 1992 and has
had no operations since that date other than matters relating to its
organization and registration as a non-diversified, open-end investment
company under the Investment Company Act of 1940 and the Securities Act of
1933 and the sale and issuance of 8,000 shares of beneficial interest to
The Dreyfus Corporation ("Initial Shares"). Organization expenses payable
by the Fund have been deferred and will be amortized from the date
operations commence over a period which it is expected that a benefit will
be realized, not to exceed five years. If any of the Initial Shares are
redeemed during the amortization period by any holder thereof, the
redemption proceeds will be reduced by any unamortized organization
expenses in the same proportion as the number of Initial Shares being
redeemed bears to the number of Initial Shares outstanding at the time of
the redemption.
REPORT OF INDEPENDENT AUDITORS
Shareholder and Board of Trustees
Dreyfus Pennsylvania Intermediate Municipal Bond Fund
We have audited the accompanying statement of assets and liabilities of
Dreyfus Pennsylvania Intermediate Municipal Bond Fund as of September 24,
1993. This statement of assets and liabilities is the responsibility of
the Fund's management. Our responsibility is to express an opinion on this
statement of assets and liabilities based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether this statement of assets and
liabilities is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
statement of assets and liabilities. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall statement of assets and liabilities
presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of
Dreyfus Pennsylvania Intermediate Municipal Bond Fund at September 24,
1993, in conformity with generally accepted accounting principles.
New York, New York
October 21, 1993
Ernst & Young
