File No. 2-96709
811-4271
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 19 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 19 [X]
(Check appropriate box or boxes.)
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6000
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
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X on October 1, 2000 pursuant to paragraph (a)(i)
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60 days after filing pursuant to paragraph (a)(i)
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on (date) pursuant to paragraph (b)
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75 days after filing pursuant to paragraph (a)(ii)
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on (date) pursuant to paragraph (a)(ii) of Rule 485
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If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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Dreyfus Massachusetts Tax Exempt Bond Fund
Investing for income exempt from federal and Massachusetts state income taxes
PROSPECTUS October 1, 2000
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
Contents
THE FUND
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2 Goal/Approach
3 Main Risks
4 Past Performance
5 Expenses
6 Management
7 Financial Highlights
YOUR INVESTMENT
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8 Account Policies
11 Distributions and Taxes
12 Services for Fund Investors
14 Instructions for Regular Accounts
FOR MORE INFORMATION
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Back Cover
What every investor should know about the fund
Information for managing your fund account
Where to learn more about this and other Dreyfus funds
<PAGE>
The Fund
Dreyfus Massachusetts Tax Exempt Bond Fund
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Ticker Symbol: DMEBX
GOAL/APPROACH
The fund seeks as high a level of current income exempt from federal and
Massachusetts state income taxes as is consistent with the preservation of
capital. To pursue this goal, the fund normally invests substantially all of its
assets in municipal bonds that provide income exempt from federal and
Massachusetts state income taxes.
The fund will invest at least 80% of its assets in investment grade municipal
bonds or the unrated equivalent as determined by Dreyfus. The fund may invest up
to 20% of its assets in municipal bonds rated below investment grade ("high
yield" or "junk" bonds) or the unrated equivalent as determined by Dreyfus. The
dollar-weighted average maturity of the fund's portfolio normally exceeds ten
years, but the fund may invest without regard to maturity.
Municipal bonds are typically of two types:
* GENERAL OBLIGATION BONDS, which are secured by the full faith and credit
of the issuer and its taxing power
* REVENUE BONDS, which are payable from the revenues derived from a specific
revenue source, such as charges for water and sewer service or highway
tolls
Although the fund's objective is to generate income exempt from federal and
Massachusetts personal income taxes, interest from some of its holdings may be
subject to the federal alternative minimum tax. In addition, the fund
temporarily may invest in taxable bonds and/or municipal bonds that pay income
exempt only from federal income tax.
INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT (SEE BACK COVER).
Concepts to understand
AVERAGE MATURITY: an average of the stated maturities of the bonds held in the
fund, based on their dollar-weighted proportions in the fund.
INVESTMENT GRADE BONDS: independent rating organizations analyze and evaluate a
bond issuer's credit history and ability to repay debts. Based on their
assessment, they assign letter grades that reflect the issuer's
creditworthiness. AAA or Aaa represents the highest credit rating, AA/Aa the
second highest, and so on down to D, for defaulted debt. Bonds rated BBB or Baa
and above are considered investment grade.
<PAGE 2>
MAIN RISKS
Prices of bonds tend to move inversely with changes in interest rates. While a
rise in rates may allow the fund to invest for higher yields, the most immediate
effect is usually a drop in bond prices and, therefore, in the fund's share
price as well. As a result, the value of your investment in the fund could go up
and down, which means that you could lose money.
Other risk factors could have an effect on the fund's performance:
* if an issuer fails to make timely interest or principal payments or
there is a decline in the credit quality of a bond or perception of
a decline, the bond's value could fall, potentially lowering the
fund's share price
* Massachusetts's economy and revenues underlying its municipal bonds
may decline
* investing primarily in a single state may make the fund's portfolio
securities more sensitive to risks specific to the state
* lower-rated, higher-yielding municipal bonds are subject to greater
credit risk, including the risk of default, than investment grade
bonds; lower-rated bonds tend to be more volatile and less liquid
* if the municipal bond market becomes less liquid, typically when
there are many more sellers than buyers for the securities, the
value of such securities, particularly those purchased at a
discounted price, and the fund's share price, may fall dramatically
The fund is non-diversified, which means that a relatively high percentage of
the fund's assets may be invested in a limited number of issuers. Therefore, its
performance may be more vulnerable to changes in the market value of a single
issuer or a group of issuers.
Other potential risks
The fund, at times, may invest in certain derivatives, such as futures and
options, that may cause taxable income, and in inverse floaters. Derivatives are
used primarily to hedge the fund's portfolio or for daily liquidity. They also
may be used to increase returns. However, these practices may lower returns or
increase volatility. Derivatives can be illiquid and highly sensitive to changes
in their underlying security, interest rate or index. A small investment in
certain derivatives could have a potentially large impact on the fund's
performance.
The Fund
<PAGE 3>
PAST PERFORMANCE
The bar chart and table below show some of the risks of investing in the fund.
The bar chart shows the changes in the fund's performance from year to year. The
table compares the fund's average annual total return to that of the Lehman
Brothers Municipal Bond Index, an unmanaged total return municipal bond
performance benchmark. Of course, past performance is no guarantee of future
results.
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Year-by-year total return AS OF 12/31 EACH YEAR (%)
6.06 12.70 7.50 12.45 -6.04 15.51 4.01 9.05 6.07 -4.52
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q1 '95 +6.09%
WORST QUARTER: Q1 '94 -5.53%
THE FUND'S YEAR-TO-DATE TOTAL RETURN AS OF 6/30/00 WAS 4.56%.
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Average annual total return AS OF 12/31/99
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 Year 5 Years 10 Years
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FUND -4.52% 5.82% 6.06%
LEHMAN BROTHERS
MUNICIPAL
BOND INDEX* -2.06% 6.91% 6.89%
* UNLIKE THE FUND, THE LEHMAN INDEX IS NOT COMPOSED OF BONDS OF A SINGLE STATE.
</TABLE>
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
<PAGE 4>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the table below. Shareholder transaction fees are paid
from your account. Annual fund operating expenses are paid out of fund assets,
so their effect is included in the share price. The fund has no sales charge
(load) or Rule 12b-1 distribution fees.
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Fee table
SHAREHOLDER TRANSACTION FEES
% OF TRANSACTION AMOUNT
Maximum redemption fee 1.00%
CHARGED ONLY WHEN SELLING SHARES YOU
HAVE OWNED FOR LESS THAN 30 DAYS
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ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.60%
Shareholder services fee 0.09%
Other expenses 0.16%
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TOTAL 0.85%
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Expense example
1 Year 3 Years 5 Years 10 Years
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$87 $271 $471 $1,049
This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. The figures
shown would be the same whether you sold your shares at the end of a period or
kept them. Because actual return and expenses will be different, the example is
for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to Dreyfus for managing the fund's portfolio and
assisting in all aspects of the fund's operations.
SHAREHOLDER SERVICES FEE: a fee of up to 0.25% used to reimburse the fund's
distributor for shareholder account service and maintenance.
OTHER EXPENSES: fees paid by the fund for miscellaneous items such as transfer
agency, custody, professional and registration fees.
The Fund
<PAGE 5>
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages more than $139
billion in over 160 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus a management fee at the annual rate of 0.60% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a global financial services company with approximately
$2.8 trillion of assets under management, administration or custody, including
approximately $521 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
The fund, Dreyfus and Dreyfus Service Corporation (the fund's distributor) each
have adopted a code of ethics that permits its personnel, subject to such code,
to invest in securities, including securities that may be purchased or held by
the fund. The Dreyfus code of ethics restricts the personal securities
transactions of its employees, and requires portfolio managers and other
investment personnel to comply with the code's preclearance and disclosure
procedures. Its primary purpose is to ensure that personal trading by Dreyfus
employees does not disadvantage any Dreyfus-managed fund.
Portfolio manager
Joseph P. Darcy has been the fund's primary portfolio manager since January 1996
and has been a portfolio manager at Dreyfus since May 1994.
<PAGE 6>
FINANCIAL HIGHLIGHTS
This table describes the fund's performance for the fiscal periods indicated.
"Total return" shows how much your investment in the fund would have increased
(or decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been independently audited by Ernst & Young
LLP, whose report, along with the fund's financial statements, is included in
the annual report.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR ENDED MAY 31,
2000 1999 1998 1997 1996
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PER-SHARE DATA ($)
Net asset value, beginning of period 16.73 17.01 16.31 15.86 16.25
Investment operations:
Investment income -- net .83 .82 .83 .85 .88
Net realized and unrealized gain
(loss) on investments (1.27) (.17) .70 .45 (.39)
Total from investment operations (.44) .65 1.53 1.30 .49
Distributions:
Dividends from investment
income -- net (.83) (.82) (.83) (.85) (.88)
Dividends from net realized gain
on investments (.04) (.11) -- -- --
Total distributions (.87) (.93) (.83) (.85) (.88)
Net asset value, end of period 15.42 16.73 17.01 16.31 15.86
Total return (%) (2.56) 3.87 9.52 8.37 3.06
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RATIOS/SUPPLEMENTAL DATA
Ratio of expenses
to average net assets (%) .85 .82 .81 .79 .79
Ratio of net investment income
to average net assets (%) 5.22 4.82 4.97 5.27 5.43
Portfolio turnover rate (%) 19.45 19.47 28.53 38.29 60.67
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Net assets, end of period ($ x 1,000) 137,587 160,582 160,218 151,379 151,722
</TABLE>
The Fund
<PAGE 7>
Your Investment
ACCOUNT POLICIES
Buying shares
YOU PAY NO SALES CHARGES to invest in this fund. Your price for fund shares is
the fund's net asset value per share (NAV), which is generally calculated as of
the close of trading on the New York Stock Exchange (usually 4:00 p.m. Eastern
time) every day the exchange is open.
YOUR ORDER WILL BE PRICED at the next NAV calculated after your order is
accepted by the fund's transfer agent or other authorized entity. Because the
fund seeks tax-exempt income, it is not recommended for purchase in IRAs or
other qualified retirement plans.
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Minimum investments
Initial Additional
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REGULAR ACCOUNTS $2,500 $100
$500 FOR
TELETRANSFER
INVESTMENTS
DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS
All investments must be in U.S. dollars. Third-party
checks cannot be accepted. You may be charged a fee for
any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.
Concepts to understand
NET ASSET VALUE (NAV): a mutual fund's share price on a given day. A fund's NAV
is calculated by dividing the value of its net assets by the number of existing
shares.
When calculating its NAV, the fund's investments are priced at fair value by an
independent pricing service approved by the fund's board. The pricing service's
procedures are reviewed under the general supervision of the board.
<PAGE 8>
Selling shares
YOU MAY SELL (REDEEM) SHARES AT ANY TIME. Your shares will be sold at the next
NAV calculated after your order is accepted by the fund's transfer agent or
other authorized entity. Any certificates representing fund shares being sold
must be returned with your redemption request. Your order will be processed
promptly and you will generally receive the proceeds within a week.
BEFORE SELLING OR WRITING A CHECK against shares recently purchased by check,
TeleTransfer or Automatic Asset Builder, please note that:
* if you send a written request to sell such shares, the fund may delay
sending the proceeds for up to eight business days following the purchase
of those shares
* the fund will not honor redemption checks, or process wire, telephone or
TeleTransfer redemption requests, for up to eight business days following
the purchase of those shares
IF YOU ARE SELLING OR EXCHANGING SHARES you have owned for less than 30 days,
the fund may deduct a 1% redemption fee (not charged on shares sold through the
Checkwriting Privilege, Automatic Withdrawal Plan or Dreyfus Auto-Exchange
Privilege, or on shares acquired through dividend reinvestment).
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Limitations on selling shares by phone
Proceeds
sent by Minimum Maximum
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CHECK NO MINIMUM $250,000 PER DAY
WIRE $1,000 $500,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
TELETRANSFER $500 $500,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $10,000 or more on accounts whose address has been changed
within the last 30 days
* requests to send the proceeds to a different payee or address
Written sell orders of $100,000 or more must also be signature guaranteed.
A SIGNATURE GUARANTEE helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.
Your Investment
<PAGE 9>
ACCOUNT POLICIES (CONTINUED)
General policies
UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.
THE FUND RESERVES THE RIGHT TO:
* refuse any purchase or exchange request that could adversely affect the
fund or its operations, including those from any individual or group who,
in the fund's view, is likely to engage in excessive trading (usually
defined as more than four exchanges out of the fund within a calendar
year)
* refuse any purchase or exchange request in excess of 1% of the fund's
total assets
* change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions
* change its minimum investment amounts
* delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions)
The fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).
Small account policies
To offset the relatively higher costs of servicing smaller accounts, the fund
charges regular accounts with balances below $2,000 an annual fee of $12. The
fee will be imposed during the fourth quarter of each calendar year.
The fee will be waived for: any investor whose aggregate Dreyfus mutual fund
investments total at least $25,000; IRA accounts; accounts participating in
automatic investment programs; and accounts opened through a financial
institution.
If your account falls below $500, the fund may ask you to increase your balance.
If it is still below $500 after 30 days, the fund may close your account and
send you the proceeds.
<PAGE 10>
DISTRIBUTIONS AND TAXES
THE FUND USUALLY PAYS ITS SHAREHOLDERS DIVIDENDS from its net investment income
once a month, and distributes any net capital gains it has realized once a year.
Your distributions will be reinvested in the fund unless you instruct the fund
otherwise. There are no fees or sales charges on reinvestments.
THE FUND ANTICIPATES THAT VIRTUALLY ALL OF ITS INCOME DIVIDENDS will be exempt
from federal and Massachusetts state personal income taxes. However, any
dividends paid from interest on taxable investments or short-term capital gains
will be taxable as ordinary income. Any distributions of long-term capital gains
will be taxable as such. The tax status of any distribution is the same
regardless of how long you have been in the fund and whether you reinvest your
distributions or take them in cash. In general, distributions are federally
taxable as follows:
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Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
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INCOME GENERALLY GENERALLY
DIVIDENDS TAX EXEMPT TAX EXEMPT
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
The tax status of your dividends and distributions will be detailed in your
annual tax statement from the fund.
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Any sale or exchange of fund shares, including through the checkwriting
privilege, may generate a tax liability.
The table at right also can provide a guide for your potential tax liability
when selling or exchanging fund shares. "Short-term capital gains" applies to
fund shares sold or exchanged up to 12 months after buying them. "Long-term
capital gains" applies to shares sold or exchanged after 12 months.
<PAGE 11>
SERVICES FOR FUND INVESTORS
Automatic services
BUYING OR SELLING SHARES AUTOMATICALLY is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application or by
calling 1-800-645-6561.
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For investing
DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.
DREYFUS PAYROLL For making automatic investments
SAVINGS PLAN through a payroll deduction.
DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.
DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another
(not available for IRAs).
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For exchanging shares
DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
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For selling shares
DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds.
Dreyfus Financial Centers
Through a nationwide network of Dreyfus Financial Centers, Dreyfus offers a full
array of investment services and products. This includes information on mutual
funds, brokerage services, tax-advantaged products and retirement planning.
Experienced financial consultants can help you make informed choices and provide
you with personalized attention in handling account transactions. The Financial
Centers also offer informative seminars and events. To find the Financial Center
nearest you, call 1-800-499-3327.
<PAGE 12>
Checkwriting privilege
YOU MAY WRITE REDEMPTION CHECKS against your account in amounts of $500 or more.
These checks are free; however, a fee will be charged if you request a stop
payment or if the transfer agent cannot honor a redemption check due to
insufficient funds or another valid reason. Please do not postdate your checks
or use them to close your account.
Exchange privilege
YOU CAN EXCHANGE SHARES worth $500 or more from one Dreyfus fund into another.
You can request your exchange in writing or by phone. Be sure to read the
current prospectus for any fund into which you are exchanging before investing.
Any new account established through an exchange will have the same privileges as
your original account (as long as they are available). There is currently no fee
for exchanges, although you may be charged a sales load when exchanging into any
fund that has one.
Dreyfus TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the Dreyfus TeleTransfer privilege. You can set up TeleTransfer
on your account by providing bank account information and following the
instructions on your application.
24-hour automated account access
YOU CAN EASILY MANAGE YOUR DREYFUS ACCOUNTS, check your account balances,
transfer money between your Dreyfus funds, get price and yield information and
much more -- when it's convenient for you -- by calling 1-800-645-6561.
Third-party investments
If you invest through a third party (rather than directly with Dreyfus), the
policies and fees may be different than those described here. Banks, brokers,
financial advisers and financial supermarkets may charge transaction fees and
may set different minimum investments or limitations on buying or selling
shares. Consult a representative of your financial institution if in doubt.
Your Investment
<PAGE 13>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
The Dreyfus Family of Funds
P.O. Box 9387, Providence, RI 02940-9387
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to: The Dreyfus Family of Funds P.O. Box 105,
Newark, NJ 07101-0105
By Telephone
WIRE Have your bank send your
investment to The Bank of New York, with these instructions:
* ABA# 021000018
* DDA# 8900051981
* the fund name
* your Social Security or tax ID number
* name(s) of investor(s)
Call us to obtain an account number. Return your application.
WIRE Have your bank send your investment to The Bank of New York, with these
instructions:
* ABA# 021000018
* DDA# 8900051981
* the fund name
* your account number
* name(s) of investor(s)
ELECTRONIC CHECK Same as wire, but insert "1111" before your account number.
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate
on your application which automatic service(s) you want. Return your application
with your investment.
WITHOUT ANY INITIAL INVESTMENT Check the Dreyfus Step Program option on your
application. Return your application, then complete the additional materials
when they are sent to you.
ALL SERVICES Call us to request a form to add any automatic investing service
(see "Services for Fund Investors"). Complete and return the forms along with
any other required materials.
Via the Internet
COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.
<PAGE 14>
TO SELL SHARES
Write a redemption check OR write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see "Account
Policies -- Selling Shares").
Mail your request to: The Dreyfus Family of Funds P.O. Box 9671, Providence, RI
02940-9671
WIRE Be sure the fund has your bank account information on file. Call us to
request your transaction. Proceeds will be wired to your bank.
TELETRANSFER Be sure the fund has your bank account information on file. Call
us to request your transaction. Proceeds will be sent to your bank by electronic
check.
CHECK Call us to request your transaction. A check will be sent to the address
of record.
DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request a form to add the plan.
Complete the form, specifying the amount and frequency of withdrawals you would
like.
Be sure to maintain an account balance of $5,000 or more.
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS FAMILY OF FUNDS
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
Your Investment
<PAGE 15>
NOTES
<PAGE>
<PAGE>
For More Information
Dreyfus Massachusetts Tax Exempt Bond Fund
-----------------------------
SEC file number: 811-4271
More information on this fund is available free upon
request, including the following:
Annual/Semiannual Report
Describes the fund's performance, lists portfolio
holdings and contains a letter from the fund's manager
discussing recent market conditions, economic trends and
fund strategies that significantly affected the fund's
performance during the last fiscal year.
Statement of Additional Information (SAI)
Provides more details about the fund and its policies. A
current SAI is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference (is
legally considered part of this prospectus).
To obtain information:
BY TELEPHONE Call 1-800-645-6561
BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request to [email protected]
ON THE INTERNET Text-only versions of certain fund documents can be viewed
online or downloaded from:
SEC
http://www.sec.gov
DREYFUS
http://www.dreyfus.com
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (for information, call 1-202-942-8090) or, after paying a
duplicating fee, by E-mail request to [email protected], or by writing to the
SEC's Public Reference Section, Washington, DC 20549-0102.
(c) 2000 Dreyfus Service Corporation 267P1000
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DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 1, 2000
--------------------------------------------------------------------------------
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Dreyfus Massachusetts Tax Exempt Bond Fund (the "Fund"), dated October 1, 2000,
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 one of the following numbers:
Call Toll Free 1-800-645-6561
In New York City--Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452
The Fund's most recent Annual Report and Semi-Annual Report to
Shareholders are separate documents supplied with this Statement of Additional
Information, and the financial statements, accompanying notes and report of
independent auditors appearing in the Annual Report are incorporated by
reference into this Statement of Additional Information.
TABLE OF CONTENTS
Page
Description of the Fund....................................................B-2
Management of the Fund....................................................B-15
Management Arrangements...................................................B-19
How to Buy Shares.........................................................B-22
Shareholder Services Plan.................................................B-23
How to Redeem Shares......................................................B-24
Shareholder Services......................................................B-27
Determination of Net Asset Value..........................................B-30
Dividends, Distributions and Taxes........................................B-30
Portfolio Transactions....................................................B-32
Performance Information...................................................B-33
Information About the Fund................................................B-34
Counsel and Independent Auditors..........................................B-36
Appendix A................................................................B-37
Appendix B................................................................B-40
DESCRIPTION OF THE FUND
The Fund is a Massachusetts business trust that commenced operations on
June 11, 1985. The Fund is an open-end, management investment company, known as
a municipal bond fund.
The Dreyfus Corporation (the "Manager") serves as the Fund's investment
adviser.
Dreyfus Service Corporation (the "Distributor") is the distributor of the
Fund's shares.
Certain Portfolio Securities
The following information supplements and should be read in conjunction
with the Fund's Prospectus.
Municipal Obligations. The Fund invests primarily in the debt securities
of the Commonwealth of Massachusetts, its political subdivisions, authorities
and corporations, the interest from which is, in the opinion of bond counsel to
the issuer, is exempt from Federal and Commonwealth of Massachusetts personal
income taxes (collectively, "Massachusetts Municipal Obligations"). To the
extent acceptable Massachusetts Municipal Obligations are at any time
unavailable for investment by the Fund, the Fund may invest temporarily in other
debt securities the interest from which is, in the opinion of bond counsel to
the issuer, exempt from Federal, but not Commonwealth of Massachusetts, income
tax. The Fund will invest at least 80% of the value of its net assets (except
when maintaining a temporary defensive position) in Municipal Obligations.
Municipal Obligations are debt obligations issued by states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, or multistate agencies
or authorities, the interest from which, in the opinion of bond counsel to the
issuer, is exempt from Federal income tax. Municipal Obligations generally
include debt obligations issued to obtain funds for various public purposes as
well as certain industrial development bonds issued by or on behalf of public
authorities. Municipal Obligations are classified as general obligation bonds,
revenue bonds and notes. General obligation bonds are secured by the issuer's
pledge of its faith, credit and taxing power for the payment of principal and
interest. Revenue bonds are payable from the revenue derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise or other specific revenue source, but not from the general taxing
power. Tax exempt industrial development bonds, in most cases, are revenue bonds
that do not carry the pledge of the credit of the issuing municipality, but
generally are guaranteed by the corporate entity on whose behalf they are
issued. Notes are short-term instruments which are obligations of the issuing
municipalities or agencies and are sold in anticipation of a bond sale,
collection of taxes or receipt of other revenues. Municipal Obligations include
municipal lease/purchase agreements which are similar to installment purchase
contracts for property or equipment issued by municipalities. Municipal
Obligations bear fixed, floating or variable rates of interest, which are
determined in some instances by formulas under which the Municipal Obligation's
interest rate will change directly or inversely to changes in interest rates or
an index, or multiples thereof, in many cases subject to a maximum and minimum.
Certain Municipal Obligations are subject to redemption at a date earlier than
their stated maturity pursuant to call options, which may be separated from the
related Municipal Obligation and purchased and sold separately.
The yields on Municipal Obligations are dependent on a variety of factors,
including general economic and monetary conditions, money market factors,
conditions in the Municipal Obligations market, size of a particular offering,
maturity of the obligation and rating of the issue.
Certain Tax Exempt Obligations. The Fund may purchase floating and
variable rate demand notes and bonds, which are tax exempt obligations
ordinarily having stated maturities in excess of one year, but which permit the
holder to demand payment of principal at any time or at specified intervals.
Variable rate demand notes include master demand notes which are obligations
that permit the Fund to invest fluctuating amounts, at varying rates of
interest, pursuant to direct arrangements between the Fund, as lender, and the
borrower. These obligations permit daily changes in the amount borrowed. Because
these obligations are direct lending arrangements between the lender and
borrower, it is not contemplated that such instruments generally will be traded,
and there generally is no established secondary market for these obligations,
although they are redeemable at face value, plus accrued interest. Accordingly,
where these obligations are not secured by letters of credit or other credit
support arrangements, the Fund's right to redeem is dependent on the ability of
the borrower to pay principal and interest on demand. Each obligation purchased
by the Fund will meet the quality criteria established for the purchase of
Municipal Obligations.
Tax Exempt Participation Interests. The Fund may purchase from financial
institutions participation interests in Municipal Obligations (such as
industrial development bonds and municipal lease/purchase agreements). A
participation interest gives the Fund an undivided interest in the Municipal
Obligation in the proportion that the Fund's participation interest bears to the
total principal amount of the Municipal Obligation. These instruments may have
fixed, floating or variable rates of interest. If the participation interest is
unrated, it will be backed by an irrevocable letter of credit or guarantee of a
bank that the Fund's Board has determined meets prescribed quality standards for
banks, or the payment obligation otherwise will be collateralized by U.S.
Government securities. For certain participation interests, the Fund will have
the right to demand payment, on not more than seven days' notice, for all or any
part of the Fund's participation interest in the Municipal Obligation, plus
accrued interest. As to these instruments, the Fund intends to exercise its
right to demand payment only upon a default under the terms of the Municipal
Obligation, as needed to provide liquidity to meet redemptions, or to maintain
or improve the quality of its investment portfolio.
Municipal lease obligations or installment purchase contract obligations
(collectively, "lease obligations") have special risks not ordinarily associated
with Municipal Obligations. Although lease obligations do not constitute general
obligations of the municipality for which the municipality's taxing power is
pledged, a lease obligation ordinarily is backed by the municipality's covenant
to budget for, appropriate and make the payments due under the lease obligation.
However, certain lease obligations contain "non-appropriation" clauses which
provide that the municipality has no obligation to make lease or installment
purchase payments in future years unless money is appropriated for such purpose
on a yearly basis. Although "non-appropriation" lease obligations are secured by
the leased property, disposition of the property in the event of foreclosure
might prove difficult. Certain lease obligations may be considered illiquid.
Determination as to the liquidity of such securities is made in accordance with
guidelines established by the Fund's Board. Pursuant to such guidelines, the
Board has directed the Manager to monitor carefully the Fund's investment in
such securities with particular regard to (1) the frequency of trades and quotes
for the lease obligation; (2) the number of dealers willing to purchase or sell
the lease obligation and the number of 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 to the operations of
the municipality (e.g., the potential for an "event of nonappropriation"); (e)
the legal recourse in the event of failure to appropriate; and (f) such other
factors concerning credit quality as the Manager may deem relevant. The Fund
will not invest more than 15% of the value of its net assets in lease
obligations that are illiquid and in other illiquid securities. See "Investment
Restriction No. 11" below.
Tender Option Bonds. The Fund may purchase tender option bonds. A tender
option bond is a Municipal Obligation (generally held pursuant to a custodial
arrangement) having a relatively long maturity and bearing interest at a fixed
rate substantially higher than prevailing short-term tax exempt rates, that has
been coupled with the agreement of a third party, such as a bank, broker-dealer
or other financial institution, pursuant to which such institution grants the
security holders the option, at periodic intervals, to tender their securities
to the institution and receive the face value thereof. As consideration for
providing the option, the financial institution receives periodic fees equal to
the difference between the Municipal Obligation's fixed coupon rate and the
rate, as determined by a remarketing or similar agent at or near the
commencement of such period, that would cause the securities, coupled with the
tender option, to trade at par on the date of such determination. Thus, after
payment of this fee, the security holder effectively holds a demand obligation
that bears interest at the prevailing short-term tax exempt rate. The Manager,
on behalf of the Fund, will consider on an ongoing basis the creditworthiness of
the issuer of the underlying Municipal Obligation, of any custodian and of the
third party provider of the tender option. In certain instances and for certain
tender option bonds, the option may be terminable in the event of a default in
payment of principal or interest on the underlying Municipal Obligation and for
other reasons.
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.
Custodial Receipts. The Fund may purchase custodial receipts representing
the right to receive certain future principal and interest payments on Municipal
Obligations which underlie the custodial receipts. A number of different
arrangements are possible. In a typical custodial receipt arrangement, an issuer
or a third party owner of Municipal Obligations deposits such obligations with a
custodian in exchange for two classes of custodial receipts. The two classes
have different characteristics, but, in each case, payments on the two classes
are based on payments received on the underlying Municipal Obligations. One
class has the characteristics of a typical auction rate security, where at
specified intervals its interest rate is adjusted, and ownership changes, based
on an auction mechanism. This class's interest rate generally is expected to be
below the coupon rate of the underlying Municipal Obligations and generally is
at a level comparable to that of a Municipal Obligation of similar quality and
having a maturity equal to the period between interest rate adjustments. The
second class bears interest at a rate that exceeds the interest rate typically
borne by a security of comparable quality and maturity; this rate also is
adjusted, but in this case inversely to changes in the rate of interest of the
first class. In no event will the aggregate interest paid with respect to the
two classes exceed the interest paid by the underlying Municipal Obligations.
The value of the second class and similar securities should be expected to
fluctuate more than the value of a Municipal Obligation of comparable quality
and maturity and their purchase by the Fund should increase the volatility of
its net asset value and, thus, its price per share. These custodial receipts are
sold in private placements. The Fund also may purchase directly from issuers,
and not in a private placement, Municipal Obligations having characteristics
similar to custodial receipts. These securities may be issued as part of a
multi-class offering and the interest rate on certain classes may be subject to
a cap or floor.
Stand-By Commitments. The Fund may acquire "stand-by commitments" with
respect to Municipal Obligations held in its portfolio. Under a stand-by
commitment, the Fund obligates a broker, dealer or bank to repurchase, at the
Fund's option, specified securities at a specified price and, in this respect,
stand-by commitments are comparable to put options. The exercise of a stand-by
commitment, therefore, is subject to the ability of the seller to make payment
on demand. The Fund will acquire stand-by commitments solely to facilitate its
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The Fund may pay for stand-by commitments if such action is
deemed necessary, thus increasing to a degree the cost of the underlying
Municipal Obligation and similarly decreasing such security's yield to
investors. Gains realized in connection with stand-by commitments will be
taxable. The Fund also may acquire call options on specific Municipal
Obligations. The Fund generally would purchase these call options to protect the
Fund from the issuer of the related Municipal Obligation redeeming, or other
holder of the call option from calling away, the Municipal Obligation before
maturity. The sale by the Fund of a call option that it owns on a specific
Municipal Obligation could result in the receipt of taxable income by the Fund.
Zero Coupon Securities. The Fund may invest in zero coupon securities
which are debt securities issued or sold at a discount from their face value
which do not entitle the holder to any periodic payment of interest prior to
maturity or a specified redemption date (or cash payment date) and pay-in-kind
bonds (bonds which pay interest through the issuance of additional bonds). The
amount of the discount varies depending on the time remaining until maturity or
cash payment date, prevailing interest rates, liquidity of the security and
perceived credit quality of the issuer. Zero coupon securities also may take the
form of debt securities that have been stripped of their unmatured interest
coupons, the coupons themselves and receipts or certificates representing
interests in such stripped debt obligations and coupons. The market prices of
zero coupon securities generally are more volatile than the market prices of
securities that pay interest periodically and are likely to respond to a greater
degree to changes in interest rates than non-zero coupon securities having
similar maturities and credit qualities.
Ratings of Municipal Obligations. The Fund will invest at least 80% of the
value of its net assets in Municipal Obligations which, in the case of bonds,
are rated no lower than Baa by Moody's Investors Service, Inc. ("Moody's") or
BBB by Standard & Poor's Ratings Group ("S&P") or Fitch IBCA, Inc. ("Fitch" and,
together with Moody's and S&P, the "Rating Agencies"). The Fund may invest up to
20% of the value of its net assets in Municipal Obligations which, in the case
of bonds, are rated lower than Baa by Moody's and BBB by S&P and Fitch and as
low as the lowest rating assigned by the Rating Agencies, but it currently is
the intention of the Fund that this portion of the Fund's portfolio be invested
primarily in Municipal Obligations rated no lower than Baa by Moody's or BBB by
S&P or Fitch. The Fund may invest in short-term Municipal Obligations which are
rated in the two highest rating categories by a Rating Agency. The Fund also may
invest in securities which, while not rated, are determined by the Manager to be
of comparable quality to the rated securities in which the Fund may invest; for
purposes of the 80% requirement described in this paragraph, such unrated
securities will be considered to have the rating so determined.
The average distribution of investments (at value) in Municipal
Obligations (including notes) by ratings for the fiscal year ended May 31, 2000,
computed on a monthly basis, was as follows:
Fitch Moody's S&P Percentage of
-------------- or ------------------- or --------------- Value
AAA Aaa AAA 61.9%
AA Aa AA 12.1%
A A A 8.6%
BBB Baa BBB 7.8%
F-1 VMIG-1/MIG-1, P-1 SP-1, A-1 1.7% (1)
Not Rated Not Rated Not Rated 7.9% (2)
100.0%
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 the Rating Agencies 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
Prospectus and this Statement of Additional Information. The ratings of the
Rating Agencies 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.
--------
(1) Included in these categories are tax exempt notes rated within the
two highest rating grades by a Rating Agency. These securities,
together with Municipal Obligations rated Baa or better by Moody's
or BBB or better by S&P or Fitch, are taken into account at the
time of purchase for purposes of determining that the Fund's
portfolio meets the 80% minimum quality standard discussed above.
(2) Included in the Not Rated category are securities comprising 7.9%
of the Fund's market value which, while not rated, have been
determined by the Manager to be of comparable quality to
securities rated Baa/BBB.
Illiquid Securities. The Fund may invest up to 15% of the value of its net
assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Fund's investment objective.
These securities may include securities that are not readily marketable, such as
securities that are subject to legal or contractual restrictions on resale, and
repurchase agreements providing for settlement in more than seven days after
notice. As to these securities, the Fund is subject to a risk that should the
Fund desire to sell them when a ready buyer is not available at a price the Fund
deems representative of their value, the value of the Fund's net assets could be
adversely affected.
Taxable Investments. From time to time, on a temporary basis other than
for temporary defensive purposes (but not to exceed 20% of the value of the
Fund's net assets) or for temporary defensive purposes, the Fund may invest in
taxable short-term investments ("Taxable Investments") consisting of: notes of
issuers having, at the time of purchase, a quality rating within the two highest
grades of a Rating Agency; obligations of the U.S. Government, its agencies or
instrumentalities; commercial paper rated not lower than P-1 by Moody's, A-1 by
S&P or F-1 by Fitch; certificates of deposit of U.S. domestic banks, including
foreign branches of domestic banks, with assets of $1 billion or more; time
deposits; bankers' acceptances and other short-term bank obligations; and
repurchase agreements in respect of any of the foregoing. Dividends paid by the
Fund that are attributable to income earned by the Fund from Taxable Investments
will be taxable to investors. Except for temporary defensive purposes, at no
time will more than 20% of the value of the Fund's net assets be invested in
Taxable Investments and Municipal Obligations the interest from which gives rise
to a preference item for the purpose of the alternate minimum tax. When the Fund
has adopted a temporary defensive position, including when acceptable
Massachusetts Municipal Obligations are unavailable for investment by the Fund,
in excess of 35% of the Fund's assets may be invested in securities that are not
exempt from Massachusetts personal income taxes. Under normal market conditions,
the Fund anticipates that not more than 5% of the value of its total assets will
be invested in any one category of Taxable Investments.
Investment Techniques
The following information supplements and should be read in conjunction
with the Fund's Prospectus. The Fund's use of certain of the investment
techniques described below may give rise to taxable income.
Borrowing Money. The Fund is permitted to borrow to the extent permitted
under the Investment Company Act of 1940, as amended (the "1940 Act"), which
permits an investment company to borrow in an amount up to 33-1/3% of the value
of its total assets. The Fund currently intends to borrow money only for
temporary or emergency (not leveraging) purposes, in an amount up to 15% of the
value of its total assets (including the amount borrowed) valued at the lesser
of cost or market, less liabilities (not including the amount borrowed) at the
time the borrowing is made. While such borrowings exceed 5% of the Fund's total
assets, the Fund will not make any additional investments.
Lending Portfolio Securities. The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to borrow
securities to complete certain transactions. The Fund continues to be entitled
to payments in amounts equal to the interest or other distributions payable on
the loaned securities which affords the Fund an opportunity to earn interest on
the amount of the loan and on the loaned securities' collateral. Loans of
portfolio securities may not exceed 33-1/3% of the value of the Fund's total
assets, and the Fund will receive collateral consisting of cash, U.S. Government
securities or irrevocable letters of credit which will be maintained at all
times in an amount equal to at least 100% of the current market value of the
loaned securities. Such loans are terminable by the Fund at any time upon
specified notice. The Fund might experience risk of loss if the institution with
which it has engaged in a portfolio loan transaction breaches its agreement with
the Fund. In connection with its securities lending transactions, 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.
Derivatives. The Fund may invest in, or enter into, derivatives, such as
options and futures, for a variety of reasons, including to hedge certain market
risks, to provide a substitute for purchasing or selling particular securities
or to increase potential income gain. Derivatives may provide a cheaper, quicker
or more specifically focused way for the Fund to invest than "traditional"
securities would.
Derivatives can be volatile and involve various types and degrees of risk,
depending upon the characteristics of the particular derivative and the
portfolio as a whole. Derivatives permit the Fund to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Fund can increase or decrease the level of
risk, or change the character of the risk, of its portfolio by making
investments in specific securities. However, derivatives may entail investment
exposures that are greater than their cost would suggest, meaning that a small
investment in derivatives could have a large potential impact on the Fund's
performance.
If the Fund invests in derivatives at inopportune times or judges market
conditions incorrectly, such investments may lower the Fund's return or result
in a loss. The Fund also could experience losses if its derivatives were poorly
correlated with its other investments, or if the Fund were unable to liquidate
its position because of an illiquid secondary market. The market for many
derivatives is, or suddenly can become, illiquid. Changes in liquidity may
result in significant, rapid and unpredictable changes in the prices for
derivatives.
Although the Fund will not be a commodity pool, certain derivatives
subject the Fund to the rules of the Commodity Futures Trading Commission which
limit the extent to which the Fund can invest in such derivatives. The Fund may
invest in futures contracts and options with respect thereto for hedging
purposes without limit. However, the Fund may not invest in such contracts and
options for other purposes if the sum of the amount of initial margin deposits
and premiums paid for unexpired options with respect to such contracts, other
than for bona fide hedging purposes, exceeds 5% of the liquidation value of the
Fund's assets, after taking into account unrealized profits and unrealized
losses on such contracts and options; provided, however, that in the case of an
option that is in-the-money at the time of purchase, the in-the-money amount may
be excluded in calculating the 5% limitation.
Derivatives may be purchased on established exchanges or through privately
negotiated transactions referred to as over-the-counter derivatives.
Exchange-traded derivatives generally are guaranteed by the clearing agency
which is the issuer or counterparty to such derivatives. This guarantee usually
is supported by a daily variation margin system operated by the clearing agency
in order to reduce overall credit risk. As a result, unless the clearing agency
defaults, there is relatively little counterparty credit risk associated with
derivatives purchased on an exchange. By contrast, no clearing agency guarantees
over-the-counter derivatives. Therefore, each party to an over-the-counter
derivative bears the risk that the counterparty will default. Accordingly, the
Manager will consider the creditworthiness of counterparties to over-the-counter
derivatives in the same manner as it would review the credit quality of a
security to be purchased by the Fund. Over-the-counter derivatives are less
liquid than exchange-traded derivatives since the other party to the transaction
may be the only investor with sufficient understanding of the derivative to be
interested in bidding for it.
Futures Transactions--In General. The Fund may enter into futures contracts in
U.S. domestic markets. Engaging in these transactions involves risk of loss to
the Fund which could adversely affect the value of the Fund's net assets.
Although the Fund intends to purchase or sell futures contracts only if there is
an active market for such contracts, no assurance can be given that a liquid
market will exist for any particular contract at any particular time. Many
futures exchanges and boards of trade limit the amount of fluctuation permitted
in futures contract prices during a single trading day. Once the daily limit has
been reached in a particular contract, no trades may be made that day at a price
beyond that limit or trading may be suspended for specified periods during the
trading day. Futures contract prices could move to the limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of futures positions and potentially subjecting the Fund to
substantial losses.
Successful use of futures by the Fund also is subject to the Manager's
ability to predict correctly movements in the direction of the relevant market,
and, to the extent the transaction is entered into for hedging purposes, to
ascertain the appropriate correlation between the securities being hedged and
the price movements of the futures contract. For example, if the Fund uses
futures to hedge against the possibility of a decline in the market value of
securities held in its portfolio and the prices of such securities instead
increase, the Fund will lose part or all of the benefit of the increased value
of securities which it has hedged because it will have offsetting losses in its
futures positions. Furthermore, if in such circumstances the Fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements. The Fund may have to sell such securities at a time when it may be
disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities and
Exchange Commission, the Fund may be required to segregate permissible liquid
assets to cover its obligations relating to its transactions in derivatives. To
maintain this required cover, the Fund may have to sell portfolio securities at
disadvantageous prices or times since it may not be possible to liquidate a
derivative position at a reasonable price. In addition, the segregation of such
assets will have the effect of limiting the Fund's ability otherwise to invest
those assets.
Specific Futures Transactions. The Fund may purchase and sell interest rate
futures contracts. An interest rate future obligates the Fund to purchase or
sell an amount of a specific debt security at a future date at a specific price.
Options--In General. The Fund may invest up to 5% of its assets, represented by
the premium paid, in the purchase of call and put options with respect to
specific securities and interest rate futures contracts. The Fund may write
(i.e., sell) covered call and put option contracts to the extent of 20% of the
value of its net assets at the time such option contracts are written. A call
option gives the purchaser of the option the right to buy, and obligates the
writer to sell, the underlying security or securities at the exercise price at
any time during the option period, or at a specific date. Conversely, a put
option gives the purchaser of the option the right to sell, and obligates the
writer to buy, the underlying security or securities at the exercise price at
any time during the option period, or at a specific date.
A covered call option written by the Fund is a call option with respect to
which the Fund owns the underlying security or otherwise covers the transaction
by segregating permissible liquid assets. A put option written by the Fund is
covered when, among other things, the Fund segregates permissible liquid assets
having a value equal to or greater than the exercise price of the option to
fulfill the obligation undertaken. The principal reason for writing covered call
and put options is to realize, through the receipt of premiums, a greater return
than would be realized on the underlying securities alone. The Fund receives a
premium from writing covered call or put options which it retains whether or not
the option is exercised.
There is no assurance that sufficient trading interest to create a liquid
secondary market on a securities exchange will exist for any particular option
or at any particular time, and for some options no such secondary market may
exist. A liquid secondary market in an option may cease to exist for a variety
of reasons. In the past, for example, higher than anticipated trading activity
or order flow, or other unforeseen events, at times have rendered certain of the
clearing facilities inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain types of orders
or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If, as a
covered call option writer, the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise or it otherwise covers its position.
Successful use by the Fund of options will be subject to the Manager's
ability to predict correctly movements in interest rates. To the extent the
Manager's predictions are incorrect, the Fund may incur losses.
Future Developments. The Fund may take advantage of opportunities in the
area of options and futures contracts and options on futures contracts and any
other derivatives which are not presently contemplated for use by the Fund or
which are not currently available but which may be developed, to the extent such
opportunities are both consistent with the Fund's investment objective and
legally permissible for the Fund. Before entering into such transactions or
making any such investment, the Fund will provide appropriate disclosure in its
Prospectus or this Statement of Additional Information.
Forward Commitments. The Fund may purchase Municipal Obligations and other
securities on a forward commitment or when-issued basis, which means that
delivery and payment take place a number of days after the date of the
commitment to purchase. The payment obligation and the interest rate receivable
on a forward commitment or when-issued security are fixed when the Fund enters
into the commitment, but the Fund does not make payment until it receives
delivery from the counterparty. The Fund will commit to purchase such securities
only with the intention of actually acquiring the securities, but the Fund may
sell these securities before the settlement date if it is deemed advisable. The
Fund will segregate permissible liquid assets at least equal at all times to the
amount of the Fund's purchase commitments.
Municipal Obligations and other securities purchased on a forward
commitment or when-issued basis are subject to changes in value (generally
changing in the same way, i.e. appreciating when interest rates decline and
depreciating when interest rates rise) based upon the public's perception of the
creditworthiness of the issuer and changes, real or anticipated, in the level of
interest rates. Securities purchased on a forward commitment or when-issued
basis may expose the Fund to risks because they may experience such fluctuations
prior to their actual delivery. Purchasing securities on a forward commitment or
when-issued basis can involve the additional risk that the yield available in
the market when the delivery takes place actually may be higher than that
obtained in the transaction itself. Purchasing securities on a forward
commitment or when-issued basis when the Fund is fully or almost fully invested
may result in greater potential fluctuation in the value of the Fund's net
assets and its net asset value per share.
Investment Considerations and Risks
Investing in Municipal Obligations. The Fund may invest more than 25% of
the value of its total assets in Municipal Obligations which are related in such
a way that an economic, business or political development or change affecting
one such security also would affect the other securities; for example,
securities the interest upon which is paid from revenues of similar types of
projects. As a result, the Fund may be subject to greater risk as compared to a
fund that does not follow this practice.
Certain municipal lease/purchase obligations in which the Fund may invest
may contain "non-appropriation" clauses which provide that the municipality has
no obligation to make lease payments in future years unless money is
appropriated for such purpose on a yearly basis. Although "non-appropriation"
lease/purchase obligations are secured by the leased property, disposition of
the leased property in the event of foreclosure might prove difficult. In
evaluating the credit quality of a municipal lease/purchase obligation that is
unrated, the Manager will consider, on an ongoing basis, a number of factors
including the likelihood that the issuing municipality will discontinue
appropriating funding for the leased property.
Certain provisions in the Internal Revenue Code of 1986, as amended (the
"Code"), relating to the issuance of Municipal Obligations may reduce the volume
of Municipal Obligations qualifying for Federal tax exemption. One effect of
these provisions could be to increase the cost of the Municipal Obligations
available for purchase by the Fund and thus reduce available yield. Shareholders
should consult their tax advisers concerning the effect of these provisions on
an investment in the Fund. Proposals that may restrict or eliminate the income
tax exemption for interest on Municipal Obligations may be introduced in the
future. If any such proposal were enacted that would reduce the availability of
Municipal Obligations for investment by the Fund so as to adversely affect Fund
shareholders, the Fund would reevaluate its investment objective and policies
and submit possible changes in the Fund's structure to shareholders for their
consideration. If legislation were enacted that would treat a type of Municipal
Obligation as taxable, the Fund would treat such security as a permissible
Taxable Investment within the applicable limits set forth herein.
Investing in Massachusetts Municipal Obligations. Since the Fund is
concentrated in securities issued by Massachusetts or entities within
Massachusetts, an investment in the Fund may involve greater risk than
investments in certain other types of bond funds. You should consider carefully
the special risks inherent in the Fund's investment in Massachusetts Municipal
Obligations. You should review the information in "Appendix A," which provides a
brief summary of special investment considerations and risk factors relating to
investing in Massachusetts Municipal Obligations.
Lower Rated Bonds. The Fund may invest up to 20% of the value of its net
assets in higher yielding (and, therefore, higher risk) debt securities such as
those rated below investment grade by the Rating Agencies (commonly known as
junk bonds). They may be subject to certain risks with respect to the issuing
entity and to greater market fluctuations than certain lower yielding, higher
rated Municipal Obligations. See "Appendix B" for a general description of the
Rating Agencies' ratings of Municipal Obligations. Although ratings may be
useful in evaluating the safety of interest and principal payments, they do not
evaluate the market value risk of these bonds. The Fund will rely on the
Manager's judgment, analysis and experience in evaluating the creditworthiness
of an issuer.
You should be aware that the market values of many of these bonds tend to
be more sensitive to economic conditions than are higher rated securities and
will fluctuate over time. These bonds generally are considered by the Rating
Agencies to be, on balance, predominantly speculative with respect to capacity
to pay interest and repay principal in accordance with the terms of the
obligation and generally will involve more credit risk than securities in the
higher rating categories.
Because there is no established retail secondary market for many of these
securities, 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. An
economic recession could adversely affect the ability of the issuers of lower
rated bonds to repay principal and pay interest thereon which would increase the
incidence of default for such securities. It is likely that any economic
recession also would disrupt severely the market for such securities and may
have an adverse impact on the value of such securities.
The Fund may acquire these bonds during an initial offering. Such
securities may involve special risks because they are new issues. The Fund has
no arrangement with any person concerning the acquisition of such securities,
and the Manager will review carefully the credit and other characteristics
pertinent to such new issues.
The credit risk factors pertaining to lower rated securities also apply to
lower rated zero coupon bonds and pay-in-kind bonds, in which the Fund may
invest up to 5% of its total assets. Zero coupon bonds and pay-in-kind 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."
Zero Coupon Securities. The Fund may invest in zero coupon securities and
pay-in-kind bonds (bonds which pay interest through the issuance of additional
bonds). Federal income tax law requires the holder of a zero coupon security or
of certain pay-in-kind bonds to accrue income with respect to these securities
prior to the receipt of cash payments. To maintain its qualification as a
regulated investment company and avoid liability for Federal income taxes, the
Fund may be required to distribute such income accrued with respect to these
securities and may have to dispose of portfolio securities under disadvantageous
circumstances in order to generate cash to satisfy these distribution
requirements.
Simultaneous Investments. Investment decisions for the Fund are made
independently from those of other investment companies advised by the Manager.
If, however, such other investment companies desire to invest in, or dispose of,
the same securities as the Fund, available investments or opportunities for
sales will be allocated equitably to each investment company. In some cases,
this procedure may adversely affect the size of the position obtained for or
disposed of by the Fund or the price paid or received by the Fund.
Investment Restrictions
The Fund's investment objective is a fundamental policy, which cannot be
changed without approval by the holders of a majority (as defined in the 1940
Act) of the Fund's outstanding voting shares. In addition, the Fund has adopted
investment restrictions numbered 1 through 7 as fundamental policies. Investment
restrictions numbered 8 through 12 are not fundamental policies and may be
changed by a vote of a majority of the Fund's Board members at any time. The
Fund may not:
1. Invest more than 25% of its assets in the securities of issuers in any
single industry; provided that there shall be no limitation on the purchase of
Municipal Obligations and, for temporary defensive purposes, securities issued
by banks and obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
2. Borrow money, except to the extent permitted under the 1940 Act (which
currently limits borrowing to no more than 33-1/3% of the value of the Fund's
total assets). For purposes of this investment restriction, the entry into
options, forward contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices shall not constitute
borrowing.
3. Purchase or sell real estate, commodities or commodity contracts, or
oil and gas interests, but this shall not prevent the Fund from investing in
Municipal Obligations secured by real estate or interests therein, or prevent
the Fund from purchasing and selling options, forward contracts, futures
contracts, including those relating to indices, and options on futures contracts
or indices.
4. Underwrite the securities of other issuers, except that the Fund may
bid separately or as part of a group for the purchase of Municipal Obligations
directly from an issuer for its own portfolio to take advantage of the lower
purchase price available, and except to the extent the Fund may be deemed an
underwriter under the Securities Act of 1933, as amended, by virtue of disposing
of portfolio securities.
5. Make loans to others, except through the purchase of debt obligations
and the entry into repurchase agreements; however, the Fund may lend its
portfolio securities in an amount not to exceed 33-1/3% of the value of its
total assets. Any loans of portfolio securities will be made according to
guidelines established by the Securities and Exchange Commission and the Fund's
Board.
6. Issue any senior security (as such term is defined in Section 18(f) of
the 1940 Act), except to the extent that the activities permitted in Investment
Restrictions numbered 2, 3 and 10 may be deemed to give rise to a senior
security.
7. Sell securities short or purchase securities on margin, but the Fund
may make margin deposits in connection with transactions in options, forward
contracts, futures contracts, including those relating to indices, and options
on futures contracts or indices.
8. Purchase securities other than Municipal Obligations and Taxable
Investments and those arising out of transactions in futures and options or as
otherwise provided in the Fund's Prospectus.
9. Invest in securities of other investment companies, except to the
extent permitted under the 1940 Act.
10. Pledge, hypothecate, mortgage or otherwise encumber its assets, except
to the extent necessary to secure permitted borrowings and to the extent related
to the deposit of assets in escrow in connection with the purchase of securities
on a when-issued or delayed-delivery basis and collateral and initial or
variation margin arrangements with respect to options, futures contracts,
including those related to indices, and options on futures contracts or indices.
11. Enter into repurchase agreements providing for settlement in more than
seven days after notice or purchase securities which are illiquid (which
securities could include participation interests (including municipal
lease/purchase agreements) that are not subject to the demand feature described
in the 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. 1, 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 an investment, a
later increase or decrease in percentage resulting from a change in values or
assets will not constitute a violation of such restriction.
MANAGEMENT OF THE FUND
The Fund's Board is responsible for the management and supervision of the
Fund. The Board approves all significant agreements between the Fund and those
companies that furnish services to the Fund. These companies are as follows:
The Dreyfus Corporation.....................Investment Adviser
Dreyfus Service Corporation.................Distributor
Dreyfus Transfer, Inc.......................Transfer Agent
The Bank of New York........................Custodian
Board members and officers of the Fund, together with information as to
their principal business occupations during at least the last five years, are
shown below.
Board Members of the Fund
JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman of the
Board of various funds in the Dreyfus Family of Funds. He also is a
director of The Muscular Dystrophy Association, HealthPlan Services
Corporation, a provider of marketing, administrative and risk management
services to health and other benefit programs, Carlyle Industries, Inc.
(formerly, Belding Heminway Company, Inc.), a button packager and
distributor, Century Business Services, Inc., a provider of various
outsourcing functions for small and medium size companies, and
QuickCAT.com, Inc., a private company engaged in the development of high
speed movement, routing, storage, and encryption of data across all modes
of data transport. For more than five years prior to January 1995, he was
President, a director and, until August 1994, Chief Operating Officer of
the Manager and Executive Vice President and a director of the
Distributor. From August 1994 to December 31, 1994, he was a director of
Mellon Financial Corporation. He is 56 years old and his address is 200
Park Avenue, New York, New York 10166.
DAVID W. BURKE, Board Member. Board member of various funds in the Dreyfus
Family of Funds. Chairman of the Broadcasting Board of Governors, an
independent board within the United States Information Agency, from August
1994 to November 1998. From August 1994 to December 1994, Mr. Burke was a
Consultant to the Manager, and from October 1990 to August 1994, he was
Vice President and Chief Administrative Officer of the Manager. From 1977
to 1990, Mr. Burke was involved in the management of national television
news, as Vice President and Executive Vice President of ABC News, and
subsequently as President of CBS News. He is 64 years old and his address
is Box 654, Eastham, Massachusetts 02642.
SAMUEL CHASE, Board Member. Retired. From 1982 through 1996, Mr. Chase has been
President of Samuel Chase & Company, Ltd., an economic consulting firm. He
is 68 years old and his address is 10380 Springhill Road, Belgrade,
Montana 59714.
GORDON J. DAVIS, Board Member. A senior partner with the law firm of LeBoeuf,
Lamb, Greene & MacRae, since October 1994. From 1983 to September 1994,
Mr. Davis was a senior partner with the law firm of Lord Day & Lord,
Barrett Smith. He was Commissioner of Parks and Recreation for the City of
New York from 1978 to 1983. He is also a director of Consolidated Edison,
a utility company, and Phoenix Home Life Insurance Company and a member of
various other corporate and not-for-profit boards. He is 59 years old and
his address is 241 Central Park West, New York, New York 10023.
JONI EVANS, Board Member. Senior Vice President of the William Morris Agency,
since September 1993. From September 1987 to May 1993, Executive Vice
President of Random House, Inc.; from January 1991 to May 1993, President
and Publisher of Turtle Bay Books; from January 1987 to December 1990,
Publisher of Random House-Adult Trade Division; and from September 1985 to
September 1987, President of Simon and Schuster-Trade Division. She is 58
years old and her address is 1325 Avenue of the Americas, 33rd floor, New
York, New York 10019.
ARNOLD S. HIATT, Board Member. Chairman of The Stride Rite Foundation. From
1969 to June 1992, Mr. Hiatt was Chairman of the Board, President or Chief
Executive Officer of The Stride Rite Corporation, a multi-divisional
footwear manufacturing and retailing company. Mr. Hiatt is also a director
of the Cabot Corporation. He is 73 years old and his address is 400
Atlantic Avenue, Boston, Massachusetts 02110.
BURTONN. WALLACK, Board Member. President and co-owner of Wallack Management
Company, a real estate management company managing real estate in the New
York City area. He is 49 years old and his address is 18 East 64th Street,
New York, New York 10021.
The Fund has a standing nominating committee comprised of its Board
members who are not "interested persons" of the Fund, as defined in the 1940
Act. The function of the nominating committee is to select and nominate all
candidates who are not "interested persons" of the Fund.
The Fund typically pays its Board members an annual retainer and a per
meeting fee and reimburses them for their expenses. The Chairman of the Board
receives an additional 25% of such compensation. Emeritus Board members are
entitled to receive an annual retainer and a per meeting fee of one-half the
amount paid to them as Board members. The aggregate amount of compensation paid
by the Fund to each Board member for the fiscal year ended May 31, 2000, and by
all funds in the Dreyfus Family of Funds for which such person was a Board
member (the
number of which is set forth in parenthesis next to each Board member's
total compensation)* for the year ended December 31, 1999, was as follows:
Total Compensation
Aggregate From Fund and
Name of Board Compensation Fund Complex
Member From Fund** Paid to Board Member
Joseph S. DiMartino $3,438 $642,177 (189)
David W. Burke $2,750 $228,500 (62)
Samuel Chase $2,500 $53,500 (12)
Gordon J. Davis $2,750 $89,625 (29)
Joni Evans $2,750 $42,250 (12)
Arnold S. Hiatt $2,500 $45,000 (12)
Burton N. Wallack $2,750 $49,750 (12)
---------------------
* Represents the number of separate portfolios comprising the investment
companies in the Fund Complex, including the Fund, for which the Board
member serves.
** Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $-- for all Board members as a group.
Officers of the Fund
STEPHEN E. CANTER, President. President, Chief Operating Officer, Chief
Investment Officer and a director of the Manager, and an officer of other
investment companies advised or administered by the Manager. Mr. Canter
also is a Director or Executive Committee Member of other investment
management subsidiaries of Mellon Financial Corporation, each of which is
an affiliate of the Manager. He is 54 years old.
MARK N. JACOBS, Vice President. Vice President, Secretary and General Counsel
of the Manager, and an officer of other investment companies advised or
administered by the Manager. He is 53 years old.
JOSEPH CONNOLLY, Vice President and Treasurer. Director - Mutual Fund Accounting
of the Manager, and an officer of other investment companies advised or
administered by the Manager. He is 42 years old.
JOHN B. HAMMALIAN, Secretary. Associate General Counsel of the Manager, and an
officer of other investment companies advised or administered by the
Manager. He is 37 years old.
MICHAEL A. ROSENBERG, Assistant Secretary. Associate General Counsel of the
Manager, and an officer of other investment companies advised or
administered by the Manager. He is 40 years old.
STEVEN F. NEWMAN, Assistant Secretary. Associate General Counsel and Assistant
Secretary of the Manager, and an officer of other investment companies
advised or administered by the Manager. He is 50 years old.
GREGORY S. GRUBER, Assistant Treasurer. Senior Accounting Manager - Municipal
Bond Funds of the Manager, and an officer of other investment companies
advised or administered by the Manager. He is 40 years old.
The address of each officer of the Fund is 200 Park Avenue, New York, New
York 10166.
The Fund's Board members and officers, as a group, owned less than 1% of
the Fund's shares outstanding on August 31, 2000.
As of August 31, 2000, there were no shareholders known by the Fund to own
or record 5% or more of the outstanding voting securities of the Fund.
MANAGEMENT ARRANGEMENTS
Investment Adviser. The Manager is a wholly-owned subsidiary of Mellon
Bank, N.A., which is a wholly-owned subsidiary of Mellon Financial Corporation
("Mellon"). Mellon is a global multibank financial holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international markets.
Mellon is among the twenty largest bank holding companies in the United States
based on total assets.
The Manager provides management services pursuant to a Management
Agreement (the "Agreement") between the Fund and the Manager. The Agreement is
subject to annual approval by (i) the Fund's Board or (ii) vote of a majority
(as defined in the 1940 Act) of the outstanding voting securities of the Fund,
provided that in either event the continuance also is approved by a majority of
the Board members who are not "interested persons" (as defined in the 1940 Act)
of the Fund or the Manager, by vote cast in person at a meeting called for the
purpose of voting on such approval. The Agreement is terminable without penalty,
on not more than 60 days' notice, by the Fund's Board or by vote of the holders
of a majority of the Fund's outstanding voting shares, or, upon not less than 90
days' notice, by the Manager. The Agreement will terminate automatically in the
event of its assignment (as defined in the 1940 Act).
The following persons are officers and/or directors of the Manager:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment Officer
and a director; Thomas F. Eggers, Vice Chairman--Institutional and a director;
Lawrence S. Kash, Vice Chairman; J. David Officer, Vice Chairman and a director;
Ronald P. O'Hanley III, Vice Chairman; William T. Sandalls, Jr., Executive Vice
President; Stephen R. Byers, Senior Vice President; Patrice M. Kozlowski, Senior
Vice President--Corporate Communications; Mark N. Jacobs, Vice President,
General Counsel and Secretary; Diane P. Durnin, Vice President--Product
Development; Mary Beth Leibig, Vice President--Human Resources; Ray Van Cott,
Vice President--Information Systems; Theodore A. Schachar, Vice President--Tax;
Wendy Strutt, Vice President; William H. Maresca, Controller; James Bitetto,
Assistant Secretary; Steven F. Newman, Assistant Secretary; and Mandell L.
Berman, Burton C. Borgelt, Steven G. Elliot, Martin G. McGuinn, Richard W. Sabo
and Richard F. Syron, directors.
The Manager manages the Fund's portfolio of investments in accordance with
the stated policies of the Fund, subject to the approval of the Fund's Board.
The Manager is responsible for investment decisions and provides the Fund with
portfolio managers who are authorized by the Fund's Board to execute purchases
and sales of securities. The Fund's portfolio managers are Joseph P. Darcy, A.
Paul Disdier, Douglas J. Gaylor, Richard J. Moynihan, W. Michael Petty, Joseph
Irace, Colleen Meehan, Scott Sprauer, 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 and for other funds advised by the Manager.
The Manager's Code of Ethics subjects its employees' personal securities
transactions to various restrictions to ensure that such trading does not
disadvantage any fund advised by the Manager. In that regard, portfolio managers
and other investment personnel of the Manager must preclear and report their
personal securities transactions and holdings, which are reviewed for compliance
with the Code of Ethics and are also subject to the oversight of Mellon's
Investment Ethics Committee. Portfolio managers and other investment personnel
of the Manager who comply with the preclearance and disclosure procedures of the
Code of Ethics and the requirements of the Committee may be permitted to
purchase, sell or hold securities which also may be or are held in fund(s) they
manage or for which they otherwise provide investment advice.
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: taxes, interest, loan commitment fees, interest and
distribution paid on securities sold short, brokerage fees and commissions, if
any, fees of Board members who are not officers, directors, employees or holders
of 5% or more of the outstanding voting securities of the Manager, Securities
and Exchange Commission fees, state Blue Sky qualification fees, advisory fees,
charges of custodians, transfer and dividend disbursing agents' fees, certain
insurance premiums, industry association fees, outside auditing and legal
expenses, costs of independent pricing services, costs of maintaining the Fund's
existence, 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 maintains office facilities on behalf of the Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager may pay the Distributor for shareholder
services from the Manager's own assets, including past profits but not including
the management fee paid by the Fund. The Distributor may use part or all of such
payments to pay certain financial institutions (which may include banks),
securities dealers and other industry professionals in respect of these
services. The Manager also may make such advertising and promotional
expenditures, using its own resources, as it from time to time deems
appropriate.
As compensation for the Manager's services, the Fund has agreed to pay the
Manager a monthly management fee at the annual rate of 0.60% of the value of the
Fund's average daily net assets. All fees and expenses are accrued daily and
deducted before declaration of dividends to investors. The management fees paid
to the Manager for the fiscal years ended May 31, 1998, 1999 and 2000 amounted
to $928,443, $976,018, and $884,916, respectively.
The Manager has agreed that if, in any fiscal year, the aggregate expenses
of the Fund, exclusive of taxes, brokerage fees, interest on borrowings and
(with the prior written consent of the necessary state securities commissions)
extraordinary expenses, but including the management fee, exceed 1-1/2% of the
value of the Fund's average net assets for the fiscal year, the Fund may deduct
from the payment to be made to the Manager under the Agreement, or the Manager
will bear, such excess expense. Such deduction or payment, if any, will be
estimated daily, and reconciled and effected or paid, as the case may be, on a
monthly basis.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of the Fund's net assets increases.
Distributor. The Distributor, a wholly-owned subsidiary of the Manager
located at 200 Park Avenue, New York, New York 10166, serves as the Fund's
distributor on a best efforts basis pursuant to an agreement with the Fund which
is renewable annually.
Transfer and Dividend Disbursing Agent and Custodian. Dreyfus Transfer,
Inc. (the "Transfer Agent"), a wholly-owned subsidiary of the Manager, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Fund's transfer and dividend
disbursing agent. Under a transfer agency agreement with the Fund, the Transfer
Agent arranges for the maintenance of shareholder account records for the Fund,
the handling of certain communications between shareholders and the Fund and the
payment of dividends and distributions payable by the Fund. For these services,
the Transfer Agent receives a monthly fee computed on the basis of the number of
shareholder accounts it maintains for the Fund during the month, and is
reimbursed for certain out-of-pocket expenses.
The Bank of New York (the "Custodian"), 100 Church Street, New York, New
York 10286, is the Fund's custodian. The Custodian has no part in determining
the investment policies of the Fund or which securities are to be purchased or
sold by the Fund. Under a custody agreement with the Fund, the Custodian holds
the Fund's securities and keeps all necessary accounts and records. For its
custody services, the Custodian receives a monthly fee based on the market value
of the Fund's assets held in custody and receives certain securities
transactions charges.
HOW TO BUY SHARES
General. Fund shares are sold without a sales charge. You may be charged a
fee if you effect transactions in Fund shares through a securities dealer, bank
or other financial institution. Stock certificates are issued only upon your
written request. No certificates are issued for fractional shares. It is not
recommended that the Fund be used as a vehicle for Keogh, IRA or other qualified
plans. The Fund reserves the right to reject any purchase order.
The minimum initial investment is $2,500, or $1,000 if you are a client of
a securities dealer, bank or other financial institution which maintains an
omnibus account in the Fund and has made an aggregate minimum initial purchase
for its customers of $2,500. Subsequent investments must be at least $100. The
initial investment must be accompanied by the Account Application. For full-time
or part-time employees of the Manager or any of its affiliates or subsidiaries,
directors of the Manager, Board members of a fund advised by the Manager,
including members of the Fund's Board, or the spouse or minor child of any of
the foregoing, the minimum initial investment is $1,000. For full-time or
part-time employees of the Manager or any of its affiliates or subsidiaries who
elect to have a portion of their pay directly deposited into their Fund
accounts, the minimum initial investment is $50. The Fund reserves the right to
vary further the initial and subsequent investment minimum requirements at any
time.
Fund shares also are offered without regard to the minimum initial
investment requirements through Dreyfus-Automatic Asset Builder(R), Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan pursuant to
the Dreyfus Step Program described under "Shareholder Services." These services
enable you to make regularly scheduled investments and may provide you with a
convenient way to invest for long-term financial goals. You should be aware,
however, that periodic investment plans do not guarantee a profit and will not
protect you against loss in a declining market.
Shares are sold on a continuous basis at the net asset value per share
next determined after an order in proper form is received by the Transfer Agent
or other entity authorized to receive orders on behalf of the Fund. Net asset
value per share is determined as of the close of trading on the floor of the New
York Stock Exchange (currently 4:00 p.m., New York time), on each day the New
York Stock Exchange is open for business. For purposes of determining net asset
value per share, options and futures contracts will be valued 15 minutes after
the close of trading on the floor of the New York Stock Exchange. Net asset
value per share is computed by dividing the value of the Fund's net assets
(i.e., the value of its assets less liabilities) by the total number of shares
outstanding. The Fund's investments are valued by an independent pricing service
approved by the Fund's Board and are valued at fair value as determined by the
pricing service. The pricing service's procedures are reviewed under the general
supervision of the Board. For further information regarding the methods employed
in valuing Fund investments, see "Determination of Net Asset Value."
Dreyfus TeleTransfer Privilege. You may purchase shares by telephone if
you have checked the appropriate box and supplied the necessary information on
the Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The proceeds will be transferred between the bank account
designated in one of these documents and your fund account. Only a bank account
maintained in a domestic financial institution which is an Automated Clearing
House ("ACH") member may be so designated.
Dreyfus TeleTransfer purchase orders may be made at any time. Purchase
orders received by 4:00 p.m., New York time, on any day the Transfer Agent and
the New York Stock Exchange are open for business will be credited to the
shareholder's Fund account on the next bank business day following such purchase
order. Purchase orders made after 4:00 p.m., New York time, on any day the
Transfer Agent and the New York Stock Exchange are open for business, or orders
made on Saturday, Sunday or any Fund holiday (e.g., when the New York Stock
Exchange is not open for business), will be credited to the shareholder's Fund
account on the second bank business day following such purchase order. To
qualify to use the Dreyfus TeleTransfer Privilege, the initial payment for
purchase of Fund shares must be drawn on, and redemption proceeds paid to, the
same bank and account as are designated on the Account Application or
Shareholder Services Form on file. If the proceeds of a particular redemption
are to be wired to an account at any other bank, the request must be in writing
and signature-guaranteed. See "How to Redeem Shares--Dreyfus TeleTransfer
Privilege."
Reopening an Account. You may reopen an account with a minimum investment
of $100 without filing a new Account Application during the calendar year the
account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan (the "Plan") pursuant to
which the Fund reimburses the Distributor an amount not to exceed an annual rate
of 0.25% of the value of the Fund's average daily net assets for certain
allocated expenses of providing personal services and/or maintaining shareholder
accounts. The services provided may include personal services relating to
shareholder accounts, such as answering shareholder inquiries regarding the Fund
and providing reports and other information, and services related to the
maintenance of shareholder accounts.
A quarterly report of the amounts expended under the Plan, and the
purposes for which such expenditures were incurred, must be made to the Fund's
Board for its review. In addition, the Plan provides that material amendments of
the Plan must be approved by the Fund's Board and by the Board members who are
not "interested persons" (as defined in the 1940 Act) of the Fund and have no
direct or indirect financial interest in the operation of the Plan, by vote cast
in person at a meeting called for the purpose of considering such amendments.
The Plan is subject to annual approval by such vote of the Board members cast in
person at a meeting called for the purpose of voting on the Plan. The Plan is
terminable at any time by vote of a majority of the Board members who are not
"interested persons" and have no direct or indirect financial interest in the
operation of the Plan.
For the fiscal year ended May 31, 2000, the Fund paid $133,480 under the
Plan.
HOW TO REDEEM SHARES
General. The Fund ordinarily will make payment for all shares redeemed
within seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission. However, if you have purchased Fund shares by check, by Dreyfus
TeleTransfer Privilege or through Dreyfus-Automatic Asset Builder(R) and
subsequently submit a written redemption request to the Transfer Agent, the Fund
may delay sending the redemption proceeds for up to eight business days after
the purchase of such shares. In addition, the Fund will not honor checks under
the Checkwriting Privilege, and will reject requests to redeem shares by wire or
telephone or pursuant to the Dreyfus TeleTransfer Privilege, for a period of up
to eight business days after receipt by the Transfer Agent of the purchase
check, the Dreyfus TeleTransfer purchase or the Dreyfus-Automatic Asset
Builder(R) order against which such redemption is requested. These procedures
will not apply if your shares were purchased by wire payment, or if you
otherwise have a sufficient collected balance in your account to cover the
redemption request. Fund shares may not be redeemed until the Transfer Agent has
received your Account Application.
Redemption Fee. The Fund will deduct a redemption fee equal to 1% of the
net asset value of Fund shares redeemed (including redemptions through the use
of the Fund Exchanges service) less than 30 days following the issuance of such
shares. The redemption fee will be deducted from the redemption proceeds and
retained by the Fund. For the fiscal year ended May 31, 2000, the Fund retained
$23 in redemption fees.
No redemption fee will be charged on the redemption or exchange of shares
(1) through the Fund's Checkwriting Privilege, Automatic Withdrawal Plan, or
Dreyfus Auto-Exchange Privilege, (2) through accounts that are reflected on the
records of the Transfer Agent as omnibus accounts approved by the Distributor,
(3) through accounts established by securities dealers, banks or other financial
institutions approved by the Distributor that utilize the National Securities
Clearing Corporation's networking system, or (4) acquired through the
reinvestment of dividends or capital gains distributions. The redemption fee may
be waived, modified or terminated at any time, or from time to time.
Checkwriting Privilege. The Fund provides redemption checks ("Checks")
automatically upon opening an account, unless you specifically refuse the
Checkwriting Privilege by checking the applicable "No" box on the Account
Application. The Checkwriting Privilege may be established for an existing
account by a separate signed Shareholder Services Form. Checks will be sent only
to the registered owner(s) of the account and only to the address of record. The
Account Application or Shareholder Services Form must be manually signed by the
registered owner(s). Checks 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 your agent, will cause the Fund to redeem a
sufficient number of shares in your account to cover the amount of the Check.
Dividends are earned until the Check clears. After clearance, a copy of the
Check will be returned to you. You generally will be subject to the same rules
and regulations that apply to checking accounts, although the election of this
Privilege creates only a shareholder-transfer agent relationship with the
Transfer Agent.
You should date your Checks with the current date when you write them.
Please do not postdate your Checks. If you do, the Transfer Agent will honor,
upon presentment, even if presented before the date of the Check, all postdated
Checks which are dated within six months of presentment for payment, if they are
otherwise in good order.
The Transfer Agent will impose a fee for stopping payment of a Check upon
your request or if the Transfer Agent cannot honor a Check due to insufficient
funds or other valid reason. If the amount of the Check is greater than the
value of the shares in your account, the Check will be returned marked
insufficient funds. Checks should not be used to close an account.
This Privilege will be terminated immediately, without notice, with
respect to any account which is, or becomes, subject to backup withholding on
redemptions. Any Check written on an account which has become subject to backup
withholding on redemptions will not be honored by the Transfer Agent.
Wire Redemption Privilege. By using this Privilege, you authorize the
Transfer Agent to act on wire, telephone or letter redemption instructions from
any person representing himself or herself to be you, 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 by the Transfer Agent of a redemption request in proper form. Redemption
proceeds ($1,000 minimum ) will be transferred by Federal Reserve wire only to
the commercial bank account specified by you on the Account Application or
Shareholder Services Form, or to a correspondent bank if your bank is not a
member of the Federal Reserve System. Fees ordinarily are imposed by such bank
and borne by the investor. Immediate notification by the correspondent bank to
your bank is necessary to avoid a delay in crediting the funds to your bank
account.
If you have access to telegraphic equipment, you may wire redemption
requests to the Transfer Agent by employing the following transmittal code which
may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
If you do not have direct access to telegraphic equipment, you may have
the wire transmitted by contacting a TRT Cables operator at 1-800-654-7171, toll
free. You should advise the operator that the above transmittal code must be
used and should also inform the operator of the Transfer Agent's answer back
sign.
To change the commercial bank or account designated to receive redemption
proceeds, a written request must be sent to the Transfer Agent. This request
must be signed by each shareholder, with each signature guaranteed as described
below under "Share Certificates; Signatures."
Dreyfus TeleTransfer Privilege. You may request by telephone that
redemption proceeds be transferred between your Fund account and your bank
account. Only a bank account maintained in a domestic financial institution
which is an ACH member may be designated. Holders of jointly registered Fund or
bank accounts may redeem through the Dreyfus TeleTransfer Privilege for transfer
to their bank account not more than $500,000 within any 30-day period. You
should be aware that if you have selected the Dreyfus TeleTransfer Privilege,
any request for a wire redemption will be effected as a Dreyfus TeleTransfer
transaction through the ACH system unless more prompt transmittal specifically
is requested. Redemption proceeds will be on deposit in the your account at an
ACH member bank ordinarily two business days after receipt of the redemption
request. See "How to Buy Shares--Dreyfus TeleTransfer Privilege."
Share Certificates; Signatures. Any certificates representing Fund shares
to be redeemed must be submitted with the redemption request. Written redemption
requests must be signed by each shareholder, including each holder of a joint
account, and each signature must be guaranteed. Signatures on endorsed
certificates submitted for redemption also must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations,
as well as from participants in the New York Stock Exchange Medallion Signature
Program, the Securities Transfer Agents Medallion Program ("STAMP") and the
Stock Exchanges Medallion Program. Guarantees must be signed by an authorized
signatory of the guarantor and "Signature-Guaranteed" must appear with the
signature. The Transfer Agent may request additional documentation from
corporations, executors, administrators, trustees or guardians and may accept
other suitable verification arrangements from foreign investors, such as
consular verification. For more information with respect to
signature-guarantees, please call one of the telephone numbers listed on the
cover.
Redemption Commitment. The Fund has committed itself to pay in cash all
redemption requests by any shareholder of record, limited in amount during any
90-day period to the lesser of $250,000 or 1% of the value of the Fund's net
assets at the beginning of such period. Such commitment is irrevocable without
the prior approval of the Securities and Exchange Commission. In the case of
requests for redemption in excess of such amount, the Fund's Board reserves the
right to make payments in whole or in part in securities or other assets of the
Fund in case of an emergency or any time a cash distribution would impair the
liquidity of the Fund to the detriment of the existing shareholders. In such
event, the securities would be valued in the same manner as the Fund's portfolio
is valued. If the recipient sells such securities, brokerage charges might be
incurred.
Suspension of Redemptions. 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
Fund Exchanges. You may purchase, in exchange for shares of the Fund,
shares of certain other funds managed or administered by the Manager or Founders
Asset Management LLC ("Founders"), an affiliate of the Manager, to the extent
such shares are offered for sale in your state of residence. The Fund will
deduct a redemption fee equal to 0.10% of the net asset value of Fund shares
exchanged out of the Fund where the exchange is made less than 30 days after the
issuance of such shares. Shares of other funds purchased by exchange will be
purchased on the basis of relative net asset value per share as follows:
A. Exchanges for shares of funds offered without a sales load will be
made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged for
shares of other funds sold with a sales load, and the applicable sales
load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged without a
sales load for shares of other funds sold without a sales load.
D. Shares of funds purchased with a sales load, shares of funds acquired
by a previous exchange from shares purchased with a sales load, and
additional shares acquired through reinvestment of dividends or
distributions of any such funds (collectively referred to herein as
"Purchased Shares") may be exchanged for shares of other funds sold
with a sales load (referred to herein as "Offered Shares"), but if the
sales load applicable to the Offered Shares exceeds the maximum sales
load that could have been imposed in connection with the Purchased
Shares (at the time the Purchased Shares were acquired), without
giving effect to any reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, you must notify the Transfer
Agent of your prior ownership of fund shares and your account number.
To request an exchange, you must give exchange instructions to the
Transfer Agent in writing or by telephone. The ability to issue exchange
instructions by telephone is given to all Fund shareholders automatically,
unless you check the applicable "No" box on the Account Application, indicating
that you specifically refuse this Privilege. By using the Telephone Exchange
Privilege, you authorize the Transfer Agent to act on telephonic instructions
(including over The Dreyfus Touch(R) automated telephone system) from any person
representing himself or herself to be you and reasonably believed by the
Transfer Agent to be genuine. Telephone exchanges may be subject to limitations
as to the amount involved or the number of telephone exchanges permitted. Shares
issued in certificate form are not eligible for telephone exchange. No fees
currently are charged shareholders directly in connection with exchanges,
although the Fund reserves the right, upon not less than 60 days' written
notice, to charge shareholders a nominal administrative fee in accordance with
rules promulgated by the Securities and Exchange Commission.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made.
Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege permits
you to purchase, in exchange for shares of the Fund, shares of another fund in
the Dreyfus Family of Funds or a fund advised by Founders of which you are a
shareholder. This Privilege is available only for existing accounts. Shares will
be exchanged on the basis of relative net asset value as described above under
"Fund Exchanges." Enrollment in or modification or cancellation of this
Privilege is effective three business days following notification by the
investor. You will be notified if your account falls below the amount designated
to be exchanged under this Privilege. In this case, your account will fall to
zero unless additional investments are made in excess of the designated amount
prior to the next Auto-Exchange transaction. Shares held under IRA and other
retirement plans are eligible for this Privilege. Exchanges of IRA shares may be
made between IRA accounts and from regular accounts to IRA accounts, but not
from IRA accounts to regular accounts. With respect to all other retirement
accounts, exchanges may be made only among those accounts.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject any
exchange request in whole or in part. Shares may be exchanged only between
accounts having identical names and other identifying designations. The Fund
Exchanges service or Dreyfus Auto-Exchange Privilege may be modified or
terminated at any time upon notice to shareholders.
Dreyfus-Automatic Asset Builder(R). Dreyfus-Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000 per
transaction) at regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you.
Dreyfus Government Direct Deposit Privilege. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social Security,
or certain veterans', military or other payments from the U.S. Government
automatically deposited into your fund account. You may deposit as much of such
payments as you elect.
Dreyfus Payroll Savings Plan. Dreyfus Payroll Savings Plan permits you to
purchase Fund shares (minimum of $100 per transaction) automatically on a
regular basis. Depending upon your employer's direct deposit program, you may
have part or all of your paycheck transferred to your existing Dreyfus account
electronically through the ACH system at each pay period. To establish a Dreyfus
Payroll Savings Plan account, you must file an authorization form with your
employer's payroll department. It is the sole responsibility of your employer to
arrange for transactions under the Dreyfus Payroll Savings Plan.
Dreyfus Step Program. Dreyfus Step Program enables you to purchase Fund
shares without regard to the Fund's minimum initial investment requirements
through Dreyfus-Automatic Asset Builder(R), Dreyfus Government Direct Deposit
Privilege or Dreyfus Payroll Savings Plan. To establish a Dreyfus Step Program
account, you must supply the necessary information on the Account Application
and file the required authorization form(s) with the Transfer Agent. For more
information concerning this Program, or to request the necessary authorization
form(s), please call toll free 1-800-782-6620. You may terminate your
participation in this Program at any time by discontinuing your participation in
Dreyfus-Automatic Asset Builder, Dreyfus Government Direct Deposit Privilege or
Dreyfus Payroll Savings Plan, as the case may be, as provided under the terms of
such Privilege(s). The Fund may modify or terminate this Program at any time.
Dreyfus Dividend Options. Dreyfus Dividend Sweep allows you to invest
automatically your dividends or dividends and capital gain distributions, if
any, from the Fund in shares of another fund in the Dreyfus Family of Funds or a
fund advised by Founders of which you are a shareholder. Shares of other funds
purchased pursuant to this privilege will be purchased on the basis of relative
net asset value per share as follows:
A. Dividends and distributions paid by a fund may be invested without
imposition of a sales load in shares of other funds offered without a
sales load.
B. Dividends and distributions paid by a fund which does not charge a
sales load may be invested in shares of other funds sold with a sales
load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund that charges a sales load
may be invested in shares of other funds sold with a sales load
(referred to herein as "Offered Shares"), but if the sales load
applicable to the Offered Shares exceeds the maximum sales load
charged by the fund from which dividends or distributions are being
swept (without giving effect to any reduced loads), the difference
will be deducted.
D. Dividends and distributions paid by a fund may be invested in shares
of other funds that impose a contingent deferred sales charge ("CDSC")
and the applicable CDSC, if any, will be imposed upon redemption of
such shares.
Dreyfus Dividend ACH permits you to transfer electronically dividends or
dividends and capital gain distributions, if any, from the Fund to a designated
bank account. Only an account maintained at a domestic financial institution
which is an ACH member may be so designated. Banks may charge a fee for this
service.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits you to
request withdrawal of a specified dollar amount (minimum of $50) on either a
monthly or quarterly basis if you have a $5,000 minimum account. Withdrawal
payments are the proceeds from sales of Fund shares, not the yield on the
shares. If withdrawal payments exceed reinvested dividends and distributions,
your shares will be reduced and eventually may be depleted. Automatic Withdrawal
may be terminated at any time by you, the Fund or the Transfer Agent. Shares for
which certificates have been issued may not be redeemed through the Automatic
Withdrawal Plan.
DETERMINATION OF NET ASSET VALUE
Valuation of Portfolio Securities. The Fund's investments are valued each
business day by an independent pricing service (the "Service") approved by the
Fund's Board. When, in the judgment of the Service, quoted bid prices for
investments are readily available and are representative of the bid side of the
market, these investments are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for such
securities). Other investments (which constitute a majority of the portfolio
securities) are carried at fair value as determined by the Service, based on
methods which include consideration of: yields or prices of municipal bonds of
comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions. The Service may employ electronic data
processing techniques and/or a matrix system to determine valuations. The
Service's procedures are reviewed by the Fund's officers under the general
supervision of the Fund's Board. Expenses and fees, including the management fee
(reduced by the expense limitation, if any), are accrued daily and are taken
into account for the purpose of determining the net asset value of Fund shares.
New York Stock Exchange Closings. The holidays (as observed) on which the
New York Stock Exchange is closed currently are: New Year's Day, Martin Luther
King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Management believes that the Fund has qualified as a "regulated investment
company" under the Code, for the fiscal year ended May 31, 2000 and the Fund
intends to continue to so qualify, if such qualification is in the best
interests of its shareholders. As a regulated investment company, the Fund will
pay no Federal income tax on net investment income and net realized capital
gains to the extent that such income and gains are distributed to shareholders
in accordance with applicable provisions of the Code. To qualify as a regulated
investment company, the Fund must distribute at least 90% of its net income
(consisting of net investment income from tax exempt obligations and net
short-term capital gains) to its shareholders, and must meet certain asset
diversification and other requirements. If the Fund did not qualify as a
regulated investment company, it would be treated for tax purposes as an
ordinary corporation subject to Federal income tax. The term "regulated
investment company" does not imply the supervision of management or investment
practices or policies by any government agency.
The Fund ordinarily declares dividends from its net investment income on
each day the New York Stock Exchange is open for business. Fund shares begin
earning dividends on the day following the date of purchase. The Fund's earnings
for Saturdays, Sundays and holidays are declared as dividends on the next
business day. Dividends usually are paid on the last business day of each month
and are automatically reinvested in additional Fund shares at net asset value
or, at your option, paid in cash. If you redeem all shares in your account at
any time during the month, all dividends to which you are entitled will be paid
to you along with the proceeds of the redemption. If you are an omnibus
accountholder and indicate in a partial redemption request that a portion of any
accrued dividends to which such account is entitled belongs to an underlying
accountholder who has redeemed all shares in his or her account, such portion of
the accrued dividends will be paid to you along with the proceeds of the
redemption. Distributions from net realized securities gains, if any, generally
are declared and paid once a year, but the Fund may make distributions on a more
frequent basis to comply with the distribution requirements of the Code, in all
events in a manner consistent with the provisions of the 1940 Act.
If you elect to receive dividends and distributions in cash and your
dividend or distribution check is returned to the Fund as undeliverable or
remains uncashed for six months, the Fund reserves the right to reinvest such
dividend or distribution and all future dividends and distributions payable to
you in additional Fund shares at net asset value. No interest will accrue on
amounts represented by uncashed distribution or redemption checks.
Any dividend or distribution paid shortly after an investor's purchase may
have the effect of reducing the net asset value of his shares below the cost of
his investment. Such a distribution would be a return on investment in an
economic sense although taxable as stated under " Distributions and Taxes" in
the Prospectus. In addition, if a shareholder holds Fund shares for six months
or less and has received an exempt-interest dividend with respect to such
shares, any loss incurred on the sale of such shares will be disallowed to the
extent of the exempt-interest dividend received.
If, at the close of each quarter of its taxable year, at least 50% of the
value of the Fund's total assets consists of Federal tax exempt obligations, the
Fund may designate and pay Federal exempt-interest dividends from interest
earned on all such tax exempt obligations. Such exempt-interest dividends may be
excluded by shareholders of the Fund from their gross income for Federal income
tax purposes. Dividends derived from taxable investments, together with
distributions from any net realized short-term securities gains, generally are
taxable as ordinary income for Federal income tax purposes whether or not
reinvested. Distributions from net realized long-term securities gains generally
are taxable as long-term capital gains to a shareholder who is a citizen or
resident of the United States, whether or not reinvested and regardless of the
length of time the shareholder has held his shares.
Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gain or loss. However, all or a portion of the gain realized
from the disposition of certain market discount bonds will be treated as
ordinary income. In addition, all or a portion of the gain realized from
engaging in "conversion transactions" (generally including certain transactions
designed to convert ordinary income into capital gain) may be treated as
ordinary income.
Gain or loss, if any, realized by the Fund from certain financial futures
and options transactions ("Section 1256 contracts") 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 Section 1256 contracts as well as from
closing transactions. In addition, any Section 1256 contracts remaining
unexercised at the end of the Fund's taxable year will be treated as sold for
their then fair market value, resulting in additional gain or loss to the Fund
characterized as described above.
Offsetting positions held by the Fund involving certain futures or forward
contracts or options transactions with respect to actively traded personal
property may be considered, for tax purposes, to constitute "straddles." To the
extent the straddle rules apply to positions established by the Fund, losses
realized by the Fund may be deferred to the extent of unrealized gain in the
offsetting position. In addition, short-term capital loss on straddle positions
may be recharacterized as long-term capital loss, and long-term capital gains on
straddle positions may be treated as short-term capital gains or ordinary
income. Certain of the straddle positions held by a Fund may constitute "mixed
straddles." The Fund may make one or more elections with respect to the
treatment of "mixed straddles," resulting in different tax consequences. In
certain circumstances, the provisions governing the tax treatment of straddles
override or modify certain of the provisions discussed above.
If the Fund either (1) holds an appreciated financial position with
respect to stock, certain debt obligations, or partnership interests
("appreciated financial positions") and then enters into a short sale, futures,
forward, or offsetting notional principal contract (collectively, a "Contract")
respecting the same or substantially identical property or (2) holds an
appreciated financial position that is a Contract and then acquires property
that is the same as, or substantially identical to, the underlying property, the
Fund generally will be taxed as if the appreciated financial position were sold
at its fair market value on the date the Fund enters into the financial position
or acquires the property.
Investment by the Fund in securities issued or acquired 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 by causing the Fund to
recognize income prior to the receipt of cash payments. For example, the Fund
could be required to take into account annually a portion of the discount (or
deemed discount) at which the 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.
PORTFOLIO TRANSACTIONS
Portfolio securities ordinarily are purchased from and sold to parties
acting as principal. 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. The prices paid to underwriters of
newly-issued securities usually include a concession paid by the issuer to the
underwriter, and purchases of after-market securities from dealers ordinarily
are executed at a price between the bid and asked price. No brokerage
commissions have been paid by the Fund to date.
Transactions are allocated to various dealers by the Fund's portfolio
managers in their best judgment. The primary consideration is prompt and
effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected for research, statistical or
other services to enable the Manager to supplement its own research and analysis
with the views and information of other securities firms and may be selected
based upon their sales of shares of the Fund or other funds advised by the
Manager or its affiliates.
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 Manager's opinion that the receipt and study of such
services should not reduce the overall expenses of its research department.
PERFORMANCE INFORMATION
The Fund's current yield for the 30-day period ended May 31, 2000 was
5.21%. 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 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
distributions, and (b) the net asset value per share on the last day of the
period less any undistributed earned income per share reasonably expected to be
declared as a dividend shortly thereafter. The quotient is then added to 1, and
that sum is raised to the 6th power, after which 1 is subtracted. The current
yield is then arrived at by multiplying the result by 2.
Based upon a combined 2000 Federal and Massachusetts personal income tax
rate of 43.13%, the Fund's tax equivalent yield for the 30-day period ended May
31, 2000 was 9.16%. Tax equivalent yield is computed by dividing that portion of
the current yield (calculated as described above) which is tax exempt by 1 minus
a stated tax rate and adding the quotient to that portion, if any, of the yield
of the Fund that is not tax exempt.
The tax equivalent yield quoted above represents the application of the
highest Federal and Commonwealth of Massachusetts marginal personal income tax
rates presently in effect. For Federal personal income tax purposes, the highest
39.6% tax rate has been used. For Massachusetts personal income tax purposes, a
12% tax rate has been used. The tax equivalent figure, however, does not include
the potential effect of any local (including, but not limited to, county,
district or city) taxes, including applicable surcharges. In addition, there may
be pending legislation which could affect such stated tax rates or yield. Each
investor should consult its tax adviser, and consider its own factual
circumstances and applicable tax laws, in order to ascertain the relevant tax
equivalent yield.
The Fund's average annual total return for the 1, 5 and 10 year periods
ended May 31, 2000 was -2.56%, 4.36% and 6.10%, respectively. Average annual
total return is calculated by determining the ending redeemable value of an
investment purchased with a hypothetical $1,000 payment made at the beginning of
the period (assuming the reinvestment of dividends and distributions), dividing
by the amount of the initial investment, taking the "n"th root of the quotient
(where "n" is the number of years in the period) and subtracting 1 from the
result.
The Fund's aggregate total return for the period June 11, 1985
(commencement of operations) through May 31, 2000 was 156.36%. Total return is
calculated by subtracting the amount of the Fund's net asset value per share at
the beginning of a stated period from the net asset value per share at the end
of the period (after giving effect to the reinvestment of dividends and
distributions during the period), and dividing the result by the net asset value
per share at the beginning of the period.
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 representative of the Fund's past or
future performance.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from CDA Investment
Technologies, Inc., Lipper Analytical Services, Inc., Moody's Bond Survey Bond
Index, Lehman Brothers Municipal Bond Index, Morningstar, Inc. and other
industry publications. From time to time, advertising materials for the Fund may
refer to or discuss then-current or past economic conditions, developments
and/or events, actual or proposed tax legislation, or to statistical or other
information concerning trends relating to investment companies, as compiled by
industry associations such as the Investment Company Institute. From time to
time, advertising materials for the Fund also may refer to Morningstar ratings
and related analyses supporting the ratings.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer to, or
include commentary by the portfolio manager relating to investment strategy,
asset growth, current or past business, political, economic or financial
conditions and other matters of general interest to investors.
INFORMATION ABOUT THE FUND
Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and nonassessable. 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.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Board members or
the appointment of auditors. However, the holders of at least 10% of the shares
outstanding and entitled to vote may require the Fund to hold a special meeting
of shareholders for purposes of removing a Board member from office. Fund
shareholders may remove a Board member by the affirmative vote of two-thirds of
the Fund's outstanding voting shares. In addition, the Board will call a meeting
of shareholders for the purpose of electing Board members if, at any time, less
than a majority of the Board members then holding office have been elected by
shareholders.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund. However, the Fund's
Agreement and Declaration of Trust (the "Trust Agreement") disclaims shareholder
liability for acts or obligations of the Fund and requires that notice of such
disclaimer be given in each agreement, obligation or instrument entered into or
executed by the Fund or a Board member. The Trust Agreement provides for
indemnification from the Fund's property for all losses and expenses of any
shareholder held personally liable for the obligations of the Fund. Thus, the
risk of a shareholder's incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund itself would be unable
to meet its obligations, a possibility which management believes is remote. Upon
payment of any liability incurred by the Fund, the shareholder paying such
liability will be entitled to reimbursement from the general assets of the Fund.
The Fund intends to conduct its operations in such a way so as to avoid, as far
as possible, ultimate liability of the shareholders for liabilities of the Fund.
The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculating on short-term market
movements. A pattern of frequent purchases and exchanges can be disruptive to
efficient portfolio management and, consequently, can be detrimental to the
Fund's performance and its shareholders. Accordingly, if the Fund's management
determines that an investor is following a market-timing strategy or is
otherwise engaging in excessive trading, the Fund, with or without prior notice,
may temporarily or permanently terminate the availability of Fund Exchanges, or
reject in whole or part any purchase or exchange request, with respect to such
investor's account. Such investors also may be barred from purchasing other
funds in the Dreyfus Family of Funds. Generally, an investor who makes more than
four exchanges out of the Fund during any calendar year or who makes exchanges
that appear to coincide with a market-timing strategy may be deemed to be
engaged in excessive trading. Accounts under common ownership or control will be
considered as one account for purposes of determining a pattern of excessive
trading. In addition, the Fund may refuse or restrict purchase or exchange
requests by any person or group if, in the judgment of the Fund's management,
the Fund would be unable to invest the money effectively in accordance with its
investment objective and policies or could otherwise be adversely affected or if
the Fund receives or anticipates receiving simultaneous orders that may
significantly affect the Fund (e.g., amounts equal to 1% or more of the Fund's
total assets). If an exchange request is refused, the Fund will take no other
action with respect to the shares until it receives further instructions from
the investor. The Fund may delay forwarding redemption proceeds for up to seven
days if the investor redeeming shares is engaged in excessive trading or if the
amount of the redemption request otherwise would be disruptive to efficient
portfolio management or would adversely affect the Fund. The Fund's policy on
excessive trading applies to investors who invest in the Fund directly or
through financial intermediaries, but does not apply to the Dreyfus
Auto-Exchange Privilege, to any automatic investment or withdrawal privilege
described herein, or to participants in employer-sponsored retirement plans.
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange requests
based on their separate components--redemption orders with a simultaneous
request to purchase the other fund's shares. In such a case, the redemption
request would be processed at the Fund's next determined net asset value but the
purchase order would be effective only at the net asset value next determined
after the fund being purchased receives the proceeds of the redemption, which
may result in the purchase being delayed.
To offset the relatively higher costs of servicing smaller accounts, the
Fund charges regular accounts with balances below $2,000 an annual fee of $12.
The valuation of accounts and the deductions are expected to take place during
the last four months of each year. The fee will be waived for any investor whose
aggregate Dreyfus mutual fund investments total at least $25,000, and will not
apply to IRA accounts or to accounts participating in automatic investment
programs or opened through a securities dealer, bank or other financial
institution, or to other fiduciary accounts.
The Fund sends annual and semi-annual financial statements to all its
shareholders.
COUNSEL AND INDEPENDENT AUDITORS
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York
10038-4982, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the shares
being sold pursuant to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as independent auditors of the Fund.
APPENDIX A
RISK FACTORS - INVESTING
IN MASSACHUSETTS MUNICIPAL OBLIGATIONS
The following information constitutes only a brief summary, does not
purport to be a complete description, and is based on information drawn from
official statements relating to securities offerings of the Commonwealth of
Massachusetts available as of the date of this Statement of Additional
Information. While the Fund has not independently verified this information, it
has no reason to believe that such information is not correct in all material
aspects.
Between 1982 and 1988, the economies of Massachusetts and New England were
among the strongest performers in the nation, with growth rates considerably
higher than those for the national economy as a whole. Between 1989 and 1992,
however, both Massachusetts and New England experienced growth rates
significantly below the national average. Since then, growth rates in
Massachusetts and New England have improved to levels on par with the rest of
the nation. In 1997, the economies of both Massachusetts and New England grew at
a faster pace than the nation as a whole for the first time since 1988. The
Massachusetts economy has been the strongest in New England, making up an
average of 47.7% of New England's total Gross Product and an average of 2.8% of
the nation's economy over the decade and a half.
In 1998, employment levels in every industry increased or remained
constant. The most rapid growth in 1998 came in the construction sector and the
services sector, which grew at rates of 7.6% and 2.8%, respectively. Total
non-agricultural employment in Massachusetts grew at a rate of 1.9% in 1998.
While the Massachusetts unemployment rate was significantly lower than the
national average between 1979 and 1989, the economic recession of the early
1990s caused unemployment rates in Massachusetts to rise significantly above the
national average. However, the economic recovery that began in 1993 has caused
unemployment rates in Massachusetts to decline faster than the national average.
As a result, since 1994 the unemployment rate in Massachusetts has been below
the national average. The unemployment rate in Massachusetts fell from 3.4% in
June 1998 to 3.1% in June 1999 and the United States unemployment rate remained
the same between June 1998 and June 1999. In 1998, average annual pay levels in
Massachusetts were the fourth highest in the nation, and the personal income
growth rate was the eight highest in the nation.
Massachusetts ended each of the fiscal years 1995 through 1999 with a
positive closing fund balance in its budgeted operating funds, and expects to do
so again at the close of fiscal 2000. Year-to-date tax collections through May
totaled approximately $13.909 billion, an increase of approximately $1.165
billion, or 9.1%, over the same period in fiscal 1999. Taking into account
expected reversions (i.e., appropriations that will not be spent in fiscal
2000), the Executive Office for Administration and Finance projected in June
2000 fiscal 2000 spending of approximately $31.259 billion, a 5.0% increase over
fiscal 1999 spending.
A cash flow projection for the balance of fiscal 2000 was released by the
State Treasurer and the Secretary of Administration and Finance on March 7,
2000. Fiscal 2000 was projected to end with a cash balance of $776.6 million,
excluding any fiscal 2000 activity that will occur after June 30, 2000 and
excluding the Stabilization Fund. Bond issues of $250 million each were
projected to occur in April and June, 2000. Federal grant anticipation note and
note issues of $450 million and $150 million were projected to occur in April
and June 2000, respectively. (These bond and note issues did not occur as
projected. It is now anticipated that the Commonwealth will issue approximately
$650 million of general obligation bonds in June, 2000 and $600 million of
federal grant anticipation notes in August, 2000.)
In recent years, health related costs have risen dramatically in
Massachusetts and across the nation, and the increase in Massachusetts' Medicaid
and group health insurance costs reflects this trend. In fiscal 1993, Medicaid
was the largest item in Massachusetts' budget and has been one of the fastest
growing budget items. However the rate of increase has abated in recent years,
due to a number of savings and cost-cutting initiatives, such as managed care
and utilization review. During fiscal years 1995, 1996, 1997, 1998 and 1999,
Medicaid expenditures were $3.398 billion, $3.416 billion, $3.456 billion,
$3.666 billion and $3.856 billion, respectively. The average annual growth rate
from fiscal 1995 to fiscal 1999 was 3.3%. It is estimated that in fiscal 2000,
Medicaid expenditures will be $4.092 billion, an increase of 6.1% from fiscal
1999.
On June 15, 2000 the federal Health Care Financing Administration (HCFA)
sent a letter to nine states, including Massachusetts, New York and Florida,
indicating that portions of their Medicaid programs may be funded with
impermissible taxes on health care providers, jeopardizing federal
reimbursements collected on any Medicaid program expenditures funded with such
taxes. If HCFA makes a final determination that the Commonwealth has imposed an
impermissible provider tax, HCFA will undertake an audit of the Commonwealth's
uncompensated care pool program and seek retroactive repayment of federal
Medicaid reimbursements. Under federal regulations recoupment of federal
Medicaid reimbursements is generally accomplished by withholding a portion of
future Medicaid reimbursements to the state owing the repayment. States can
appeal a request for repayment to an appeals panel within the U.S. Department of
Health and Human Services and then to a federal district court. Since 1993, the
Commonwealth has received an estimated $920 million in federal Medicaid
reimbursements related to the expenditures in question. Clarification of the law
surrounding permissible provider taxes is a national issue and resolution could
take several years.
Massachusetts' pension costs had risen dramatically as the Commonwealth
appropriated funds to address in part the unfunded liabilities that had
accumulated over several decades. Total pension costs increased an aggregate
rate of 3.54% from $908.9 million in fiscal 1994 to $1.07 billion in fiscal
1998. Since fiscal 1998, total pension costs have decreased to $990.2 million in
fiscal 1999 and are estimated to be $987.4 million in fiscal 2000. As
recommended by the Governor, the Senate and House fiscal 2001 budget
appropriates $922 million for the state's pension funding schedule and an
additional $100 million related to increased pension liabilities due to the
conversion to a new actuarial software.
Payments for debt service on Massachusetts general obligation bonds and
notes have risen at an average annual rate of 1.11% from $1.15 billion in fiscal
1994 to $1.21 billion in fiscal 1998. Payments for debt service in fiscal 1999
amounted to $1.17 billion. State law generally imposes a 10% limit on the total
appropriations in any fiscal year that may be expended for payment of interest
and principal on general obligation debt. As of January 1, 2000 the State had
approximately $9.9 billion of long-term general obligation debt outstanding and
short-term direct obligations of the Commonwealth totaled $175.0 million.
Certain independent authorities and agencies within the State are
statutorily authorized to use debt for which Massachusetts is directly, in whole
or in part, or indirectly liable. Massachusetts' liabilities are either in the
form of (i) a direct guaranty, (ii) state support through contract assistance
payments for debt service, or (iii) indirect obligations. Massachusetts is
indirectly liable for the debt of certain authorities through a moral obligation
to maintain the funding of reserve funds which are pledged as security for the
authorities' debt.
In November 1980, voters in the Commonwealth approved a state-wide tax
limitation initiative petition, commonly known as Proposition 2 1/2, to
constrain levels of property taxation and to limit the charges and fees imposed
on cities and towns by certain government entities, including county
governments. The law is not a constitutional provision and accordingly is
subject to amendment or repeal by the legislature. Proposition 2 1/2, as amended
to date, limits the property taxes which a Massachusetts city or town may assess
in any fiscal year to the lesser of (i) 2.5% of the full and fair cash value of
real estate and personal property therein and (ii) 2.5% over the previous year's
levy limit plus any growth in the tax base from certain new construction and
parcel subdivisions. In addition, Proposition 2 1/2 limits any increase in the
charges and fees assessed by certain governmental entities, including county
governments, on cities and towns to the sum of (i) 2.5% of the total charges and
fees imposed in the preceding fiscal year, and (ii) any increase in charges for
services customarily provided locally or services obtained by the city or town
at its option. The law contains certain override provisions which require voter
approval at a general or special election. Proposition 2 1/2 also limits any
annual increase in the total assessments on cities and towns by any county,
district, authority, the Commonwealth, or any other governmental entity except
regional school districts and regional water and sewer districts whose budgets
are approved by two-thirds of their member cities and towns. During the 1980's,
Massachusetts increased payments to the cities, towns and regional school
districts ("Local Aid") to mitigate the impact of Proposition 2 1/2 on local
programs and services. In fiscal 2000, approximately 21.7% of Massachusetts'
budgeted expenditures were allocated to Local Aid.
Many factors affect the financial condition of the Commonwealth and its cities,
towns and public bodies, such as social, environmental, and economic conditions,
many of which are not within the control of such entities. As is the case with
most urban states, the continuation of many of Massachusetts' programs,
particularly its human services programs, is in significant part dependent upon
continuing Federal reimbursements which have been steadily declining. The loss
of grants to Massachusetts and its cities and towns could further slow economic
development. To the extent that such factors may exist, they could have an
adverse effect on economic conditions in Massachusetts, although what effects,
if any, such factors would have on Massachusetts' Municipal Obligations cannot
be predicted.
APPENDIX B
Description of certain S&P, Moody's and Fitch ratings:
S&P
Municipal Bond Ratings
An S&P municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable, and will include: (1)
likelihood of default--capacity and willingness of the obligor as to the timely
payment of interest and repayment of principal in accordance with the terms of
the obligation; (2) nature and provisions of the obligation; and (3) protection
afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A
Principal and interest payments on bonds in this category are regarded as
safe. This rating describes the third strongest capacity for payment of debt
service. It differs from the two higher ratings because:
General Obligation Bonds -- There is some weakness in the local economic
base, in debt burden, in the balance between revenues and expenditures, or in
quality of management. Under certain adverse circumstances, any one such
weakness might impair the ability of the issuer to meet debt obligations at some
future date.
Revenue Bonds -- Debt service coverage is good, but not exceptional.
Stability of the pledged revenues could show some variations because of
increased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent. Management performance
appears adequate.
BBB
Of the investment grade, this is the lowest.
General Obligation Bonds -- Under certain adverse conditions, several of
the above factors could contribute to a lesser capacity for payment of debt
service. The difference between an A and BBB rating is that the latter shows
more than one fundamental weakness, or one very substantial fundamental
weakness, whereas the former shows only one deficiency among the factors
considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the pledged
revenues could show substantial variations, with the revenue flow possibly being
subject to erosion over time. Basic security provisions are no more than
adequate. Management performance could be stronger.
BB, B, CCC, CC, C
Debt rated BB, B, CCC, CC or C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest degree
of speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB
Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payment.
B
Debt rated B has a greater vulnerability to default but presently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions would likely impair capacity or willingness to
pay interest and repay principal.
CCC
Debt rated CCC has a current identifiable vulnerability to default, and is
dependent upon favorable business, financial and economic conditions to meet
timely payments of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.
CC
The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.
C
The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating.
D
Bonds rated D are in default, and payment of interest and/or payment of
principal is in arrears.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus designation to show relative standing within the
major rating 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 (+) 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.
Issues assigned an A rating are regarded as having the greatest capacity for
timely payment. Issues in this category are delineated with the numbers 1, 2 and
3 to indicate the relative degree of safety.
A-1
This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+)
designation.
Moody's
Municipal Bond Ratings
Aaa
Bonds 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 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 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 sometime in the future.
Baa
Bonds 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 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 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 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 rated Ca present obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings.
C
Bonds 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.
Generally, Moody's provides either a generic rating or a rating with a
numerical modifier of 1 for the bonds in the generic rating category Aa. Moody's
also provides numerical modifiers of 2 and 3 in this category for bond issues in
the health care, higher education and other not-for-profit sectors; the modifier
1 indicates that the issue ranks in the higher end of that generic rating
category; the modifier 2 indicates that the issue is in the mid-range of that
generic category; and the modifier 3 indicates that the issue is in the low end
of that generic 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
difference 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 ordinarily will be evidenced by leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structures with moderate reliance on debt
and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a range of financial markets and assured sources of alternate liquidity.
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.
<PAGE>
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.
Demand Bond or Notes Ratings
Certain demand securities empower the holder at his option to require the
issuer, usually through a remarketing agent, to repurchase the security upon
notice at par with accrued interest. This is also referred to as a put option.
The ratings of the demand provision may be changed or withdrawn at any time if,
in Fitch's judgment, changing circumstances warrant such action.
Fitch demand provision ratings carry the same symbols and related
definitions as its short-term ratings.
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
PART C. OTHER INFORMATION
-------------------------
Item 23. Exhibits.
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(a) Registrant's Agreement and Declaration of Trust is incorporated by
reference to Exhibit (1) of Post-Effective Amendment No. 12 to the
Registration Statement on Form N-1A, filed on August 16, 1995.
(b) Registrant's amended By-Laws.
(d) Management Agreement is incorporated by reference to Exhibit (5) of
Post-Effective Amendment No. 12 to the Registration Statement on
Form N-1A, filed on August 16, 1995.
(e) Form of Distribution Agreement.
(f) Amended and Restated Custody Agreement is incorporated by reference
to Exhibit (8)(a) of Post-Effective Amendment No. 12 to the
Registration Statement on Form N-1A, filed on August 16, 1995.
Sub-Custodian Agreements are incorporated by reference to Exhibit
(8)(b) of Post-Effective Amendment No. 15 to the Registration
Statement on Form N-1A, filed on July 25, 1996.
(i) Opinion and Consent of Counsel is incorporated by reference to
Exhibit (10) of Post-Effective Amendment No. 15 to the Registration
Statement on Form N-1A, filed on July 25, 1996.
(j) Consent of Ernst & Young LLP, Independent Auditors.
(m) Registrant's Shareholder Services Plan is incorporated by reference
to Exhibit (9) of Post-Effective Amendment No. 12 to the
Registration Statement on Form N-1A, filed on August 16, 1995.
(p) Code of Ethics
Other Exhibits
(a) Powers of Attorney
(b) Certificate of Assistant Secretary
Item 24. Persons Controlled by or under Common Control with Registrant.
------- --------------------------------------------------------------
Not Applicable
Item 25. Indemnification
------- ---------------
Reference is made to Article VIII of the Registrant's Declaration of
Trust incorporated by reference to Exhibit (1) to the Registration
Statement on Form N-1A, filed on March 28, 1995. The application of
these provisions is limited by the following undertaking set forth in
the rules promulgated by the Securities and Exchange Commission:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a trustee,
officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in such Act and will be governed by the final
adjudication of such issue.
Reference is also made to the Distribution Agreement as amended.
Item 26. Business and Other Connections of Investment Adviser.
------- ----------------------------------------------------
The Dreyfus Corporation ("Dreyfus") and subsidiary companies
comprise a financial service organization whose business
consists primarily of providing investment management services
as the investment adviser, manager and distributor for sponsored
investment companies registered under the Investment Company Act
of 1940 and as an investment adviser to institutional and
individual accounts. Dreyfus also serves as sub-investment
adviser to and/or administrator of other investment companies.
Dreyfus Service Corporation, is a registered broker-dealer.
Dreyfus Management, Inc., another wholly-owned subsidiary,
provides investment management services to various pension
plans, institutions and individuals.
ITEM 26. Business and Other Connections of Investment Adviser (continued)
----------------------------------------------------------------------------
Officers and Directors of Investment Adviser
<TABLE>
Name and Position
With Dreyfus Other Businesses Position Held Dates
------------ ---------------- ------------- -----
<S> <C> <C> <C>
Christopher M. Condron Franklin Portfolio Director 1/97 - Present
Chairman of the Board Associates,
and LLC*
Chief Executive
Officer
TBCAM Holdings, Inc.* Director 10/97 - Present
President 10/97 - 6/98
Chairman 10/97 - 6/98
The Boston Company Director 1/98 - Present
Asset Management, LLC* Chairman 1/98 - 6/98
President 1/98 - 6/98
The Boston Company President 9/95 - 1/98
Asset Management, Inc.* Chairman 4/95 - 1/98
Director 4/95 - 1/98
Franklin Portfolio Director 1/97 - Present
Holdings, Inc.*
Certus Asset Advisors Director 6/95 - Present
Corp.**
Mellon Capital Management Director 5/95 - Present
Corporation***
Mellon Bond Associates, Executive Committee 1/98 - Present
LLP+ Member
Mellon Bond Associates+ Trustee 5/95 - 1/98
Mellon Equity Associates, Executive 1/98 - Present
LLP+ Committee
Member
Christopher M. Condron Mellon Equity Associates+ Trustee 5/95 - 1/98
Chairman and Chief
Executive Officer Boston Safe Advisors, Director 5/95 - Present
(Continued) Inc.* President 5/95 - Present
Mellon Bank, N.A. + Director 1/99 - Present
Chief Operating 3/98 - Present
Officer 3/98 - Present
President 11/94 - 3/98
Vice Chairman
Mellon Financial Chief Operating 1/99 - Present
Corporation+ Officer 1/99 - Present
President 1/98 - Present
Director 11/94 - 1/99
Vice Chairman
Founders Asset Chairman 12/97 - Present
Management, Director 12/97 - Present
LLC****
The Boston Company, Inc.* Vice Chairman 1/94 - Present
Director 5/93 - Present
Laurel Capital Advisors, Executive Committee 1/98 - 8/98
LLP+ Member
Laurel Capital Advisors+ Trustee 10/93 - 1/98
Boston Safe Deposit and Director 5/93 - Present
Trust Company*
The Boston Company President 6/89 - 1/97
Financial Director 6/89 - 1/97
Strategies, Inc. *
Mandell L. Berman Self-Employed Real Estate 11/74 - Present
Director 29100 Northwestern Highway Consultant,
Suite 370 Residential
Southfield, MI 48034 Builder and
Private Investor
Burton C. Borgelt DeVlieg Bullard, Inc. Director 1/93 - Present
Director 1 Gorham Island
Westport, CT 06880
Mellon Financial Director 6/91 - Present
Corporation+
Mellon Bank, N.A. + Director 6/91 - Present
Dentsply International, Director 2/81 - Present
Inc.
570 West College Avenue
York, PA
Quill Corporation Director 3/93 - Present
Lincolnshire, IL
Stephen E. Canter Dreyfus Investment Chairman of the 1/97 - Present
President, Chief Advisors, Inc.++ Board 5/95 - Present
Operating Director 5/95 - Present
Officer, Chief President
Investment
Officer, and Director
Newton Management Limited Director 2/99 - Present
London, England
Mellon Bond Associates, Executive 1/99 - Present
LLP+ Committee
Member
Mellon Equity Associates, Executive Committee 1/99 - Present
LLP+ Member
Franklin Portfolio Director 2/99 - Present
Associates,
LLC*
Franklin Portfolio Director 2/99 - Present
Holdings, Inc.*
The Boston Company Asset Director 2/99 - Present
Management, LLC*
TBCAM Holdings, Inc.* Director 2/99 - Present
Mellon Capital Management Director 1/99 - Present
Corporation***
Stephen E. Canter Founders Asset Management, Member, Board of 12/97 - Present
President, Chief LLC**** Managers
Operating Acting Chief 7/98 - 12/98
Officer, Chief Executive
Investment Officer
Officer, and Director
(Continued)
The Dreyfus Trust Director 6/95 - Present
Company+++ Chairman 1/99 - Present
President 1/99 - Present
Chief Executive 1/99 - Present
Officer
Thomas F. Eggers Dreyfus Service Chief Executive 3/00 - Present
Vice Chairman - Corporation++ Officer
Institutional and Chairman of
And Director the 4/96 - 3/00
Board 9/96 - Present
Executive Vice
President
Director
Founders Asset Management, Member, Board of 2/99 - Present
LLC**** Managers
Dreyfus Investment Director 1/00 - Present
Advisors, Inc.
Dreyfus Service Director 3/99 - Present
Organization,
Inc.++
Dreyfus Insurance Agency Director 3/99 - Present
of
Massachusetts, Inc. +++
Dreyfus Brokerage Director 11/97 - 6/98
Services, Inc.
401 North Maple Avenue
Beverly Hills, CA.
Steven G. Elliott Mellon Financial Senior Vice 1/99 - Present
Director Corporation+ Chairman 1/90 - Present
Chief Financial 6/92 - 1/99
Officer 1/90 - 5/98
Vice Chairman
Treasurer
Mellon Bank, N.A.+ Senior Vice 3/98 - Present
Chairman 6/92 - 3/98
Vice Chairman 1/90 - Present
Chief Financial
Officer
Mellon EFT Services Director 10/98 - Present
Corporation
Mellon Bank Center, 8th
Floor
1735 Market Street
Philadelphia, PA 19103
Mellon Financial Services Director 1/96 - Present
Corporation #1 Vice President 1/96 - Present
Mellon Bank Center, 8th
Floor
1735 Market Street
Philadelphia, PA 19103
Boston Group Holdings, Vice President 5/93 - Present
Inc.*
APT Holdings Corporation Treasurer 12/87 - Present
Pike Creek Operations
Center
4500 New Linden Hill Road
Wilmington, DE 19808
Allomon Corporation Director 12/87 - Present
Two Mellon Bank Center
Pittsburgh, PA 15259
Collection Services Controller 10/90 - 2/99
Corporation Director 9/88 - 2/99
500 Grant Street Vice President 9/88 - 2/99
Pittsburgh, PA 15258 Treasurer 9/88 - 2/99
Mellon Financial Company+ Principal Exec. 1/88 - Present
Officer 8/87 - Present
Chief Executive 8/87 - Present
Officer 8/87 - Present
Director
President
Steven G. Elliott Mellon Overseas Director 4/88 - Present
Director (Continued) Investments
Corporation+
Mellon Financial Services Treasurer 12/87 - Present
Corporation # 5+
Mellon Financial Markets, Director 1/99 - Present
Inc.+
Mellon Financial Services Director 1/99 - Present
Corporation #17
Fort Lee, NJ
Mellon Mortgage Company Director 1/99 - Present
Houston, TX
Mellon Ventures, Inc. + Director 1/99 - Present
Lawrence S. Kash Dreyfus Investment Director 4/97 - 12/99
Vice Chairman Advisors, Inc.++
Dreyfus Brokerage Chairman 11/97 - 2/99
Services, Inc. Chief Executive 11/97 - 2/98
401 North Maple Ave. Officer
Beverly Hills, CA
Dreyfus Service Director 1/95 - 2/99
Corporation++ President 9/96 - 3/99
Dreyfus Precious Metals, Director 3/96 - 12/98
Inc.+++ President 10/96 - 12/98
Dreyfus Service Director 12/94 - 3/99
Organization, Inc.++ President 1/97 - 3/99
Seven Six Seven Agency, Director 1/97 - 4/99
Inc. ++
Dreyfus Insurance Agency Chairman 5/97 - 3/99
of President 5/97 - 3/99
Massachusetts, Inc.++++ Director 5/97 - 3/99
The Dreyfus Trust Chairman 1/97 - 1/99
Company+++ President 2/97 - 1/99
Chief Executive 2/97 - 1/99
Officer 12/94 - Present
Director
The Dreyfus Consumer Chairman 5/97 - 6/99
Credit President 5/97 - 6/99
Corporation++ Director 12/94 - 6/99
Founders Asset Management, Member, Board of 12/97 - 12/99
LLC**** Managers
The Boston Company Chairman 12/95 - 1/99
Advisors, Chief Executive 12/95 - 1/99
Inc. Officer 12/95 - 1/99
Wilmington, DE President
The Boston Company, Inc.* Director 5/93 - 1/99
President 5/93 - 1/99
Mellon Bank, N.A.+ Executive Vice 6/92 - Present
President
Laurel Capital Advisors, Chairman 1/98 - 8/98
LLP+ Executive Committee 1/98 - 8/98
Member
Chief Executive 1/98 - 8/98
Officer 1/98 - 8/98
President
Laurel Capital Advisors, Trustee 12/91 - 1/98
Inc. + Chairman 9/93 - 1/98
President and CEO 12/91 - 1/98
Boston Group Holdings, Director 5/93 - Present
Inc.* President 5/93 - Present
Boston Safe Deposit & Director 6/93 - 1/99
Trust Co.+ Executive Vice 6/93 - 4/98
President
Martin G. McGuinn Mellon Financial Chairman 1/99 - Present
Director Corporation+ Chief Executive 1/99 - Present
Officer 1/98 - Present
Director 1/90 - 1/99
Vice Chairman
Mellon Bank, N. A. + Chairman 3/98 - Present
Chief Executive 3/98 - Present
Officer 1/98 - Present
Director 1/90 - 3/98
Vice Chairman
Mellon Leasing Vice Chairman 12/96 - Present
Corporation+
Mellon Bank (DE) National Director 4/89 - 12/98
Association
Wilmington, DE
Mellon Bank (MD) National Director 1/96 - 4/98
Association
Rockville, Maryland
J. David Officer Dreyfus Service President 3/00 - Present
Vice Chairman Corporation++ Executive Vice 5/98 - 3/00
And Director President 3/99 - Present
Director
Dreyfus Service Director 3/99 - Present
Organization,
Inc.++
Dreyfus Insurance Agency Director 5/98 - Present
of
Massachusetts, Inc.++++
Dreyfus Brokerage Chairman 3/99 - Present
Services, Inc.
401 North Maple Avenue
Beverly Hills, CA
Seven Six Seven Agency, Director 10/98 - Present
Inc.++
Mellon Residential Director 4/97 - Present
Funding Corp. +
Mellon Trust of Florida, Director 8/97 - Present
N.A.
2875 Northeast 191st
Street
North Miami Beach, FL
33180
Mellon Bank, NA+ Executive Vice 7/96 - Present
President
The Boston Company, Inc.* Vice Chairman 1/97 - Present
Director 7/96 - Present
Mellon Preferred Capital Director 11/96 - 1/99
Corporation*
RECO, Inc.* President 11/96 - Present
Director 11/96 - Present
The Boston Company President 8/96 - 6/99
Financial Director 8/96 - 6/99
Services, Inc.*
Boston Safe Deposit and Director 7/96 - Present
Trust President 7/96 - 1/99
Company*
Mellon Trust of New York Director 6/96 - Present
1301 Avenue of the
Americas
New York, NY 10019
Mellon Trust of California Director 6/96 - Present
400 South Hope Street
Suite 400
Los Angeles, CA 90071
Mellon United National Director 3/98 - Present
Bank
1399 SW 1st Ave., Suite
400
Miami, Florida
Boston Group Holdings, Director 12/97 - Present
Inc.*
Dreyfus Financial Director 9/96 - Present
Services Corp. +
J. David Officer Dreyfus Investment Director 4/96 - Present
Vice Chairman and Services
Director (Continued) Corporation+
Richard W. Sabo Founders Asset Management President 12/98 - Present
Director LLC**** Chief Executive 12/98 - Present
Officer
Prudential Securities Senior Vice 07/91 - 11/98
New York, NY President 07/91 - 11/98
Regional Director
Richard F. Syron Thermo Electron President 6/99 - Present
Director 81 Wyman Street Chief Executive 6/99 - Present
Waltham, MA 02454-9046 Officer
American Stock Exchange Chairman 4/94 - 6/99
86 Trinity Place Chief Executive 4/94 - 6/99
New York, NY 10006 Officer
Ronald P. O'Hanley Franklin Portfolio Director 3/97 - Present
Vice Chairman Holdings, Inc.*
Franklin Portfolio Director 3/97 - Present
Associates,
LLC*
Boston Safe Deposit and Executive Committee 1/99 - Present
Trust Member
Company* Director 1/99 - Present
The Boston Company, Inc.* Executive Committee 1/99 - Present
Member 1/99 - Present
Director
Buck Consultants, Inc.++ Director 7/97 - Present
Newton Asset Management Executive 10/98 - Present
LTD Committee
(UK) Member 10/98 - Present
London, England Director
Mellon Asset Management Non-Resident 11/98 - Present
(Japan) Co., LTD Director
Tokyo, Japan
TBCAM Holdings, Inc.* Director 10/97 - Present
The Boston Company Asset Director 1/98 - Present
Management, LLC*
Boston Safe Advisors, Chairman 6/97 - Present
Inc.* Director 2/97 - Present
Pareto Partners Partner 5/97 - Present
271 Regent Street Representative
London, England W1R 8PP
Mellon Capital Management Director 2/97 -Present
Corporation***
Certus Asset Advisors Director 2/97 - Present
Corp.**
Mellon Bond Associates; Trustee 1/98 - Present
LLP+ Chairman 1/98 - Present
Mellon Equity Associates; Trustee 1/98 - Present
LLP+ Chairman 1/98 - Present
Mellon-France Corporation+ Director 3/97 - Present
Laurel Capital Advisors+ Trustee 3/97 - Present
Stephen R. Byers Dreyfus Service Senior Vice 3/00 - Present
Director of Corporation++ President 5/97 - 11/99
Investments and Gruntal & Co., LLC Executive Vice 5/97 - 11/99
Senior Vice President New York, NY President 5/97 - 11/99
Partner
Executive Committee 5/97 - 11/99
Member
Board of Directors 5/97 - 11/99
Member
Treasurer 5/97 - 11/99
Chief Financial 5/97 - 6/99
Officer
Mark N. Jacobs Dreyfus Investment Director 4/97 - Present
General Counsel, Advisors, Inc.++ Secretary 10/77 - 7/98
Vice President, and
Secretary The Dreyfus Trust Director 3/96 - Present
Company+++
The TruePenny President 10/98 - Present
Corporation++ Director 3/96 - Present
Dreyfus Service Director 3/97 - 3/99
Organization, Inc.++
William H. Maresca The Dreyfus Trust Chief Financial 3/99 - Present
Controller Company+++ Officer 9/98 - Present
Treasurer 3/97 - Present
Director
Dreyfus Service Chief Financial 12/98 - Present
Corporation++ Officer
Dreyfus Consumer Credit Treasurer 10/98 - Present
Corp. ++
Dreyfus Investment Treasurer 10/98 - Present
Advisors, Inc. ++
Dreyfus-Lincoln, Inc. Vice President 10/98 - Present
4500 New Linden Hill Road
Wilmington, DE 19808
The TruePenny Vice President 10/98 - Present
Corporation++
Dreyfus Precious Metals, Treasurer 10/98 - 12/98
Inc. +++
The Trotwood Corporation++ Vice President 10/98 - Present
Trotwood Hunters Vice President 10/98 - Present
Corporation++
Trotwood Hunters Site A Vice President 10/98 - Present
Corp. ++
Dreyfus Transfer, Inc. Chief Financial 5/98 - Present
One American Express Officer
Plaza,
Providence, RI 02903
Dreyfus Service Treasurer 3/99 - Present
Organization, Inc.++ Assistant 3/93 - 3/99
Treasurer
Dreyfus Insurance Agency Assistant Treasurer 5/98 - Present
of
Massachusetts, Inc.++++
William T. Sandalls, Dreyfus Transfer, Inc. Chairman 2/97 - Present
Jr. One American Express
Executive Vice Plaza,
President Providence, RI 02903
Dreyfus Service Director 1/96 - Present
Corporation++ Executive Vice 2/97 - Present
President 2/97 - 12/98
Chief Financial
Officer
Dreyfus Investment Director 1/96 - Present
Advisors, Inc.++ Treasurer 1/96 - 10/98
Dreyfus-Lincoln, Inc. Director 12/96 - Present
4500 New Linden Hill Road President 1/97 - Present
Wilmington, DE 19808
Seven Six Seven Agency, Director 1/96 - 10/98
Inc.++ Treasurer 10/96 - 10/98
The Dreyfus Consumer Director 1/96 - Present
Credit Corp.++ Vice President 1/96 - Present
Treasurer 1/97 - 10/98
The Dreyfus Trust Company Director 1/96 - Present
+++
Dreyfus Service Treasurer 10/96 - 3/99
Organization,
Inc.++
Dreyfus Insurance Agency Director 5/97 - 3/99
of Treasurer 5/97 - 3/99
Massachusetts, Inc.++++ Executive Vice 5/97 - 3/99
President
Diane P. Durnin Dreyfus Service Senior Vice 5/95 - 3/99
Vice President - Corporation++ President -
Product Marketing and
Development Advertising
Division
Patrice M. Kozlowski None
Senior Vice President
- Corporate
Communications
Mary Beth Leibig None
Vice President -
Human Resources
Theodore A. Schachar Dreyfus Service Vice President -Tax 10/96 - Present
Vice President - Tax Corporation++
The Dreyfus Consumer Chairman 6/99 - Present
Credit President 6/99 - Present
Corporation ++
Dreyfus Investment Vice President - 10/96 - Present
Advisors, Tax
Inc.++
Dreyfus Precious Metals, Vice President - 10/96 - 12/98
Inc. +++ Tax
Dreyfus Service Vice President - 10/96 - Present
Organization, Tax
Inc.++
Wendy Strutt None
Vice President
Raymond J. Van Cott Mellon Financial Vice President 7/98 - Present
Vice-President - Corporation+
Information Systems
Computer Sciences Vice President 1/96 - 7/98
Corporation
El Segundo, CA
James Bitetto The TruePenny Secretary 9/98 - Present
Assistant Secretary Corporation++
Dreyfus Service Assistant Secretary 8/98 - Present
Corporation++
Dreyfus Investment Assistant Secretary 7/98 - Present
Advisors, Inc.++
Dreyfus Service Assistant Secretary 7/98 - Present
Organization, Inc.++
Steven F. Newman Dreyfus Transfer, Inc. Vice President 2/97 - Present
Assistant Secretary One American Express Plaza Director 2/97 - Present
Providence, RI 02903 Secretary 2/97 - Present
Dreyfus Service Secretary 7/98 - Present
Organization, Inc.++ Assistant Secretary 5/98 - 7/98
</TABLE>
* The address of the business so indicated is One Boston Place, Boston,
Massachusetts, 02108.
** The address of the business so indicated is One Bush Street, Suite 450,
San Francisco, California 94104.
*** The address of the business so indicated is 595 Market Street, Suite 3000,
San Francisco, California 94105.
**** The address of the business so indicated is 2930 East Third Avenue,
Denver, Colorado 80206.
+ The address of the business so indicated is One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258.
++ The address of the business so indicated is 200 Park Avenue, New York, New
York 10166.
+++ The address of the business so indicated is 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144.
++++ The address of the business so indicated is 53 State Street, Boston,
Massachusetts 02109.
Item 27. Principal Underwriters
-------- ----------------------
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or exclusive
distributor:
1) Dreyfus A Bonds Plus, Inc.
2) Dreyfus Appreciation Fund, Inc.
3) Dreyfus Balanced Fund, Inc.
4) Dreyfus BASIC GNMA Fund
5) Dreyfus BASIC Money Market Fund, Inc.
6) Dreyfus BASIC Municipal Fund, Inc.
7) Dreyfus BASIC U.S. Government Money Market Fund
8) Dreyfus California Intermediate Municipal Bond Fund
9) Dreyfus California Tax Exempt Bond Fund, Inc.
10) Dreyfus California Tax Exempt Money Market Fund
11) Dreyfus Cash Management
12) Dreyfus Cash Management Plus, Inc.
13) Dreyfus Connecticut Intermediate Municipal Bond Fund
14) Dreyfus Connecticut Municipal Money Market Fund, Inc.
15) Dreyfus Florida Intermediate Municipal Bond Fund
16) Dreyfus Florida Municipal Money Market Fund
17) Dreyfus Founders Funds, Inc.
18) The Dreyfus Fund Incorporated
19) Dreyfus Global Bond Fund, Inc.
20) Dreyfus Global Growth Fund
21) Dreyfus GNMA Fund, Inc.
22) Dreyfus Government Cash Management Funds
23) Dreyfus Growth and Income Fund, Inc.
24) Dreyfus Growth and Value Funds, Inc.
25) Dreyfus Growth Opportunity Fund, Inc.
26) Dreyfus Debt and Equity Funds
27) Dreyfus Index Funds, Inc.
28) Dreyfus Institutional Money Market Fund
29) Dreyfus Institutional Preferred Money Market Fund
30) Dreyfus Institutional Short Term Treasury Fund
31) Dreyfus Insured Municipal Bond Fund, Inc.
32) Dreyfus Intermediate Municipal Bond Fund, Inc.
33) Dreyfus International Funds, Inc.
34) Dreyfus Investment Grade Bond Funds, Inc.
35) Dreyfus Investment Portfolios
36) The Dreyfus/Laurel Funds, Inc.
37) The Dreyfus/Laurel Funds Trust
38) The Dreyfus/Laurel Tax-Free Municipal Funds
39) Dreyfus LifeTime Portfolios, Inc.
40) Dreyfus Liquid Assets, Inc.
41) Dreyfus Massachusetts Intermediate Municipal Bond Fund
42) Dreyfus Massachusetts Municipal Money Market Fund
43) Dreyfus MidCap Index Fund
44) Dreyfus Money Market Instruments, Inc.
45) Dreyfus Municipal Bond Fund, Inc.
46) Dreyfus Municipal Cash Management Plus
47) Dreyfus Municipal Money Market Fund, Inc.
48) Dreyfus New Jersey Intermediate Municipal Bond Fund
49) Dreyfus New Jersey Municipal Bond Fund, Inc.
50) Dreyfus New Jersey Municipal Money Market Fund, Inc.
51) Dreyfus New Leaders Fund, Inc.
52) Dreyfus New York Municipal Cash Management
53) Dreyfus New York Tax Exempt Bond Fund, Inc.
54) Dreyfus New York Tax Exempt Intermediate Bond Fund
55) Dreyfus New York Tax Exempt Money Market Fund
56) Dreyfus U.S. Treasury Intermediate Term Fund
57) Dreyfus U.S. Treasury Long Term Fund
58) Dreyfus 100% U.S. Treasury Money Market Fund
59) Dreyfus U.S. Treasury Short Term Fund
60) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
61) Dreyfus Pennsylvania Municipal Money Market Fund
62) Dreyfus Premier California Municipal Bond Fund
63) Dreyfus Premier Equity Funds, Inc.
64) Dreyfus Premier International Funds, Inc.
65) Dreyfus Premier GNMA Fund
66) Dreyfus Premier Opportunity Funds
67) Dreyfus Premier Worldwide Growth Fund, Inc.
68) Dreyfus Premier Municipal Bond Fund
69) Dreyfus Premier New York Municipal Bond Fund
70) Dreyfus Premier State Municipal Bond Fund
71) Dreyfus Premier Value Equity Funds
72) Dreyfus Short-Intermediate Government Fund
73) Dreyfus Short-Intermediate Municipal Bond Fund
74) The Dreyfus Socially Responsible Growth Fund, Inc.
75) Dreyfus Stock Index Fund
76) Dreyfus Tax Exempt Cash Management
77) The Dreyfus Premier Third Century Fund, Inc.
78) Dreyfus Treasury Cash Management
79) Dreyfus Treasury Prime Cash Management
80) Dreyfus Variable Investment Fund
81) Dreyfus Worldwide Dollar Money Market Fund, Inc.
82) General California Municipal Bond Fund, Inc.
83) General California Municipal Money Market Fund
84) General Government Securities Money Market Funds, Inc.
85) General Money Market Fund, Inc.
86) General Municipal Bond Fund, Inc.
87) General Municipal Money Market Funds, Inc.
88) General New York Municipal Bond Fund, Inc.
89) General New York Municipal Money Market Fund
(b)
<TABLE>
Positions and
Name and principal Offices with
Business address Positions and offices with the Distributor Registrant
---------------- ------------------------------------------ ----------
<S> <C> <C>
Thomas F. Eggers * Chief Executive Officer and Chairman of the None
Board
J. David Officer * President and Director None
Stephen Burke * Executive Vice President None
Charles Cardona * Executive Vice President None
Anthony DeVivio ** Executive Vice President None
David K. Mossman ** Executive Vice President None
Jeffrey N. Nachman *** Executive Vice President and Chief Operations None
Officer
William T. Sandalls, Jr. * Executive Vice President and Director None
Wilson Santos ** Executive Vice President and Director of None
Client Services
William H. Maresca * Chief Financial Officer None
Ken Bradle ** Senior Vice President None
Stephen R. Byers * Senior Vice President None
Frank J. Coates * Senior Vice President None
Joseph Connolly * Senior Vice President Vice President
and Treasurer
William Glenn * Senior Vice President None
Michael Millard ** Senior Vice President None
Mary Jean Mulligan ** Senior Vice President None
Bradley Skapyak * Senior Vice President None
Jane Knight * Chief Legal Officer and Secretary None
Stephen Storen * Chief Compliance Officer None
Jeffrey Cannizzaro * Vice President - Compliance None
Maria Georgopoulos * Vice President - Facilities Management None
William Germenis Vice President - Compliance None
Walter T. Harris * Vice President None
Janice Hayles * Vice President None
Hal Marshall * Vice President - Compliance None
Paul Molloy * Vice President None
Theodore A. Schachar * Vice President - Tax None
James Windels * Vice President None
James Bitetto * Assistant Secretary None
</TABLE>
* Principal business address is 200 Park Avenue, New York, NY 10166.
** Principal business address is 144 Glenn Curtiss Blvd., Uniondale, NY
11556-0144.
*** Principal business address is 401 North Maple Avenue, Beverly Hills,
CA 90210.
Item 28. Location of Accounts and Records
------- --------------------------------
1. First Data Investor Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671
2. The Bank of New York
100 State Street
New York, NY
3. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02940-9671
4. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 29. Management Services
------- -------------------
Not Applicable
Item 30. Undertakings
------- ------------
None
SIGNATURES
-------------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York, and
State of New York on the 28th day of September, 2000.
DREYFUS MASSACHUSSETTS TAX EXEMPT BOND FUND
BY: /s/Stephen E. Canter*
---------------------------
Stephen E. Canter, PRESIDENT
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Amendment to the Registration Statement has
been signed below by the following persons in the capacities and on the date
indicated.
Signatures Title Date
/s/ Stephen E. Canter* President (Principal Executive 09/28/00
Officer) and Director
---------------------------------
Stephen E. Canter
/s/Joseph Connolly* Vice President and Treasurer 09/28/00
--------------------------------- (Principal Financial Officer)
Joseph Connolly
/s/David Burke* Trustee 09/28/00
---------------------------------
David Burke
/s/Joseph S. DiMartino* Trustee 09/28/00
--------------------------------
Joseph S. DiMartino
/s/Samuel Chase* Trustee 09/28/00
--------------------------------
Samuel Chase
/s/Gordon J. Davis* Trustee 09/28/00
--------------------------------
Gordon J. Davis
/s/Joni Evans* Trustee 09/28/00
--------------------------------
Joni Evans
/s/Arnold S. Hiatt* Trustee 09/28/00
--------------------------------
Arnold S. Hiatt
/s/Burton N. Wallack* Trustee 09/28/00
--------------------------------
Burton N. Wallack
*BY: /s/John B. Hammalian
---------------------
John B. Hammalian
Attorney-in-Fact
INDEX OF EXHIBITS
Exhibit No.
(b) Amended By-Laws
(e) Form of Distribution Agreement
(j) Consent of Independent Auditors
(p) Code of Ethics
OTHER EXHIBITS
(a) Powers of Attorney
(b) Certificate of Secretary
