DREYFUS MASSACHUSETTS INTERMEDIATE MUNICIPAL BOND FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
AUGUST 1, 1995
(AS REVISED AUGUST 22, 1995)
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus
of Dreyfus Massachusetts Intermediate Municipal Bond Fund (the "Fund"),
dated August 1, 1995, as it may be revised from time to time. To obtain a
copy of the Fund's Prospectus, please write to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or call toll free
1-800-645-6561; in New York City, call 1-718-895-1206; outside the U.S. and
Canada, call 516-794-5424.
The Dreyfus Corporation (the "Manager") serves as the Fund's
investment adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies. . . . . . . . . . . . B-2
Management of the Fund. . . . . . . . . . . . . . . . . . . . . . . B-10
Management Agreement. . . . . . . . . . . . . . . . . . . . . . . . B-14
Shareholder Services Plan . . . . . . . . . . . . . . . . . . . . . B-16
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . . . . . B-16
Redemption of Fund Shares . . . . . . . . . . . . . . . . . . . . . B-17
Shareholder Services. . . . . . . . . . . . . . . . . . . . . . . . B-19
Determination of Net Asset Value. . . . . . . . . . . . . . . . . . B-22
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . . B-22
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . . . B-23
Performance Information . . . . . . . . . . . . . . . . . . . . . . B-24
Information About the Fund. . . . . . . . . . . . . . . . . . . . . B-26
Custodian, Transfer and Dividend Disbursing Agent,
Counsel and Independent Auditors. . . . . . . . . . . . . . . . . B-26
Appendix A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-27
Appendix B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-31
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . B-40
Report of Independent Auditors. . . . . . . . . . . . . . . . . . . B-50
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Description
of the Fund."
The average distribution of investments (at value) in Municipal
Obligations (including notes) by ratings for the fiscal year ended March
31, 1995, computed on a monthly basis, was as follows:
<TABLE>
<CAPTION>
Fitch Investors Moody's Investors Standard & Poor's
Service, Inc. Service, Inc. Corporation Percent of
("Fitch") or ("Moody's") or ("S&P") Value
------------- ------------------ ----------------- ------------
<S> <C> <C> <C>
AAA Aaa AAA 48.4%
AA Aa AA 6.5%
A A A 22.4%
BBB Baa BBB 22.1%
F-1+/F-1 VMIG 1/MIG 1, SP-1+/SP-1, .6%
P-1 A-1 -----
100.0%
======
</TABLE>
Municipal Obligations. The term "Municipal Obligations" generally
includes debt obligations issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities
such as airports, bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer works. Other public
purposes for which Municipal Obligations may be issued include refunding
outstanding obligations, obtaining funds for general operating expenses and
lending such funds to other public institutions and facilities. In
addition, certain types of industrial development bonds are issued by or on
behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated
housing facilities, sports facilities, convention or trade show facilities,
airport, mass transit, industrial, port or parking facilities, air or water
pollution control facilities and certain local facilities for water supply,
gas, electricity, or sewage or solid waste disposal; the interest paid on
such obligations may be exempt from Federal income tax, although current
tax laws place substantial limitations on the size of such issues. Such
obligations are considered to be Municipal Obligations if the interest paid
thereon qualifies as exempt from Federal income tax in the opinion of bond
counsel to the issuer. There are, of course, variations in the security of
Municipal Obligations, both within a particular classification and between
classifications.
Floating and variable rate demand notes and bonds are tax exempt
obligations ordinarily having stated maturities in excess of one year, but
which permit the holder to demand payment of principal at any time, or at
specified intervals. The issuer of such obligations ordinarily has a
corresponding right, after a given period, to prepay in its discretion the
outstanding principal amount of the obligations plus accrued interest upon
a specified number of days' notice to the holders thereof. The interest
rate on a floating rate demand obligation is based on a known lending rate,
such as a bank's prime rate, and is adjusted automatically each time such
rate is adjusted. The interest rate on a variable rate demand obligation
is adjusted automatically at specified intervals.
The yields on Municipal Obligations are dependent on a variety of
factors, including general economic and monetary conditions, money market
factors, conditions in the Municipal Obligations market, size of a
particular offering, maturity of the obligation, and rating of the issue.
The imposition of the Fund's management fee, as well as other operating
expenses, will have the effect of reducing the yield to investors.
Municipal lease obligations or installment purchase contract
obligations (collectively, "lease obligations") have special risks not
ordinarily associated with Municipal Obligations. Although lease
obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation
ordinarily is backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation. However,
certain lease obligations contain "non-appropriation" clauses which provide
that the municipality has no obligation to make lease or installment
purchase payments in future years unless money is appropriated for such
purpose on a yearly basis. Although "non-appropriation" lease obligations
are secured by the leased property, disposition of the property in the
event of foreclosure might prove difficult. The staff of the Securities
and Exchange Commission currently considers certain lease obligations to be
illiquid. Determination as to the liquidity of such securities is made in
accordance with guidelines established by the Fund's Board. Pursuant to
such guidelines, the Board has directed the Manager to monitor carefully
the Fund's investment in such securities with particular regard to (1) the
frequency of trades and quotes for the lease obligation; (2) the number of
dealers willing to purchase or sell the lease obligation and the number of
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 cancelled; (b) what
assurance there is that the assets represented by the lease can be sold;
(c) the strength of the lessee's general credit (e.g., its debt,
administrative, economic, and financial characteristics); (d) the
likelihood that the municipality will discontinue appropriating funding for
the leased property because the property is no longer deemed essential to
the operations of the municipality (e.g., the potential for an "event of
nonappropriation; (e) the legal recourse in the event of failure to
appropriate; and (f) such other factors concerning credit quality as the
Manager may deem relevant. The Fund will not invest more than 15% of the
value of its net assets in lease obligations that are illiquid and in other
illiquid securities. See "Investment Restriction No. 11" below.
The Fund will purchase tender option bonds only when it is satisfied
that the custodial and tender option arrangements, including the fee
payment arrangements, will not adversely affect the tax exempt status of
the underlying Municipal Obligations and that payment of any tender fees
will not have the effect of creating taxable income for the Fund. Based on
the tender option bond agreement, the Fund expects to be able to value the
tender option bond at par; however, the value of the instrument will be
monitored to assure that it is valued at fair value.
Ratings of Municipal Obligations. Subsequent to its purchase by the
Fund, an issue of rated Municipal Obligations may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require the sale of such Municipal Obligations by the
Fund, but the Manager will consider such event in determining whether the
Fund should continue to hold the Municipal Obligations. To the extent that
the ratings given by Moody's, S&P or Fitch for Municipal Obligations may
change as a result of changes in such organizations or their rating
systems, the Fund will attempt to use comparable ratings as standards for
its investments in accordance with the investment policies contained in the
Fund's Prospectus and this Statement of Additional Information. The
ratings of Moody's, S&P and Fitch represent their opinions as to the
quality of the Municipal Obligations which they undertake to rate. It
should be emphasized, however, that ratings are relative and subjective and
are not absolute standards of quality. Although these ratings may be an
initial criterion for selection of portfolio investments, the Manager also
will evaluate these securities and the creditworthiness of the issuers of
such securities.
Illiquid Securities. If a substantial market of qualified
institutional buyers develops pursuant to Rule 144A under the Securities
Act of 1933, as amended, for certain restricted securities held by the
Fund, the Fund intends to treat such securities as liquid securities in
accordance with procedures approved by the Fund's Board of Trustees.
Because it is not possible to predict with assurance how the market for
restricted securities pursuant to Rule 144A will develop, the Fund's Board
of Trustees has directed the Manager to monitor carefully the Fund's
investments in such securities with particular regard to trading activity,
availability of reliable price information and other relevant information.
To the extent that, for a period of time, qualified institutional buyers
cease purchasing restricted securities pursuant to Rule 144A, the Fund's
investing in such securities may have the effect of increasing the level of
illiquidity in the Fund's portfolio during such period.
Short-Selling. The Fund may engage in short-selling. Until the Fund
replaces a borrowed security in connection with a short sale, the Fund
will: (a) maintain daily a segregated account, containing cash or U.S.
Government securities, at such a level that (i) the amount deposited in the
account plus the amount deposited with the broker as collateral will equal
the current value of the security sold short and (ii) the amount deposited
in the segregated account plus the amount deposited with the broker as
collateral will not be less than the market value of the security at the
time it was sold short; or (b) otherwise cover its short position.
Futures Contracts and Options on Futures Contracts. Upon exercise of
an option on a futures contract, the writer of the option delivers to the
holder of the option the futures position and accumulated balance in the
writer's futures margin account, which represents the amount by which the
market price of the futures contract exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of the option on the
futures contract. The potential loss related to the purchase of an option
on a futures contract is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed at the time
of sale, there are no daily cash payments to reflect changes in the value
of the underlying contract; however, the value of the option does change
daily and that change would be reflected in the net asset value of the
Fund.
Lending Portfolio Securities. To a limited extent, the Fund may lend
its portfolio securities to brokers, dealers and other financial
institutions, provided it receives cash collateral which at all times is
maintained in an amount equal to at least 100% of the current market value
of the securities loaned. By lending its portfolio securities, the Fund
can increase its income through the investment of the cash collateral. For
purposes of this policy, the Fund considers collateral consisting of U.S.
Government securities or irrevocable letters of credit issued by banks
whose securities meet the standards for investment by the Fund to be the
equivalent of cash. From time to time, the Fund may return to the borrower
or a third party which is unaffiliated with the Fund, and which is acting
as a "placing broker," a part of the interest earned from the investment of
collateral received for securities loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned:
(1) the Fund must receive at least 100% cash collateral from the borrower;
(2) the borrower must increase such collateral whenever the market value of
the securities rises above the level of such collateral; (3) the Fund must
be able to terminate the loan at any time; (4) the Fund must receive
reasonable interest on the loan, as well as any interest or other
distributions payable on the loaned securities, and any increase in market
value; and (5) the Fund may pay only reasonable custodian fees in
connection with the loan. These conditions may be subject to future
modification.
Taxable Investments. Securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities include U.S. Treasury
securities, which differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government
agencies and instrumentalities, for example, Government National Mortgage
Association pass-through certificates, are supported by the full faith and
credit of the U.S. Treasury; others, such as those of the Federal Home Loan
Banks, by the right of the issuer to borrow from the U.S. Treasury; others,
such as those issued by the Federal National Mortgage Association, by
discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others, such as those
issued by the Student Loan Marketing Association, only by the credit of the
agency or instrumentality. These securities bear fixed, floating or
variable rates of interest. Principal and interest may fluctuate based on
generally recognized reference rates or the relationship of rates. While
the U.S. Government provides financial support to such U.S. Government-
sponsored agencies or instrumentalities, no assurance can be given that it
will always do so, since it is not so obligated by law. The Fund will
invest in such securities only when it is satisfied that the credit risk
with respect to the issuer is minimal.
Commercial paper consists of short-term, unsecured promissory notes
issued to finance short-term credit needs.
Certificates of deposit are negotiable certificates representing the
obligation of a bank to repay funds deposited with it for a specified
period of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate.
Investments in time deposits generally are limited to London branches of
domestic banks that have total assets in excess of one billion dollars.
Time deposits which may be held by the Fund will not benefit from insurance
from the Bank Insurance Fund or the Savings Association Insurance Fund
administered by the Federal Deposit Insurance Corporation.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments
reflect the obligation both of the bank and of the drawer to pay the face
amount of the instrument upon maturity. Other short-term bank obligations
may include uninsured, direct obligations bearing fixed, floating or
variable interest rates.
Repurchase agreements involve the acquisition by the Fund of an
underlying debt instrument, subject to an obligation of the seller to
repurchase, and the Fund to resell, the instrument at a fixed price usually
not more than one week after its purchase. The Fund's custodian or
sub-custodian will have custody of, and will hold in a segregated account,
securities acquired by the Fund under a repurchase agreement. Repurchase
agreements are considered by the staff of the Securities and Exchange
Commission to be loans by the Fund. In an attempt to reduce the risk of
incurring a loss on a repurchase agreement, the Fund will enter into
repurchase agreements only with domestic banks with total assets in excess
of one billion dollars or primary government securities dealers reporting
to the Federal Reserve Bank of New York, with respect to securities of the
type in which the Fund may invest, and will require that additional
securities be deposited with it if the value of the securities purchased
should decrease below resale price. The Manager will monitor on an ongoing
basis the value of the collateral to assure that it always equals or
exceeds the repurchase price. Certain costs may be incurred by the Fund in
connection with the sale of the securities if the seller does not
repurchase them in accordance with the repurchase agreement. In addition,
if bankruptcy proceedings are commenced with respect to the seller of the
securities, realization on the securities by the Fund may be delayed or
limited. The Fund will consider on an ongoing basis the creditworthiness
of the institutions with which it enters into repurchase agreements.
Risk Factors
Investing in Massachusetts Municipal Obligations. Investors should
consider carefully the special risks inherent in the Fund's investment in
Massachusetts Municipal Obligations. Massachusetts, economic and fiscal
difficulties of recent years appear to have abated. While the
Commonwealth's expenditures for state programs and services in each of the
fiscal years 1987 through 1991 exceeded each year's current revenues,
Massachusetts ended each of the fiscal years 1991 through 1994 and expects
to end fiscal 1995 with a positive fiscal balance in its general operating
funds. Investors should obtain and review a copy of the Statement of
Additional Information which more fully sets forth these and other risk
factors.
Lower Rated Bonds. The Fund is permitted to invest in securities
rated below Baa by Moody's and below BBB by S&P and Fitch. Such bonds,
though higher yielding, are characterized by risk. See "Description of the
Fund--Risk Factors--Lower Rated Bonds" in the Prospectus for a discussion
of certain risks and "Appendix B" for a general description of Moody's, S&P
and Fitch ratings of Municipal Obligations. Although ratings may be useful
in evaluating the safety of interest and principal payments, they do not
evaluate the market value risk of these bonds. The Fund will rely on the
Manager's judgment, analysis and experience in evaluating the
creditworthiness of an issuer. In this evaluation, the Manager will take
into consideration, among other things, the issuer's financial resources,
its sensitivity to economic conditions and trends, the quality of the
issuer's management and regulatory matters. It also is possible that a
rating agency might not timely change the rating on a particular issue to
reflect subsequent events. As stated above, once the rating of a bond in
the Fund's portfolio has been changed, the Manager will consider all
circumstances deemed relevant in determining whether the Fund should
continue to hold the bond.
Investors should be aware that the market values of many of these
bonds tend to be more sensitive to economic conditions than are higher
rated securities. These bonds are considered by S&P, Moody's and Fitch, on
balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation
and generally will involve more credit risk than securities in the higher
rating categories.
Because there is no established retail secondary market for many of
these securities, the Fund anticipates that such securities could be sold
only to a limited number of dealers or institutional investors. To the
extent a secondary trading market for these bonds does exist, it generally
is not as liquid as the secondary market for higher rated securities. The
lack of a liquid secondary market may have an adverse impact on market
price and yield and the Fund's ability to dispose of particular issues when
necessary to meet the Fund's liquidity needs or in response to a specific
economic event such as a deterioration in the creditworthiness of the
issuer. The lack of a liquid secondary market for certain securities also
may make it more difficult for the Fund to obtain accurate market
quotations for purposes of valuing the Fund's portfolio and calculating its
net asset value. Adverse publicity and investor perceptions, whether or
not based on fundamental analysis, may decrease the values and liquidity of
these securities. In such cases, judgment may play a greater role in
valuation because less reliable objective data may be available.
These bonds may be particularly susceptible to economic downturns. It
is likely that any economic recession could disrupt severely the market for
such securities and may have an adverse impact on the value of such
securities. In addition, it is likely that any such economic downturn
could adversely affect the ability of the issuers of such securities to
repay principal and pay interest thereon and increase the incidence of
default for such securities.
The Fund may acquire these bonds during an initial offering. Such
securities may involve special risks because they are new issues. The Fund
has no arrangement with any persons concerning the acquisition of such
securities, and the Manager will review carefully the credit and other
characteristics pertinent to such new issues.
Lower rated zero coupon securities, in which the Fund may invest up to
5% of its net assets, involve special considerations. The credit risk
factors pertaining to lower rated securities also apply to lower rated zero
coupon bonds. Such zero coupon bonds carry an additional risk in that,
unlike bonds which pay interest throughout the period to maturity, the Fund
will realize no cash until the cash payment date unless a portion of such
securities are sold and, if the issuer defaults, the Fund may obtain no
return at all on its investment. See "Dividends, Distributions and Taxes."
Investment Restrictions
The Fund has adopted investment restrictions numbered 1 through 6
below as fundamental policies. These restrictions cannot be changed
without approval by the holders of a majority (as defined in the Investment
Company Act of 1940, as amended (the "Act")) of the Fund's outstanding
voting shares. Investment restrictions numbered 7 through 12 are not
fundamental policies and may be changed by vote of a majority of the
Trustees at any time. The Fund may not:
1. Borrow money, except to the extent permitted under the Act (which
currently limits borrowings 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.
2. Purchase or sell real estate, real estate investment trust
securities, commodities or commodity contracts, or oil and gas interests,
but this shall not prevent the Fund from investing in Municipal Obligations
secured by real estate or interests therein, or prevent the Fund from
purchasing and selling futures contracts, including those relating to
indices, and options on futures contracts or indices.
3. Underwrite the securities of other issuers, except that the Fund
may bid separately or as part of a group for the purchase of Municipal
Obligations directly from an issuer for its own portfolio to take advantage
of the lower purchase price available, and except to the extent the Fund
may be deemed an underwriter under the Securities Act of 1933, as amended,
by virtue of disposing of portfolio securities.
4. Make loans to others except through the purchase of debt
obligations and the entry into repurchase agreements; however, the Fund may
lend its portfolio securities in an amount not to exceed 33 1/3% of the value
of its total assets. Any loans of portfolio securities will be made
according to guidelines established by the Securities and Exchange
Commission and the Fund's Board of Trustees.
5. Invest more than 25% of its total assets in the securities of
issuers in any single industry; provided that there shall be no such
limitation on the purchase of Municipal Obligations and, for temporary
defensive purposes, obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
6. Issue any senior security (as such term is defined in Section
18(f) of the Act), except to the extent that the activities permitted in
Investment Restriction Nos. 1, 2, 8 and 10 may be deemed to give rise to a
senior security.
7. Purchase securities other than Municipal Obligations and Taxable
Investments and those arising out of transactions in futures and options or
as otherwise provided in the Fund's Prospectus.
8. Purchase securities on margin, but the Fund may make margin
deposits in connection with transactions in futures, including those
relating to indices, and options on futures or indices.
9. Invest in securities of other investment companies, except as they
may be acquired as part of a merger, consolidation or acquisition of
assets.
10. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except to the extent necessary to secure permitted borrowings and to the
extent related to the deposit of assets in escrow in connection with the
purchase of securities on a when-issued or delayed-delivery basis and
collateral arrangements with respect to futures contracts, including those
related to indexes and options on futures contracts or indexes, and
collateral arrangements with respect to initial or variation margin for
futures contracts, including those relating to indices, and options on
futures contracts or indices.
11. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid
(which securities could include participation interests (including
municipal lease/purchase agreements) that are not subject to the demand
feature described in the Fund's Prospectus, and floating and variable rate
demand obligations as to which the Fund cannot exercise the demand feature
described in the Fund's Prospectus on less than seven days' notice and as
to which there is no secondary market) if, in the aggregate, more than 15%
of its net assets would be so invested.
12. Invest in companies for the purpose of exercising control.
For purposes of Investment Restriction No. 5, industrial development
bonds, where the payment of principal and interest is the ultimate
responsibility of companies within the same industry, are grouped together
as an "industry." If a percentage restriction is adhered to at the time of
investment, a later increase or decrease in percentage resulting from a
change in values or assets will not constitute a violation of such
restriction.
The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Fund shares in certain states.
Should the Fund determine that a commitment is no longer in the best
interests of the Fund and its shareholders, the Fund reserves the right to
revoke the commitment by terminating the sale of Fund shares in the state
involved.
MANAGEMENT OF THE FUND
Trustees and officers of the Fund, together with information as to
their principal business occupations during at least the last five years,
are shown below. Each Trustee who is deemed to be an "interested person"
of the Fund, as defined in the Act, is indicated by an asterisk.
Trustees of the Fund
*DAVID W. BURKE, Trustee. Since August 1994, Consultant to the Manager.
From October 1990 to August 1994, Vice President and Chief
Administrative Officer of the Manager. From 1977 to October 1990, Mr.
Burke was involved in the management of national television news, as
Vice President and Executive Vice President at ABC News, and
subsequently as President of CBS News. He is 59 years old and his
address is 200 Park Avenue, New York, New York 10166.
*JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman
of the Board of various funds in the Dreyfus Family of Funds. For
more than five years prior thereto, he was President, a director and,
until August 1994, Chief Operating Officer of the Manager and
Executive Vice President and a director of Dreyfus Service
Corporation, a wholly-owned subsidiary of the Manager and, until
August 24, 1994, the Fund's distributor. From August 1994 to December
31, 1994, he was a director of Mellon Bank Corporation. He is
Chairman of the Board of Noel Group, Inc., a venture capital company;
a trustee of Bucknell University; and a director of the Muscular
Dystrophy Association, HealthPlan Services Corporation, Belding
Heminway, Inc., a manufacturer and marketer of industrial threads,
specialty yarns, home furnishings and fabrics, Curtis Industries,
Inc., a national distributor of security products, chemicals and
automotive and other hardware, Simmons Outdoor Corporation and
Staffing Resources, Inc. He is 51 years old and his address is 200
Park Avenue, New York, New York 10166.
DIANE DUNST, Trustee. Since January 1992, President of Diane Dunst
Promotion, Inc., a full service promotion agency. From January 1989
to January 1992, Director of Promotion Services, Lear's Magazine.
From 1985 to January 1989, she was Sales Promotion Manager of ELLE
Magazine. She is 55 years old and her address is 120 E. 87th Street,
New York, New York 10128.
ROSALIND GERSTEN JACOBS, Trustee. Director of Merchandise and Marketing
for Corporate Property Investors, a real estate investment company.
From 1974 to 1976, she was owner and manager of a merchandise and
marketing consulting firm. Prior to 1974, she was a Vice President of
Macy's, New York. She is 70 years old and her address is c/o
Corporate Property Investors, 305 East 47th Street, New York, New York
10017.
JAY I. MELTZER, Trustee. Physician engaged in private practice
specializing in internal medicine. He is also a member of the
Advisory Board of the Section of Society and Medicine, College of
Physicians and Surgeons, Columbia University and a Clinical Professor
of Medicine, Department of Medicine, Columbia University College of
Physicians and Surgeons. He is 66 years old and his address is 903
Park Avenue, New York, New York 10021.
DANIEL ROSE, Trustee. President and Chief Executive Officer of Rose
Associates, Inc., a New York based real estate development and
management firm. He is also Chairman of the Housing Committee of The
Real Estate Board of New York, Inc., and a Trustee of Corporate
Property Investors, a real estate investment company. He is 65 years
old and his address is c/o Rose Associates, Inc., 380 Madison Avenue,
New York, New York 10017.
WARREN B. RUDMAN, Trustee. Since January 1993, Partner in the law firm of
Paul, Weiss, Rifkind, Wharton & Garrison. From January 1981 to
January 1993, Mr. Rudman served as a United States Senator from the
State of New Hampshire. Since May 1995, Mr. Rudman has served as a
director for Collins & Aikman Corporation. Since January 1993, Mr.
Rudman has also served as a director of Chubb Corporation and Raytheon
Company. Since 1988, Mr. Rudman has also served as a trustee of
Boston College and since 1986 as a member of the Senior Advisory Board
of the Institute of Politics of the Kennedy School of Government at
Harvard University. He also serves as Vice Chairman of the
President's Foreign Intelligence Advisory Board. From January 1993 to
December 31, 1994, Mr. Rudman served as Vice Chairman of the Federal
Reserve Bank of Boston. He is 65 years old and his address is c/o
Paul, Weiss, Rifkind, Wharton & Garrison, 1615 L Street, N.W.,
Washington, D.C. 20036.
SANDER VANOCUR, Trustee. Since January 1992, President of Old Owl
Communications, a full-service communications firm. Since November
1989, Mr. Vanocur has served as a Director of the Damon Runyon-Walter
Winchell Cancer Research Fund. Since January 1994, Mr. Vanocur has
served as a Visiting Professional Scholar at the Freedom Forum First
Amendment Center at Vanderbilt University. From June 1986 to December
1991, he was a Senior Correspondent of ABC News and, from October 1986
to December 31, 1991, he was Anchor of the ABC News program "Business
World," a weekly business program on the ABC television network. He
is 67 years old and his address is 2928 P Street, N.W., Washington,
D.C. 20007.
For so long as the Fund's plan described in the section captioned
"Shareholder Services Plan" remains in effect, the Trustees of the Fund who
are not "interested persons" of the Fund, as defined in the Act, will be
selected and nominated by the Trustees who are not "interested persons" of
the Fund.
Ordinarily, meetings of shareholders for the purpose of electing
Trustees will not be held unless and until such time as less than a
majority of the Trustees holding office have been elected by shareholders,
at which time the Trustees then in office will call a shareholders' meeting
for the election of Trustees. Under the Act, shareholders of record of not
less than two-thirds of the outstanding shares of the Fund may remove a
Trustee through a declaration in writing or by vote cast in person or by
proxy at a meeting called for that purpose. The Trustees are required to
call a meeting of shareholders for the purpose of voting upon the question
of removal of any such Trustee when requested in writing to do so by the
shareholders of record of not less than 10% of the Fund's outstanding
shares.
<TABLE>
<CAPTION>
The Fund typically pays its Trustees an annual retainer and a per
meeting fee and reimburses them for their expenses. The aggregate amount
of fees and expenses paid to Board members by the Fund for the fiscal year
ended March 31, 1995, and all by other funds in the Dreyfus Family of Funds
for which such person is a Board member (the number of which is set forth
in parentheses next to each Board members total compensation) for the year
ended December 31, 1994, were as follows:
(5) Total
(3) Pension or Compensation From
(2) Aggregate Retirement Benefits (4) Estimated Annual Fund and Fund
(1)Name of Board Compensation from Accrued as Part of Benefits Upon Complex Paid to
Member Fund* Fund's Expenses Retirement Board Member
------------ ----------------- ------------------- ---------------- ----------------
<S> <C> <C> <C> <C>
David W. Burke $1,100 none none $ 27,898 (50)
Joseph S. DiMartino $2,500** none none $445,000***
(93)
Diane Dunst $2,000 none none $ 32,602 (9)
Rosalind Gersten Jacobs $1,410 none none $ 57,638 (20)
Jay I. Meltzer $2,000 none none $ 32,102 (9)
Daniel Rose $2,000 none none $ 62,006 (22)
Warren B. Rudman $2,000 none none $ 29,602 (17)
Sander Vanocur $2,000 none none $ 62,006 (22)
_____________________
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $143 for all Trustees as a group.
** Estimated amount for the current fiscal year ending March 31, 1996.
*** Estimated amount for the year ending December 31, 1995.
</TABLE>
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President and Chief Operating
Officer of the Distributor and an officer of other investment
companies advised or administered by the Manager. From December 1991
to July 1994, she was President and Chief Compliance Officer of Funds
Distributor, Inc., the ultimate parent company of which is Boston
Institutional Group, Inc. Prior to December 1991, she served as Vice
President and Controller, and later as Senior Vice President, of The
Boston Company Advisors, Inc. She is 37 years old.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President and
General Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From February 1992
to July 1994, he served as Counsel for The Boston Company Advisors,
Inc. From August 1990 to February 1992, he was employed as an
Associate at Ropes & Gray. He is 30 years old.
FREDERICK C. DEY, Vice President and Assistant Treasurer. Senior Vice
President of the Distributor and an officer of other investment
companies advised or administered by the Manager. From 1988 to
August 1994, he was manager of the High Performance Fabric Division
of Springs Industries Inc. He is 33 years old.
ERIC B. FISCHMAN, Vice President and Assistant Secretary. Associate
General Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From September 1992
to August 1994, he was an attorney with the Board of Governors of the
Federal Reserve System. He is 30 years old.
JOSEPH S. TOWER, III, Assistant Treasurer. Senior Vice President, Treasurer
and Chief Financial Officer of the Distributor and an officer of other
investment companies advised or administered by the Manager. From July
1988 to August 1994, he was employed by The Boston Company, Inc. where
he held various management positions in the Corporate Finance and
Treasury areas. He is 32 years old.
JOHN J. PYBURN, Assistant Treasurer. Assistant Treasurer of the
Distributor and an officer of other investment companies advised or
administered by the Manager. From 1984 to July 1994, he was Assistant
Vice President in the Mutual Fund Accounting Department of the Manager.
He is 59 years old.
RUTH D. LEIBERT, Assistant Secretary. Assistant Vice President of the
Distributor and an officer of other investment companies advised or
administered by the Manager. From March 1992 to July 1994, she was a
Compliance Officer for The Managers Funds, a registered investment
company.
From March 1990 until September 1991, she was Development Director of
The Rockland Center for the Arts. She is 50 years old.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
Board members and officers of the Fund, as a group, owned less than 1%
of the Fund's shares of beneficial interest outstanding on July 14, 1995.
MANAGEMENT AGREEMENT
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Management
of the Fund."
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") dated August 24, 1994 with the Fund, which is
subject to annual approval by (i) the Fund's Board of Trustees or (ii) vote
of a majority (as defined in the Act) of the outstanding voting securities
of the Fund, provided that in either event the continuance also is approved
by a majority of the Trustees who are not "interested persons" (as defined
in the Act) of the Fund or the Manager, by vote cast in person at a meeting
called for the purpose of voting on such approval. The Agreement was
approved by shareholders on August 3, 1994, and was last approved by the
Board of Trustees, including a majority of the Trustees who are not
"interested persons" (as defined in the Act) of the Fund or the Manager, at
a meeting held on May 3, 1995. The Agreement is terminable without
penalty, on 60 days' notice, by the Fund's Board of Trustees or by vote of
the holders of a majority of the Fund's shares, or, on not less than 90
days' notice, by the Manager. The Agreement will terminate automatically
in the event of its assignment (as defined in the Act).
The following persons are officers and/or directors of the Manager:
Howard Stein, Chairman of the Board and Chief Executive Officer; Robert E.
Riley, President, Chief Operating Officer and a director; W. Keith Smith,
Vice Chairman of the Board; Lawrence S. Kash, Vice Chairman--Distribution
and a director; Philip L. Toia, Vice Chairman--Operations and
Administration; Stephen E. Canter--Vice Chairman, Chief Investment Officer
and a director; Paul H. Synder, Vice President and Chief Financial Officer;
Daniel C. Maclean III, Vice President and General Counsel; Diane M. Coffey,
Vice President--Corporate Communications; Jeffrey N. Nachman, Vice
President--Fund Administration; Mark N. Jacobs, Vice President--Legal and
Secretary; Henry D. Gottmann, Vice President--Retail; Katherine C. Wickham,
Vice President--Human Resources; Elie M. Genadry, Vice President--
Wholesale; Barbara Casey, Vice President--Dreyfus Retirement Services;
William F. Glavin, Vice President--Corporate Development; Andrew S. Wasser,
Vice President--Information Services; Maurice Bendrihem, Controller; Elvira
Oslapas--Assistant Secretary; and Mandell L. Berman, Frank V. Cahouet,
Alvin E. Friedman, Lawrence M. Greene, Julian M. Smerling and David B.
Truman, 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 of Trustees. The Manager is responsible for investment decisions,
and provides the Fund with portfolio managers who are authorized by the
Board of Trustees to execute purchases and sales of securities. The Fund's
portfolio managers are Richard J. Moynihan, Joseph A. Darcy, A. Paul
Disdier, Karen M. Hand, Stephen C. Kris, Jill C. Shaffro, L. Lawrence
Troutman, Samuel J. Weinstock, and Monica S. Wieboldt. The Manager also
maintains a research department with a professional staff of portfolio
managers and securities analysts who provide research services for the Fund
as well as for other funds advised by the Manager. All purchases and sales
are reported for the Trustees' review at the meeting subsequent to such
transactions.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager. The
expenses borne by the Fund include: organizational costs, taxes, interest,
loan commitment fees, interest and distributions paid on securities sold
short, brokerage fees and commissions, if any, fees of Trustees who are not
officers, directors, employees or holders of 5% or more of the outstanding
voting securities of the Manager, Securities and Exchange Commission fees,
state Blue Sky qualification fees, advisory fees, charges of custodians,
transfer and dividend disbursing agents' fees, certain insurance premiums,
industry association fees, outside auditing and legal expenses, costs of
maintaining the Fund's existence, costs of independent pricing services,
costs attributable to investor services (including, without limitation,
telephone and personnel expenses), costs of shareholders' reports and
meetings, costs of preparing and printing prospectuses and statements of
additional information for regulatory purposes and for distribution to
existing shareholders, and any extraordinary expenses.
The Manager maintains office facilities on behalf of the Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager also may make such advertising and
promotional expenditures, using its own resources, as it from time to time
deems appropriate.
As compensation for the Manager's services, the Fund has agreed to pay
the Manager a monthly management fee at the annual rate of .60 of 1% of the
value of the Fund's average daily net assets. All fees and expenses are
accrued daily and deducted before the declaration of dividends to
shareholders. For the period May 28, 1992 (commencement of operations)
through March 31, 1993 and for the fiscal year ended March 31, 1994, no
management fee was paid by the Fund pursuant to undertakings by the
Manager. For the fiscal year ended March 31, 1995, the management fee
payable amounted to $467,124, which amount was reduced by $328,284 pursuant
to undertakings by the Manager then in effect, resulting in a net fee paid
to the Manager of $138,840 in fiscal 1995.
The Manager has agreed that if in any fiscal year the aggregate
expenses of the Fund, exclusive of taxes, brokerage, interest on borrowings
and (with the prior written consent of the necessary state securities
commissions) extraordinary expenses, but including the management fee,
exceed the expense limitation of any state having jurisdiction over the
Fund, the Fund may deduct from the payment to be made to the Manager under
the Agreement, or the Manager will bear, such excess expense to the extent
required by state law. Such deduction or payment, if any, will be
estimated daily, and reconciled and effected or paid, as the case may be,
on a monthly basis.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of the Fund's net assets increases.
SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Shareholder
Services Plan."
The Fund has adopted a Shareholder Services Plan (the "Plan") pursuant
to which the Fund reimburses Dreyfus Service Corporation for certain
allocated expenses of providing personal services and/or maintaining
shareholder accounts. The services provided may include personal services
relating to shareholder accounts, such as answering shareholder inquiries
regarding the Fund and providing reports and other information, and
services related to the maintenance of shareholder accounts.
A quarterly report of the amounts expended under the Plan, and the
purposes for which such expenditures were incurred, must be made to the
Board members for their review. In addition, the Plan provides that
material amendments of the Plan must be approved by the Board members and
by the Trustees who are not "interested persons" (as defined in the Act) of
the Fund and have no direct or indirect financial interest in the operation
of the Plan by vote cast in person at a meeting called for the purpose of
considering such amendments. The Plan is subject to annual approval by
such vote of the Board members cast in person at a meeting called for the
purpose of voting on the Plan. The Plan is terminable at any time by vote
of a majority of the Board members who are not "interested persons" and
have no direct or indirect financial interest in the operation of the Plan.
For the fiscal year ended March 31, 1995, $66,304 was chargeable to
the Fund under the Plan.
PURCHASE OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Fund Shares."
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement which is renewable annually. The Distributor also
acts as distributor for the other funds in the Dreyfus Family of Funds and
for certain other investment companies.
Services Charges. There is no sales or service charge by the Fund or
the Distributor, although investment dealers, banks and other institutions
may make reasonable charges to investors for their services. The services
provided and the applicable fees are established by each dealer or other
institution acting independently of the Fund. The Fund has been given to
understand that these fees may be charged for customer services including,
but not limited to, same-day investment of client funds; same-day access to
client funds; advice to customers about the status of their accounts, yield
currently being paid or income earned to date; provision of periodic
account statements showing security and money market positions; other
services available from the dealer, bank or other institution; and
assistance with inquiries related to their investment. Any such fees will
be deducted monthly from the investor's account, which on smaller accounts
could constitute a substantial portion of distributions. Small, inactive,
long-term accounts involving monthly service charges may not be in the best
interest of investors. Investors should be aware that they may purchase
shares of the Fund directly from the Fund without imposition of any
maintenance or service charges, other than those already described herein.
In some states, banks or other financial institutions effecting
transactions in Fund shares may be required to register as dealers pursuant
to state law.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made between the hours of 8:00 a.m. and 4:00 p.m., New York time, on
any business day that The Shareholder Services Group, Inc., the Fund's
transfer and dividend disbursing agent (the "Transfer Agent"), and the New
York Stock Exchange are open. Such purchases will be credited to the
shareholder's Fund account on the next bank business day. To qualify to
use the Dreyfus TeleTransfer Privilege, the initial payment for purchase of
Fund shares must be drawn on, and redemption proceeds paid to, the same
bank and account as are designated in the Account Application or
Shareholder Services Form on file. If the proceeds of a particular
redemption are to be wired to an account at any other bank, the request
must be in writing and signature-guaranteed. See "Redemption of Fund
Shares--Dreyfus TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account with a
minimum investment of $100 without filing a new Account Application during
the calendar year the account is closed or during the following calendar
year, provided the information on the old Account Application is still
applicable.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to
Redeem Fund Shares."
Check Redemption Privilege. An investor may indicate on the Account
Application or by later written request that the Fund provide Redemption
Checks ("Checks") drawn on the Fund's account. Checks will be sent only to
the registered owner(s) of the account and only to the address of record.
The Account Application or later written request must be manually signed by
the registered owner(s). Checks may be made payable to the order of any
person in an amount of $500 or more. When a Check is presented to the
Transfer Agent for payment, the Transfer Agent, as the investor's agent,
will cause the Fund to redeem a sufficient number of shares in the
investor's account to cover the amount of the Check. Dividends are earned
until the Check clears. After clearance, a copy of the Check will be
returned to the investor. Investors generally will be subject to the same
rules and regulations that apply to checking accounts, although election of
this Privilege creates only a shareholder-transfer agent relationship with
the Transfer Agent.
If the amount of the Check is greater than the value of the shares in
an investor's account, the Check will be returned marked insufficient
funds. Checks should not be used to close an account.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor, and reasonably believed by the Transfer Agent to be genuine.
Ordinarily, the Fund will initiate payment for shares redeemed pursuant to
this Privilege on the next business day after receipt if the Transfer Agent
receives the redemption request in proper form. Redemption proceeds will
be transferred by Federal Reserve wire only to the commercial bank account
specified by the investor on the Account Application or Shareholder
Services Form. Redemption proceeds, if wired, must be in the amount of
$1,000 or more and will be wired to the investor's account at the bank of
record designated in the investor's file at the Transfer Agent, if the
investor's bank is a member of the Federal Reserve System, or to a
correspondent bank if the investor's bank is not a member. Fees ordinarily
are imposed by such bank and usually are borne by the investor. Immediate
notification by the correspondent bank to the investor's bank is necessary
to avoid a delay in crediting the funds to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at 1-800-654-
7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive wire
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Share Certificates; Signatures."
Dreyfus TeleTransfer Privilege. Investors should be aware that if
they have selected the Dreyfus TeleTransfer Privilege, any request for a
wire redemption will be effected as a Dreyfus TeleTransfer transaction
through the Automated Clearing House ("ACH") system unless more prompt
transmittal specifically is requested. Redemption proceeds will be on
deposit in the investor's account at an ACH member bank ordinarily two
business days after receipt of the redemption request. See "Purchase of
Fund Shares--Dreyfus TeleTransfer Privilege."
Share Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the New York
Stock Exchange Medallion Signature Program, the Securities 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 the telephone number 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 Board of Trustees reserves the right to make payments in whole
or in part in securities or other assets in case of an emergency or any
time a cash distribution would impair the liquidity of the Fund to the
detriment of the existing shareholders. In such event, the securities
would be valued in the same manner as the Fund's portfolio is valued. If
the recipient sold such securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be suspended
or the date of payment postponed (a) during any period when the New York
Stock Exchange is closed (other than customary weekend and holiday
closings), (b) when trading in the markets the Fund ordinarily utilizes is
restricted, or when an emergency exists as determined by the Securities and
Exchange Commission so that disposal of the Fund's investments or deter-
mination of its net asset value is not reasonably practicable, or (c) for
such other periods as the Securities and Exchange Commission by order may
permit to protect the Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Shareholder
Services."
Fund Exchanges. Shares of other funds purchased by exchange will be
purchased on the basis of relative net asset value per share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load,
and the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without
a sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a
sales load and additional shares acquired through
reinvestment of dividends or distributions of any such
funds (collectively referred to herein as "Purchased
Shares") may be exchanged for shares of other funds sold
with a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered
Shares exceeds the maximum sales load that could have been
imposed in connection with the Purchased Shares (at the time
the Purchased Shares were acquired), without giving effect
to any reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their
account number.
To request an exchange, an investor must give exchange instructions to
the Transfer Agent in writing or by telephone. The ability to issue
exchange instructions by telephone is given to all Fund shareholders
automatically, unless the investor checks the applicable box on the Account
Application, indicating that the investor specifically refuses this
Privilege. By using the Telephone Exchange Privilege, the investor
authorizes the Transfer Agent to act on telephonic instructions from any
person representing himself or herself to be the investor and reasonably
believed by the Transfer Agent to be genuine. Telephone exchanges may be
subject to limitations as to the amount involved or the number of telephone
exchanges permitted. Shares issued in certificate form are not eligible
for telephone exchange.
To establish a Personal Retirement Plan by exchange, shares of the
fund being exchanged must have a value of at least the minimum initial
investment required for the fund into which the exchange is being made.
For Dreyfus-sponsored Keogh Plans, IRAs and IRAs set up under a Simplified
Employment Pension Plan ("SEP-IRAs") with only one participant, the minimum
initial investment is $750. To exchange shares held in Corporate Plans,
403(b)(7) Plans and SEP-IRAs with more than one participant, the minimum
initial investment is $100 if the plan has at least $2,500 invested among
the funds in the Dreyfus Family of Funds. To exchange shares held in
Personal Retirement Plans, the shares exchanged must have a current value
of at least $100.
Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of the Fund, shares
of another fund in the Dreyfus Family of Funds. This Privilege is
available only for existing accounts. Shares will be exchanged on the
basis of relative net asset value as described above under "Fund
Exchanges." Enrollment in or modification or cancellation of this
Privilege is effective three business days following notification by the
investor. An investor will be notified if his account falls below the
amount designated to be exchanged under this Privilege. In this case, an
investor's account will fall to zero unless additional investments are made
in excess of the designated amount prior to the next Auto-Exchange
transaction. Shares held under IRA and other retirement plans are eligible
for this Privilege. Exchanges of IRA shares may be made between IRA
accounts and from regular accounts to IRA accounts, but not from IRA
accounts to regular accounts. With respect to all other retirement
accounts, exchanges may be made only among those accounts.
Fund Exchanges and Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between
accounts having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchanges service or
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends
and distributions, the investor's shares will be reduced and eventually may
be depleted. There is a service charge of $.50 for each withdrawal check.
Automatic Withdrawal may be terminated at any time by the investor, the
Fund or the Transfer Agent. Shares for which certificates have been issued
may not be redeemed through the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest on the payment date their dividends or dividends and capital gains
distributions, if any, from the Fund in shares of another fund in the
Dreyfus Family of Funds of which the investor is a shareholder. Shares of
other funds purchased pursuant to this privilege will be purchased on the
basis of relative net asset value per share as follows:
A. Dividends and distributions paid by a fund may be invested
without imposition of a sales load in shares of other
funds that are offered without a sales load.
B. Dividends and distributions paid by a fund which does not
charge a sales load may be invested in shares of other
funds sold with a sales load, and the applicable sales
load will be deducted.
C. Dividends and distributions paid by a fund which charges a
sales load may be invested in shares of other funds sold
with a sales load (referred to herein as "Offered
Shares"), provided that, if the sales load applicable to
the Offered Shares exceeds the maximum sales load charged
by the fund from which dividends or distributions are
being swept, without giving effect to any reduced
loads, the difference will be deducted.
D. Dividends and distributions paid by a fund may be invested
in shares of other funds that impose a contingent deferred
sales charge ("CDSC") and the applicable CDSC, if any,
will be imposed upon redemption of such shares.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Fund Shares."
Valuation of Portfolio Securities. The Fund's investments are valued
by an independent pricing service (the "Service") approved by the Board of
Trustees. When, in the judgment of the Service, quoted bid prices for
investments are readily available and are representative of the bid side of
the market, these investments are valued at the mean between the quoted bid
prices (as obtained by the Service from dealers in such securities) and
asked prices (as calculated by the Service based upon its evaluation of the
market for such securities). Other investments (which constitute a
majority of the portfolio securities) are carried at fair value as
determined by the Service, based on methods which include consideration of:
yields or prices of municipal bonds of comparable quality, coupon, maturity
and type; indications as to values from dealers; and general market
conditions. The Service may employ electronic data processing techniques
and/or a matrix system to determine valuations. The Service's procedures
are reviewed by the Fund's officers under the general supervision of the
Board of Trustees. Expenses and fees, including the management fee
(reduced by the expense limitation, if any), are accrued daily and are
taken into account for the purpose of determining the net asset value of
Fund shares.
New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
PORTFOLIO TRANSACTIONS
Portfolio securities ordinarily are purchased from and sold to parties
acting as either principal or agent. Newly-issued securities ordinarily
are purchased directly from the issuer or from an underwriter; other
purchases and sales usually are placed with those dealers from which it
appears that the best price or execution will be obtained. Usually no
brokerage commissions, as such, are paid by the Fund for such purchases and
sales, although the price paid usually includes an undisclosed compensation
to the dealer acting as agent. The prices paid to underwriters of newly-
issued securities usually include a concession paid by the issuer to the
underwriter, and purchases of after-market securities from dealers
ordinarily are executed at a price between the bid and asked price. No
brokerage commissions have been paid by the Fund to date.
Transactions are allocated to various dealers by the Fund's portfolio
managers in their best judgment. The primary consideration is prompt and
effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected for research, statistical or
other services to enable the Manager to supplement its own research and
analysis with the views and information of other securities firms.
Research services furnished by brokers through which the Fund effects
securities transactions may be used by the Manager in advising other funds
it advises and, conversely, research services furnished to the Manager by
brokers in connection with other funds the Manager advises may be used by
the Manager in advising the Fund. Although it is not possible to place a
dollar value on these services, it is the opinion of the Manager that the
receipt and study of such services should not reduce the overall expenses
of its research department.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Dividends,
Distributions and Taxes."
The Internal Revenue Code of 1986, as amended (the "Code"), provides
that if a shareholder has not held his Fund shares for more than six months
(or such shorter period as the Internal Revenue Service may prescribe by
regulation) and has received an exempt-interest dividend with respect to
such shares, any loss incurred on the sale of such shares shall be
disallowed to the extent of the exempt-interest dividend received. In
addition, any dividend or distribution paid shortly after an investor's
purchase may have the effect of reducing the net asset value of his shares
below the cost of his investment. Such a distribution should be a return
on the investment in an economic sense although taxable as stated in
"Dividends, Distributions and Taxes" in the Prospectus.
Under Section 1256 of the Code, gain or loss realized by the Fund from
certain financial futures and options transactions will be treated as 60%
long-term capital gain or loss and 40% short-term capital gain or loss.
Gain or loss will arise upon exercise or lapse of such futures and options
as well as from closing transactions. In addition, any such futures or
options remaining unexercised at the end of the Fund's taxable year will be
treated as sold for their then fair market value, resulting in additional
gain or loss to the Fund characterized in the manner described above.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain or loss. However, all or a portion of any gains
realized from the sale or other disposition of certain market discount
bonds will be treated as ordinary income under Section 1276 of the Code.
In addition, all or a portion of the gain realized from engaging in
"conversion transactions" may be treated as ordinary income under Section
1258. "Conversion transactions" are defined to include certain forward,
futures, option and "straddle" transactions, transactions marketed or sold
to produce capital gains, or transactions described in Treasury regulations
to be issued in the future.
Offsetting positions held by the Fund involving certain financial
futures contracts or options transactions may be considered, for tax
purposes, to constitute "straddles." "Straddles" are defined to include
"offsetting positions" in actively traded personal property. The tax
treatment of "straddles" is governed by Sections 1092 and 1258 of the Code,
which, in certain circumstances, override or modify the provisions of
Section 1256. As such, all or a portion of any short- or long-term capital
gain from certain "straddle" and/or conversion transactions may be
recharacterized to ordinary income.
If the Fund were treated as entering into "straddles" by reason of its
engaging in financial futures contracts or options transactions, such
"straddles" would be characterized as "mixed straddles" if the futures or
options comprising a part of such "straddles" were governed by Section 1256
of the Code. The Fund may make one or more elections with respect to
"mixed straddles." If no election is made, to the extent the straddle
rules apply to positions established by the Fund, losses realized by the
Fund will be deferred to the extent of unrealized gain in any offsetting
positions. Moreover, as a result of the straddle and conversion
transaction rules, short-term capital loss on straddle positions may be
recharacterized as long-term capital loss, and long-term capital gain may
be recharacterized as short-term capital gain or ordinary income.
Investment by the Fund in securities issued at a discount or providing
for deferred interest or for payment of interest in the form of additional
obligations could, under special tax rules, affect the amount, timing and
character of distributions to shareholders. For example, the Fund could be
required to take into account annually a portion of the discount (or deemed
discount) at which such securities were issued and to distribute such
portion in order to maintain its qualification as a regulated investment
company. In such case, the Fund may have to dispose of securities which it
might otherwise have continued to hold in order to generate cash to satisfy
these distribution requirements.
PERFORMANCE INFORMATION
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Performance
Information."
For the 30-day period ended March 31, 1995, the Fund's yield was
4.66%. The Fund's yield reflects the waiver of a portion of the management
fee then in effect, without which the Fund's yield for the 30-day period
ended March 31, 1995 would have been 4.31%. Current yield is computed
pursuant to a formula which operates as follows: The amount of the Fund's
expenses accrued for the 30-day period (net of reimbursements) is
subtracted from the amount of the dividends and interest earned (computed
in accordance with regulatory requirements) by the Fund during the period.
That result is then divided by the product of: (a) the average daily
number of shares outstanding during the period that were entitled to
receive dividends, and (b) the net asset value per share on the last day of
the period less any undistributed earned income per share reasonably
expected to be declared as a dividend shortly thereafter. The quotient is
then added to 1, and that sum is raised to the 6th power, after which 1 is
subtracted. The current yield is then arrived at by multiplying the result
by 2.
Based upon a combined 1995 Federal and Massachusetts income tax rate
of 46.85%, the Fund's tax equivalent yield for the 30-day period ended
March 31, 1995 was 8.77%. Absent the fee waiver then in effect, the Fund's
tax equivalent yield for such period would have been 8.11%. Tax equivalent
yield is computed by dividing that portion of the current yield (calculated
as described above) which is tax exempt by 1 minus a stated tax rate and
adding the quotient to that portion, if any, of the yield of the Fund that
is not tax exempt.
The tax equivalent yield quoted above represents the application of
the highest Federal and State of Massachusetts marginal personal income
tax rates presently in effect. For Federal personal income tax purposes, a
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.
For the one year period ended March 31, 1995 and for the period May
28, 1992 (commencement of operations) through March 31, 1995, the Fund's
average annual total return was 4.23% and 5.86%, 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.
For the period May 28, 1992 (commencement of operations) through March
31, 1995, the Fund's aggregate total return was 17.06%. Total return is
calculated by subtracting the amount of the Fund's net asset value per
share at the beginning of a stated period from the net asset value per
share at the end of the period (after giving effect to the reinvestment of
dividends and distributions during the periods), and dividing the result by
the net asset value per share at the beginning of the period.
From time to time, the Fund may use hypothetical tax equivalent yields
or charts in its advertising. These hypothetical yields or charts will be
used for illustrative purposes only and are not indicative of the Fund's
past or future performance.
From time to time, advertising materials for the Fund may refer to or
discuss then-current or past economic conditions, developments and/or
events, and actual or proposed tax legislation. From time to time,
advertising materials for the Fund may also refer to statistical or other
information concerning trends relating to investment companies, as compiled
by industry associations such as the Investment Company Institute. From
time to time, the Fund may advertise that it is (or was) the first no-load
Massachusetts intermediate-term tax-free mutual fund available to investors
and, for so long as such statement remains true, that it is the only no-
load Massachusetts intermediate-term tax-free fund available to investors.
From time to time, advertising materials for the Fund also may refer to
Morningstar ratings and related analyses supporting such ratings.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "General
Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-
assessable. Fund shares are of one class and have equal rights as to
dividends and in liquidation. Shares have no preemptive, subscription or
conversion rights and are freely transferable.
The Fund will send annual and semi-annual financial statements to all
its shareholders.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS
The Bank of New York, 90 Washington Street, New York, New York 10286,
is the Fund's custodian. The Shareholder Services Group, Inc., a
subsidiary of First Data Corporation, P.O. Box 9671, Providence, Rhode
Island 02940-9671, is the Fund's transfer and dividend disbursing agent.
Neither The Bank of New York nor The Shareholder Services Group, Inc. has
any part in determining the investment policies of the Fund or which
securities are to be purchased or sold by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York 10004-
2696, as counsel for the Fund, has rendered its opinion as to certain legal
matters regarding the due authorization and valid issuance of the shares of
beneficial interest being sold pursuant to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as 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.
At the present time, the Commonwealth of Massachusetts' economy is
experiencing a modest recovery following a slowdown that began in mid-1988.
Massachusetts has nonetheless undergone serious financial difficulties in
recent years that have adversely affected Massachusetts' credit standing.
Between 1988 and 1992, total employment in Massachusetts declined 10.7%.
In 1993 and 1994, however, total employment increased by 1.6% and 2.2%,
respectively. Employment levels increased in all sectors except
manufacturing. Between 1990 and 1992, the Commonwealth's unemployment rate
was considerably higher than the national average, although unemployment
rates in Massachusetts since 1993 have declined faster than the national
average. As a result, the average monthly unemployment rate in
Massachusetts for 1993 was only slightly higher than the national average
(6.9% compared to 6.8%) and the unemployment rate in Massachusetts in 1994
was slightly below the national average (6.0% compared to 6.1%).
Massachusetts' economic and fiscal difficulties of recent years appear
to have abated. While the Commonwealth's expenditures for state programs
and services in each of the fiscal years 1987 through 1991 exceeded each
year's current revenues, Massachusetts ended each of the fiscal years 1991
through 1994 and expects to end fiscal 1995 with a positive closing fund
balance in it budgeted operating funds.
Massachusetts expenditures for state government programs and services
in each of the fiscal years 1987 through 1991, inclusive, exceeded each
such fiscal year's current revenues. In fiscal years 1987 and 1988,
largely by drawing on fund balances from prior years, Massachusetts ended
each fiscal year with budgetary surpluses. However, fiscal years 1989 and
1990 ended with operating deficits of $672.5 million and $1.25 billion,
respectively.
In fiscal 1991, total revenues and other sources of the budgeted
operating funds increased by 13.8% over the prior year, to $13.913 billion.
This increase was due chiefly to state tax rate increases enacted in July
1990 and to a substantial Federal reimbursement under the Medicaid program
for uncompensated patient care payments, as well as other factors.
The Commonwealth ended fiscal 1991 with an operating loss of $21.2 million,
but with positive closing fund balances of $237.1 million.
Budgeted revenues and other sources for fiscal 1992 were $13.728
billion, including tax revenues of $9.484 billion. Budgeted revenues and
other sources increased by approximately 0.7% from fiscal 1991 to fiscal
1992, while tax revenues increased by 5.4% for the same period.
Commonwealth expenditures and other uses were approximately $13.420
billion in fiscal 1992, which is $238.7 million, or 1.7% lower than fiscal
1991 budgeted expenditures and other uses. Final fiscal 1992 budgeted
expenditures were approximately $300 million higher than the initial July
1991 estimates of budgetary expenditures. A large portion of the increase
in spending is the result of increases in certain human services programs,
including an increase of $268.7 million for the Medicaid program and $50.0
million for mental retardation consent decree requirements. Fiscal 1992
expenditures for Medicaid were $2.818 billion, or 1.9% higher than fiscal
1991. The increase compares favorably with the 19.25% average annual
growth rate of Medicaid expenditures for fiscal years 1988 through 1991.
Overall, the budgeted operating funds ended fiscal 1992 with an excess of
revenues and other sources over expenditures and other uses of $312.3
million.
The budgeted operating funds of the Commonwealth ended fiscal 1993
with a surplus of revenues and other sources over expenditures and other
uses of $13.1 million. Budgeted revenues and other sources for fiscal 1993
totaled approximately $14.710 billion, including tax revenues of $9.40
billion. Total revenues and other sources increased by approximately 6.9%
from fiscal 1992 to fiscal 1993, while tax revenues increased by 4.7% for
the same period.
The budgeted operating funds of the Commonwealth ended fiscal 1994
with a surplus of revenues and other sources over expenditures and other
uses of $26.8 million and aggregate ending fund balance of approximately
$589.3 million. Budgeted revenues and other sources for fiscal 1994
totaled approximately $15.55 billion, including tax revenues of $10.607
billion. Budgeted expenditures and other uses in fiscal 1994 totaled
$15.52 billion, approximately 5.6% higher than budgeted expenditures and
other uses in fiscal 1993.
In recent years, health care related costs have risen dramatically in
Massachusetts and across the nation and the increase in the State's
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. During fiscal years 1989, 1990,
1991 and 1992, Medicaid expenditures were $1.83 billion, $2.12 billion,
$2.77 billion and $2.82 billion, respectively, representing an average
annual increase of 15.4%. Expenditures for fiscal 1993 were $3.15 billion,
an 11.8% increase over fiscal 1992. Medicaid expenses in fiscal 1994 were
$3.31 billion.
During the 1980s, 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 1994,
approximately 17.59% of Massachusetts' budget was allocated to Local Aid.
Direct Local Aid has dropped from a high of $2.961 billion in 1989 to
$2.727 billion to fiscal 1994.
Massachusetts' pension costs have risen dramatically as the
Commonwealth has appropriated funds to address in part the unfunded
liabilities that had accumulated over several decades. Total pension costs
increased at an average annual rate of 7.1% from $659.7 million in fiscal
1989 to $868.2 million in 1993. The estimated pension costs (inclusive of
current benefits and pension reserves) for fiscal 1994 are $951.0 million,
an increase of 9.5% over fiscal 1993 expenditures.
Payments for debt service on Massachusetts general obligation bonds
and notes have risen at an average annual rate of 20.4%, from $649.8
million in fiscal 1989 to $942.3 million in fiscal 1991. Debt service
payments in fiscal 1992 were $898.3 million, representing a 4.7% decrease
from fiscal 1991. Debt service expenditures for fiscal 1993 were $1.140
billion and are projected to be $1.179 billion for fiscal 1994 and $1.295
billion for fiscal 1995. In January 1990, legislation was enacted which
imposes a 10% limit on the total appropriations in any fiscal year that may
be expended for payment of interest and principal on general obligations
debt (excluding Fiscal Recovery Bonds) of Massachusetts.
Certain independent authorities and agencies within the State are
statutorily authorized to issue debt for which Massachusetts is either
directly, in whole or in part, or indirectly liable. The State's
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. The State is indirectly liable for the debt of
certain authorities through 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 town 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 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 a majority vote, or
higher, for 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.
Many factors affect the financial condition of the Commonwealth of
Massachusetts 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 in 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
effect, if any, such factors would have on Massachusetts Municipal
Obligations cannot be predicted.
APPENDIX B
Description of Standard & Poor's Corporation ("S&P"), Moody's
Investors Service, Inc. ("Moody's") and Fitch Investors Service, Inc.
("Fitch") ratings:
S&P
Municipal Bond Ratings
An S&P municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation.
The ratings are based on current information furnished by the issuer
or obtained by S&P from other sources it considers reliable, and will
include: (1) likelihood of default-capacity and willingness of the obligor
as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation; (2) nature and provisions of
the obligation; and (3) protection afforded by, and relative position of,
the obligation in the event of bankruptcy, reorganization or other
arrangement under the laws of bankruptcy and other laws affecting
creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A
Principal and interest payments on bonds in this category are regarded
as safe. This rating describes the third strongest capacity for payment of
debt service. It differs from the two higher ratings because:
General Obligation Bonds -- There is some weakness in the local
economic base, in debt burden, in the balance between revenues and
expenditures, or in quality of management. Under certain adverse
circumstances, any one such weakness might impair the ability of the issuer
to meet debt obligations at some future date.
Revenue Bonds -- Debt service coverage is good, but not exceptional.
Stability of the pledged revenues could show some variations because of
increased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent. Management performance
appears adequate.
BBB
Of the investment grade, this is the lowest.
General Obligation Bonds -- Under certain adverse conditions, several
of the above factors could contribute to a lesser capacity for payment of
debt service. The difference between "A" and "BBB" rating is that the
latter shows more than one fundamental weakness, or one very substantial
fundamental weakness, whereas the former shows only one deficiency among
the factors considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the
pledged revenues could show substantial variations, with the revenue flow
possibly being subject to erosion over time. Basic security provisions are
no more than adequate. Management performance could be stronger.
BB, B, CCC, CC, C
Debt rated BB, B, CCC, CC and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and
repay principal. BB indicates the least degree of speculation and C the
highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
BB
Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payment.
B
Debt rated B has a greater vulnerability to default but presently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC
Debt rated CCC has a current identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic conditions
to meet timely payments of principal. In the event of adverse business,
financial or economic conditions, it is not likely to have the capacity to
pay interest and repay principal.
CC
The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.
C
The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating.
D
Bonds rated D are in default, and payment of interest and/or repayment
of principal is in arrears.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by
the addition of a plus or minus sign to show relative standing within the
major ratings categories.
Municipal Note Ratings
SP-1
The issuers of these municipal notes exhibit very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics are given a plus sign (+) designation.
SP-2
The issuers of these municipal notes exhibit satisfactory capacity to
pay principal and interest.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A
Issues assigned this rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with
the numbers 1, 2 and 3 to indicate the relative degree of safety.
A-1
This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus sign
(+) designation.
A-2
Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues
designated A-1.
Moody's
Municipal Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A
Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment some time in
the future.
Baa
Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca
Bonds which are rated Ca present obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and
in categories below B. The modifier 1 indicates a ranking for the security
in the higher end of a rating category; the modifier 2 indicates a mid-
range ranking; and the modifier 3 indicates a ranking in the lower end of a
rating category.
Municipal Note Ratings
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade (MIG). Such ratings
recognize the differences between short-term credit risk and long-term
risk. Factors affecting the liquidity of the borrower and short-term
cyclical elements are critical in short-term ratings, while other factors
of major importance in bond risk, long-term secular trends for example, may
be less important over the short run.
A short-term rating may also be assigned on an issue having a demand
feature. Such ratings will be designated as VMIG or, if the demand feature
is not rated, as NR. Short-term ratings on issues with demand features are
differentiated by the use of the VMIG symbol to reflect such
characteristics as payment upon periodic demand rather than fixed maturity
dates and payment relying on external liquidity. Additionally, investors
should be alert to the fact that the source of payment may be limited to
the external liquidity with no or limited legal recourse to the issuer in
the event the demand is not met.
Moody's short-term ratings are designated Moody's Investment Grade as
MIG 1 or VMIG 1 through MIG 4 or VMIG 4. As the name implies, when Moody's
assigns a MIG or VMIG rating, all categories define an investment grade
situation.
MIG 1/VMIG 1
This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2
This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
Commercial Paper Ratings
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Issuers of P-1 paper must have a superior capacity
for repayment of short-term promissory obligations, and will normally be
evidenced by leading market positions in well established industries, high
rates of return on funds employed, conservative capitalization structures
with moderate reliance on debt and ample asset protection, broad margins in
earnings coverage of fixed financial charges and high internal cash
generation, and well established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers (or related supporting institutions) rated Prime-2 (P-2) have
a strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics cited above but
to a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
Fitch
Municipal Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability to
meet the obligations of a specific debt issue or class of debt. The
ratings take into consideration special features of the issue, its
relationship to other obligations of the issuer, the current financial
condition and operative performance of the issuer and of any guarantor, as
well as the political and economic environment that might affect the
issuer's future financial strength and credit quality.
AAA
Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated AAA. Because
bonds rated in the AAA and AA categories are not significantly vulnerable
to foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A
Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB
Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have an adverse
impact on these bonds and, therefore, impair timely payment. The
likelihood that the ratings of these bonds will fall below investment grade
is higher than for bonds with higher ratings.
BB
Bonds rated BB are considered speculative. The obligor's ability to
pay interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt service
requirements.
B
Bonds rated B are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC
Bonds rated CCC have certain identifiable characteristics, which, if
not remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
CC
Bonds rated CC are minimally protected. Default payment of interest
and/or principal seems probable over time.
C
Bonds rated C are in imminent default in payment of interest or
principal.
DDD, DD and D
Bonds rated DDD, DD and D are in actual or imminent default of
interest and/or principal payments. Such bonds are extremely speculative
and should be valued on the basis of their ultimate recovery value in
liquidation or reorganization of the obligor. DDD represents the highest
potential for recovery on these bonds and D represents the lowest potential
for recovery.
Plus (+) and minus (-) signs are used with a rating symbol to indicate
the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA category covering 12-36
months or the DDD, DD or D categories.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
Although the credit analysis is similar to Fitch's bond rating
analysis, the short-term rating places greater emphasis than bond ratings
on the existence of liquidity necessary to meet the issuer's obligations in
a timely manner.
F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
F-1+.
F-2
Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payments, but the margin of safety is not as
great as the F-1+ and F-1 categories.
<TABLE>
<CAPTION>
DREYFUS MASSACHUSETTS INTERMEDIATE MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS MARCH 31, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-97.9% AMOUNT VALUE
-------------------------- ------------- --------
<S> <C> <C>
MASSACHUSETTS-86.3%
Arlington 5%, 8/15/2001..................................................... $ 200,000 $ 199,340
Attleboro:
5.50%, 1/15/2001........................................................ 400,000 401,656
5.70%, 1/15/2002........................................................ 400,000 405,492
5.90%, 1/15/2004........................................................ 325,000 332,651
6%, 1/15/2005........................................................... 345,000 354,981
Belchertown, Refunding:
4.80%, 10/15/2001 (Insured; MBIA)....................................... 240,000 235,250
5%, 10/15/2002 (Insured; MBIA).......................................... 400,000 396,032
Boston:
6.10%, 7/1/1999 (Insured; MBIA)......................................... 250,000 260,875
6.20%, 7/1/2002......................................................... 865,000 914,997
Refunding 5.20%, 2/1/2004 (Insured; AMBAC).............................. 500,000 495,775
Revenue, Refunding (Boston City Hospital):
5.45%, 2/15/2004 (Insured; FHA)....................................... 500,000 485,935
5.45%, 8/15/2004 (Insured; FHA)....................................... 210,000 203,841
5.55%, 2/15/2005 (Insured; FHA)....................................... 295,000 286,262
Brockton, Refunding:
5.60%, 6/1/2001 (Insured; AMBAC)........................................ 255,000 262,469
5.70%, 6/1/2002 (Insured; AMBAC)........................................ 260,000 268,772
Brookline 5.20%, 9/1/2003................................................... 500,000 499,975
Canton Industrial Development Finance Authority, IDR
(General Signal Corp.) 5.625%, 12/1/2002................................ 510,000 513,264
Dartmouth 4.90%, 5/1/2002................................................... 200,000 198,106
Greater New Bedford Regional Refuse Management District:
4.75%, 5/1/1997......................................................... 815,000 801,903
5.10%, 5/1/2000......................................................... 240,000 227,825
Harwich:
4%, 2/15/2000........................................................... 1,105,000 1,036,733
4.20%, 2/15/2001........................................................ 1,080,000 1,011,323
Haverhill 6.30%, 6/15/2002.................................................. 100,000 102,039
Holyoke, Refunding:
6.10%, 11/1/1998........................................................ 190,000 195,787
6.20%, 11/1/1999........................................................ 100,000 103,783
Lawrence:
4.40%, 9/15/1998........................................................ 1,100,000 1,069,167
4.625%, 2/15/2005....................................................... 1,190,000 1,090,980
Lowell 5.60%, 4/1/2005...................................................... 1,530,000 1,547,503
Ludlow 6.90%, 10/15/2003.................................................... 100,000 112,148
Lynn, Refunding:
4.90%, 1/15/2005 (Insured; FSA)......................................... 1,210,000 1,142,361
5%, 1/15/2006........................................................... 1,185,000 1,122,385
DREYFUS MASSACHUSETTS INTERMEDIATE MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) MARCH 31, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------------------- ----------- -------
MASSACHUSETTS(CONTINUED)
Massachusetts Bay Transportation Authority, Refunding 6%, 3/1/2005.......... $ 1,000,000 $ 1,040,090
Massachusetts Commonwealth:
Consolidated Loan:
5.25%, 6/1/1998....................................................... 100,000 101,505
5.75%, 5/1/2003....................................................... 500,000 516,935
6.20%, 6/1/2003....................................................... 85,000 90,415
Refunding 4.90%, 2/1/2003............................................... 1,000,000 972,680
Massachusetts Convention Center Authority, Refunding (Hynes Convention
Center)
5.90%, 9/1/1998......................................................... 250,000 258,082
Massachusetts Education Loan Authority, Education Loan Revenue:
7.40%, 6/1/1998 (LOC; Rabobank Nederland) (a)........................... 330,000 335,564
7.55%, 1/1/2002 (Insured; MBIA)......................................... 880,000 949,960
8%, 6/1/2002 (LOC; Rabobank Nederland) (a).............................. 90,000 94,987
Massachusetts Health and Educational Facilities Authority, Revenue:
(Bentley College) 5.50%, 7/1/2003 (Insured; MBIA)....................... 500,000 505,900
(Beth Israel Hospital) 5.10%, 7/1/2000 (Insured; AMBAC)................. 300,000 301,896
(Brigham and Womens Hospital) 4.90%, 7/1/2005........................... 1,840,000 1,730,833
(Cape Cod Health System) 5%, 11/15/2002
(Insured; College Construction Loan Insurance Association)............ 1,000,000 978,260
(Central New England Health System) 5.75%, 8/1/2003..................... 1,000,000 922,160
(New England Medical Center Hospitals):
5.60%, 7/1/1999 (Insured; FGIC)....................................... 100,000 102,493
4.90%, 7/1/2006 (Insured; MBIA)....................................... 1,365,000 1,285,912
(Refunding - Baystate Medical Center):
4.60%, 7/1/2002 (Insured; FGIC)....................................... 1,000,000 946,130
4.90%, 7/1/2005 (Insured; FGIC)....................................... 1,000,000 941,410
(Refunding - Massachusetts General Hospital):
4.85%, 7/1/2004 (Insured; AMBAC)...................................... 1,000,000 943,580
6%, 7/1/2004 (Insured; AMBAC)......................................... 1,875,000 1,972,613
(Refunding - Melrose-Wakefield Hospital):
5.50%, 7/1/1999....................................................... 200,000 201,486
5.80%, 7/1/2001....................................................... 100,000 101,453
(University of Massachusetts Medical School Research Project)
5.30%, 7/1/2002 (Insured; College Construction Loan Insurance Association) 400,000 401,396
Massachusetts Housing Finance Agency:
(Holy Cross College-11) 6%, 11/1/2002................................... 100,000 104,700
Housing Projects, Refunding:
5.20%, 4/1/2000....................................................... 800,000 788,600
5.25%, 4/1/2002 (Insured; AMBAC)...................................... 1,000,000 998,260
5.35%, 10/1/2003 (Insured; AMBAC)..................................... 1,750,000 1,753,552
Residential Development 5.25%, 5/15/2001 (Collateralized; FNMA)......... 1,000,000 996,830
SFHR 6.90%, 12/1/2001................................................... 95,000 99,468
Massachusetts Industrial Finance Agency, Revenue:
(Museum of Fine Arts-Boston) 6.20%, 1/1/2000 (Insured; MBIA)............ 100,000 103,709
(Refunding - Combined Jewish Philanthropies) 5.65%, 2/1/2003 (Insured; AMBAC) 795,000 798,919
(Refunding - Refusetech, Inc. Project) 6.15%, 7/1/2002.................. 1,800,000 1,812,780
DREYFUS MASSACHUSETTS INTERMEDIATE MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) MARCH 31, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------------------- ----------- -------
MASSACHUSETTS(CONTINUED)
Massachusetts Municipal Wholesale Electric Co., Power Supply Systems Revenue:
5.875%, 7/1/2003........................................................ $ 500,000 $ 508,600
Refunding:
6.30%, 7/1/2001....................................................... 100,000 104,333
6.40%, 7/1/2002....................................................... 100,000 105,006
Massachusetts Water Pollution Abatement Trust, Water Pollution Abatement
Revenue
(MWRA Loan Program) 4.75%, 2/1/2002..................................... 500,000 478,840
New Bedford 5.60%, 3/1/2003................................................. 600,000 581,772
New England Education Loan Marketing Corp., Student Loan Revenue:
6%, 3/1/2002............................................................ 500,000 510,445
6.60%, 9/1/2002......................................................... 100,000 103,724
6.90%, 11/1/2009........................................................ 1,000,000 1,058,580
Newton:
4.40%, 4/15/2002........................................................ 600,000 576,090
4.50%, 4/15/2003........................................................ 575,000 551,000
North Andover:
6.50%, 11/1/2004........................................................ 300,000 324,609
6.55%, 11/1/2005........................................................ 300,000 323,634
North Reading, Refunding 6.40%, 6/15/2002 (Insured; MBIA)................... 200,000 215,120
Pioneer Valley Transit Authority, COP 5.70%, 2/1/2003 (Insured; CGIC)....... 1,240,000 1,270,554
Plymouth County, COP 6.50%, 10/1/2001....................................... 200,000 204,670
Quincy, Revenue, Refunding (Quincy Hospital):
4.70%, 1/15/2002 (Insured; FSA)......................................... 2,735,000 2,621,169
4.80%, 1/15/2003 (Insured; FSA)......................................... 2,745,000 2,627,706
Springfield:
4.90%, 1/15/2002 (Insured; MBIA) ....................................... 850,000 830,280
Refunding:
6%, 9/1/2001.......................................................... 500,000 504,475
4.90%, 9/1/2002 (Insured; MBIA)....................................... 515,000 502,166
Swansea 6.60%, 1/15/2005.................................................... 100,000 107,016
Taunton 5.25%, 7/15/2002 (Insured; AMBAC)................................... 100,000 101,138
Webster 6.50%, 9/1/2005 (Insured; AMBAC).................................... 310,000 331,288
Westfield:
4.20%, 9/1/2000 (Insured; FSA).......................................... 500,000 473,020
4.30%, 9/1/2001 (Insured; FSA).......................................... 500,000 469,705
Refunding 4.50%, 12/15/2003 (Insured; MBIA)............................. 960,000 891,072
Westford, Refunding 5%, 10/15/2004 (Insured; AMBAC)......................... 795,000 774,974
Weymouth 6%, 6/15/2001...................................................... 100,000 103,281
Woods Hole, Marthas Vineyard & Nantucket 6.10%, 3/1/2005.................... 690,000 718,828
DREYFUS MASSACHUSETTS INTERMEDIATE MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) MARCH 31, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------------------- ----------- ---------
MASSACHUSETTS(CONTINUED)
Worcester:
5.80%, 8/1/1998......................................................... $ 200,000 $ 203,204
5.80%, 8/1/1999......................................................... 250,000 254,057
6%, 8/1/2003............................................................ 545,000 556,995
U. S. RELATED-11.6%
Guam Airport Authority, Revenue 6%, 10/1/2000............................... 1,100,000 1,109,713
Guam Government 4.90%, 11/15/2004........................................... 5,910,000 5,505,047
Puerto Rico Commonwealth Highway and Transportation Authority,
Highway Revenue, Refunding 5.875%, 7/1/1999............................. 100,000 102,718
Puerto Rico Housing Bank and Finance Agency, Refunding
(Commonwealth Approved Subsidy Prepayment) 5%, 12/1/2002................ 1,240,000 1,164,881
-----------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $67,600,208).................... $66,301,878
===========
SHORT-TERM MUNICIPAL INVESTMENTS-2.1%
Massachusetts Commonwealth, VRDN 3.75% (b).................................. $ 600,000 $ 600,000
Massachusetts Industrial Finance Agency, Revenue, Refunding, VRDN
(Cabot Newburyport Ltd.) 4.25% (b)...................................... 800,000 800,000
-----------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $1,400,000).................... $ 1,400,000
===========
TOTAL INVESTMENTS-100.0%
(cost $69,000,208)...................................................... $67,701,878
===========
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation IDR Industrial Development Revenue
CGIC Capital Guaranty Insurance Corporation LOC Letter of Credit
COP Certificate of Participation MBIA Municipal Bond Investors Assurance Insurance
FGIC Financial Guaranty Insurance Company Corporation
FHA Federal Housing Administration SFHR Single Family Housing Revenue
FNMA Federal National Mortgage Association VRDN Variable Rate Demand Notes
FSA Financial Security Assurance
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (C) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
--------- --------- -------------------- -----------------------
<S> <C> <S> <C>
AAA Aaa AAA 49.4%
AA Aa AA 3.3
A A A 21.0
BBB Baa BBB 24.2
F-1+, F-1 MIG1, VMIG1 & P1 SP1 & A1 2.1
------
100.0%
======
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Secured by letters of credit.
(b) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(c) Fitch currently provides creditworthiness information for a limited
number of investments.
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS MASSACHUSETTS INTERMEDIATE MUNICIPAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 1995
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $69,000,208)-see statement...................................... $67,701,878
Interest receivable..................................................... 942,647
Prepaid expenses........................................................ 16,612
-------------
68,661,137
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 9,355
Due to Custodian..................................................... 74,674
Payable for shares of Beneficial Interest redeemed...................... 2,000
Accrued expenses and other liabilities.................................. 72,486 158,515
-------- -------------
NET ASSETS ................................................................ $68,502,622
=============
REPRESENTED BY:
Paid-in capital......................................................... $72,421,595
Accumulated net realized (loss) on investments.......................... (2,620,643)
Accumulated net unrealized (depreciation) on investments-Note 3......... (1,298,330)
-------------
NET ASSETS at value applicable to 5,348,137 shares outstanding
(unlimited number of $.001 par value shares of Beneficial
Interest authorized).................................................... $68,502,622
============
NET ASSET VALUE, offering and redemption price per share
($68,502,622/5,348,137 shares).......................................... $12.81
=========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS MASSACHUSETTS INTERMEDIATE MUNICIPAL BOND FUND
STATEMENT OF OPERATIONS YEAR ENDED MARCH 31, 1995
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $4,134,740
EXPENSES:
Management fee-Note 2(a).............................................. $ 467,124
Shareholder servicing costs-Note 2(b)................................. 145,570
Professional fees..................................................... 27,170
Trustees' fees and expenses-Note 2(c)................................. 14,893
Prospectus and shareholders' reports.................................. 14,528
Custodian fees........................................................ 7,844
Registration fees..................................................... 3,491
Miscellaneous......................................................... 32,497
------------
713,117
Less-reduction in management fee due to
undertakings-Note 2(a)............................................ 328,284
------------
TOTAL EXPENSES.................................................. 384,833
------------
INVESTMENT INCOME-NET........................................... 3,749,907
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized (loss) on investments-Note 3............................... $(2,620,069)
Net unrealized appreciation on investments.............................. 1,403,906
------------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS............... (1,216,163)
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $2,533,744
=============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS MASSACHUSETTS INTERMEDIATE MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED MARCH 31,
-------------------------------
1994 1995
------------- ----------
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 3,446,771 $ 3,749,907
Net realized gain (loss) on investments................................. 91,074 (2,620,069)
Net unrealized appreciation (depreciation) on investments for the year.. (3,426,852) 1,403,906
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. 110,993 2,533,744
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net................................................... (3,446,771) (3,749,907)
Net realized gain on investments........................................ (10,493) (91,423)
------------ ------------
TOTAL DIVIDENDS....................................................... (3,457,264) (3,841,330)
------------ ------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold........................................... 89,753,354 16,540,755
Dividends reinvested.................................................... 2,741,287 2,833,098
Cost of shares redeemed................................................. (32,851,162) (40,811,502)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 59,643,479 (21,437,649)
------------ -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........................... 56,297,208 (22,745,235)
NET ASSETS:
Beginning of year....................................................... 34,950,649 91,247,857
------------- ------------
End of year............................................................. $91,247,857 $68,502,622
============= ============
SHARES SHARES
---------------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................. 6,642,576 1,300,469
Shares issued for dividends reinvested.................................. 203,491 223,568
Shares redeemed......................................................... (2,435,307) (3,245,315)
-------------- ------------
NET INCREASE (DECREASE) IN SHARES OUTSTANDING......................... 4,410,760 (1,721,278)
============ ============
See notes to financial statements.
</TABLE>
DREYFUS MASSACHUSETTS INTERMEDIATE MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
Reference is made to Page __ of the of the Fund's Prospectus dated
August 1, 1995 (As Revised August 22, 1995).
See notes to financial statements.
DREYFUS MASSACHUSETTS INTERMEDIATE MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940 ("Act")
as a non-diversified open-end management investment company. Dreyfus Service
Corporation, until August 24, 1994, acted as the exclusive distributor of the
Fund's shares, which are sold to the public without a sales charge. Dreyfus
Service Corporation is a wholly-owned subsidiary of The Dreyfus Corporation
("Manager"). Effective August 24, 1994, the Manager became a direct
subsidiary of Mellon Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The Distributor,
located at One Exchange Place, Boston, Massachusetts 02109, is a wholly-owned
subsidiary of Institutional Administration Services, Inc., a provider of
mutual fund administration services, the parent company of which is Boston
Institutional Group, Inc.
(A) PORTFOLIO VALUATION: The Fund's investments are valued each business
day by an independent pricing service ("Service") approved by the Board of
Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the
Service are valued at the mean between the quoted bid prices (as obtained by
the Service from dealers in such securities) and asked prices (as calculated
by the Service based upon its evaluation of the market for such securities).
Other investments (which constitute a majority of the portfolio securities)
are carried at fair value as determined by the Service, based on methods
which include consideration of: yields or prices of municipal securities of
comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
The Fund follows an investment policy of investing primarily in municipal
obligations of one state. Economic changes affecting the state and certain of
its public bodies and municipalities may affect the ability of issuers within
the state to pay interest on, or repay principal of, municipal obligations
held by the Fund.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, it is the policy of the Fund not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
The Fund has an unused capital loss carryover of approximately $432,000
available for Federal income tax purposes to be applied against future net
securities profits, if any realized subsequent to March 31, 1995. The
carryover does not include net realized securities losses from November 1,
1994 through March 31, 1995 which are treated, for Federal income tax
purposes, as arising in fiscal 1996. If not applied, the carryover expires in
fiscal 2003.
DREYFUS MASSACHUSETTS INTERMEDIATE MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .60 of 1% of the average
daily value of the Fund's net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Fund's
aggregate expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Fund for any full fiscal year. However, the Manager has
undertaken, from April 1, 1994 through April 30, 1995 to reduce the
management fee paid by the Fund, to the extent that the Fund's aggregate
expenses (excluding certain expenses as described above) exceeded specified
annual percentages of the Fund's average daily net assets. The reduction in
management fee, pursuant to the undertakings, amounted to $328,284 for the
year ended March 31, 1995.
The Manager has currently undertaken from May 1, 1995 through June 30,
1995, or until such time as the net assets of the Fund exceed $125 million,
regardless of whether they remain at that level, to waive receipt of the
management fee payable to it by the Fund in excess of an annual rate of .35
of 1% of the Fund's average net assets.
The undertaking may be modified by the Manager from time to time,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the Agreement.
(B) Pursuant to the Fund's Shareholder Services Plan, the Fund reimburses
Dreyfus Service Corporation an amount not to exceed an annual rate of .25 of
1% of the Fund's average daily net assets for servicing shareholder accounts.
The services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Fund and
providing reports and other information, and services related to the
maintenance of shareholder accounts. During the year ended March 31, 1995,
the Fund was charged an aggregate of $66,304 pursuant to the Shareholder
Services Plan.
(C) Prior to August 24, 1994, certain officers and trustees of the Fund
were "affiliated persons," as defined in the Act, of the Manager and/or
Dreyfus Service Corporation. Each trustee who is not an "affiliated person"
receives an annual fee of $1,000 and an attendance fee of $250 per meeting.
The Chairman of the Board receives an additional 25% of such compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities
amounted to $24,289,705 and $45,963,949, respectively, for the year ended
March 31, 1995, and consisted entirely of long-term and short-term municipal
investments.
At March 31, 1995, accumulated net unrealized depreciation on investments
was $1,298,330, consisting of $612,889 gross unrealized appreciation and
$1,911,219 gross unrealized depreciation.
At March 31, 1995, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
DREYFUS MASSACHUSETTS INTERMEDIATE MUNICIPAL BOND FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
DREYFUS MASSACHUSETTS INTERMEDIATE MUNICIPAL BOND FUND
We have audited the accompanying statement of assets and liabilities of
Dreyfus Massachusetts Intermediate Municipal Bond Fund, including the
statement of investments, as of March 31, 1995, and the related statement of
operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and financial highlights
for each of the years indicated therein. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of March 31, 1995 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Dreyfus Massachusetts Intermediate Municipal Bond Fund at March
31, 1995, the results of its operations for the year then ended, the changes
in its net assets for each of the two years in the period then ended, and the
financial highlights for each of the indicated years, in conformity with
generally accepted accounting principles.
(Ernst and Young Signature Logo)
New York, New York
April 28,1995
