Fund Goal and Approach

The fund seeks as high a level of current income exempt from federal income tax as is consistent with the preservation of capital and the maintenance of liquidity. As a money market fund, the fund is subject to maturity, quality and diversification requirements designed to help it maintain a stable share price of $1.00.

To pursue its goal, the fund normally invests substantially all of its assets in short-term, high quality municipal obligations that provide income exempt from federal personal income tax.

The fund also may invest in high quality short-term structured notes, which are derivative instruments whose value is tied to underlying municipal obligations.

Generally, the fund is required to invest its assets in the securities of issuers with the highest or second-highest credit rating or the unrated equivalent as determined by Dreyfus. Additionally, the fund is required to maintain an average dollar weighted portfolio maturity of 90 days or less and buy individual securities that have remaining maturities of 13 months or less.

Although the fund seeks to provide income exempt from federal income tax, the fund temporarily may invest in high quality, taxable money market instruments, including when the portfolio manager believes acceptable municipal obligations are not available for investment. In addition, interest from some of the fund's holdings may be subject to the federal alternative minimum tax.

Main Risks

An investment in the fund is not a bank deposit. It is not insured or guaranteed by the FDIC or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.

The fund's yield will fluctuate as the short-term securities in its portfolio mature and the proceeds are reinvested in securities with different interest rates. Additionally, while the fund has maintained a constant share price since inception, and will continue to try to do so, neither Dreyfus nor its affiliates are required to make a capital infusion, enter into a capital support agreement or take other actions to prevent the fund's share price from falling below $1.00. The following are the principal risks that could reduce the fund's income level and/or share price:

*Interest rate risk. This risk refers to the decline in the prices of fixed-income securities that may accompany a rise in the overall level of interest rates. The fund's yield will vary; it is not fixed for a specific period like the yield on a bank certificate of deposit. A sharp and unexpected rise in interest rates could cause a money market fund's share price to drop below a dollar. However, the extremely short maturities of the securities held in money market portfolios - a means of achieving an overall fund objective of principal safety - reduces their potential for price fluctuation.

*Credit risk. Failure of an issuer to make timely interest or principal payments, or a decline or perception of a decline in the credit quality of a municipal obligation, can cause the obligation's price to fall, potentially lowering the fund's share price. Although the fund invests only in high quality debt securities, any of the fund's holdings could have its credit rating downgraded or could default. The credit quality of the securities held by the fund can change rapidly in certain market environments, and the default of a single holding could have the potential to cause significant deterioration of the fund's net asset value.

*Derivatives risk. Derivative securities, such as structured notes, can be volatile, and the possibility of default by the financial institution or counterparty may be greater for these securities than for other types of money market instruments. Structured notes typically are purchased in privately negotiated transactions from financial institutions and, thus, an active trading market for such instruments may not exist.

*Liquidity risk. When there is little or no active trading market for specific types of securities it can become more difficult to sell the securities at or near their perceived value. In such a market, the value of such securities may fall dramatically, potentially lowering the fund's share price, even during periods of declining interest rates. Also, during such periods, redemptions by a few large investors in the fund may have a significant adverse effect on the fund's net asset value and remaining fund shareholders.

*Tax risk. To be tax-exempt, municipal obligations generally must meet certain regulatory requirements. Although the fund will normally invest all or a substantial portion of its assets in municipal obligations that pay interest that is exempt, in the opinion of counsel to the issuer (or on the basis of other authority believed by the adviser to be reliable), from federal personal income taxes, if any such municipal obligations fails to meet these regulatory requirements, the interest received by the fund from its investment in such obligations and distributed to fund shareholders will be taxable.

Portfolio Manager

The Dreyfus Corporation has been manager since 8/1/1987.
Dreyfus, established in 1951 and headquartered in New York City, is one of the nation's leading asset management and distribution companies. As of June 30, 2010, Dreyfus manages over $384 billion in mutual funds, separately managed accounts, and institutional portfolios*.

Dreyfus is part of The Bank of New York Mellon ("BNY Mellon") Asset Management, a leading global provider of investment management products and services that offers a broad range of equity, fixed-income, hedge and liquidity management products through individual asset management companies and multiple distribution channels.

*Dreyfus assets under management include separately managed accounts and CIS non-money market assets that are as of May 31, 2010.

Other Funds Managed

Dreyfus Money Market Instruments, Inc.: Government Securities Series

Dreyfus New Jersey Municipal Money Market Fund, Inc.

Dreyfus Liquid Assets, Inc. - Class 1 Shares

Dreyfus Money Market Instruments, Inc.: Money Market Series

Dreyfus BASIC Money Market Fund, Inc.

Dreyfus Worldwide Dollar Money Market Fund, Inc.

Dreyfus BASIC U.S. Government Money Market Fund

General California Municipal Money Market Fund

General Municipal Money Market Fund

General New York Municipal Money Market Fund

Dreyfus Connecticut Municipal Money Market Fund, Inc.

Dreyfus Pennsylvania Municipal Money Market Fund

Dreyfus BASIC New Jersey Municipal Money Market Fund

Dreyfus BASIC Municipal Money Market Fund

Dreyfus New York AMT-Free Municipal Money Market Fund

General Money Market Fund, Inc.

General Treasury Prime Money Market Fund

General Government Securities Money Market Fund

Dreyfus 100% U.S. Treasury Money Market Fund

Dreyfus BASIC S&P 500 Stock Index Fund

Dreyfus Midcap Index Fund, Inc.

Dreyfus BASIC California Municipal Money Market Fund

Dreyfus BASIC Massachusetts Municipal Money Market Fund

Dreyfus BASIC New York Municipal Money Market Fund

Dreyfus AMT-Free Municipal Reserves - BASIC Shares

Dreyfus AMT-Free Municipal Reserves - Class B

Dreyfus AMT-Free Municipal Reserves - Class R

Dreyfus AMT-Free Municipal Reserves - Investor Shares

Dreyfus Money Market Reserves - Class R

Dreyfus Money Market Reserves - Investor Shares

Dreyfus U.S. Treasury Reserves - Class R

Dreyfus U.S. Treasury Reserves - Investor Shares

Dreyfus S&P 500 Index Fund

Dreyfus International Stock Index Fund

Dreyfus Bond Market Index Fund - BASIC Shares

Dreyfus Bond Market Index Fund - Investor Shares

Dreyfus Smallcap Stock Index Fund

Dreyfus Massachusetts Municipal Money Market Fund

Investors should consider the investment objectives, risks, charges, and expenses of the fund carefully before investing. Download a prospectus that contains this and other information about the fund, and read it carefully before investing.

An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation, or any other government agency. Although a money market fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in a money market fund. As a measure of current income, seven-day yield is more reflective of the fund's income generating ability than total return.

1. Annualized distribution rate is based upon dividends per share from net investment income paid during the period, divided by the period ended maximum offering price per share, adjusted for capital gains (IF ANY) distributed during the period, and annualized based upon the number of days in the distribution period.