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PROSPECTUS JUNE 9, 1997
AS REVISED JULY 1, 1997
DREYFUS INSTITUTIONAL PREFERRED MONEY MARKET FUND
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DREYFUS INSTITUTIONAL PREFERRED MONEY MARKET FUND (THE "FUND") IS AN
OPEN-END, DIVERSIFIED, MANAGEMENT INVESTMENT COMPANY, KNOWN AS A MONEY MARKET
MUTUAL FUND. THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE INVESTORS WITH AS
HIGH A LEVEL OF CURRENT INCOME AS IS CONSISTENT WITH THE PRESERVATION OF
CAPITAL AND THE MAINTENANCE OF LIQUIDITY.
THE DREYFUS CORPORATION WILL SERVE AS THE FUND'S INVESTMENT ADVISER.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
AN INVESTOR SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND RETAINED FOR
FUTURE REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED JUNE 9, 1997, WHICH
MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF CERTAIN
AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST TO SOME
INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND
IS INCORPORATED HEREIN BY REFERENCE. THE SECURITIES AND EXCHANGE COMMISSION
MAINTAINS A WEB SITE (HTTP://WWW.SEC.GOV) THAT CONTAINS THE STATEMENT OF
ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY REFERENCE, AND OTHER
INFORMATION REGARDING THE FUND. FOR A FREE COPY OF THE STATEMENT OF
ADDITIONAL INFORMATION, WRITE TO THE FUND AT 144 GLENN CURTISS BOULEVARD,
UNIONDALE, NEW YORK 11556-0144, OR CALL 1-800-346-3621.
MUTUAL FUND SHARES ARE NOT DEPOSITS OF OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY. ALL MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <S> <C>
PAGE PAGE
ANNUAL FUND OPERATING EXPENSES.............. 2 HOW TO REDEEM SHARES................... 6
YIELD INFORMATION........................... 2 DIVIDENDS, DISTRIBUTIONS AND TAXES..... 7
DESCRIPTION OF THE FUND..................... 3 GENERAL INFORMATION.................... 8
MANAGEMENT OF THE FUND...................... 4 APPENDIX............................... 9
HOW TO BUY SHARES........................... 5
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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Annual Fund Operating Expenses
(as a percentage of average daily net assets)
Management Fees ........................... .10%
Total Fund Operating Expenses............. .10%
Example: 1 Year 3 Years
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period: $1 $3
</TABLE>
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The amounts listed in the example should not be considered as
representative of past or future expenses and actual expenses may be greater
or less than those indicated. Moreover, while the example assumes a 5% annual
return, the Fund's actual performance will vary and may result in an actual
return greater or less than 5%.
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The purpose of the foregoing table is to assist investors in
understanding the costs and expenses to be borne by the Fund, the payment of
which will reduce investors' annual return. The Dreyfus Corporation has
agreed to pay all of the Fund's expenses, except the management fee,
brokerage commissions, taxes, interest, fees and expenses of non-interested
Board members, fees and expenses of independent counsel to the Fund and to
the non-interested Board members, and extraordinary expenses. The Dreyfus
Corporation also has agreed to reduce its management fee in an amount equal to
the accrued fees and expenses of the non-interested Board members, and fees
and expenses of independent counsel to the Fund and to the non-interested
Board members. See "Management of the Fund."
Yield Information
From time to time, the Fund will advertise its yield and effective
yield. Both yield figures are based on historical earnings and are not
intended to indicate future performance. It can be expected that these yields
will fluctuate substantially. The yield of the Fund refers to the income
generated by an investment in the Fund over a seven-day period (which period
will be stated in the advertisement). This income is then annualized. That
is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The effective yield is calculated similarly,
but, when annualized, the income earned by an investment in the Fund is
assumed to be reinvested. The effective yield will be slightly higher than
the yield because of the compounding effect of this assumed reinvestment. The
Fund's yield and effective yield may reflect absorbed expenses pursuant to
any undertaking that may be in effect. See "Management of the Fund."
Yield information is useful in reviewing the Fund's performance, but
because yields will fluctuate, under certain conditions such information may
not provide a basis for comparison with domestic bank deposits, other
investments which pay a fixed yield for a stated period of time, or other
investment companies which may use a different method of computing yield.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., Bank Rate Monitortrademark, IBC's Money Fund
Reporttrademark, Morningstar, Inc. and other industry publications.
Page 2
Description of the Fund
INVESTMENT OBJECTIVE
The Fund's investment objective is to provide investors with as
high a level of current income as is consistent with the preservation of
capital and the maintenance of liquidity. It cannot be changed without
approval by the holders of a majority (as defined in the 1940 Act) of the
Fund's outstanding voting shares. There can be no assurance that the Fund's
investment objective will be achieved. Securities in which the Fund invests
may not earn as high a level of current income as long-term or lower quality
securities which generally have less liquidity, greater market risk and more
fluctuation in market value.
MANAGEMENT POLICIES
The Fund invests in short-term money market obligations, including
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, U.S. dollar denominated time deposits, certificates of
deposit, banker's acceptances and other short-term obligations issued by
domestic banks, foreign subsidiaries or foreign branches of domestic banks,
domestic and foreign branches of foreign banks and thrift institutions,
repurchase agreements, asset-backed securities, and high quality domestic and
foreign commercial paper and other short-term corporate obligations,
including those with floating or variable rates of interest. See
"Appendix_Certain Portfolio Securities." In addition, the Fund is permitted
to lend portfolio securities and enter into reverse repurchase agreements.
See "Appendix_Investment Techniques." During normal market conditions, at
least 25% of the Fund's total assets will be invested in bank obligations.
See "Investment Considerations and Risks" below.
The Fund seeks to maintain a net asset value of $1.00 per share for
purchases and redemptions. To do so, the Fund uses the amortized cost method
of valuing its securities pursuant to Rule 2a-7 under the 1940 Act, which
Rule includes various maturity, quality, and diversification requirements,
certain of which are summarized below.
In accordance with Rule 2a-7, the Fund is required to maintain a
dollar-weighted average portfolio maturity of 90 days or less, purchase only
instruments having remaining maturities of 13 months or less and invest only
in U.S. dollar denominated securities determined in accordance with
procedures established by the Fund's Board to present minimal credit risks
and which are rated in one of the two highest rating categories for debt
obligations by at least two nationally recognized statistical rating
organizations (or one rating organization if the instrument was rated only
by one such organization) or, if unrated, are of comparable quality as
determined in accordance with procedures established by the Board. Moreover,
the Fund will purchase only instruments so rated in the highest rating
category or, if unrated, of comparable quality as determined in accordance
with procedures established by the Fund's Board. The nationally recognized
statistical rating organizations currently rating instruments of the type the
Fund may purchase are Moody's Investors Service, Inc., Standard & Poor's
Ratings Group, Duff & Phelps Credit Rating Co., Fitch Investors Service, L.P.,
IBCA Limited and IBCA Inc. and Thomson BankWatch, Inc. and their rating
criteria are described in the "Appendix" to the Statement of Additional
Information.
For further information regarding the amortized cost method of
valuing securities, see "Determination of Net Asset Value" in the Statement
of Additional Information. There can be no assurance that the Fund will be
able to maintain a stable net asset value of $1.00 per share.
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL _ The Fund attempts to increase yields by trading to take advantage
of short-term market variations. This policy is expected to result in high
portfolio turnover but should not adversely affect the Fund since the Fund
usually does not pay brokerage commissions when it purchases short-term
obligations. The value of the portfolio securities held by the Fund will vary
inversely to changes in prevailing interest rates. Thus, if interest rates
have increased from the time a security was purchased, such security, if
sold, might be sold at a price less than its cost. Similarly, if interest
rates have declined from the time a security was purchased, such security, if
sold, might be sold at a price greater than its purchase cost. In either
instance, if the security was purchased at face value and held to maturity,
no gain or loss would be realized.
Page 3
BANK SECURITIES _ To the extent the Fund's investments are concentrated in
the banking industry, the Fund will have correspondingly greater exposure to
the risk factors which are characteristic of such investments. Sustained
increases in interest rates can adversely affect the availability or
liquidity and cost of capital funds for a bank's lending activities, and a
deterioration in general economic conditions could increase the exposure to
credit losses. In addition, the value of and the investment return on the
Fund's shares could be affected by economic or regulatory developments in or
related to the banking industry, which industry also is subject to the
effects of competition within the banking industry as well as with other
types of financial institutions. The Fund, however, will seek to minimize its
exposure to such risks by investing only in debt securities which are
determined to be of highest quality.
FOREIGN SECURITIES _ Since the Fund's portfolio may contain securities
issued by foreign subsidiaries or foreign branches of domestic banks,
domestic and foreign branches of foreign banks, and commercial paper issued
by foreign issuers, the Fund may be subject to additional investment risks
with respect to such securities that are different in some respects from
those incurred by a fund which invests only in debt obligations of U.S.
domestic issuers, although such obligations may be higher yielding when
compared to the securities of U.S. domestic issuers. Such risks include
possible future political and economic developments, seizure or
nationalization of foreign deposits, imposition of foreign withholding taxes
on interest income payable on the securities, establishment of exchange
controls, or adoption of other foreign governmental restrictions which might
adversely affect the payment of principal and interest on these securities .
SIMULTANEOUS INVESTMENTS _ Investment decisions for the Fund are made
independently from those of other investment companies advised by The Dreyfus
Corporation. If, however, such other investment companies desire to invest
in, or dispose of, the same securities as the Fund, available investments or
opportunities for sales will be allocated equitably to each investment
company. In some cases, this procedure may adversely affect the size of the
position obtained for or disposed of by the Fund or the price paid or
received by the Fund.
Management of the Fund
INVESTMENT ADVISER _ The Dreyfus Corporation, located at 200 Park Avenue,
New York, New York 10166, was formed in 1947 and serves as the Fund's
investment adviser. The Dreyfus Corporation is a wholly-owned subsidiary of
Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank
Corporation ("Mellon"). As of May 31, 1997, The Dreyfus Corporation managed
or administered approximately $87 billion in assets for approximately 1.7
million investor accounts nationwide.
The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the Fund,
subject to the overall authority of the Fund's Board in accordance with
Massachusetts law.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international
markets. Mellon is among the twenty-five largest bank holding companies in
the United States based on total assets. Mellon's principal wholly-owned
subsidiaries are Mellon Bank, N.A., Mellon Bank (DE) National Association,
Mellon Bank (MD), The Boston Company, Inc., AFCO Credit Corporation and a
number of companies known as Mellon Financial Services Corporations. Through
its subsidiaries, including The Dreyfus Corporation, Mellon managed more than
$259 billion in assets as of March 31, 1997, including approximately $88
billion in mutual fund assets. As of March 31, 1997, Mellon, through various
subsidiaries, provided non-investment services, such as custodial or
administration services, for more than $1.061 trillion in assets, including
approximately $58 billion in mutual fund assets.
Under the terms of the Management Agreement, The Dreyfus Corporation
receives a monthly fee at an annual rate of .10 of 1% of the value of the
average daily net assets of the Fund. The Dreyfus Corporation pays all of the
Fund's expenses, except the management fee, brokerage commissions, taxes,
interest, fees and expenses of non-interested Board members, fees and
expenses of independent counsel to the Fund and to the non-interested Board
members and extraordinary expenses. The Dreyfus Corporation also has agreed to
Page 4
reduce its management fee in an amount equal to the accrued fees and
expenses of the non-interested Board members, and fees and expenses of
independent counsel to the Fund and to the non-interested Board members. From
time to time, The Dreyfus Corporation may waive receipt of its management fee
and/or voluntarily assume certain additional expenses of the Fund, which
would have the effect of lowering the expense ratio of the Fund and
increasing yield to investors. The Fund will not reimburse The Dreyfus
Corporation for any amounts it may waive, nor will the Fund reimburse The
Dreyfus Corporation for any amounts it may assume.
In allocating brokerage transactions for the Fund, The Dreyfus
Corporation seeks to obtain the best execution of orders at the most
favorable net price. Subject to this determination, The Dreyfus Corporation
may consider, among other things, the receipt of research services and/or the
sale of shares of the Fund or other funds managed, advised or administered by
The Dreyfus Corporation as factors in the selection of broker-dealers to
execute portfolio transactions for the Fund. See "Portfolio Transactions" in
the Statement of Additional Information.
The Dreyfus Corporation may pay the Fund's distributor for
shareholder services from The Dreyfus Corporation's own assets, including
past profits but not including the management fee paid by the Fund. The
Fund's distributor may use part or all of such payments to pay service agents
in respect of these services.
DISTRIBUTOR _ The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at 60 State Street, Boston, Massachusetts 02109.
The Distributor's ultimate parent is Boston Institutional Group, Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN _ Dreyfus Transfer,
Inc., a wholly-owned subsidiary of The Dreyfus Corporation, P.O. Box 9671,
Providence, Rhode Island 02940-9671, is the Fund's Transfer and Dividend
Disbursing Agent (the "Transfer Agent"). The Bank of New York, 90 Washington
Street, New York, New York 10286, is the Fund's Custodian (the "Custodian").
How to Buy Shares
The Fund is designed for institutional investors, particularly
colleges and universities for the investment of endowment and other funds.
Fund shares will not be sold to institutions which desire to use the Fund as
a commercial sweep account.
The minimum initial investment is $1 billion, unless the investor
has, in the opinion of Dreyfus Institutional Services Division, a division of
Dreyfus Service Corporation, adequate intent and availability of funds to
reach a future level of investment of $1 billion. There is no minimum for
subsequent purchases. The initial investment must be accompanied by the
Account Application. Stock certificates are issued only upon the investor's
written request. No certificates are issued for fractional shares. The Fund
reserves the right to reject any purchase order.
Fund shares may be purchased by wire, by telephone or through a
compatible automated interface or trading system. All payments should be made
in U.S. dollars and, to avoid fees and delays, should be drawn only on U.S.
banks. To place an order by telephone, or to determine whether their computer
facilities are compatible with the Fund's, investors should telephone Dreyfus
Institutional Services Division at one of the telephone numbers listed under
"General Information" in this Prospectus.
Fund shares are sold on a continuous basis at the net asset value per
share next determined after an order in proper form and Federal Funds (monies
of member banks in the Federal Reserve System which are held on deposit at a
Federal Reserve Bank) are received by the Custodian or by any agent or entity
subject to the direction of such agents. If an investor does not remit
Federal Funds, its payment must be converted into Federal Funds. This usually
occurs within one business day of receipt of a bank wire and within two
business days of receipt of a check drawn on a member bank of the Federal
Reserve System. Checks drawn on banks which are not members of the Federal
Reserve System may take considerably longer to convert into Federal Funds.
Prior to receipt of Federal Funds, the investor's money will not be invested.
The Fund's net asset value per share is determined as of 5:00 p.m.,
New York time, on each day the New York Stock Exchange or the Transfer Agent
is open for business. Net asset value per share is computed by dividing the
value of the Fund's net assets (i.e., the value of its assets less
liabilities) by the total number of shares outstanding. See "Determination of
Net Asset Value" in the Statement of Additional Information.
Page 5
Investors whose orders are placed and payments are received in or
converted into Federal Funds by the Custodian by 12:00 Noon, New York time,
will become effective at the price determined at 5:00 p.m., New York time,
and will receive the dividend declared on such day. Except as described
below, investors whose payments are received in or converted into Federal
Funds after 12:00 Noon, New York time, by the Custodian, will begin to accrue
dividends on the following business day.
Orders in proper form received by Dreyfus Institutional Services
Division in New York after 12:00 Noon, New York time, but prior to 5:00 p.m.,
New York time, and payments for which are received by the Custodian
by 6:00 p.m., New York time, will become effective at the price determined
at 5:00 p.m., New York time, and the shares so purchased will receive the
dividend declared on such day.
Federal regulations require that an investor provide a certified
Taxpayer Identification Number ("TIN") upon opening or reopening an account.
See "Dividends, Distributions and Taxes" and the Fund's Account Application
for further information concerning this requirement. Failure to furnish a
certified TIN to the Fund could subject the shareholder to a $50 penalty
imposed by the Internal Revenue Service (the "IRS").
HOW TO REDEEM SHARES
GENERAL
Investors may request redemption of their shares at any time and
the shares will be redeemed at the next determined net asset value.
The Fund imposes no charges when shares are redeemed. Any stock
certificates representing Fund shares being redeemed must be submitted with
the redemption request. The value of the shares redeemed may be more or less
than their original cost, depending upon the Fund's then-current net asset
value.
If a request for redemption is received in proper form, and
transmitted to the Custodian in New York by 5:00 p.m., New York time, the
proceeds of the redemption, if transfer by wire is requested, ordinarily will
be transmitted in Federal Funds on the same day and the shares will not
receive the dividend declared on that day. If the request is received later
that day in New York, the shares will receive the dividend declared on that
day and the proceeds of redemption, if wire transfer is requested, ordinarily
will be transmitted in Federal Funds on the next business day.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by Dreyfus Institutional Services Division of a
redemption request in proper form, except as provided by the rules of the
Securities and Exchange Commission.
PROCEDURES
Investors may redeem Fund shares by wire or telephone, or through a
compatible automated interface or trading system, as described below.
If an investor selects a telephone redemption privilege (which is
granted automatically unless the investor refuses it), the investor
authorizes the Transfer Agent to act on telephone instructions from any
person representing himself or herself to be an authorized representative of
the investor, and reasonably believed by the Transfer Agent to be genuine.
The Fund will require the Transfer Agent to employ reasonable procedures,
such as requiring a form of personal identification, to confirm that
instructions are genuine and, if they do not follow such procedures, the Fund
or the Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Fund nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, investors may
experience difficulty in contacting the Fund or its agents by telephone to
request a redemption or exchange of Fund shares. In such cases, investors
should consider using the other redemption procedures described herein.
REDEMPTION BY WIRE OR TELEPHONE _ Investors may redeem Fund shares by wire
or telephone. The redemption proceeds will be paid by wire transfer.
Investors can redeem shares by telephone by calling one of the telephone
numbers listed under "General Information." The Fund reserves the right to
refuse any request made by wire or telephone and may limit the amount
involved or the number of telephone redemptions. This
Page 6
procedure may be modified or terminated at any time by the Transfer Agent or
the Fund. The Statement of Additional Information sets forth instructions for
redeeming shares by wire. Shares for which certificates have been issued may
not be redeemed by wire or telephone.
REDEMPTION THROUGH COMPATIBLE AUTOMATED FACILITIES _ The Fund makes
available to institutions the ability to redeem shares through a compatible
automated interface or trading system. Investors desiring to redeem shares in
this manner should call Dreyfus Institutional Services Division at one of the
telephone numbers listed under "General Information" to determine whether
their automated facilities are compatible and to receive instructions for
redeeming shares in this manner.
Dividends, Distributions and Taxes
The Fund ordinarily declares dividends from net investment income on
each day the New York Stock Exchange or the Transfer Agent is open for
business. Fund shares begin earning income dividends on the day the purchase
order is effective. Dividends usually are paid on the last calendar day of
each month, and are automatically reinvested in additional Fund shares at net
asset value or, at the investor's option, paid in cash. The Fund's earnings
for Saturdays, Sundays and holidays are declared as dividends on the
preceding business day. If an investor redeems all shares in its account at
any time during the month, all dividends to which the investor is entitled
are paid along with the proceeds of the redemption. Distributions from net
realized securities gains, if any, generally are declared and paid once a
year, but the Fund may make distributions on a more frequent basis to comply
with the distribution requirements of the Internal Revenue Code of 1986, as
amended (the "Code"), in all events in a manner consistent with the
provisions of the 1940 Act. The Fund will not make distributions from net
realized securities gains unless capital loss carryovers, if any, have been
utilized or have expired. Investors may choose whether to receive
distributions in cash or to reinvest in additional Fund shares at net asset
value. All expenses are accrued daily and deducted before declaration of
dividends to investors.
Dividends derived from net investment income, together with
distributions from any net realized short-term securities gains and gains
from the sale or other disposition of certain market discount bonds, paid by
the Fund are taxable as ordinary income, whether received in cash or
reinvested in Fund shares, if the owner of Fund shares is a citizen or
resident of the United States. No dividend paid by the Fund will qualify for
the dividends received deduction allowable to certain U.S. corporations.
Distributions from net realized long-term securities gains of the Fund, if
any, generally are taxable as long-term capital gains for Federal income tax
purposes regardless of how long the owner of the Fund shares has held the
shares and whether such distributions are received in cash or reinvested in
additional Fund shares if the owner of Fund shares is a citizen or resident
of the United States. The Code provides that the net capital gain of an
individual generally will not be subject to Federal income tax at a rate in
excess of 28%.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and gains from
the sale or other disposition of certain market discount bonds, paid by the
Fund with respect to Fund shares beneficially owned by a foreign person
generally are subject to U.S. nonresident withholding taxes at the rate of
30%, unless the foreign person claims the benefit of a lower rate specified
in a tax treaty. Distributions from net realized long-term securities gains
paid by the Fund with respect to Fund shares beneficially owned by a foreign
person generally will not be subject to U.S. nonresident withholding tax.
However, such distributions may be subject to backup withholding, as
described below, unless the foreign person certifies his non-U.S. residency
status.
Notice as to the tax status of dividends and distributions will be
mailed to investors annually. Each investor also will receive periodic
summaries of such investor's account which will include information as to
dividends and distributions from securities gains, if any, paid during the
year.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends and
distributions from net realized securities gains of the Fund paid to a
shareholder if such shareholder fails to certify either that the TIN
furnished in connection with opening an account is correct, or that such
shareholder has not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report taxable dividend or
interest income on a Federal income tax
Page 7
return. Furthermore, the IRS may notify the Fund to institute backup
withholding if the IRS determines a shareholder's TIN is incorrect or if a
shareholder has failed to properly report taxable dividend and interest
income on a Federal income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the
record owner of the account, and may be claimed as a credit on the record
owner's Federal income tax return.
It is expected that the Fund will qualify as a "regulated investment
company" under the Code so long as such qualification is in the best
interests of its shareholders. Such qualification relieves the Fund of any
liability for Federal income tax to the extent its earnings are distributed
in accordance with applicable provisions of the Code. The Fund is subject to
a non-deductible 4% excise tax, measured with respect to certain
undistributed amounts of taxable investment income and capital gains.
Each investor should consult its tax adviser regarding specific
questions as to Federal, state or local taxes.
General Information
The Fund is organized as an unincorporated business trust under the
laws of the Commonwealth of Massachusetts, pursuant to an Amended and
Restated Agreement and Declaration of Trust, and commenced operations on
June 11, 1997. The Fund is authorized to issue an unlimited number of
shares of beneficial interest, par value $.001 per share. Each share
has one vote.
Under Massachusetts law, shareholders could, under certain
circumstances, be held liable for the obligations of the Fund. However, the
Fund's Amended and Restated Agreement and Declaration of Trust (the "Trust
Agreement") disclaims shareholder liability for acts or obligations of the
Fund and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Fund or its Trustees.
The Trust Agreement provides for indemnification from the Fund's property for
all losses and expenses of any shareholder held personally liable
for the obligations of the Fund. Thus, the risk of a shareholder's incurring
financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its
obligations, a possibility which management believes is remote. Upon payment
of any liability incurred by a Fund organized as a Massachusetts business
trust, the shareholder paying such liability will be entitled to reimbursement
from the general assets of the Fund. The Fund intends to conduct its
operations in such a way so as to avoid, as far as possible, ultimate
liability of its shareholders for liabilities of the Fund. As described under
"Management of the Fund" in the Statement of Additional Information,
ordinarily, the Fund does not hold shareholder meetings; however,
shareholders under certain circumstances may have the right to call a meeting
of shareholders for the purpose of voting to remove Trustees.
The Transfer Agent maintains a record of each investor's ownership
and sends confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or, by calling in New York
State, 1-718-895-1650 or, outside New York State, 1-800-346-3621.
Page 8
APPENDIX
INVESTMENT TECHNIQUES
BORROWING MONEY _ The Fund is permitted to borrow to the extent permitted
under the 1940 Act, which permits an investment company to borrow in an
amount up to 331\3% of the value of its total assets. Except for when the
Fund enters into reverse repurchase agreements, as described below, the Fund
currently intends to borrow money only for temporary or emergency (not
leveraging) purposes in an amount up to 15% of the value of its total assets
(including the amount borrowed) valued at the lesser or cost or market, less
liabilities (not including the amount borrowed) at the time the borrowing is
made. While such borrowings exceed 5% of the value of the Fund's total assets,
the Fund will not make any additional investments. In addition, the Fund may
borrow for investment purposes on a secured basis through entering into
reverse repurchase agreements as described below.
REVERSE REPURCHASE AGREEMENTS _ The Fund may enter into reverse repurchase
agreements with banks, brokers or dealers. Reverse repurchase agreements
involve the transfer by the Fund of an underlying debt instrument in return
for cash proceeds based on a percentage of the value of the security. The
Fund retains the right to receive interest and principal payments on the
security. The Fund will use the proceeds of reverse repurchase agreements
only to make investments which generally either mature or have a demand
feature to resell to the issuer at a date simultaneous with or prior to the
expiration of the reverse repurchase agreement. At an agreed upon future
date, the Fund repurchases the security, at principal, plus accrued interest.
As a result of these transactions, the Fund is exposed to greater potential
fluctuations in the value of its assets and its net asset value per share.
These borrowings will be subject to interest costs which may or may not be
recovered by appreciation of the securities purchased; in certain cases,
interest costs may exceed the return received on the securities purchased.
Reverse repurchase agreements constitute borrowings under the 1940 Act and,
therefore, together with other borrowings, will be subject to the limitations
on borrowing set forth in the 1940 Act.
LENDING PORTFOLIO SECURITIES _ The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. The Fund continues to be
entitled to payments in amounts equal to the interest or other distributions
payable on the loaned securities which affords the Fund an opportunity to
earn interest on the amount of the loan and on the loaned securities'
collateral. Loans of portfolio securities may not exceed 331/3% of the value
of the Fund's total assets, and the Fund will receive collateral consisting
of cash or U.S. Government securities which will be maintained at all times
in an amount equal to at least 100% of the current market value of the loaned
securities. Such loans are terminable by the Fund at any time upon specified
notice. The Fund might experience risk of loss if the institution with which
it has engaged in a portfolio loan transaction breaches its agreement with
the Fund.
FORWARD COMMITMENTS _ The Fund may purchase money market instruments on a
forward commitment or when-issued basis, which means that delivery and
payment take place a number of days after the date of the commitment to
purchase. The payment obligation and the interest rate receivable on a
forward commitment or when-issued security are fixed when the Fund enters
into the commitment, but the Fund does not make payment until it receives
delivery from the counterparty. The Fund will commit to purchase such
securities only with the intention of actually acquiring the securities, but
the Fund may sell these securities before the settlement date if it is deemed
advisable. A segregated account of the Fund consisting of permissible liquid
assets at least equal at all times to the amount of the commitments will be
established and maintained at the Fund's custodian bank.
CERTAIN PORTFOLIO SECURITIES
U.S. GOVERNMENT SECURITIES _ The Fund may invest in U.S. Treasury securities
and other securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities. These securities differ in their interest
rates, maturities and times of issuance. Some obligations issued or
guaranteed by U.S. Government agencies and instrumentalities are supported by
the full faith and credit of the U.S. Treasury; others by the right of the
issuer to borrow from the Treasury; others by discretionary authority of the
U.S. Government to purchase certain obligations of the agency or
instrumentality; and others only by the credit of
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the agency or instrumentality. These securities bear fixed, floating or
variable rates of interest. While the U.S. Government currently 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.
REPURCHASE AGREEMENTS _ The Fund may enter into repurchase agreements with
certain banks and non-bank dealers. In a repurchase agreement, the Fund buys,
and the seller agrees to repurchase, a security at a mutually agreed upon
time and price (usually within seven days). The repurchase agreement thereby
determines the yield during the purchaser's holding period, while the
seller's obligation to repurchase is secured by the value of the underlying
security. Repurchase agreements could involve risks in the event of a default
or insolvency of the other party to the agreement, including possible delays
or restrictions upon the Fund's ability to dispose of the underlying
securities.
BANK OBLIGATIONS _ The Fund may purchase certificates of deposit, time
deposits, bankers' acceptances and other short-term obligations issued by
domestic banks, foreign subsidiaries or foreign branches of domestic banks,
domestic and foreign branches of foreign banks, domestic savings and loan
associations and other banking institutions. With respect to such securities
issued by foreign subsidiaries or foreign branches of domestic banks, and
domestic and foreign branches of foreign banks, the Fund may be subject to
additional investment risks that are different in some respects from those
incurred by a fund which invests only in debt obligations of U.S. domestic
issuers. See "Description of the Fund_Investment Considerations and
Risks_Foreign Securities."
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period
of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven
days) at a stated interest rate.
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 the drawer to pay the face amount of the
instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
COMMERCIAL PAPER _ Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs. The commercial
paper purchased by the Fund will consist only of direct obligations issued by
domestic and foreign entities. The other corporate obligations in which the
Fund may invest consist of high quality, U.S. dollar denominated short-term
bonds and notes (including variable amount master demand notes).
FLOATING AND VARIABLE RATE OBLIGATIONS _ The Fund may purchase floating and
variable rate demand notes and bonds, which are obligations ordinarily having
stated maturities in excess of 13 months, but which permit the holder to
demand payment of principal at any time, or at specified intervals not
exceeding 13 months, in each case upon not more than 30 days' notice.
Variable rate demand notes include master demand notes which are obligations
that permit the Fund to invest fluctuating amounts, at varying rates of
interest, pursuant to direct arrangements between the Fund, as lender, and
the borrower. These obligations permit daily changes in the amounts borrowed.
Because these obligations are direct lending arrangements between the lender
and borrower, it is not contemplated that such instruments generally will be
traded, and there generally is no established secondary market for these
obligations, although they are redeemable at face value, plus accrued
interest. Accordingly, where these obligations are not secured by letters of
credit or other credit support arrangements, the Fund's right to redeem is
dependent on the ability of the borrower to pay principal and interest on
demand.
ASSET-BACKED SECURITIES _ The asset-backed securities in which the Fund may
invest are securities issued by special purpose entities whose primary assets
consist of a pool of mortgages, loans, receivables or other assets. Payment
of principal and interest may depend largely on the cash flows generated by
the assets backing the securities and in certain cases, supported by letters
of credit, surety bonds or other forms of credit or liquidity enhancements.
The value of these asset-backed securities also may be affected by the
creditworthiness of the servicing agent for the pool of assets, the originator
of the loans or receivables or the financial institutions providing the credit
support.
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ILLIQUID SECURITIES _ The Fund may invest up to 10% of the value of its net
assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Fund's investment
objective. Such securities may include securities that are not readily
marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, and repurchase agreements providing for
settlement in more than seven days after notice. As to these securities, the
Fund is subject to a risk that should the Fund desire to sell them when a
ready buyer is not available at a price the Fund deems representative of
their value, the value of the Fund's net assets could be adversely affected.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
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PROSPECTUS
Dreyfus
Institutional
Preferred
Money Market
Fund
Copy Rights 1997 Dreyfus Service Corporation
194p070197
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