SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. / /
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. / /
(CHECK APPROPRIATE BOX OR BOXES)
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DREYFUS HIGH YIELD STRATEGIES FUND
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
200 PARK AVENUE, NEW YORK, NEW YORK 10166
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
1-888-338-8084
ROBERT R. MULLERY
ASSISTANT GENERAL COUNSEL
THE DREYFUS CORPORATION
LEGAL DEPARTMENT
200 PARK AVENUE - 8TH FLOOR WEST
NEW YORK, NEW YORK 10166
(NAME AND ADDRESS OF AGENT FOR SERVICE)
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COPIES TO:
THOMAS A. HALE CLIFFORD J. ALEXANDER
SKADDEN, ARPS, SLATE, KIRKPATRICK & LOCKHART LLP
MEAGHER & FLOM (ILLINOIS) 1800 MASSACHUSETTS AVENUE
333 WACKER DRIVE SECOND FLOOR
CHICAGO, ILLINOIS 60606 WASHINGTON, DC 20036
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APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
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CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
================================================================================
PROPOSED PROPOSED
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
BEING OFFERING MAXIMUM REGISTRATION
REGISTERED(1)PRICE PER OFFERING FEE
UNIT PRICE(1)
- --------------------------------------------------------------------------------
SHARES OF BENEFICIAL 4,000,000 $15.00 $69,000,000 $20,355.00
INTEREST
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(1)INCLUDES 600,000 SHARES WHICH MAY BE OFFERED BY THE UNDERWRITERS PURSUANT TO
AN OPTION TO COVER OVER ALLOTMENTS.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE
DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY
STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR
UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH A DATE AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE>
DREYFUS HIGH YIELD STRATEGIES FUND
CROSS REFERENCE SHEET PURSUANT TO RULE 404(C)
UNDER THE SECURITIES ACT OF 1933
PARTS A AND B OF THE PROSPECTUS*
ITEM NO. REGISTRATION STATEMENT CAPTION LOCATION IN PROSPECTUS
- -------- ------------------------------ ----------------------
1. Outside Front Cover.............. Outside Front Cover
2. Inside Front and Outside back
Cover Page....................... Inside Front and Outside Back
Cover Page
3. Fee Table and Synopsis........... Prospectus Summary; Expenses
Summary
4. Financial Highlights............. Not Applicable
5. Plan of Distribution............. Cover Page; Outside Front
Cover Page; Prospectus
Summary; Underwriting
6. Selling Shareholders............. Not Applicable
7. Use of Proceeds.................. Outside Front Cover; Inside
Front Cover; Prospectus
Summary; Use of Proceeds;
Investment Restrictions
8. General Description of
Registrant....................... Outside Front Cover; Inside
Front Cover; Prospectus
Summary; The Fund; Investment
Practices; Special
Considerations and Risk
Factors; Investment
Restrictions; Dividends and
Distributions; Taxes;
Portfolio Transactions;
Determination of Net Asset
Value
9. Management....................... Inside Front Cover;
Prospectus Summary;
Management of the Fund;
Investment Adviser; Trustees
and Officers of the Fund;
Investment Management
Contract; Portfolio
Transactions; Custodian;
Transfer Agent, Shareholder
Servicing Agent, Custodian
and Transfer and Dividend
Paying Agent;
10. Capital Stock, Long-term Debt,
and Other Securities............. Prospectus Summary; Dividends
and Distributions; Taxes;
Automatic Dividend
Reinvestment Plan
11. Defaults and Arrears on Senior
Securities....................... Not Applicable
12. Legal Proceedings................ Not Applicable
13. Table of Contents of Statement
of Additional Information........ Not Applicable
<PAGE>
ITEM NO. REGISTRATION STATEMENT CAPTION LOCATION IN PROSPECTUS
- -------- ------------------------------ ----------------------
14. Cover Page....................... Not Applicable
15. Table of Contents................ Not Applicable
16. General Information.............. Not Applicable
17. Investment Objectives and
Policies......................... Outside Front Cover; Inside
Front Cover; Prospectus
Summary; Restrictions;
Investment Considerations and
Risks
18. Management....................... Trustees and Officers of the
Fund
19. Control Persons and Principal
Holders of Securities............ Not Applicable
20. Investment and Advisory and
Other Services................... Prospectus Summary;
Investment Advisor; Trustees
and Officers of the Fund;
Management Contract;
Portfolio Transactions;
Shareholder Servicing Agent,
Custodian and Transfer and
Dividend Paying Agent
21. Brokerage Allocation and Other
Practices........................ Portfolio Transactions
22. Tax Status....................... Dividends and Distributions;
Taxes; Independent Auditor's
Report
23. Financial Statements............. Not Applicable
- ----------
* Pursuant to General Instruction H of Form N-2, all information required to
be set forth in Part B: Statement of Additional Information has been
included in Part A: The Prospectus.
PART C
The information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE>
[GRAPHIC OMITTED]
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MARCH 17, 1998
__________ SHARES
DREYFUS HIGH YIELD STRATEGIES FUND
__________________________
Dreyfus High Yield Strategies Fund (the "Fund") is a newly organized,
non-diversified, closed-end management investment company. The Fund's primary
investment objective is to seek high current income. The Fund will also seek
capital growth as a secondary objective, to the extent consistent with its
objective of seeking high current income. Under normal market conditions, the
Fund will invest at least 65% of its total assets in income securities of U.S.
issuers rated below investment grade quality (lower than Baa by Moody's
Investors Service, Inc. or lower than BBB by Standard & Poor's Ratings Group or
comparably rated by another nationally recognized securities organization) or in
unrated income securities that The Dreyfus Corporation ("Dreyfus"), the Fund's
investment manager, determines to be of comparable quality. The Fund may invest
up to 25% of its total assets in securities of issuers domiciled outside the
United States or that are denominated in various foreign currencies and
multinational foreign currency units.
Investments in lower grade securities are subject to special risks,
including greater price volatility and a greater risk of loss of principal and
interest. As a non-diversified investment company, the Fund may invest a greater
portion of its assets in a small number of issuers. The Fund may engage in
various portfolio strategies to seek to enhance income and hedge its portfolio
against investment and interest rate risks, including the use of leverage and
the use of derivative financial instruments. The Fund is designed for investors
willing to assume additional risk in return primarily for the potential for high
current income and secondarily capital growth. An investment in the Fund may be
speculative in that it involves a high degree of risk and should not constitute
a complete investment program. Investors should carefully assess the risks
associated with an investment in the Fund.
SEE "RISK FACTORS AND SPECIAL CONSIDERATIONS."
Dreyfus will serve as investment manager to the Fund. The Fund's address
is 200 Park Avenue, New York, New York 10166, and its telephone number is
1-888-338-8084.
(CONTINUED ON THE FOLLOWING PAGE)
__________________________
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 REPRESEN-
TATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
================================================================================
Price to Sales Load Proceeds to
Public (1) Fund (2)
Per Share......................... $15.00 $None $
Total............................. $ $None $
Total Assuming Full Exercise of
Over-Allotment Option (3)....... $ $None $
================================================================================
(FOOTNOTES ON THE FOLLOWING PAGE)
The Shares are offered by the Underwriters, subject to prior sale, when, as and
if delivered to and accepted by the Underwriters, and subject to their right to
reject orders in whole or in part. It is expected that delivery of the Shares
will be made in New York City on or about ____________, 1998.
__________________________
PAINEWEBBER INCORPORATED
__________________________
The date of this Prospectus is April __, 1998.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SHARES
OF THE FUND AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
NASDAQ MARKET OR OTHERWISE. SUCH STABILIZATION, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
__________________________
(CONTINUED FROM COVER PAGE)
At times, the Fund expects to utilize financial leverage through
borrowings, including the issuance of debt securities, or the issuance of
preferred shares or through other transactions, such as reverse repurchase
agreements, which have the effect of financial leverage. The Fund intends to
utilize financial leverage in an initial amount equal to approximately 25% of
its total assets (including the amount obtained through leverage). The Fund
generally will not utilize leverage if it anticipates that the Fund's leveraged
capital structure would result in a lower return to common shareholders than
that obtainable over time with an unleveraged capital structure. Use of
financial leverage creates an opportunity for increased income and capital
growth for the common shareholders but, at the same time, creates special risks.
SEE "RISK FACTORS AND SPECIAL CONSIDERATIONS-LEVERAGE."
The Fund is offering its shares of beneficial interest, par value $.001
per share (the "Shares"). Prior to this offering, there has been no market for
the Fund's Shares. The Fund intends to apply to list its Shares on the New York
Stock Exchange under the symbol "DHF." Shares of closed-end management
investment companies have in the past frequently traded at discounts from their
net asset values and the Fund's Shares may likewise trade at such a discount.
The risks associated with this characteristic of closed-end management
investment companies may be greater for investors expecting to sell shares of a
closed-end management investment company soon after completion of an initial
public offering of the company's shares. The minimum investment in this offering
is 100 Shares ($1,500). This Prospectus sets forth in concise form information
about the Fund that a prospective investor should know before investing in the
Fund. Investors are advised to read this Prospectus carefully and to retain it
for future reference.
The Fund's Shares do not represent a deposit or obligation of, and are not
guaranteed or endorsed by, any bank or other insured depository institution, and
are not federally insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other government agency.
__________________________
(FOOTNOTES FROM COVER PAGE)
(1) Dreyfus or an affiliate (not the Fund) from its own assets will pay a
commission to the Underwriters in the amount of _% of the Price to Public
per Share in connection with the sale of the Shares offered hereby. The
Fund and Dreyfus have agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(2) Before deducting organizational and offering expenses payable by the Fund,
including payment of $250,000 to the Underwriters in partial reimbursement
of their expenses, estimated at $_______ and $_______, respectively.
Offering expenses will be deducted from net proceeds, and organizational
expenses will be capitalized and amortized against income over a five-year
period.
(3) Assuming exercise in full of the 60-day option granted by the Fund to the
Underwriters to purchase up to _______ additional Shares, on the same
terms, solely to cover over-allotments. See "Underwriting."
-ii-
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. INVESTORS SHOULD CAREFULLY
CONSIDER INFORMATION SET FORTH UNDER THE HEADING "RISK FACTORS AND SPECIAL
CONSIDERATIONS."
THE FUND Dreyfus High Yield Strategies Fund ("Fund") is a newly
organized, non-diversified, closed-end management
investment company. The Fund is managed by The Dreyfus
Corporation ("Dreyfus"). See "The Fund."
THE OFFERING The Fund is offering __________ Shares of Beneficial
Interest, par value $.001 per share ("Shares"),
through a group of underwriters ("Underwriters") led
by PaineWebber Incorporated. The Underwriters have
been granted an option to purchase up to _______
additional Shares solely to cover over-allotments, if
any. The initial public offering price is $15 per
share. The minimum investment in the offering is 100
Shares ($1,500). See "Underwriting."
NO SALES CHARGE The Shares will be sold during the initial public
offering without any sales load or underwriting
discounts payable by investors or the Fund. Dreyfus or
an affiliate (not the Fund) from its own assets will
pay a commission to the Underwriters in connection
with sales of the Shares in this offering. See
"Underwriting."
INVESTMENT OBJECTIVES The Fund's primary investment objective is to seek
AND POLICIES high current income. The Fund will also seek capital
growth as a secondary objective, to the extent
consistent with its objective of seeking high current
income. The Fund is designed for investors willing to
assume additional risk in return for the potential for
high current income and capital growth. The Fund is
not intended to be a complete investment program and
there is no assurance that the Fund will achieve its
objectives.
Under normal market conditions, the Fund will invest
at least 65% of its total assets in income securities
of U.S. issuers rated below investment grade quality
(lower than Baa by Moody's Investors Service, Inc.
("Moody's") or lower than BBB by Standard & Poor's
Ratings Group ("S&P") or comparably rated by another
nationally recognized securities organization (each,
a "Rating Agency")) or in unrated income securities
that Dreyfus determines to be of comparable quality.
Lower grade income securities are commonly known as
"junk bonds." The Fund may invest up to 25% of its
total assets in securities of issuers domiciled
outside the United States or that are denominated in
various foreign currencies and multinational currency
units. The Fund may also invest up to 10% of its total
assets in securities that are the subject of
bankruptcy proceedings or otherwise in default or in
significant risk of being in default ("Distressed
Securities"). The Fund may engage in various portfolio
1
<PAGE>
strategies to seek to enhance income and hedge its
portfolio against investment and interest rate risks,
including the use of leverage and the use of
derivative financial instruments. The Fund is designed
for investors willing to assume additional risk in
return primarily for the potential for high current
income and secondarily capital growth. An investment
in the Fund may be speculative in that it involves a
high degree of risk.
At times, the Fund expects to utilize financial
leverage through borrowings, including the issuance of
debt securities, or the issuance of preferred shares
or through other transactions, such as reverse
repurchase agreements, which have the effect of
financial leverage. The Fund intends to utilize
financial leverage in an initial amount equal to
approximately 25% of its total assets (including the
amount obtained through leverage). The Fund generally
will not utilize leverage if it anticipates that the
Fund's leveraged capital structure would result in a
lower return to holders of Shares ("Shareholders")
than that obtainable over time with an unleveraged
capital structure. Use of financial leverage creates
an opportunity for increased income and capital growth
for the Shareholders but, at the same time, creates
special risks. See "Risk Factors and Special
Considerations-Leverage."
In selecting investments for the Fund's portfolio,
Dreyfus will seek to identify issuers and industries
that Dreyfus believes are likely to experience stable
or improving financial conditions. Dreyfus believes
that this strategy should enhance the Fund's ability
to earn high current income while also providing
opportunities for capital growth. Dreyfus's analysis
may include consideration of general industry trends,
the issuer's managerial strength, changing financial
condition, borrowing requirements or debt maturity
schedules, and its responsiveness to changes in
business conditions and interest rates. Dreyfus may
also consider relative values based on anticipated
cash flow, interest or dividend coverage, asset
coverage and earnings prospects. Of course there can
be no assurances that this strategy will be
successful.
The Fund will seek its secondary objective of capital
growth by investing in securities that Dreyfus expects
may appreciate in value as a result of favorable
developments affecting the business or prospects of
the issuer, which may improve the issuer's financial
condition and credit rating, or as a result of
declines in long-term interest rates.
In certain market conditions, Dreyfus may determine
that securities rated investment grade (i.e., at least
Baa by Moody's or BBB by S&P or comparably rated by
another Rating Agency) offer significant opportunities
for high income and capital growth. In such
conditions, the Fund may invest less than 65% of its
total assets in lower grade income securities of U.S.
issuers. In addition, the Fund may implement various
temporary "defensive" strategies at times when Dreyfus
determines that conditions in the markets make
pursuing the Fund's basic investment strategy
inconsistent with the best interests of its
2
<PAGE>
Shareholders. These strategies may include investing
all or a portion of the Fund's assets in
higher-quality debt securities. See "Investment
Objectives and Policies."
INVESTMENT MANAGER AND Dreyfus is the Fund's investment manager and
ADMINISTRATOR administrator. Dreyfus provides investment management
services to all of the Dreyfus Group of Funds as well
as other institutional, corporate and individual
clients. Dreyfus is a wholly-owned subsidiary of
Mellon Bank, N.A. ("Mellon Bank"). As of December 31,
1997, aggregate assets under the management of Mellon
Bank and its affiliates worldwide exceeded $305
billion. The companies comprising Mellon Bank and its
affiliates are direct and indirect subsidiaries of
Mellon Bank Corporation. As of February 28, 1998,
Dreyfus managed or administered assets of more than
$99 billion.
LISTING Prior to this offering, there has been no market for
the Shares. The Fund intends to apply to list its
Shares on the New York Stock Exchange, Inc. ("NYSE")
under the symbol "DHF," subject to notice of issuance.
DIVIDENDS AND OTHER The Fund intends to pay monthly distributions to
DISTRIBUTIONS Shareholders from net investment income. The initial
distribution to Shareholders is expected to be paid
approximately 60 days after the completion of the
offering of the Fund's Shares. See "Dividends and
Other Distributions."
AUTOMATIC DIVIDEND The Fund has established an Automatic Dividend
REINVESTMENT PLAN Reinvestment Plan (the "Plan"). Under the Plan, all
dividend and capital gain distributions will be
automatically reinvested in additional Shares of the
Fund either purchased in the open market or issued by
the Fund if the Shares are trading at or above their
net asset value, in either case unless the Shareholder
elects to receive cash. Shareholders who intend to
hold their Shares through a broker or nominee should
contact such broker or nominee to determine whether or
how they may participate in the Plan. See "Automatic
Dividend Reinvestment Plan."
STOCK REPURCHASES AND In recognition of the possibility that the Shares
TENDER OFFERS; might trade at a discount to net asset value and that
CONVERSION TO OPEN- any such discount may not be in the interest of
END INVESTMENT Shareholders, the Fund's Board of Trustees, in
COMPANY consultation with Dreyfus, from time to time may
review the possibility of open market repurchases or
tender offers for Shares at net asset value. There can
be no assurance that the Board of Trustees will decide
to undertake either of these actions or that, if
undertaken, such actions would result in the Shares
trading at a price equal to or close to net asset
value per Share. The Board of Trustees from time to
time also may consider the conversion of the Fund to
an open-end investment company. See "Description of
Shares."
3
<PAGE>
INVESTMENT As the Fund's investment manager, Dreyfus will
MANAGEMENT AND determine the composition of the Fund's portfolio,
ADMINISTRATION FEE place all orders for the purchase and sale of
securities and for other transactions, and oversee the
settlement of the Fund's securities and other
portfolio transactions. Dreyfus will also provide
administrative services to the Fund. These will
include, among other things, furnishing officers and
office space, preparing or assisting in preparing
materials for Shareholders and regulatory bodies and
overseeing the provision to the Fund of custodial and
accounting services. For these investment management
and administrative services, the Fund will pay Dreyfus
a monthly fee at the annual rate of .90% of the Fund's
average weekly value of the total assets of the Fund
minus the sum of accrued liabilities (other than the
aggregate indebtedness constituting financial
leverage) (the "Managed Assets"). This fee is higher
than fees paid by other comparable investment
companies. During periods in which the Fund is
utilizing financial leverage, the management and
administrative fee payable to Dreyfus will be higher
than if the Fund did not utilize a leveraged capital
structure because the fee is calculated as a
percentage of the Fund's Managed Assets including
those purchased with leverage. See "Management of the
Fund."
SHAREHOLDER SERVICING PaineWebber Incorporated will act as Shareholder
AGENT, CUSTODIAN Servicing Agent for the Fund. The Fund will pay a
AND TRANSFER AND monthly fee at the annual rate of .10% of the Fund's
DIVIDEND DISBURSING average weekly Managed Assets (as defined above) for
AGENT such services. Mellon Bank, the parent company of
Dreyfus, will act as custodian for the Fund and may
employ sub-custodians outside the U.S. approved by the
Trustees of the Fund in accordance with regulations of
the Securities and Exchange Commission. Mellon Bank
will act as the Fund's Transfer and Dividend
Disbursing Agent. See "Shareholder Servicing Agent,
Custodian and Transfer and Dividend Disbursing Agent."
RISK FACTORS AND Investors are advised to consider carefully the
SPECIAL CONSIDERA- special risks involved in investing in the Fund.
TIONS
GENERAL. The Fund is a newly organized,
non-diversified, closed-end management investment
company and has no operating history. Shares of
closed-end management investment companies frequently
trade at a discount from their net asset value. This
risk of loss associated with this characteristic may
be greater for investors expecting to sell their
Shares in a relatively short period after completion
of the public offering. Accordingly, the Shares are
designed primarily for long-term investors and should
not be considered a vehicle for trading purposes. The
net asset value of the Fund's Shares will fluctuate
with interest rate changes as well as with price
changes of the Fund's portfolio securities and these
fluctuations are likely to be greater during periods
in which the Fund utilizes a leveraged capital
structure. See "Other Investment Practices-Leverage."
LOWER GRADE SECURITIES. Lower grade securities are
regarded as being predominantly speculative as to the
issuer's ability to make payments of principal and
4
<PAGE>
interest. Investment in such securities involves
substantial risk. Lower grade securities are commonly
referred to as "junk bonds." Issuers of lower grade
securities may be highly leveraged and may not have
available to them more traditional methods of
financing. Therefore, the risks associated with
acquiring the securities of such issuers generally are
greater than is the case with higher-rated securities.
For example, during an economic downturn or a
sustained period of rising interest rates, issuers of
lower grade securities may be more likely to
experience financial stress, especially if such
issuers are highly leveraged. During periods of
economic downturn, such issuers may not have
sufficient revenues to meet their interest payment
obligations. The issuer's ability to service its debt
obligations also may be adversely affected by specific
issuer developments, the issuer's inability to meet
specific projected business forecasts or the
unavailability of additional financing. Therefore,
there can be no assurance that in the future there
will not exist a higher default rate relative to the
rates currently existing in the market for lower grade
securities. The risk of loss due to default by the
issuer is significantly greater for the holders of
lower grade securities because such securities may be
unsecured and may be subordinate to other creditors of
the issuer. Other than with respect to Distressed
Securities, discussed below, the lower grade
securities in which the Fund may invest do not include
instruments which, at the time of investment, are in
default or the issuers of which are in bankruptcy.
However, there can be no assurance that such events
will not occur after the Fund purchases a particular
security, in which case the Fund may experience losses
and incur costs.
Lower grade securities frequently have call or
redemption features that would permit an issuer to
repurchase the security from the Fund. If a call were
exercised by the issuer during a period of declining
interest rates, the Fund is likely to have to replace
such called security with a lower yielding security,
thus decreasing the net investment income to the Fund
and dividends to Shareholders.
Lower grade securities tend to be more volatile than
higher-rated fixed-income securities, so that adverse
economic events may have a greater impact on the
prices of lower grade securities than on higher-rated
fixed-income securities. Factors adversely affecting
the market value of such securities are likely to
affect adversely the Fund's net asset value. Recently,
demand for lower grade securities has increased
significantly and the difference between the yields
paid by lower grade securities and investment grade
bonds (i.e., the "spread") has narrowed. To the extent
this differential increases, the value of lower grade
securities in the Fund's portfolio could be adversely
affected.
Like higher-rated fixed-income securities, lower grade
securities generally are purchased and sold through
dealers who make a market in such securities for their
own accounts. However, there are fewer dealers in the
lower grade securities market, which market may be
less liquid than the market for higher-rated
5
<PAGE>
fixed-income securities, even under normal economic
conditions. Also, there may be significant disparities
in the prices quoted for lower grade securities by
various dealers. As a result, during periods of high
demand in the lower grade securities market, it may be
difficult to acquire lower grade securities
appropriate for investment by the Fund. Adverse
economic conditions and investor perceptions thereof
(whether or not based on economic reality) may impair
liquidity in the lower grade securities market and may
cause the prices the Fund receives for its lower grade
securities to be reduced. In addition, the Fund may
experience difficulty in liquidating a portion of its
portfolio when necessary to meet the Fund's liquidity
needs or in response to a specific economic event such
as deterioration in the creditworthiness of the
issuers. Under such conditions, judgment may play a
greater role in valuing certain of the Fund's
portfolio instruments than in the case of instruments
trading in a more liquid market. In addition, the Fund
may incur additional expense to the extent that it is
required to seek recovery upon a default on a
portfolio holding or to participate in the
restructuring of the obligation. See "Investment
Objectives and Policies."
DISTRESSED SECURITIES. The Fund may invest up to 10%
of its total assets in securities that are the subject
of bankruptcy proceedings or otherwise in default as
to the repayment of principal and/or payment of
interest at the time of acquisition by the Fund or are
rated in the lower rating categories (Ca or lower by
Moody's and CC or lower by S&P) or which, if unrated,
are in the judgment of Dreyfus of equivalent quality
("Distressed Securities"). Investment in Distressed
Securities is speculative and involves significant
risk. Distressed Securities frequently do not produce
income while they are outstanding and may require the
Fund to bear certain extraordinary expenses in order
to protect and recover its investment. Therefore, to
the extent the Fund pursues its secondary objective of
capital growth through investment in Distressed
Securities, the Fund's ability to achieve current
income for its Shareholders may be diminished.
LEVERAGE. The use of leverage by the Fund creates an
opportunity for increased net income and capital
growth for the Shares, but, at the same time, creates
special risks. The Fund intends to utilize leverage to
provide the holders of Shares with a potentially
higher return. Leverage creates risks for holders of
Shares including the likelihood of greater volatility
of net asset value and market price of the Shares and
the risk that fluctuations in interest rates on
borrowings and debt or in the dividend rates on any
preferred shares may affect the return to the holders
of Shares. To the extent the income or capital growth
derived from securities purchased with funds received
from leverage exceeds the cost of leverage, the Fund's
return will be greater than if leverage had not been
used. Conversely, if the income or capital growth from
the securities purchased with such funds is not
sufficient to cover the cost of leverage, the return
to the Fund will be less than if leverage had not been
used, and therefore the amount available for
distribution to Shareholders as dividends and other
distributions will be reduced. In the latter case,
6
<PAGE>
Dreyfus in its best judgment may nevertheless
determine to maintain the Fund's leveraged position if
it deems such action to be appropriate under the
circumstances. During periods in which the Fund is
utilizing financial leverage, the investment
management and administrative fee, which is payable to
Dreyfus as a percentage of the Fund's Managed Assets,
will be higher than if the Fund did not utilize a
leveraged capital structure. Certain types of
borrowings by the Fund may result in the Fund being
subject to covenants in credit agreements relating to
asset coverage and portfolio composition requirements.
The Fund may be subject to certain restrictions on
investments imposed by guidelines of one or more
Rating Agencies, which may issue ratings for the debt
securities or preferred shares issued by the Fund.
These guidelines may impose asset coverage or
portfolio composition requirements that are more
stringent than those imposed by the Investment Company
Act of 1940, as amended (the "Investment Company
Act"). It is not anticipated that these covenants or
guidelines will impede Dreyfus in managing the Fund's
portfolio in accordance with the Fund's investment
objectives and policies. The Fund at times may borrow
from affiliates of Dreyfus, provided that the terms of
such borrowings are no less favorable than those
available from comparable sources of funds in the
marketplace. As discussed under "Management of the
Fund," the fee paid to Dreyfus will be calculated on
the basis of the Fund's assets including proceeds from
borrowings for leverage and the issuance of preferred
shares. See "Other Investment Policies-Leverage."
FOREIGN SECURITIES. The Fund may invest up to 25% of
its total assets in securities of issuers domiciled
outside of the United States or that are denominated
in various foreign currencies and multinational
foreign currency units. Investing in securities of
foreign entities and securities denominated in foreign
currencies involves certain risks not involved in
domestic investments, including, but not limited to,
fluctuations in foreign exchange rates, future foreign
political and economic developments, different legal
systems and the possible imposition of exchange
controls or other foreign governmental laws or
restrictions. Securities prices in different countries
are subject to different economic, financial,
political and social factors. Since the Fund may
invest in securities denominated or quoted in
currencies other than the U.S. dollar, changes in
foreign currency exchange rates may affect the value
of securities in the Fund and the unrealized
appreciation or depreciation of investments.
Currencies of certain countries may be volatile and
therefore may affect the value of securities
denominated in such currencies. The Fund may engage in
certain transactions to hedge the currency-related
risks of investing in non-U.S. dollar denominated
securities. See "Other Investment Practices." In
addition, with respect to certain foreign countries,
there is the possibility of expropriation of assets,
confiscatory taxation, difficulty in obtaining or
enforcing a court judgment, economic, political or
social instability or diplomatic developments that
could affect investments in those countries. Moreover,
individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as
growth of gross domestic product, rates of inflation,
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<PAGE>
capital reinvestment, resources, self-sufficiency and
balance of payments position. Certain foreign
investments also may be subject to foreign withholding
taxes. These risks often are heightened for
investments in smaller, emerging capital markets.
As a result of these potential risks, Dreyfus may
determine that, notwithstanding otherwise favorable
investment criteria, it may not be practicable or
appropriate to invest in a particular country. The
Fund may invest in countries in which foreign
investors, including Dreyfus, have had no or limited
prior experience.
OTHER INVESTMENT MANAGEMENT TECHNIQUES. The Fund may
use various other investment management techniques
that also involve special considerations, including
engaging in interest rate transactions, utilization of
options and futures transactions, making forward
commitments and lending its portfolio securities. For
further discussion of these practices and the
associated risks and special considerations, see
"Other Investment Policies."
ILLIQUID SECURITIES. The Fund may invest in securities
for which no readily available market exists or which
are otherwise illiquid. The Fund may not be able
readily to dispose of such securities at prices that
approximate those at which the Fund could sell such
securities if they were more widely traded and, as a
result of such illiquidity, the Fund may have to sell
other investments or engage in borrowing transactions
if necessary to raise cash to meet its obligations.
NON-DIVERSIFIED STATUS. The Fund is classified as a
"non-diversified" investment company under the
Investment Company Act, which means that the Fund may
invest a greater portion of its assets in a limited
number of issuers than would be the case if the Fund
were classified as a "diversified" investment company.
Accordingly, the Fund may be subject to greater risk
with respect to its portfolio securities than an
investment company that is "diversified" because
changes in the financial condition or market
assessment of a single issuer may cause greater
fluctuations in the net asset value of the Shares.
MARKET PRICE, DISCOUNT AND NET ASSET VALUE OF Shares.
Shares of closed-end management investment companies
in the past frequently have traded at a discount to
their net asset values. The risk of loss associated
with this characteristic of closed-end management
investment companies may be greater for investors
purchasing Shares in the initial public offering and
expecting to sell the Shares soon after the completion
thereof. Whether investors will realize gains or
losses upon the sale of Shares will not depend
directly upon the Fund's net asset value, but will
depend upon the market price of the Shares at the time
of sale. Since the market price of the Shares will be
determined by such factors as relative demand for and
supply of the Shares in the market, general market and
8
<PAGE>
economic conditions and other factors beyond the
control of the Fund, the Fund cannot predict whether
the Shares will trade at, below or above net asset
value or at, below or above the initial offering
price. The Shares are designed primarily for long-term
investors, and investors in the Shares should not view
the Fund as a vehicle for trading purposes. See "Risk
Factors and Special Considerations" and "Description
of Shares."
ANTI-TAKEOVER PROVISIONS. The Fund's Declaration of
Trust contains provisions limiting (i) the ability of
other entities or persons to acquire control of the
Fund, (ii) the Fund's freedom to engage in certain
transactions, and (iii) the ability of the Fund's
Trustees or Shareholders to amend the Declaration of
Trust. These provisions of the Declaration of Trust
may be regarded as "anti-takeover" provisions. These
provisions could have the effect of depriving the
Shareholders of opportunities to sell their Shares at
a premium over prevailing market prices by
discouraging a third party from seeking to obtain
control of the Fund in a tender offer or similar
transaction. See "Investment Objectives and Policies,"
"Risk Factors and Special Considerations" and
"Description of Shares."
9
<PAGE>
FEE TABLE
The following tables are intended to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear, directly or
indirectly.
SHAREHOLDER TRANSACTION EXPENSES
Sales Load (as a percentage of offering price)............................None
Automatic Dividend Reinvestment Plan Fees.................................None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS
ATTRIBUTABLE TO SHARES)(1)
Management and Administrative Fee........................................0.90%
Interest Payments on Borrowed Funds ......................................None
Shareholder Servicing Fee...............................................0.10%
Other Expenses.............................................................__%
Total Annual Fund Expenses...........................................__%
- ----------
(1) See "Management of the Fund" for additional information. In the event the
Fund utilizes leverage by borrowing in an amount equal to approximately
25% of the Fund's total assets (including the amount obtained from
leverage), it is estimated that, as a percentage of net assets
attributable to the Shares, the Management and Administrative Fee would be
[____%], Interest Payments on Borrowed Funds (assuming an interest rate of
[6.25%]) would be [____]%, the Shareholder Servicing Fee would be [____%],
Other Expenses would be [____%] and Total Annual Fund Expenses would be
[____%]. "Other Expenses" have been estimated. The Fund may utilize
leverage up to 33-1/3% of the Fund's total assets (including the amount
obtained from the leverage), depending on economic conditions. See "Risk
Factors and Considerations-Leverage" and "Other Investment
Policies-Leverage."
10
<PAGE>
EXAMPLE
The following Example demonstrates the projected dollar amount of total
cumulative expense that would be incurred over various periods with respect to a
hypothetical investment in the Fund. These amounts are based upon payment by the
Fund of operating expenses at the levels set forth in the above table.
1 Year 3 Years 5 Years 10 Years
An investor would directly or
indirectly pay the following
expenses on a $1,000
investment in the Fund,
assuming (i) total annual
expenses of [____%] (assuming
no leverage) and [____%]
(assuming leverage of 25% of
the Fund's total assets) and
(ii) a 5% annual return
throughout the periods and
reinvestment of all dividends
and other distributions at net
asset value:
Assuming No Leverage.......
Assuming 25% Leverage......
This Example assumes that the percentage amounts listed under Total Annual
Fund Expenses remain the same in the years shown, except, as to Ten Years, for
the completion of organizational expense amortization. The above tables and the
assumption in the Example of a 5% annual return and reinvestment at net asset
value are required by regulation of the Securities and Exchange Commission
applicable to all investment companies; the assumed 5% annual return is not a
prediction of, and does not represent, the projected or actual performance of
the Shares. Actual expenses and annual rates of return may be more or less than
those assumed for purposes of the Example. In addition, although the Example
assumes reinvestment of all dividends and other distributions at net asset
value, participants in the Fund's Automatic Dividend Reinvestment Plan may
receive Shares obtained by the Plan Agent at or based on the market price in
effect at that time, which may be at, above or below net asset value.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES,
AND THE FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
11
<PAGE>
THE FUND
Dreyfus High Yield Strategies Fund ("Fund") is registered under the
Investment Company Act of 1940, as amended (the "Investment Company Act"), as a
non-diversified, closed-end management investment company. The Fund was
organized as a business trust under the laws of the Commonwealth of
Massachusetts on March __, 1998 and has no operating history. The Fund's
principal office is located at 200 Park Avenue, New York, New York 10166, and
its telephone number is 1-888-338-8084 . The Dreyfus Corporation ("Dreyfus") is
the Fund's investment manager.
The Fund has been organized as a closed-end management investment company.
Closed-end management investment companies differ from open-end investment
companies (commonly referred to as mutual funds) in that closed-end management
investment companies do not redeem their securities at the option of the
shareholder, whereas mutual funds issue securities redeemable at net asset value
at any time at the option of the shareholder and typically engage in a
continuous offering of their shares. Mutual funds are subject to continuous
asset in-flows and out-flows that can complicate portfolio management, whereas
closed-end funds generally can stay more fully invested. To facilitate
redemption obligations, mutual funds are subject to more stringent regulatory
limitations on certain investments, such as investments in illiquid securities,
than are closed-end funds. However, shares of closed-end companies frequently
trade at a discount from net asset value. This risk may be greater for investors
expecting to sell their shares in a relatively short period after the completion
of the public offering.
USE OF PROCEEDS
The proceeds of this initial public offering are estimated at
$_____________ ($____________ if the Underwriters' over-allotment option is
exercised in full) before payment of organizational and offering expenses
(estimated at $________ and $__________, respectively). The proceeds will be
invested in accordance with the Fund's investment objectives and policies during
a period not to exceed six months from the closing of the initial public
offering. Pending such investment, the proceeds may be invested in U.S.
dollar-denominated, high quality, short-term instruments. A portion of the
Fund's organizational and offering expenses has been advanced by Dreyfus and
will be repaid by the Fund upon completion of the initial public offering. There
is no sales load or underwriting discount imposed on sales of Shares in the
initial public offering. Dreyfus or its affiliate (not the Fund) from its own
assets will pay a commission to the Underwriters in connection with sales of
Shares in this offering. See "Underwriting."
12
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES
The Fund's primary investment objective is to seek high current income.
The Fund will also seek capital growth as a secondary objective to the extent
consistent with its objective of seeking high current income. The Fund is
designed for investors willing to assume additional risk in return primarily for
the potential for high current income and secondarily capital growth. The Fund
is not intended to be a complete investment program and there is no assurance
that the Fund will achieve its objectives. The Fund's investment objectives
cannot be changed without approval by the holders of a majority (as defined in
the Investment Company Act) of the Fund's outstanding voting securities.
INVESTMENT POLICIES
Under normal market conditions, the Fund will invest at least 65% of its
total assets in income securities of U.S. issuers rated below investment grade
quality (lower than Baa by Moody's Investors Service, Inc. ("Moody's") or lower
than BBB by Standard & Poor's Ratings Group ("S&P") or comparably rated by
another nationally recognized securities organization (each, a "Rating Agency"))
or in unrated income securities that Dreyfus determines to be of comparable
quality. Lower grade income securities are commonly known as "junk bonds." The
Fund may invest up to 25% of its total assets in securities of issuers domiciled
outside the United States or that are denominated in various foreign currencies
and multinational currency units. The Fund may also invest up to 10% of its
total assets in securities that are the subject of bankruptcy proceedings or
otherwise in default or in significant risk of being in default ("Distressed
Securities").
At times, the Fund expects to utilize financial leverage through
borrowings, including the issuance of debt securities, or the issuance of
preferred shares or through other transactions, such as reverse repurchase
agreements, which have the effect of financial leverage. The Fund intends to
utilize financial leverage in an initial amount equal to approximately 25% of
its total assets (including the amount obtained through leverage). The Fund
generally will not utilize leverage if it anticipates that the Fund's leveraged
capital structure would result in a lower return to Shareholders than that
obtainable over time with an unleveraged capital structure. Use of financial
leverage creates an opportunity for increased income and capital growth for the
Shareholders but, at the same time, creates special risks. See "Other Investment
Practices-Leverage" and "Risk Factors and Special Considerations-Leverage."
In certain market conditions, Dreyfus may determine that securities rated
investment grade (i.e., at least Baa by Moody's or BBB by S&P or comparably
rated by another Rating Agency) offer significant opportunities for high income
13
<PAGE>
and capital growth. In such conditions, the Fund may invest less than 65% of its
total assets in lower grade income securities of U.S. issuers. In addition, the
Fund may implement various temporary "defensive" strategies at times when
Dreyfus determines that conditions in the markets make pursuing the Fund's basic
investment strategy inconsistent with the best interests of its Shareholders.
These strategies may include an increase in the portion of the Fund's assets
invested in higher-quality debt securities. The Fund may invest in money market
instruments consisting of U.S. Government securities, certificates of deposit,
time deposits, bankers' acceptances, short-term investment grade corporate bonds
and other short-term debt instruments, and repurchase agreements. Under normal
market conditions, the Fund does not expect to have a substantial portion of its
assets invested in money market instruments. However, when Dreyfus determines
that adverse market conditions exist, the Fund may adopt a temporary defensive
posture and invest all or a portion of its assets in money market instruments.
In selecting investments for the Fund's portfolio, Dreyfus will seek to
identify issuers and industries that Dreyfus believes are likely to experience
stable or improving financial conditions. Dreyfus believes that this strategy
should enhance the Fund's ability to earn high current income while also
providing opportunities for capital growth. Dreyfus's analysis may include
consideration of general industry trends, the issuer's managerial strength,
changing financial condition, borrowing requirements or debt maturity schedules,
and its responsiveness to changes in business conditions and interest rates.
Dreyfus may also consider relative values based on anticipated cash flow,
interest or dividend coverage, asset coverage and earnings prospects. The Fund
will seek its secondary objective of capital growth by investing in securities
that Dreyfus expects may appreciate in value as a result of favorable
developments affecting the business or prospects of the issuer which may improve
the issuer's financial condition and credit rating or as a result of declines in
long-term interest rates. Of course there is no assurance the Fund's strategies
will be successful.
The market for lower grade income securities, as measured by the ML
High-Yield Master Index, posted total annual returns of 39.17%, 17.44%, 16.69%,
(1.03)%, 20.46%, 11.27% and 13.27% for the calendar years 1991, 1992, 1993,
1994, 1995, 1996 and 1997, respectively. By comparison, the market for
investment grade income securities, as measured by the ML Long-Term Corporate
Index, posted total annual returns of 17.60%, 8.59%, 11.57%, (3.91)%, 21.66%,
2.76% and 10.43% for calendar years 1991, 1992, 1993, 1994, 1995, 1996 and 1997,
respectively. The U.S. Treasury Bill market, as measured by the ML U.S. Treasury
91-Day Index, posted total returns of 6.38%, 3.93%, 3.19%, 4.19%, 6.03%, 5.31%
and 5.33% for calendar years 1991, 1992, 1993, 1994, 1995, 1996 and 1997,
respectively. The ML High-Yield Master Index is an unmanaged composite index of
securities rated below BBB that are not in default. The ML Long-Term Corporate
Index is an unmanaged index which includes fixed coupon domestic corporate bonds
with at least $100 million par amount outstanding that are rated between BBB and
AAA. The ML U.S. Treasury 91-Day Index is an average price based on all
three-month Treasury bill auctions over the course of the previous month.
Treasury Bills are guaranteed as to principal by the U.S. Government. The Fund
will have no direct investment in, nor will its performance be indicative of,
these unmanaged indices.
The market of outstanding lower grade income securities has increased over
the years. The outstanding principal amounts of lower grade income securities of
U.S. issuers in 1984 was $59 billion, in 1989 was $244 billion, in 1994 was $270
billion and in 1997 was over $450 billion. The default rates on lower grade
income securities of U.S. issuers for the calendar years 1989, 1990, 1991, 1992,
1993, 1994, 1995, 1996 and 1997 were 5.8%, 8.7%, 10.5%, 4.6%, 3.3%, 1.8%, 3.2%,
1.4% and 1.1%, respectively. The statistical information with respect to the
principal amounts of outstanding securities and with respect to historical
default rates is based on information the Fund obtained from Chase Securities,
Inc.
The Fund will invest primarily in bonds, debentures, notes and other debt
instruments. The Fund's portfolio securities may have fixed or variable rates of
interest and may include zero coupon securities, payment in kind securities or
other deferred payment securities, convertible debt obligations and convertible
preferred stock, participation interests in commercial loans, mortgage-related
securities, asset-backed securities, municipal obligations, government
securities, stripped securities, commercial paper and other short-term debt
obligations. The issuers of the Fund's portfolio securities may include domestic
and foreign corporations, partnerships, trusts or similar entities, and
governmental entities or their political subdivisions, agencies or
instrumentalities. The Fund may invest in companies in, or governments of,
developing countries. The Fund may invest up to 25% of its total assets in
securities of issuers domiciled outside the United States or that are
denominated in various foreign currencies and multinational foreign currency
units. The Fund's portfolio will be invested without regard to maturity. In
connection with its investments in corporate debt securities, or restructuring
14
<PAGE>
of investments owned by the Fund, the Fund may receive warrants or other
non-income producing equity securities. The Fund may retain such securities,
including equity shares received upon conversion of convertible securities,
until Dreyfus determines it is appropriate in light of current market conditions
to effect a disposition of such securities.
PORTFOLIO SECURITIES
LOWER GRADE SECURITIES. Under normal market conditions, the Fund will
invest at least 65% of its total assets in income securities of U.S. issuers
rated below investment grade quality (lower than Baa by Moody's or lower than
BBB by S&P or comparably rated by another Rating Agency) or in unrated income
securities that Dreyfus determines to be of comparable quality. Securities rated
Ba by Moody's are judged to have speculative elements; their future cannot be
considered as well assured and often the protection of interest and principal
payments may be very moderate. Securities rated BB by S&P are regarded as having
predominantly speculative characteristics and, while such obligations have less
near-term vulnerability to default than other speculative grade debt, in the
opinion of S&P they face major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to inadequate
capacity to meet timely interest and principal payments. Securities rated C by
Moody's are regarded by Moody's as having extremely poor prospects of ever
attaining any real investment standing. Securities rated D by S&P are in default
and the payment of interest and/or repayment of principal is in arrears. See
"Appendix A-Ratings of Corporate Bonds" for additional information concerning
rating categories.
Lower grade securities, though high yielding, are characterized by high
risk. They may be subject to certain risks with respect to the issuing entity
and to greater market fluctuations than certain lower yielding, higher rated
securities. The retail secondary market for lower grade securities may be less
liquid than that of higher rated securities; adverse conditions could make it
difficult at times for the Fund to sell certain securities or could result in
lower prices than those used in calculating the Fund's net asset value.
Bond prices generally are inversely related to interest rate changes;
however, bond price volatility also is inversely related to coupon. Accordingly,
lower grade securities may be relatively less sensitive to interest rate changes
than higher quality securities of comparable maturity, because of their higher
coupon. This higher coupon is what the investor receives in return for bearing
greater credit risk. The higher credit risk associated with lower grade
securities potentially can have a greater effect on the value of such securities
than may be the case with higher quality issues of comparable maturity, and will
be a substantial factor in the Fund's relative Share price volatility.
Lower grade securities may be particularly susceptible to economic
downturns. It is likely that an 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 ratings of Moody's, S&P and the other Rating Agencies
represent their opinions as to the quality of the obligations which they
undertake to rate. Ratings are relative and subjective and, although ratings may
be useful in evaluating the safety of interest and principal payments, they do
not evaluate the market value risk of such obligations. Although these ratings
may be an initial criterion for selection of portfolio investments, Dreyfus also
will evaluate these securities and the ability of the issuers of such securities
to pay interest and principal. To the extent that the Fund invests in lower
15
<PAGE>
grade securities that have not been rated by a Rating Agency, the Fund's ability
to achieve its investment objectives will be more dependent on Dreyfus' credit
analysis than would be the case when the Fund invests in rated securities.
The Fund may also invest in zero coupon, pay-in-kind or deferred payment
lower grade securities. Zero coupon securities are securities that are sold at a
discount to par value and on which interest payments are not made during the
life of the security. Upon maturity, the holder is entitled to receive the par
value of the security. While interest payments are not made on such securities,
holders of such securities are deemed annually to have received "phantom
income." Because the Fund will distribute this "phantom income" to Shareholders,
to the extent that Shareholders elect to receive dividends in cash rather than
reinvesting such dividends in additional Shares, the Fund will have fewer assets
with which to purchase income-producing securities. The Fund accrues income with
respect to these securities prior to the receipt of cash payments. Pay-in-kind
securities are securities that have interest payable by delivery of additional
securities. Upon maturity, the holder is entitled to receive the aggregate par
value of the securities. Deferred payment securities are securities that remain
zero coupon securities until a predetermined date, at which time the stated
coupon rate becomes effective and interest becomes payable at regular intervals.
Zero coupon, pay-in-kind and deferred payment securities are subject to greater
fluctuation in value and may have less liquidity in the event of adverse market
conditions than comparably rated securities paying cash interest at regular
interest payment periods.
CONVERTIBLE SECURITIES. Convertible securities may be converted at either
a stated price or stated rate into underlying shares of common stock.
Convertible securities have characteristics similar to both fixed-income and
equity securities. Convertible securities generally are subordinated to other
similar but non-convertible securities of the same issuer, although convertible
bonds, as corporate debt obligations, enjoy seniority in right of payment to all
equity securities, and convertible preferred stock is senior to shares of common
stock, of the same issuer. Because of the subordination feature, however,
convertible securities typically have lower ratings than similar non-convertible
securities.
Although to a lesser extent than with fixed-income securities, the market
value of convertible securities tends to decline as interest rates increase and,
conversely, tends to increase as interest rates decline. In addition, because of
the conversion feature, the market value of convertible securities tends to vary
with fluctuations in the market value of the underlying common stock. A unique
feature of convertible securities is that as the market price of the underlying
common stock declines, convertible securities tend to trade increasingly on a
yield basis, and so may not experience market value declines to the same extent
as the underlying common stock. When the market price of the underlying common
stock increases, the prices of the convertible securities tend to rise as a
reflection of the value of the underlying common stock. While no securities
investments are without risk, investments in convertible securities generally
entail less risk than investments in common stock of the same issuer.
Convertible securities are investments that provide for a stable stream of
income with generally higher yields than common stock. There can be no assurance
of current income because the issuers of the convertible securities may default
on their obligations. A convertible security, in addition to providing fixed
income, offers the potential for capital growth through the conversion feature,
which enables the holder to benefit from increases in the market price of the
underlying common stock. There can be no assurance of capital growth, however,
because securities prices fluctuate. Convertible securities, however, generally
offer lower interest or dividend yields than non-convertible securities of
similar quality because of the potential for capital growth.
PARTICIPATION INTERESTS. The Fund may invest in corporate obligations
denominated in U.S. and foreign currencies that are originated, negotiated and
structured by a syndicate of lenders ("Co-Lenders") consisting of commercial
16
<PAGE>
banks, thrift institutions, insurance companies, financial companies or other
financial institutions one or more of which administer the security on behalf of
the syndicate (the "Agent Bank"). Co-Lenders may sell such securities to third
parties called "Participants." The Fund may invest in such securities either by
participating as a Co-Lender at origination or by acquiring an interest in the
security from a Co-Lender or a Participant (collectively, "participation
interests"). Co-Lenders and Participants interposed between the Fund and the
corporate borrower (the "Borrower"), together with Agent Banks, are referred to
herein as "Intermediate Participants." The Fund also may purchase a
participation interest in a portion of the rights of an Intermediate
Participant, which would not establish any direct relationship between the Fund
and the Borrower. In such cases, the Fund would be required to rely on the
Intermediate Participant that sold the participation interest not only for the
enforcement of the Fund's rights against the Borrower but also for the receipt
and processing of payments due to the Fund under the security. Because it may be
necessary to assert through an Intermediate Participant such rights as may exist
against the Borrower, in the event the Borrower fails to pay principal and
interest when due, the Fund may be subject to delays, expenses and risks that
are greater than those that would be involved if the Fund would enforce its
rights directly against the Borrower. Moreover, under the terms of a
participation interest, the Fund may be regarded as a creditor of the
Intermediate Participant (rather than of the Borrower), so that the Fund may
also be subject to the risk that the Intermediate Participant may become
insolvent. Similar risks may arise with respect to the Agent Bank if, for
example, assets held by the Agent Bank for the benefit of the Fund were
determined by the appropriate regulatory authority or court to be subject to the
claims of the Agent Bank's creditors. In such case, the Fund might incur certain
costs and delays in realizing payment in connection with the participation
interest or suffer a loss of principal and/or interest. Further, in the event of
the bankruptcy or insolvency of the Borrower, the obligation of the Borrower to
repay the loan may be subject to certain defenses that can be asserted by such
Borrower as a result of improper conduct by the Agent Bank or Intermediate
Participant.
DISTRESSED SECURITIES. The Fund may invest up to 10% of its total assets
in securities, including participation interests purchased in the secondary
market, which are the subject of bankruptcy proceedings or otherwise in default
as to the repayment of principal and/or payment of interest at the time of
acquisition by the Fund or are rated in the lower rating categories (Ca or lower
by Moody's and CC or lower by S&P) or which, if unrated, are in the judgment of
Dreyfus of equivalent quality ("Distressed Securities"). Investment in
Distressed Securities is speculative and involves significant risk. Distressed
Securities frequently do not produce income while they are outstanding and may
require the Fund to bear certain extraordinary expenses in order to protect and
recover its investment. Therefore, to the extent the Fund pursues its secondary
objective of capital growth through investment in Distressed Securities, the
Fund's ability to achieve current income for its Shareholders may be diminished.
The Fund also will be subject to significant uncertainty as to when and in what
manner and for what value the obligations evidenced by the Distressed Securities
will eventually be satisfied (e.g., through a liquidation of the obligor's
assets, an exchange offer or plan of reorganization involving the Distressed
Securities or a payment of some amount in satisfaction of the obligation). In
addition, even if an exchange offer is made or plan of reorganization is adopted
with respect to Distressed Securities held by the Fund, there can be no
assurance that the securities or other assets received by the Fund in connection
with such exchange offer or plan of reorganization will not have a lower value
or income potential than may have been anticipated when the investment was made.
Moreover, any securities received by the Fund upon completion of an exchange
offer or plan of reorganization may be restricted as to resale. As a result of
the Fund's participation in negotiations with respect to any exchange offer or
plan of reorganization with respect to an issuer of Distressed Securities, the
Fund may be restricted from disposing of such securities. See "Risk Factors and
Special Considerations."
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FOREIGN SECURITIES. The Fund may invest up to 25% of its total assets in
securities of issuers domiciled outside the United States or that are
denominated in various foreign currencies and multinational foreign currency
units. Foreign securities markets generally are not as developed or efficient as
those in the United States. Securities of some foreign issuers are less liquid
and more volatile than securities of comparable U.S. issuers. Similarly, volume
and liquidity in most foreign securities markets are less than in the United
States and, at times, volatility of price can be greater than in the United
States.
Because evidences of ownership of such securities usually are held outside
the United States, the Fund will be subject to additional risks which include
possible adverse political and economic developments, seizure or nationalization
of foreign deposits and adoption of governmental restrictions which might
adversely affect or restrict the payment of principal and interest on the
foreign securities to investors located outside the country of the issuer,
whether from currency blockage or otherwise.
Developing countries have economic structures that are generally less
diverse and mature, and political systems that are less stable, than those of
developed countries. The markets of developing countries may be more volatile
than the markets of more mature economies; however, such markets may provide
higher rates of return to investors. Many developing countries providing
investment opportunities for the Fund have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have adverse
effects on the economies and securities markets of certain of these countries.
Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in U.S.
dollars may be affected favorably or unfavorably by changes in currency rates
and exchange control regulations. The Fund may engage in certain transactions to
hedge the currency-related risks of investing in non-U.S. dollar denominated
securities. See "Other Investment Practices."
VARIABLE AND FLOATING RATE SECURITIES. Variable and floating rate
securities provide for a periodic adjustment in the interest rate paid on the
obligations. The terms of such obligations must provide that interest rates are
adjusted periodically based upon an interest rate adjustment index as provided
in the respective obligations. The adjustment intervals may be regular, and
range from daily up to annually, or may be event based, such as based on a
change in the prime rate.
The Fund may invest in floating rate debt instruments ("floaters"). The
interest rate on a floater is a variable rate which is tied to another interest
rate, such as a money-market index or Treasury bill rate. The interest rate on a
floater resets periodically, typically every six months. Because of the interest
rate reset feature, floaters provide the Fund with a certain degree of
protection against rises in interest rates, although the Fund will participate
in any declines in interest rates as well. The Fund also may invest in inverse
floating rate debt instruments ("inverse floaters"). The interest rate on an
inverse floater resets in the opposite direction from the market rate of
interest to which the inverse floater is indexed or inversely to a multiple of
the applicable index. An inverse floating rate security may exhibit greater
price volatility than a fixed rate obligation of similar credit quality.
MORTGAGE-RELATED SECURITIES. Mortgage-related securities are a form of
derivative collateralized by pools of commercial or residential mortgages. Pools
of mortgage loans are assembled as securities for sale to investors by various
governmental, government-related and private organizations. These securities may
include complex instruments such as collateralized mortgage obligations,
stripped mortgage-backed securities, mortgage pass-through securities, interests
in real estate mortgage investment conduits ("REMICs"), adjustable rate
mortgages, interests in real estate investment trusts ("REITs"), including debt
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and preferred stock issued by REITs, as well as other real estate-related
securities. The mortgage-related securities in which the Fund may invest include
those with fixed, floating or variable interest rates, those with interest rates
that change based on multiples of changes in a specified index of interest rates
and those with interest rates that change inversely to changes in interest
rates, as well as those that do not bear interest.
Mortgage-related securities are subject to credit risks associated with
the performance of the underlying mortgage properties. Adverse changes in
economic conditions and circumstances are more likely to have an adverse impact
on mortgage-related securities secured by loans on certain types of commercial
properties than on those secured by loans on residential properties. In
addition, these securities are subject to prepayment risk, although commercial
mortgages typically have shorter maturities than residential mortgages and
prepayment protection features. In certain instances, the credit risk associated
with mortgage-related securities can be reduced by third-party guarantees or
other forms of credit support. Improved credit risk does not reduce prepayment
risk which is unrelated to the rating assigned to the mortgage-related security.
Prepayment risk can lead to fluctuations in value of the mortgage-related
security which may be pronounced. If a mortgage-related security is purchased at
a premium, all or part of the premium may be lost if there is a decline in the
market value of the security, whether resulting from changes in interest rates
or prepayments on the underlying mortgage collateral. Certain mortgage-related
securities that may be purchased by the Fund, such as inverse floating rate
collateralized mortgage obligations, have coupons that move inversely to a
multiple of a specific index which may result in a form of leverage. As with
other interest-bearing securities, the prices of certain mortgage-related
securities are inversely affected by changes in interest rates. However,
although the value of a mortgage-related security may decline when interest
rates rise, the converse is not necessarily true, since in periods of declining
interest rates the mortgages underlying the security are more likely to be
prepaid. For this and other reasons, a mortgage-related security's stated
maturity may be shortened by unscheduled prepayments on the underlying
mortgages, and, therefore, it is not possible to predict accurately the
security's return to the Fund. Moreover, with respect to certain stripped
mortgage-backed securities, if the underlying mortgage securities experience
greater than anticipated prepayments of principal, the Fund may fail to fully
recoup its initial investment even if the securities are rated in the highest
rating category by a Rating Agency. During periods of rapidly rising interest
rates, prepayments of mortgage-related securities may occur at slower than
expected rates. Slower prepayments effectively may lengthen a mortgage-related
security's expected maturity which generally would cause the value of such
security to fluctuate more widely in response to changes in interest rates. Were
the prepayments on the Fund's mortgage-related securities to decrease broadly,
the Fund's effective duration, and thus sensitivity to interest rate
fluctuations, would increase.
GOVERNMENT-AGENCY SECURITIES. Mortgage-related securities issued by the
Government National Mortgage Association ("GNMA") include GNMA Mortgage
Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee is
backed by the full faith and credit of the United States. GNMA is a wholly-owned
U.S. Government corporation within the Department of Housing and Urban
Development. GNMA certificates also are supported by the authority of GNMA to
borrow funds from the U.S. Treasury to make payments under its guarantee.
GOVERNMENT-RELATED SECURITIES. Mortgage-related securities issued by the
Federal National Mortgage Association ("FNMA") include FNMA Guaranteed Mortgage
Pass-Through Certificates (also known as "Fannie Maes") which are solely the
obligations of FNMA and are not backed by or entitled to the full faith and
credit of the United States. FNMA is a government-sponsored organization owned
entirely by private shareholders. Fannie Maes are guaranteed as to timely
payment of principal and interest by FNMA. Mortgage-related securities issued by
the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage
Participation Certificates (also known as "Freddie Macs" or "PCs"). FHLMC is a
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corporate instrumentality of the United States created pursuant to an Act of
Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are
not guaranteed by the United States or by any Federal Home Loan Bank and do not
constitute a debt or obligation of the United States or of any Federal Home Loan
Bank. Freddie Macs entitle the holder to timely payment of interest, which is
guaranteed by FHLMC. FHLMC guarantees either ultimate collection or timely
payment of all principal payments on the underlying mortgage loans. When FHLMC
does not guarantee timely payment of principal, FHLMC may remit the amount due
on account of its guarantee of ultimate payment of principal at any time after
default on an underlying mortgage, but in no event later than one year after it
becomes payable.
PRIVATE ENTITY SECURITIES. These mortgage-related securities are issued by
commercial banks, savings and loan institutions, mortgage bankers, private
mortgage insurance companies and other non-governmental issuers. Timely payment
of principal and interest on mortgage-related securities backed by pools created
by non-governmental issuers often is supported partially by various forms of
insurance or guarantees, including individual loan, title, pool and hazard
insurance. The insurance and guarantees are issued by government entities,
private insurers and the mortgage poolers. There can be no assurance that the
private insurers or mortgage poolers can meet their obligations under the
policies, so that if the issuers default on their obligations the holders of the
security could sustain a loss. No insurance or guarantee covers the Fund or the
price of the Fund's Shares. Mortgage-related securities issued by
non-governmental issuers generally offer a higher rate of interest than
government-agency and government-related securities because there are no direct
or indirect government guarantees of payment.
COMMERCIAL MORTGAGE-RELATED SECURITIES. Commercial mortgage-related
securities generally are multi-class debt or pass-through certificates secured
by mortgage loans on commercial properties. These mortgage-related securities
generally are structured to provide protection to the senior classes of
investors against potential losses on the underlying mortgage loans. This
protection generally is provided by having the holders of subordinated classes
of securities ("Subordinated Securities") take the first loss if there are
defaults on the underlying commercial mortgage loans. Other protection, which
may benefit all of the classes or particular classes, may include issuer
guarantees, reserve funds, additional Subordinated Securities,
cross-collateralization and over-collateralization.
The Fund may invest in Subordinated Securities issued or sponsored by
commercial banks, savings and loan institutions, mortgage bankers, private
mortgage insurance companies and other non-governmental issuers. Subordinated
Securities have no governmental guarantee, and are subordinated in some manner
as to the payment of principal and/or interest to the holders of more senior
mortgage-related securities arising out of the same pool of mortgages. The
holders of Subordinated Securities typically are compensated with a higher
stated yield than are the holders of more senior mortgage-related securities. On
the other hand, Subordinated Securities typically subject the holder to greater
risk than senior mortgage-related securities and tend to be rated in a lower
rating category, and frequently a substantially lower rating category, than the
senior mortgage-related securities issued in respect of the same pool of
mortgages. Subordinated Securities generally are likely to be more sensitive to
changes in prepayment and interest rates and the market for such securities may
be less liquid than is the case for traditional fixed-income securities and
senior mortgage-related securities.
The market for commercial mortgage-related securities developed more
recently and in terms of total outstanding principal amount of issues is
relatively small compared to the market for residential single-family
mortgage-related securities. In addition, commercial lending generally is viewed
as exposing the lender to a greater risk of loss than one- to four-family
residential lending. Commercial lending, for example, typically involves larger
loans to single borrowers or groups of related borrowers than residential one-
to four-family mortgage loans. In addition, the repayment of loans secured by
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income producing properties typically is dependent upon the successful operation
of the related real estate project and the cash flow generated therefrom.
Consequently, adverse changes in economic conditions and circumstances are more
likely to have an adverse impact on mortgage-related securities secured by loans
on commercial properties than on those secured by loans on residential
properties.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). A CMO is a multi-class bond
backed by a pool of mortgage pass-through certificates or mortgage loans. CMOs
may be collateralized by (a) Ginnie Mae, Fannie Mae, or Freddie Mac pass-through
certificates, (b) unsecuritized mortgage loans insured by the Federal Housing
Administration or guaranteed by the Department of Veterans' Affairs, (c)
unsecuritized conventional mortgages, (d) other mortgage-related securities, or
(e) any combination thereof. Each class of CMOs, often referred to as a
"tranche," is issued at a specific coupon rate and has a stated maturity or
final distribution date. Principal prepayments on collateral underlying a CMO
may cause it to be retired substantially earlier than the stated maturities or
final distribution dates. The principal and interest on the underlying mortgages
may be allocated among the several classes of a series of a CMO in many ways.
One or more tranches of a CMO may have coupon rates which reset periodically at
a specified increment over an index, such as the London Interbank Offered Rate
("LIBOR") (or sometimes more than one index). These floating rate CMOs typically
are issued with lifetime caps on the coupon rate thereon. The Fund also may
invest in inverse floating rate CMOs. Inverse floating rate CMOs constitute a
tranche of a CMO with a coupon rate that moves in the reverse direction to an
applicable index such as LIBOR. Accordingly, the coupon rate thereon will
increase as interest rates decrease. Inverse floating rate CMOs are typically
more volatile than fixed or floating rate tranches of CMOs. Many inverse
floating rate CMOs have coupons that move inversely to a multiple of the
applicable indexes. The effect of the coupon varying inversely to a multiple of
an applicable index creates a leverage factor. Inverse floaters based on
multiples of a stated index are designed to be highly sensitive to changes in
interest rates and can subject the holders thereof to extreme reductions of
yield and loss of principal. The markets for inverse floating rate CMOs with
highly leveraged characteristics at times may be very thin. The Fund's ability
to dispose of its positions in such securities will depend on the degree of
liquidity in the markets for such securities. It is impossible to predict the
amount of trading interest that may exist in such securities, and therefore the
future degree of liquidity.
STRIPPED MORTGAGE-BACKED SECURITIES. The Fund also may invest in stripped
mortgage-backed securities. Stripped mortgage-backed securities are created by
segregating the cash flows from underlying mortgage loans or mortgage securities
to create two or more new securities, each with a specified percentage of the
underlying security's principal or interest payments. Mortgage securities may be
partially stripped so that each investor class receives some interest and some
principal. When securities are completely stripped, however, all of the interest
is distributed to holders of one type of security, known as an interest-only
security, or IO, and all of the principal is distributed to holders of another
type of security known as a principal-only security, or PO. Strips can be
created in a pass-through structure or as tranches of a CMO. The yields to
maturity on IOs and POs are very sensitive to the rate of principal payments
(including prepayments) on the related underlying mortgage assets. If the
underlying mortgage assets experience greater than anticipated prepayments of
principal, the Fund may not fully recoup its initial investment in IOs.
Conversely, if the underlying mortgage assets experience less than anticipated
prepayments of principal, the yield on POs could be materially and adversely
affected.
REAL ESTATE INVESTMENT TRUSTS. A REIT is a corporation or a business trust
that would otherwise be taxed as a corporation, which meets the definitional
requirements of the Internal Revenue Code of 1986, as amended (the "Code"). The
Code permits a qualifying REIT to deduct dividends paid, thereby effectively
eliminating corporate-level Federal income tax and making the REIT a
pass-through vehicle for Federal income tax purposes. To meet the definitional
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requirements of the Code, a REIT must, among other things, invest substantially
all of its assets in interests in real estate (including mortgages and other
REITs) or cash and government securities, derive most of its income from rents
from real property or interest on loans secured by mortgages on real property,
and distribute to shareholders annually a substantial portion of its otherwise
taxable income. REITs are characterized as equity REITs, mortgage REITs and
hybrid REITs. Equity REITs, which may include operating or finance companies,
own real estate directly and the value of, and income earned by, the REITs
depends upon the income of the underlying properties and the rental income they
earn. Equity REITs also can realize capital gains (or losses) by selling
properties that have appreciated (or depreciated) in value. Mortgage REITs can
make construction, development or long-term mortgage loans and are sensitive to
the credit quality of the borrower. Mortgage REITs derive their income from
interest payments on such loans. Hybrid REITs combine the characteristics of
both equity and mortgage REITs, generally by holding both ownership interests
and mortgage interests in real estate. The value of securities issued by REITs
are affected by tax and regulatory requirements and by perceptions of management
skill. They also are subject to heavy cash flow dependency, defaults by
borrowers or tenants, self-liquidation and the possibility of failing to qualify
for conduit status under the Code or to maintain exemption from the Investment
Company Act.
ADJUSTABLE-RATE MORTGAGE LOANS ("ARMS"). ARMs eligible for inclusion in a
mortgage pool will generally provide for a fixed initial mortgage interest rate
for a specified period of time, generally for either the first three, six,
twelve, thirteen, thirty-six, or sixty scheduled monthly payments. Thereafter,
the interest rates are subject to periodic adjustment based on changes in an
index. ARMs typically have minimum and maximum rates beyond which the mortgage
interest rate may not vary over the lifetime of the loans. Certain ARMs provide
for additional limitations on the maximum amount by which the mortgage interest
rate may adjust for any single adjustment period. Negatively amortizing ARMs may
provide limitations on changes in the required monthly payment. Limitations on
monthly payments can result in monthly payments that are greater or less than
the amount necessary to amortize a negatively amortizing ARM by its maturity at
the interest rate in effect during any particular month.
OTHER MORTGAGE-RELATED SECURITIES. Other mortgage-related securities
include securities other than those described above that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage loans
on real property, including CMO residuals. Other mortgage-related securities may
be equity or debt securities issued by agencies or instrumentalities of the U.S.
Government or by private originators of, or investors in, mortgage loans,
including savings and loan associations, homebuilders, mortgage banks,
commercial banks, investment banks, partnerships, trusts and special purpose
entities of the foregoing.
ASSET-BACKED SECURITIES. Asset-backed securities are a form of derivative
securities. The securitization techniques used for asset-backed securities are
similar to those used for mortgage-related securities. The collateral for these
securities has included home equity loans, automobile and credit card
receivables, boat loans, computer leases, airplane leases, mobile home loans,
recreational vehicle loans and hospital account receivables. The Fund may invest
in these and other types of asset-backed securities that may be developed in the
future. Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities may provide the Fund
with a less effective security interest in the related collateral than do
mortgage-backed securities. Therefore, there is the possibility that recoveries
on the underlying collateral may not, in some cases, be available to support
payments on these securities.
MUNICIPAL OBLIGATIONS. Municipal obligations generally include debt
obligations issued to obtain funds for various public purposes as well as
certain industrial development bonds issued by or on behalf of public
authorities. Municipal obligations are classified as general obligation bonds,
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revenue bonds and notes. General obligation bonds are secured by the issuer's
pledge of its faith, credit and taxing power for the payment of principal and
interest. Revenue bonds are payable from the revenue derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise or other specific revenue source, but not from the general taxing
power. Industrial development bonds, in most cases, are revenue bonds that
generally do not carry the pledge of the credit of the issuing municipality, but
generally are guaranteed by the corporate entity on whose behalf they are
issued. Notes are short-term instruments which are obligations of the issuing
municipalities or agencies and are sold in anticipation of a bond sale,
collection of taxes or receipt of other revenues. Municipal obligations include
municipal lease/purchase agreements which are similar to installment purchase
contracts for property or equipment issued by municipalities.
Municipal obligations bear fixed, floating or variable rates of interest.
Certain municipal obligations are subject to redemption at a date earlier than
their stated maturity pursuant to call options, which may be separated from the
related municipal obligations and purchased and sold separately. The Fund also
may acquire call options on specific municipal obligations. The Fund generally
would purchase these call options to protect the Fund from the issuer of the
related municipal obligation redeeming, or other holder of the call option from
calling away, the municipal obligation before maturity.
While, in general, municipal obligations are tax-exempt securities having
relatively low yields as compared to taxable, non-municipal obligations of
similar quality, certain municipal obligations are taxable obligations, offering
yields comparable to, and in some cases greater than, the yields available on
other permissible Fund investments. Dividends received by Shareholders from the
Fund that are attributable to interest income received by the Fund from
municipal obligations generally will be subject to Federal income tax. The Fund
may invest in municipal obligations, the ratings of which correspond with the
ratings of other permissible Fund investments. The Fund currently intends to
invest no more than 25% of its total assets in municipal obligations.
U.S. GOVERNMENT SECURITIES. Securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities include U.S. Treasury securities
that 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
the agency or instrumentality. These securities bear fixed, floating or variable
rates of interest. While the U.S. Government provides financial support to such
U.S. Government-sponsored agencies and instrumentalities, no assurance can be
given that it will always do so since it is not so obligated by law.
FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL ENTITIES. The
Fund may invest in obligations issued or guaranteed by one or more foreign
governments or any of their political subdivisions, agencies or
instrumentalities that are determined by Dreyfus to be of comparable quality to
the other obligations in which the Fund may invest. Supranational entities
include international organizations designated or supported by governmental
entities to promote economic reconstruction or development and international
banking institutions and related government agencies. Examples include the
International Bank for Reconstruction and Development (the World Bank), the
European Coal and Steel Community, the Asian Development Bank and the
InterAmerican Development Bank.
STRIPPED SECURITIES. The Fund may invest in zero coupon U.S. Treasury
securities, which are Treasury Notes and Treasury Bonds that have been stripped
of their unmatured interest coupons, the coupons themselves and receipts or
certificates representing interests in such stripped debt obligations and
coupons. Such stripped securities also are issued by corporations and financial
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institutions which constitute a proportionate ownership of the issuer's pool of
underlying securities. A stripped security pays no interest to its holder during
its life and is sold at a discount to its face value at maturity. The market
prices of such securities generally are more volatile than the market prices of
securities that pay interest periodically and are likely to respond to a greater
degree to changes in interest rates than coupon securities having similar
maturities and credit qualities.
MONEY MARKET INSTRUMENTS. The Fund may invest in the following types
of money market instruments.
REPURCHASE AGREEMENTS. 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. The Fund may enter into
repurchase agreements with certain banks or non-bank dealers.
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 the Fund, which invests only in debt obligations of U.S. domestic
issuers.
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 which, at the time
of their purchase, are (a) rated not lower than Prime-1 by Moody's or A-1 by
S&P,(b) issued by companies having an outstanding unsecured debt issue currently
rated at least A3 by Moody's or A- by S&P, or (c) if unrated, determined by
Dreyfus to be of comparable quality to those rated obligations which may be
purchased by the Fund.
OTHER SHORT-TERM CORPORATE OBLIGATIONS. These instruments include variable
amount 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 notes 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
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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, at any time. 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. Such obligations frequently are not rated by
credit rating agencies, and the Fund may invest in them only if at the time of
an investment the borrower meets the criteria set forth in the Fund's Prospectus
for other commercial paper issuers.
OTHER INVESTMENT PRACTICES
The Fund may utilize other investment practices and portfolio management
techniques as set forth below.
LEVERAGE. At times, the Fund expects to utilize leverage through
borrowings or issuance of debt securities or preferred shares. The Fund intends
to utilize leverage in an initial amount equal to approximately 25% of its total
assets (including the amount obtained from leverage); however, the Fund has the
ability to utilize leverage in an amount up to 33-1/3% of its total assets
(including the amount obtained from leverage). The Fund generally will not
utilize leverage if it anticipates that the Fund's leveraged capital structure
would result in a lower return to holders of the Shares than that obtainable if
the Shares were unleveraged for any significant amount of time. The Fund also
may borrow money as a temporary measure for extraordinary or emergency purposes,
including the payment of dividends and the settlement of securities transactions
which otherwise may require untimely dispositions of Fund securities. The Fund
at times may borrow from affiliates of Dreyfus, provided that the terms of such
borrowings are no less favorable than those available from comparable sources of
funds in the marketplace.
The concept of leveraging is based on the premise that the cost of the
assets to be obtained from leverage will be based on short-term rates which
normally will be lower than the return earned by the Fund on its longer term
portfolio investments. Since the total assets of the Fund (including the assets
obtained from leverage) will be invested in the higher yielding portfolio
investments or portfolio investments with the potential for capital growth, the
holders of Shares will be the beneficiaries of the incremental return. Should
the differential between the underlying assets and cost of leverage narrow, the
incremental return "pick up" will be reduced. Furthermore, if long-term rates
rise, the net asset value of the Shares will reflect the decline in the value of
portfolio holdings resulting therefrom.
Leverage creates risks for holders of the Shares, including the likelihood
of greater volatility of net asset value and market price of the Shares, and the
risk that fluctuations in interest rates on borrowings and short-term debt or in
the dividend rates on any preferred shares may affect the return to the holders
of the Shares. To the extent the income or capital growth derived from
securities purchased with funds received from leverage exceeds the cost of
leverage, the Fund's return will be greater than if leverage had not been used.
Conversely, if the income or capital growth from the securities purchased with
such funds is not sufficient to cover the cost of leverage, the return on the
Fund will be less than if leverage had not been used, and therefore the amount
available for distribution to Shareholders as dividends and other distributions
will be reduced. In the latter case, Dreyfus in its best judgment nevertheless
may determine to maintain the Fund's leveraged position if it deems such action
to be appropriate under the circumstances. As discussed under "Management of the
Fund," the fee paid to Dreyfus will be calculated on the basis of the Fund's
assets including proceeds from borrowings for leverage and the issuance of
preferred shares.
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Capital raised through leverage will be subject to interest costs or
dividend payments which may not exceed the income and appreciation on the assets
purchased. The Fund also may be required to maintain minimum average balances in
connection with borrowings or to pay a commitment or other fee to maintain a
line of credit; either of these requirements will increase the cost of borrowing
over the stated interest rate. The issuance of additional classes of preferred
shares involves offering expenses and other costs and may limit the Fund's
freedom to pay dividends on Shares or to engage in other activities. Borrowings
and the issuance of a class of preferred shares having priority over the Fund's
Shares create an opportunity for greater return per Share, but at the same time
such borrowing is a speculative technique in that it will increase the Fund's
exposure to capital risk. Unless the income and appreciation, if any, on assets
acquired with borrowed funds or offering proceeds exceed the cost of borrowing
or issuing additional classes of securities, the use of leverage will diminish
the investment performance of the Fund compared with what it would have been
without leverage.
Certain types of borrowings may result in the Fund being subject to
covenants in credit agreements relating to asset coverage and portfolio
composition requirements. The Fund may be subject to certain restrictions on
investments imposed by guidelines of one or more Rating Agencies which may issue
ratings for the corporate debt securities or preferred shares issued by the
Fund. These guidelines may impose asset coverage or portfolio composition
requirements that are more stringent than those imposed by the Investment
Company Act. It is not anticipated that these covenants or guidelines will
impede Dreyfus from managing the Fund's portfolio in accordance with the Fund's
investment objectives and policies.
Under the Investment Company Act, the Fund is not permitted to incur
indebtedness unless immediately after such incurrence the Fund has an asset
coverage of at least 300% of the aggregate outstanding principal balance of
indebtedness (i.e., such indebtedness may not exceed 33-1/3% of the Fund's total
assets). Additionally, under the Investment Company Act, the Fund may not
declare any dividend or other distribution upon any class of its capital shares,
or purchase any such capital shares, unless the aggregate indebtedness of the
Fund has, at the time of the declaration of any such dividend or distribution or
at the time of any such purchase, an asset coverage of at least 300% after
deducting the amount of such dividend, distribution, or purchase price, as the
case may be. Under the Investment Company Act, the Fund is not permitted to
issue preferred shares unless immediately after such issuance the net asset
value of the Fund's portfolio is at least 200% of the liquidation value of the
outstanding preferred shares (i.e., such liquidation value may not exceed 50% of
the Fund's total assets). In addition, the Fund is not permitted to declare any
cash dividend or other distribution on its Shares unless, at the time of such
declaration, the net asset value of the Fund's portfolio (determined after
deducting the amount of such dividend or other distribution) is at least 200% of
such liquidation value. If preferred shares are issued, the Fund intends, to the
extent possible, to purchase or redeem preferred shares from time to time to
maintain coverage of any preferred shares of at least 200%.
The Fund's willingness to borrow money and issue new securities for
investment purposes, and the amount the Fund will borrow or issue, will depend
on many factors, the most important of which are investment outlook, market
conditions and interest rates. Successful use of a leveraging strategy depends
on Dreyfus' ability to predict correctly interest rates and market movements,
and there is no assurance that a leveraging strategy will be successful during
any period in which it is employed.
Assuming the utilization of leverage by borrowings in the amount of
approximately 25% of the Fund's total assets, and an annual interest rate of
[___%] payable on such leverage based on market rates as of the date of this
Prospectus, the annual return that the Fund's portfolio must experience (net of
expenses) in order to cover such interest payments would be _____%.
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The following table is designed to illustrate the effect on the return to
a holder of the Fund's Shares of the leverage obtained by borrowings in the
amount of approximately 25% of the Fund's total assets, assuming hypothetical
annual returns of the Fund's portfolio of minus 10% to plus 10%. As the table
shows, the leverage generally increases the return to Shareholders when
portfolio return is positive and greater than the cost of leverage and decreases
the return when the portfolio return is negative or less than the cost of
leverage. The figures appearing in the table are hypothetical and actual returns
may be greater or less than those appearing in the table.
Assumed Portfolio Return (net of (10)% (5) 0 % 5% 10%
expenses)
Corresponding Share Return (--)% (-)% (__)% -% __%
Until the Fund borrows or issues preferred shares, the Fund's Shares will
not be leveraged, and the risks and special considerations related to leverage
described in this Prospectus will not apply. Such leveraging of the Shares
cannot be fully achieved until the proceeds resulting from the use of leverage
have been invested in longer-term debt instruments in accordance with the Fund's
investment objectives and policies.
SHORT-SELLING. In these transactions, the Fund sells a security it does
not own in anticipation of a decline in the market value of the security. To
complete the transaction, the Fund must borrow the security to make delivery to
the buyer. The Fund is obligated to replace the security borrowed by purchasing
it subsequently at the market price at the time of replacement. The price at
such time may be more or less than the price at which the security was sold by
the Fund, which would result in a loss or gain, respectively.
Securities will not be sold short if, after effect is given to any such
short sale, the total market value of all securities sold short would exceed 25%
of the value of the Fund's net assets. The Fund may not make a short sale which
results in the Fund having sold short in the aggregate more than 5% of the
outstanding securities of any class of an issuer.
The Fund also may make short sales "against the box," in which the Fund
enters into a short sale of a security it owns. See "Taxes."
Until the Fund closes its short position or replaces the borrowed
security, it will: (a) maintain a segregated account, containing permissible
liquid assets, at such a level that the amount deposited in the account plus the
amount deposited with the broker as collateral always equals the current value
of the security sold short; or (b) otherwise cover its short position.
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, dividends or other distributions
payable on the loaned securities, which affords the Fund an opportunity to earn
interest on the amount of the loan and on the loaned securities' collateral.
Loans of portfolio securities may not exceed 33-1/3% of the value of the Fund's
total assets, and the Fund will receive collateral consisting of cash, U.S.
Government securities or irrevocable letters of credit which will be maintained
at all times in an amount equal to at least 100% of the current market value of
the loaned securities. Such loans are terminable by the Fund at any time upon
specified notice. The Fund might experience risk of loss if the institution with
which it has engaged in a portfolio loan transaction breaches its agreement with
the Fund. In connection with its securities lending transactions, the Fund may
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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 dividends, interest or other distributions payable
on the loaned securities, and any increase in market value; (5) the Fund may pay
only reasonable custodian fees in connection with the loan; and (6) while voting
rights on the loaned securities may pass to the borrower, the Fund's Board must
terminate the loan and regain the right to vote the securities if a material
event adversely affecting the investment occurs.
ILLIQUID SECURITIES. When purchasing securities that have not been
registered under the Securities Act of 1933, as amended, and are not readily
marketable, the Fund will endeavor, to the extent practicable, to obtain the
right to registration at the expense of the issuer. Generally, there will be a
lapse of time between the Fund's decision to sell any such security and the
registration of the security permitting sale. During any such period, the price
of the securities will be subject to market fluctuations. However, where a
substantial market of qualified institutional buyers has developed for certain
unregistered securities purchased by the Fund pursuant to Rule 144A under the
Securities Act of 1933, as amended, the Fund intends to treat such securities as
liquid securities in accordance with procedures approved by the Fund's Board.
Because it is not possible to predict with assurance how the market for specific
restricted securities sold pursuant to Rule 144A will develop, the Fund's Board
has directed Dreyfus 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 its investment
portfolio during such period.
REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements with respect to its portfolio investments subject to the investment
restrictions set forth herein. Reverse repurchase agreements involve the sale of
securities held by the Fund with an agreement by the Fund to repurchase the
securities at an agreed upon price, date and interest payment. The use by the
Fund of reverse repurchase agreements involves many of the same risks of
leverage described under "Risk Factors and Special Considerations" and
"-Leverage" since the proceeds derived from such reverse repurchase agreements
may be invested in additional securities. At the time the Fund enters into a
reverse repurchase agreement, it may establish and maintain a segregated account
with the custodian containing liquid instruments having a value not less than
the repurchase price (including accrued interest). If the Fund establishes and
maintains such a segregated account, a reverse repurchase agreement will not be
considered a borrowing by the Fund; however, under circumstances in which the
Fund does not establish and maintain such a segregated account, such reverse
repurchase agreement will be considered a borrowing for the purpose of the
Fund's limitation on borrowings. Reverse repurchase agreements involve the risk
that the market value of the securities acquired in connection with the reverse
repurchase agreement may decline below the price of the securities the Fund has
sold but is obligated to repurchase. Also, reverse repurchase agreements involve
the risk that the market value of the securities retained in lieu of sale by the
Fund in connection with the reverse repurchase agreement may decline in price.
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If the buyer of securities under a reverse repurchase agreement files for
bankruptcy or becomes insolvent, such buyer or its trustee or receiver may
receive an extension of time to determine whether to enforce the Fund's
obligation to repurchase the securities, and the Fund's use of the proceeds of
the reverse repurchase agreement may effectively be restricted pending such
decision. Also, the Fund would bear the risk of loss to the extent that the
proceeds of the reverse repurchase agreement are less than the value of the
securities subject to such agreement.
DERIVATIVES. The Fund may invest in, or use, derivatives ("Derivatives").
These are financial instruments that derive their performance, at least in part,
from the performance of an underlying asset, index or interest rate. The
Derivatives the Fund may use include options, futures contracts, forward
contracts, mortgage-related securities, asset-backed securities and swaps. The
Fund may invest in, or enter into, Derivatives for a variety of reasons,
including to hedge certain market risks, to provide a substitute for purchasing
or selling particular securities or to increase potential income gain.
Derivatives may provide a cheaper, quicker or more specifically focused way for
the Fund to invest than "traditional" securities would.
Derivatives can be volatile and involve various types and degrees of risk,
depending upon the characteristics of the particular Derivative and the
portfolio as a whole. Derivatives permit the Fund to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Fund can increase or decrease the level of
risk, or change the character of the risk, of its portfolio by purchasing or
selling specific securities.
Derivatives may entail investment exposures that are greater than their
cost would suggest, meaning that a small investment in Derivatives could have a
large potential impact on the Fund's performance.
If the Fund invests in Derivatives at inopportune times or judges market
conditions incorrectly, such investments may lower the Fund's return or result
in a loss. The Fund also could experience losses if its Derivatives were poorly
correlated with its other investments, or if the Fund were unable to liquidate
its position because of an illiquid secondary market. The market for many
Derivatives is, or suddenly can become, illiquid. Changes in liquidity may
result in significant, rapid and unpredictable changes in the prices for
Derivatives.
Derivatives may be purchased on established exchanges or through privately
negotiated transactions referred to as over-the-counter Derivatives.
Exchange-traded Derivatives generally are guaranteed by the clearing agency that
is the issuer or counterparty to such Derivatives. This guarantee usually is
supported by a daily payment system (i.e., variation margin requirements)
operated by the clearing agency in order to reduce overall credit risk. As a
result, unless the clearing agency defaults, there is relatively little
counterparty credit risk associated with Derivatives purchased on an exchange.
By contrast, no clearing agency guarantees over-the-counter Derivatives.
Therefore, each party to an over-the-counter Derivative bears the risk that the
counterparty will default. Accordingly, Dreyfus will consider the
creditworthiness of counterparties to over-the-counter Derivatives in the same
manner as it would review the credit quality of a security to be purchased by
the Fund. Over-the-counter Derivatives are less liquid than exchange-traded
Derivatives since the other party to the transaction may be the only investor
with sufficient understanding of the Derivative to be interested in bidding for
it.
FUTURES AND OPTIONS ON FUTURES TRANSACTIONS - IN GENERAL. The Fund may
enter into futures contracts and options on futures contracts in U.S. domestic
markets, such as the Chicago Board of Trade and the International Monetary
Market of the Chicago Mercantile Exchange or on exchanges located outside the
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United States, such as the London International Financial Futures Exchange and
the Sydney Futures Exchange Limited. Foreign markets may offer advantages such
as trading opportunities or arbitrage possibilities not available in the United
States. Foreign markets, however, may have greater risk potential than domestic
markets. For example, some foreign exchanges are principal markets so that no
common clearing facility exists and an investor may look only to the broker for
performance of the contract. In addition, any profits that the Fund might
realize in trading could be eliminated by adverse changes in the exchange rate,
or the Fund could incur losses as a result of those changes. Transactions on
foreign exchanges may include both commodities which are traded on domestic
exchanges and those that are not. Unlike trading on domestic commodity
exchanges, trading on foreign commodity exchanges is not regulated by the
Commodity Futures Trading Commission ("CFTC").
Engaging in these transactions involves risk of loss to the Fund that
could adversely affect the value of the Fund's net assets. Although the Fund
intends to purchase or sell futures contracts and options thereon only if there
is an active market for such contracts, no assurance can be given that a liquid
market will exist for any particular contract at any particular time. Many
futures exchanges and boards of trade limit the amount of fluctuation permitted
in futures contract or option prices during a single trading day. Once the daily
limit has been reached in a particular contract, no trades may be made that day
at a price beyond that limit or trading may be suspended for specified periods
during the trading day. Futures contract or option prices could move to the
limit for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures or option positions and potentially
subjecting the Fund to substantial losses. Successful use of futures and options
on futures by the Fund also is subject to the ability of Dreyfus to predict
correctly movements in the direction of the relevant market and, to the extent
the transaction is entered into for hedging purposes, to ascertain the
appropriate correlation between the transaction being hedged and the price
movements of the futures contract or option thereon. For example, if the Fund
uses futures to hedge against the possibility of a decline in the market value
of securities held in its portfolio and the prices of such securities instead
increase, the Fund will lose part or all of the benefit of the increased value
of securities that it has hedged because it will have offsetting losses in its
futures positions. Furthermore, if in such circumstances the Fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements. The Fund may have to sell such securities at a time when it may be
disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities and
Exchange Commission, the Fund may be required to segregate cash or other liquid
assets in connection with its futures and options on futures transactions in an
amount generally equal to the value of the underlying commodity. The segregation
of such assets will have the effect of limiting the Fund's ability otherwise to
invest those assets.
To the extent that the Fund enters into futures contracts, options on
futures contracts and options on foreign currencies traded on a CFTC-regulated
exchange, that are not for bona fide hedging purposes (as defined by the CFTC),
the aggregate initial margin and premiums required to establish these positions
(excluding the amount by which options are "in-the-money" at the time of
purchase) may not exceed 5% of the liquidation value of the Fund's portfolio,
after taking into account unrealized profits and unrealized losses on any
contracts the Fund has entered into. (In general, a call option on a futures
contract is "in-the-money" if the value of the underlying futures contract
exceeds the exercise ("strike") price of the call; a put option on a futures
contract is "in-the-money" if the value of the underlying futures contract is
exceeded by the strike price of the put.) This policy does not limit to 5% the
percentage of the Fund's assets that are at risk in futures contracts, options
on futures contracts and currency options.
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SPECIFIC FUTURES TRANSACTIONS. The Fund may purchase and sell interest
rate futures contracts. An interest rate future obligates the Fund to purchase
or sell an amount of a specific debt security at a future date at a specific
price.
The Fund may purchase and sell currency futures. A foreign currency future
obligates the Fund to purchase or sell an amount of a specific currency at a
future date at a specific price. The Fund may purchase and sell stock index and
debt futures contracts. An index future obligates the Fund to pay or receive an
amount of cash equal to a fixed dollar amount specified in the futures contract
multiplied by the difference between the settlement price of the contract on the
contract's last trading day and the value of the index based on the prices of
the securities that comprise it at the opening of trading in such securities on
the next business day.
The Fund may also purchase and sell options on interest rate, currency and
index futures. When the Fund writes an option on a futures contract, it becomes
obligated, in return for the premium paid, to assume a position in the futures
contract at a specified exercise price at any time during the terms of the
option. If the Fund writes a call, it assumes a short futures position. If it
writes a put, it assumes a long futures position. When the Fund purchases an
option on a futures contract, it acquires the right, in return for the premium
it pays, to assume a position in the futures contract (a long position if the
option is a call and a short position if the option is a put).
FORWARD CURRENCY CONTRACTS. The Fund may enter into forward currency
contracts to purchase or sell foreign currencies for a fixed amount of U.S.
dollars or another foreign currency. A forward currency contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days (term) from the date of the forward currency
contract agreed upon by the parties, at a price set at the time the forward
currency contract is entered into. Forward currency contracts are traded
directly between currency traders (usually large commercial banks) and their
customers.
The Fund may purchase a forward currency contract to lock in the U.S.
dollar price of a security denominated in a foreign currency that the Fund
intends to acquire. The Fund may sell a forward currency contract to lock in the
U.S. dollar equivalent of the proceeds from the anticipated sale of a security
or a dividend or interest payment denominated in a foreign currency. The Fund
may also use forward currency contracts to shift the Fund's exposure to foreign
currency exchange rate changes from one currency to another. For example, if the
Fund owns securities denominated in a foreign currency and Dreyfus believes that
currency will decline relative to another currency, it might enter into a
forward currency contract to sell the appropriate amount of the first foreign
currency with payment to be made in the second currency. The Fund may also
purchase forward currency contracts to enhance income when Dreyfus anticipates
that the foreign currency will appreciate in value but securities denominated in
that currency do not present attractive investment opportunities.
The Fund may also use forward currency contracts to hedge against a
decline in the value of existing investments denominated in foreign currency.
Such a hedge would tend to offset both positive and negative currency
fluctuations, but would not offset changes in security values caused by other
factors. The Fund could also hedge the position by entering into a forward
currency contract to sell another currency expected to perform similarly to the
currency in which the Fund's existing investments are denominated. This type of
hedge could offer advantages in terms of cost, yield or efficiency, but may not
hedge currency exposure as effectively as a simple hedge into U.S. dollars. This
type of hedge may result in losses if the currency used to hedge does not
perform similarly to the currency in which the hedged securities are
denominated.
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The Fund may also use forward currency contracts in one currency or a
basket of currencies to attempt to hedge against fluctuations in the value of
securities denominated in a different currency if Dreyfus anticipates that there
will be a correlation between the two currencies.
The cost to the Fund of engaging in forward currency contracts varies with
factors such as the currency involved, the length of the contract period and the
market conditions then prevailing. Because forward currency contracts are
usually entered into on a principal basis, no fees or commissions are involved.
When the Fund enters into a forward currency contract, it relies on the
counterparty to make or take delivery of the underlying currency at the maturity
of the contract. Failure by the counterparty to do so would result in the loss
of some or all of any expected benefit of the transaction.
Secondary markets generally do not exist for forward currency contracts,
with the result that closing transactions generally can be made for forward
currency contracts only by negotiating directly with the counterparty. Thus,
there can be no assurance that the Fund will in fact be able to close out a
forward currency contract at a favorable price prior to maturity. In addition,
in the event of insolvency of the counterparty, the Fund might be unable to
close out a forward currency contract. In either event, the Fund would continue
to be subject to market risk with respect to the position, and would continue to
be required to maintain a position in securities denominated in the foreign
currency or to maintain cash or liquid assets in a segregated account.
The precise matching of forward currency contract amounts and the value of
the securities involved generally will not be possible because the value of such
securities, measured in the foreign currency, will change after the forward
currency contract has been established. Thus, the Fund might need to purchase or
sell foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward currency contracts. The projection of
short-term currency market movements is extremely difficult, and the successful
execution of a short-term hedging strategy is highly uncertain.
INTEREST RATE SWAPS. Interest rate swaps involve the exchange by the Fund
with another party of their respective commitments to pay or receive interest
(for example, an exchange of floating rate payments for fixed-rate payments).
The exchange commitments can involve payments to be made in the same currency or
in different currencies. The use of interest rate swaps is a highly specialized
activity that involves investment techniques and risks different from those
associated with ordinary portfolio security transactions. If Dreyfus is
incorrect in its forecasts of market values, interest rates and other applicable
factors, the investment performance of the Fund would diminish compared with
what it would have been if these investment techniques were not used. Moreover,
even if Dreyfus is correct in its forecasts, there is a risk that the swap
position may correlate imperfectly with the price of the asset or liability
being hedged. There is no limit on the amount of interest rate swap transactions
that may be entered into by the Fund. These transactions do not involve the
delivery of securities or other underlying assets or principal. Accordingly, the
risk of loss with respect to interest rate swaps is limited to the net amount of
interest payments that the Fund is contractually obligated to make. If the other
party to an interest rate swap defaults, the Fund's risk of loss consists of the
net amount of interest payments that the Fund contractually is entitled to
receive.
CREDIT DERIVATIVES. The Fund may engage in credit derivative transactions.
There are two broad categories of credit derivatives: default price risk
derivatives and market spread derivatives. Default price risk derivatives are
linked to the price of reference securities or loans after a default by the
issuer or borrower, respectively. Market spread derivatives are based on the
risk that changes in market factors, such as credit spreads, can cause a decline
in the value of a security, loan or index. There are three basic transactional
forms for credit derivatives: swaps, options and structured instruments. The use
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of credit derivatives is a highly specialized activity which involves strategies
and risks different from those associated with ordinary portfolio security
transactions. If Dreyfus is incorrect in its forecasts of default risks, market
spreads or other applicable factors, the investment performance of the Fund
would diminish compared with what it would have been if these techniques were
not used. Moreover, even if Dreyfus is correct in its forecasts, there is a risk
that a credit derivative position may correlate imperfectly with the price of
the asset or liability being hedged. There is no limit on the amount of credit
derivative transactions that may be entered into by the Fund. The Fund's risk of
loss in a credit derivative transaction varies with the form of the transaction.
For example, if the Fund purchases a default option on a security, and if no
default occurs with respect to the security, the Fund's loss is limited to the
premium it paid for the default option. In contrast, if there is a default by
the grantor of a default option, the Fund's loss will include both the premium
that it paid for the option and the decline in value of the underlying security
that the default option hedged.
OPTIONS - IN GENERAL. The Fund may purchase and write (i.e., sell) call or
put options with respect to specific securities. A call option gives the
purchaser of the option the right to buy, and obligates the writer to sell, the
underlying security or securities at the exercise price at any time during the
option period, or at a specific date. Conversely, a put option gives the
purchaser of the option the right to sell, and obligates the writer to buy, the
underlying security or securities at the exercise price at any time during the
option period, or at a specific date.
A covered call option written by the Fund is a call option with respect to
which the Fund owns the underlying security or otherwise covers the transaction
by segregating cash or other liquid assets. A put option written by the Fund is
covered when, among other things, cash or liquid assets having a value equal to
or greater than the exercise price of the option are placed in a segregated
account with the Fund's custodian to fulfill the obligation undertaken. The
principal reason for writing covered call and put options is to realize, through
the receipt of premiums, a greater return than would be realized on the
underlying securities alone. The Fund receives a premium from writing covered
call or put options which it retains whether or not the option is exercised.
There is no assurance that sufficient trading interest to create a liquid
secondary market on a securities exchange will exist for any particular option
or at any particular time, and for some options no such secondary market may
exist. A liquid secondary market in an option may cease to exist for a variety
of reasons. In the past, for example, higher than anticipated trading activity
or order flow, or other unforeseen events, at times have rendered certain of the
clearing facilities inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain types of orders
or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If, as a
covered call option writer, the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise or it otherwise covers its position.
SPECIFIC OPTIONS TRANSACTIONS. The Fund may purchase and sell call and put
options on foreign currency. These options convey the right to buy or sell the
underlying currency at a price which is expected to be lower or higher than the
spot price of the currency at the time the option is exercised or expires.
The Fund may purchase and sell call and put options in respect of specific
securities (or groups or "baskets" of specific securities) or indices listed on
national securities exchanges or traded in the over-the-counter market. An
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option on an index is similar to an option in respect of specific securities,
except that settlement does not occur by delivery of the securities comprising
the index. Instead, the option holder receives an amount of cash if the closing
level of the index upon which the option is based is greater than, in the case
of a call, or less than, in the case of a put, the exercise price of the option.
Thus, the effectiveness of purchasing or writing index options will depend upon
price movements in the level of the index rather than the price of a particular
security.
The Fund also may purchase cash-settled options on swaps in pursuit of its
investment objective. A cash-settled option on a swap gives the purchaser the
right, but not the obligation, in return for the premium paid, to receive an
amount of cash equal to the value of the underlying swap as of the exercise
date. These options typically are purchased in privately negotiated transactions
from financial institutions, including securities brokerage firms.
Successful use by the Fund of options will be subject to the ability of
Dreyfus to predict correctly movements in the prices of individual securities,
the securities markets generally, foreign currencies, or interest rates. To the
extent such predictions are incorrect, the Fund may incur losses.
FUTURE DEVELOPMENTS. The Fund may take advantage of opportunities in the
area of options and futures contracts and options on futures contracts and any
other Derivatives that are not presently contemplated for use by the Fund or
that are not currently available but that may be developed, to the extent such
opportunities are both consistent with the Fund's investment objective and
legally permissible for the Fund.
FORWARD COMMITMENTS; WHEN-ISSUED SECURITIES. The Fund may purchase
securities on a forward commitment or when-issued basis, which means that
delivery and payment take place a number of days after the date of the
commitment to purchase. The payment obligation and the interest rate receivable
on a forward commitment or when-issued security are fixed when the Fund enters
into the commitment, but the Fund does not make payment until it receives
delivery from the counterparty. The Fund will commit to purchase such securities
only with the intention of actually acquiring the securities, but the Fund may
sell these securities before the settlement date if it is deemed advisable. The
Fund will set aside in a segregated account of the Fund permissible liquid
assets at least equal at all times to the amount of the commitments.
Securities purchased on a forward commitment or when-issued basis are
subject to changes in value (generally changing in the same way, i.e.,
appreciating when interest rates decline and depreciating when interest rates
rise) based upon the public's perception of the creditworthiness of the issuer
and changes, real or anticipated, in the level of interest rates. Securities
purchased on a forward commitment or when-issued basis may expose the Fund to
risks because they may experience such fluctuations prior to their actual
delivery. Purchasing securities on a when-issued basis can involve the
additional risk that the yield available in the market when the delivery takes
place actually may be higher than that obtained in the transaction itself.
Purchasing securities on a forward commitment or when-issued basis when the Fund
is fully or almost fully invested may result in greater potential fluctuation in
the value of the Fund's net assets and its net asset value per share.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investors are advised to consider carefully the special risks involved in
investing in the Fund.
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GENERAL
The Fund is a newly organized, non-diversified, closed-end management
investment company and has no operating history. Shares of closed-end management
investment companies frequently trade at a discount from their net asset value.
This risk may be greater for investors expecting to sell their shares in a
relatively short period after completion of the public offering. Accordingly,
the Shares are designed primarily for long-term investors and should not be
considered a vehicle for trading purposes. The net asset value of the Fund's
Shares will fluctuate with interest rate changes as well as with price changes
of the Fund's portfolio securities and these fluctuations are likely to be
greater in the case of a fund having a leveraged capital structure, as
contemplated for the Fund.
LOWER GRADE SECURITIES
Lower grade securities are regarded as being predominantly speculative as
to the issuer's ability to make payments of principal and interest. Investment
in such securities involves substantial risk. Lower grade securities are
commonly referred to as "junk bonds." Issuers of lower grade securities may be
highly leveraged and may not have available to them more traditional methods of
financing. Therefore, the risks associated with acquiring the securities of such
issuers generally are greater than is the case with higher-rated securities. For
example, during an economic downturn or a sustained period of rising interest
rates, issuers of lower grade securities may be more likely to experience
financial stress, especially if such issuers are highly leveraged. During
periods of economic downturn, such issuers may not have sufficient revenues to
meet their interest payment obligations. The issuer's ability to service its
debt obligations also may be adversely affected by specific issuer developments,
the issuer's inability to meet specific projected business forecasts or the
unavailability of additional financing. Therefore, there can be no assurance
that in the future there will not exist a higher default rate relative to the
rates currently existing in the market for lower grade securities. The risk of
loss due to default by the issuer is significantly greater for the holders of
lower grade securities because such securities may be unsecured and may be
subordinate to other creditors of the issuer. Other than with respect to
Distressed Securities, discussed below, the lower grade securities in which the
Fund may invest do not include instruments which, at the time of investment, are
in default or the issuers of which are in bankruptcy. However, there can be no
assurance that such events will not occur after the Fund purchases a particular
security, in which case the Fund may experience losses and incur costs.
Lower grade securities frequently have call or redemption features that
would permit an issuer to repurchase the security from the Fund. If a call were
exercised by the issuer during a period of declining interest rates, the Fund is
likely to have to replace such called security with a lower yielding security,
thus decreasing the net investment income to the Fund and dividends to
Shareholders.
Lower grade securities tend to be more volatile than higher-rated
fixed-income securities, so that adverse economic events may have a greater
impact on the prices of lower grade securities than on higher-rated fixed-income
securities. Factors adversely affecting the market value of such securities are
likely to affect adversely the Fund's net asset value. Recently, demand for
lower grade securities has increased significantly and the difference between
the yields paid by lower grade securities and investment grade bonds (i.e., the
"spread") has narrowed. To the extent this differential increases, the value of
lower grade securities in the Fund's portfolio could be adversely affected.
Like higher-rated fixed-income securities, lower grade securities
generally are purchased and sold through dealers who make a market in such
securities for their own accounts. However, there are fewer dealers in the lower
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grade securities market, which market may be less liquid than the market for
higher-rated fixed-income securities, even under normal economic conditions.
Also, there may be significant disparities in the prices quoted for lower grade
securities by various dealers. As a result, during periods of high demand in the
lower grade securities market, it may be difficult to acquire lower grade
securities appropriate for investment by the Fund. Adverse economic conditions
and investor perceptions thereof (whether or not based on economic reality) may
impair liquidity in the lower grade securities market and may cause the prices
the Fund receives for its lower grade securities to be reduced. In addition, the
Fund may experience difficulty in liquidating a portion of its portfolio when
necessary to meet the Fund's liquidity needs or in response to a specific
economic event such as deterioration in the creditworthiness of the issuers.
Under such conditions, judgment may play a greater role in valuing certain of
the Fund's portfolio instruments than in the case of instruments trading in a
more liquid market. In addition, the Fund may incur additional expense to the
extent that it is required to seek recovery upon a default on a portfolio
holding or to participate in the restructuring of the obligation.
DISTRESSED SECURITIES
The Fund may invest up to 10% of its total assets in securities which are
the subject of bankruptcy proceedings or otherwise in default as to the
repayment of principal and/or payment of interest at the time of acquisition by
the Fund or are rated in the lower rating categories (Ca or lower by Moody's and
CC or lower by S&P) or which, if unrated, are in the judgment of Dreyfus of
equivalent quality ("Distressed Securities"). Investment in Distressed
Securities is speculative and involves significant risk. Distressed Securities
frequently do not produce income while they are outstanding and may require the
Fund to bear certain extraordinary expenses in order to protect and recover its
investment. Therefore, to the extent the Fund pursues its secondary objective of
capital growth through investment in Distressed Securities, the Fund's ability
to achieve current income for its Shareholders may be diminished.
LEVERAGE
The use of leverage by the Fund creates an opportunity for increased net
income and capital growth for the Shares, but, at the same time, creates special
risks. The Fund intends to utilize leverage to provide the holders of Shares
with a potentially higher return. Leverage creates risks for holders of Shares
including the likelihood of greater volatility of net asset value and market
price of the Shares and the risk that fluctuations in interest rates on
borrowings and short-term debt or in the dividend rates on any preferred shares
may affect the return to the holders of Shares. To the extent the income or
capital growth derived from securities purchased with funds received from
leverage exceeds the cost of leverage, the Fund' s return will be greater than
if leverage had not been used. Conversely, if the income or capital growth from
the securities purchased with such funds is not sufficient to cover the cost of
leverage, the return to the Fund will be less than if leverage had not been
used, and therefore the amount available for distribution to Shareholders as
dividends and other distributions will be reduced. In the latter case, Dreyfus
in its best judgment nevertheless may determine to maintain the Fund's leveraged
position if it deems such action to be appropriate under the circumstances.
During periods in which the Fund is utilizing financial leverage, the management
and administrative fees, which is payable to Dreyfus as a percentage of the
Fund's Managed Assets, will be higher than if the Fund did not utilize a
leveraged capital structure. Certain types of borrowings by the Fund may result
in the Fund's being subject to covenants in credit agreements relating to asset
coverage and portfolio composition requirements. The Fund may be subject to
certain restrictions on investments imposed by guidelines of one or more Rating
Agencies, which may issue ratings for the corporate debt securities or preferred
shares issued by the Fund. These guidelines may impose asset coverage or
portfolio composition requirements that are more stringent than those
imposed by the Investment Company Act. It is not anticipated that
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these covenants or guidelines will impede Dreyfus in managing the Fund's
portfolio in accordance with the Fund's investment objectives and policies. The
Fund at times may borrow from affiliates of Dreyfus, provided that the terms of
such borrowings are no less favorable than those available from comparable
sources of funds in the marketplace. As discussed under "Management of the
Fund," the fee paid to Dreyfus will be calculated on the basis of the Fund's
assets including proceeds from borrowings for leverage and the issuance of
preferred shares.
FOREIGN SECURITIES
The Fund may invest up to 25% of its total assets in securities of issuers
domiciled outside of the United States or that are denominated in various
foreign currencies and multinational foreign currency units. Investing in
securities of foreign entities and securities denominated in foreign currencies
involves certain risks not involved in domestic investments, including, but not
limited to, fluctuations in foreign exchange rates, future foreign political and
economic developments, different legal systems and the possible imposition of
exchange controls or other foreign governmental laws or restrictions. Securities
prices in different countries are subject to different economic, financial,
political and social factors. Since the Fund may invest in securities
denominated or quoted in currencies other than the U.S. dollar, changes in
foreign currency exchange rates may affect the value of securities in the Fund
and the unrealized appreciation or depreciation of investments. Currencies of
certain countries may be volatile and therefore may affect the value of
securities denominated in such currencies. In addition, with respect to certain
foreign countries, there is the possibility of expropriation of assets,
confiscatory taxation, difficulty in obtaining or enforcing a court judgment,
economic, political or social instability or diplomatic developments that could
affect investments in those countries. Moreover, individual foreign economies
may differ favorably or unfavorably from the U.S. economy in such respects as
growth of gross domestic product, rates of inflation, capital reinvestment,
resources, self-sufficiency and balance of payments position. Certain foreign
investments also may be subject to foreign withholding taxes. These risks often
are heightened for investments in smaller, emerging capital markets.
As a result of these potential risks, Dreyfus may determine that,
notwithstanding otherwise favorable investment criteria, it may not be
practicable or appropriate to invest in a particular country. The Fund may
invest in countries in which foreign investors, including Dreyfus, have had no
or limited prior experience.
ILLIQUID SECURITIES
The Fund may invest in securities for which no readily available market
exists or are otherwise considered illiquid. The Fund may not be able readily to
dispose of such securities at prices that approximate those at which the Fund
could sell such securities if they were more widely traded and, as a result of
such illiquidity, the Fund may have to sell other investments or engage in
borrowing transactions if necessary to raise cash to meet its obligations.
NON-DIVERSIFIED STATUS
The Fund is classified as a "non-diversified" investment company under the
Investment Company Act, which means that the Fund may invest a greater portion
of its assets in a limited number of issuers than would be the case if the Fund
were classified as a "diversified" investment company. Accordingly, the Fund may
be subject to greater risk with respect to its portfolio securities than an
investment company that is "diversified" because changes in the financial
condition or market assessment of a single issuer may cause greater fluctuations
in the net asset value of the Shares.
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MARKET PRICE, DISCOUNT AND NET ASSET VALUE OF SHARES
Shares of closed-end management investment companies in the past
frequently have traded at a discount to their net asset values. The risk of loss
associated with this characteristic of closed-end management investment
companies may be greater for investors purchasing Shares in the initial public
offering and expecting to sell the Shares soon after the completion thereof.
Whether investors will realize gains or losses upon the sale of Shares will not
depend directly upon the Fund's net asset value, but will depend upon the market
price of the Shares at the time of sale. Since the market price of the Shares
will be determined by such factors as relative demand for and supply of the
Shares in the market, general market and economic conditions and other factors
beyond the control of the Fund, the Fund cannot predict whether the Shares will
trade at, below or above net asset value or at, below or above the initial
offering price. The Shares are designed primarily for long-term investors, and
investors in the Shares should not view the Fund as a vehicle for trading
purposes.
ANTI-TAKEOVER PROVISIONS
The Fund's Declaration of Trust contains provisions limiting (i) the
ability of other entities or persons to acquire control of the Fund, (ii) the
Fund's freedom to engage in certain transactions, and (iii) the ability of the
Fund's Trustees or Shareholders to amend the Declaration of Trust. These
provisions of the Declaration of Trust may be regarded as "anti-takeover"
provisions. These provisions could have the effect of depriving the Shareholders
of opportunities to sell their Shares at a premium over prevailing market prices
by discouraging a third party from seeking to obtain control of the Fund in a
tender offer or similar transaction.
YEAR 2000 RISKS
Like other investment companies, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by Dreyfus and the Fund's other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." Dreyfus is
taking steps to address the Year 2000 Problem with respect to the computer
systems that it uses and to obtain assurances that comparable steps are being
taken by the Fund's other major service providers. At this time, however, there
can be no assurance that these steps will be sufficient to avoid any adverse
impact on the Fund.
INVESTMENT RESTRICTIONS
The Fund has adopted investment restrictions numbered 2 through 7 as
fundamental policies, which cannot be changed without approval by the holders of
a majority (as defined in the Investment Company Act) of the Fund's outstanding
voting shares. Unless expressly designated as fundamental, the policies of the
Fund may be changed by the Board of Trustees without shareholder approval.
1. Make any investment inconsistent with the Fund's
classification as a non-diversified company under the Investment Company Act.
2. Invest more than 25% of the value of its total assets in the
securities of issuers in any single industry, provided that there shall be no
limitation on the purchase of obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
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3. Invest in commodities or commodity contracts, except that the
Fund may purchase and sell futures contracts and options thereon.
4. Purchase, hold or deal in real estate, or oil, gas or other
mineral leases or exploration or development programs, but the Fund may purchase
and sell securities that are secured by real estate or issued by companies that
invest or deal in real estate or real estate investment trusts.
5. Issue senior securities or borrow money except as
permitted by the Investment Company Act.
6. 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.
7. Act as an underwriter of securities of other issuers, 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.
8. Invest in the securities of a company for the purpose of
exercising management or control, but the Fund will vote the securities it owns
in its portfolio as a shareholder in accordance with its views.
9. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
purchase of securities on a when-issued or forward commitment basis and the
deposit of assets in escrow in connection with writing covered put and call
options and collateral and initial or variation margin arrangements with respect
to options, forward contracts, futures contracts, options on futures contracts,
swaps, caps, collars and floors.
10. Purchase securities of other investment companies, except
to the extent permitted under the Investment Company Act.
MANAGEMENT OF THE FUND
INVESTMENT MANAGER. The Dreyfus Corporation ("Dreyfus"), located at 200
Park Avenue, New York, New York 10166, was formed in 1947 and serves as the
Fund's investment manager and administrator. Dreyfus is a wholly-owned
subsidiary of Mellon Bank, N.A. ("Mellon Bank"), which is a wholly-owned
subsidiary of Mellon Bank Corporation ("Mellon Bank Corporation"). As of
February 28, 1998, Dreyfus managed or administered assets of approximately $99
billion for approximately 1.7 million investor accounts nationwide. Dreyfus has
been an innovator in the fixed-income securities market, and introduced what
Dreyfus believes to be the first retail-oriented money market mutual fund, the
first incorporated municipal bond mutual fund and the first short-term and
limited-term no load and load high yield bond mutual funds.
Mellon Bank Corporation 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 Bank Corporation provides a
comprehensive range of financial products and services in domestic and selected
international markets. Mellon Bank Corporation is among the twenty-five largest
bank holding companies in the United States based on total assets. Mellon Bank
Corporation's principal wholly-owned subsidiaries are Mellon Bank, Mellon Bank
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(DE) National Association, Mellon Bank (MD), The Boston Company, Inc., AFCO
Credit Corporation, Buck Consultants, Inc., and a number of companies known as
Mellon Financial Services Corporations. Through its subsidiaries, including
Dreyfus, Mellon Bank Corporation managed more than $305 billion in assets as of
December 31, 1997 including approximately $104 billion in proprietary mutual
fund assets. As of December 31, 1997, Mellon Bank Corporation, through various
subsidiaries, provided non-investment services, such as custodial or
administration services, for more than $1.532 trillion in assets, including
approximately $60 billion in mutual fund assets.
Dreyfus supervises and assists in the overall management of the Fund's
affairs under a Management and Administration Agreement with the Fund, subject
to the authority of the Fund's Board in accordance with Massachusetts law. The
Fund's primary portfolio manager is Roger King. He has held that position since
the Fund's inception, and has been employed by Dreyfus since February 1996.
Prior thereto, Mr. King was a Vice President of High Yield Research and, most
recently, Director of High Yield Research at Citibank Securities, Inc. In 1995,
Mr. King was named by Institutional Investor to its All America Fixed Income
Research Second Team--High Yield Securities--Manufacturing/Aviation and Defense.
Dreyfus also provides research services for the Fund and for other funds advised
by Dreyfus through a professional staff of portfolio managers and securities
analysts. Other portfolio managers of the Fund are Kevin McClintock, Head of
Taxable Fixed Income, Michael Hoeh, Senior Portfolio Manager, and Jerry
Thunelius, Senior Portfolio Manager and Head of Fixed-Income Trading.
The Dreyfus taxable fixed-income team adheres to a clearly defined
process. Emphasis is placed on sector and issue selection with portfolio
managers and analysts focusing on specific areas of the credit market. Each area
conducts detailed research in order to identify attractively priced securities
within their respective sectors.
MANAGEMENT AND ADMINISTRATION AGREEMENT. Dreyfus provides investment
management and administrative services pursuant to the Management and
Administration Agreement (the "Agreement") dated April __, 1998 with the Fund.
As compensation for Dreyfus's services to the Fund, the Fund has agreed to pay
Dreyfus a monthly investment management and administration fee at the annual
rate of .90 of 1% of the value of the average weekly value of the total assets
of the Fund minus the sum of accrued liabilities (other than the aggregate
indebtedness constituting financial leverage) (the "Managed Assets"). During the
period in which the Fund is utilizing financial leverage, the management and
administrative fee payable to Dreyfus will be higher than if the Fund did not
utilize a leveraged capital structure because the fee is calculated as a
percentage of the Fund's Managed Assets including those purchased with leverage.
The Agreement is subject to annual approval by (i) the Fund's Board or (ii) vote
of a majority (as defined in the Investment Company Act) of the outstanding
voting securities of the Fund, provided that in either event the continuance
also is approved by a majority of the Board members who are not "interested
persons" (as defined in the Investment Company Act) of the Fund or Dreyfus, by
vote cast in person at a meeting called for the purpose of voting on such
approval. The Agreement was approved by the Fund's Board, including a majority
of the Board members who are not "interested persons" of any party to the
Agreement, at a meeting held on April __, 1998. The Agreement was approved by
the Fund's initial shareholder on April __, 1998. The Agreement is terminable
without penalty, on 60 days' notice, by the Fund's Board or by vote of the
holders of a majority of the Fund's Shares, or, on not less than 90 days'
notice, by Dreyfus. The Agreement will terminate automatically in the event of
its assignment (as defined in the Investment Company Act).
The following persons are officers and/or directors of Dreyfus: W. Keith
Smith, Chairman of the Board; Christopher M. Condron, President, Chief Executive
Officer, Chief Operating Officer and a director; Stephen E. Canter, Vice
Chairman, Chief Investment Officer and a director; Lawrence S. Kash, Vice
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Chairman - Distribution and a director; Ronald P. O'Hanley, III, Vice Chairman;
J. David Officer, Vice Chairman; William T. Sandalls, Jr., Senior Vice President
and Chief Financial Officer; Mark N. Jacobs, Vice President, General Counsel and
Secretary; Patrice M. Kozlowski, Vice President - Corporate Communications; Mary
Beth Leibig, Vice President - Human Resources; Jeffrey N. Nachman, Vice
President - Mutual Fund Accounting; Andrew S. Wasser, Vice President -
Information Systems; William V. Healey, Assistant Secretary; and Mandell L.
Berman, Burton Borgelt, Frank V. Cahouet and Richard F. Syron, directors.
Dreyfus manages the Fund's investments in accordance with the stated
policies of the Fund, subject to the approval of the Fund's Board. Dreyfus is
responsible for investment decisions, and provides the Fund with portfolio
managers who are authorized by the Board to execute purchases and sales of
securities. Dreyfus 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 Dreyfus.
Mellon Bank, Dreyfus's parent, and its affiliates may have deposit, loan
and commercial banking or other relationships with the issuers of securities
purchased by the Fund. Dreyfus has informed the Fund that in making its
investment decisions it does not obtain or use material non-public information
that Mellon Bank, or its affiliates, may possess with respect to such issuers.
Dreyfus 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. Dreyfus also may make such advertising and promotional expenditures, using
its own resources, as it from time to time deems appropriate.
EXPENSES. All expenses incurred in the operation of the Fund are borne by
the Fund, except to the extent specifically assumed by Dreyfus. 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 Board members who are not
officers, directors, employees, holders of 5% or more of the outstanding voting
securities of Dreyfus or any of its affiliates, Securities and Exchange
Commission fees, state Blue Sky qualification fees, advisory and administration
fees, Shareholder servicing 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
preparing and printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing Shareholders, costs of
Shareholders' reports and meetings, and any extraordinary expenses.
FEDERAL LAW AFFECTING MELLON BANK. The Glass-Steagall Act of 1933
prohibits national banks from engaging in the business of underwriting, selling
or distributing securities and prohibits a member bank of the Federal Reserve
System from having certain affiliations with an entity engaged primarily in that
business. The activities of Mellon Bank in informing its customers of, and
performing, investment and reception services in connection with the Fund, and
in providing services to the Fund as custodian, as well as Dreyfus's investment
advisory activities, may raise issues under these provisions. Mellon Bank has
been advised by counsel that the activities contemplated under these
arrangements are consistent with statutory and regulatory obligations.
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Changes in either Federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of such
future statutes and regulations, could prevent Mellon Bank or Dreyfus from
continuing to perform all or a part of the above services for its customers
and/or the Fund. If Mellon Bank or Dreyfus were prohibited from serving the Fund
in any of its present capacities, the Board of Trustees would seek an
alternative provider(s) of such services.
TRUSTEES AND OFFICERS OF THE FUND
The Fund has a Board composed of eleven Trustees which supervises the
Fund's investment activities and reviews contractual arrangements with companies
that provide the Fund with services. The following lists the Trustees and
officers and their positions with the Fund and their present and principal
occupations during the past five years. Each Trustee who is an "interested
person" of the Fund (as defined in the Investment Company Act) is indicated by
an asterisk (*). Each of the Trustees also serves as a Trustee of The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal Funds, and
as a Director of The Dreyfus/Laurel Funds, Inc. (collectively, with the Fund,
the "Dreyfus/Laurel Funds"). Each Trustee serves on the Audit Committee of the
Board. Each Trustee who is not an "interested person" serves on the Nominating
Committee of the Board. Each of the Fund's officers listed below also serves as
an officer for other investment companies advised by Dreyfus, including The
Dreyfus/Laurel Funds Trust, The Dreyfus/Laurel Funds, Inc. and The
Dreyfus/Laurel Tax-Free Municipal Funds.
RUTH MARIE ADAMS. Trustee of the Fund; Professor of English and Vice
President Emeritus, Dartmouth College; Senator, United Chapters of Phi
Beta Kappa; Trustee, Woods Hole Oceanographic Institution; from November
1995 to January 1997, Director, Access Capital Strategic Community
Investment Fund, Inc. - Institutional Investment Portfolio. Age: 83 years
old. Address: 1026 Kendal Lyme Road, Hanover, New Hampshire 03755.
FRANCIS P. BRENNAN. Chairman of the Board of Trustees of the Fund;
Director and Chairman, Massachusetts Business Development Corp.; and from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Bank Portfolio. Age: 80 years old.
Address: Massachusetts Business Development Corp., 50 Milk Street, Boston,
Massachusetts 02109.
JOSEPH S. DIMARTINO. Trustee of the Fund. Since January 1995, Mr.
DiMartino has served as Chairman of the Board for various funds in the
Dreyfus Family of Funds. He also serves as a Director of The Muscular
Dystrophy Association, The Noel Group, Inc., a venture capital company,
Staffing Resources, Inc., a temporary placement agency, HealthPlan
Services Corporation, a provider of marketing, administrative and risk
management services to health and other benefit programs, Carlyle
Industries, Inc. (formerly Belding Heminway Company, Inc.), a button
packager and distributor, and Century Business Services, Inc., a provider
of various outsourcing functions for small and medium sized companies. Mr.
DiMartino is also a Board member of 151 other funds in the Dreyfus Family
of Funds. From November 1995 to January 1997, Director, Access Capital
Strategic Community Investment Fund, Inc. - Institutional Investment
Portfolio and Bank Portfolio. For more than five years prior to January
1995, he was President, a director and, until August 24, 1994, Chief
Operating Officer of Dreyfus and Executive Vice President and a director
of Dreyfus Service Corporation (DSC), a wholly-owned subsidiary of
Dreyfus. From August 1994 to December 31, 1994, he was a director of
Mellon Bank Corporation. Age: 54 years old. Address: 200 Park Avenue, New
York, New York 10166.
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JAMES M. FITZGIBBONS. Trustee of the Fund; Chairman, Howes Leather
Company, Inc.; Director, Fiduciary Trust Company; Chairman, CEO and
Director, Fieldcrest-Cannon Inc.; Director, Lumber Mutual Insurance
Company; Director, Barrett Resources, Inc.; from November 1995 to January
1997, Director, Access Capital Strategic Community Investment Fund, Inc. -
Bank Portfolio. Age: 63 years old. Address: 40 Norfolk Road, Brookline,
Massachusetts 02167.
J. TOMLINSON FORT.* Trustee of the Fund; Partner, Reed, Smith & McClay
(law firm). From November 1995 to January 1997, Director, Access Capital
Strategic Community Investment Fund, Inc. - Bank Portfolio. Age: 69 years
old. Address: 204 Woodcock Drive, Pittsburgh, Pennsylvania 15215.
ARTHUR L. GOESCHEL. Trustee of the Fund; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; Director, National Picture Frame
Corporation; former Chairman of the Board and Director, Rexene
Corporation; Chairman of the Board and Director, Tetra Corporation
1991-1993; Director, Medalist Corporation 1992-1993. From November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Institutional Investment Portfolio. Age: 76 years old.
Address: Way Hallow Road and Woodland Road, Sewickley, Pennsylvania 15143.
KENNETH A. HIMMEL. Trustee of the Fund; Former Director, The Boston
Company, Inc. ("TBC") and Boston Safe Deposit and Trust Company; President
and Chief Executive Officer, Himmel & Co., Inc.; Vice Chairman, Sutton
Place Gourmet, Inc.; Managing Partner, Franklin Federal Partners. From
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Bank Portfolio. Age: 51 years old.
Address: Himmel and Company, Inc., 399 Boylston Street, 11th Floor,
Massachusetts 02116.
ARCH S. JEFFERY.* Trustee of the Fund; Financial Consultant. From November
1995 to January 1997, Director, Access Capital Strategic Community
Investment Fund, Inc. - Institutional Investment Portfolio. Age: 80 years
old. Address: 1817 Foxcroft Lane, Unit 306, Allison Park, Pennsylvania
15101.
STEPHEN J. LOCKWOOD. Trustee of the Fund; President and CEO, LDG
Management Company Inc.; CEO, LDG Reinsurance Underwriters, SRRF
Management Inc. and Medical Reinsurance Underwriters Inc.; from November
1995 to January 1997, Director, Access Capital Strategic Community
Investment Fund, Inc. - Institutional Investment Portfolio. Age: 50 years
old. Address: 401 Edgewater Place, Wakefield, Massachusetts 01880.
JOHN J. SCIULLO. Trustee of the Fund; Dean Emeritus and Professor of Law,
Duquesne University Law School; Director, Urban Redevelopment Authority of
Pittsburgh; from November 1975 to January 1997, Director, Access Capital
Strategic Community Investment Fund, Inc. - Institutional Investment
Portfolio. Age: 66 years old. Address: 321 Gross Street, Pittsburgh,
Pennsylvania 15224.
ROSLYN M. WATSON. Trustee of the Fund; Principal, Watson Ventures, Inc.,
Director, American Express Centurion Bank; Director, Harvard/Pilgrim
Community Health Plan, Inc.; from November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. - Bank Portfolio;
Director, Massachusetts Electric Company; Director, the Hymans Foundation,
Inc., prior to February, 1993; Real Estate Development Project Manager and
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Vice President, The Gunwyn Company. Age: 48 years old. Address: 25
Braddock Park, Boston, Massachusetts 02116-5816. MARIE E. CONNOLLY.
President and Treasurer of the Fund. President, Chief Executive Officer,
Chief Compliance Officer and a director of Funds Distributor Inc., the
ultimate parent of which is Boston Industrial Group, Inc. Age: 40 years
old.
DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Fund.
Assistant Vice President of Funds Distributor Inc. From April 1993 to
January 1995, he was a Senior Fund Accountant for Investors Bank & Trust
Company. From December 1991 to March 1993, he was employed as the Fund
Accountant at TBC. Age: 28 years old.
RICHARD W. INGRAM. Vice President and Assistant Treasurer of the Fund.
Executive Vice President of Funds Distributor Inc. From March 1994 to
November 1995, he was Vice President and Division Manager for First Data
Investor Services Group. From 1989 to 1994, he was Vice President,
Assistant Treasurer and Tax Director - Mutual Funds of TBC. Age: 42 years
old.
MARY A. NELSON. Vice President and Assistant Treasurer of the Fund. Vice
President of Funds Distributor Inc. From September 1989 to July 1994, she
was an Assistant Vice President and Client Manager of TBC. Age: 33 years
old.
MICHAEL S. PETRUCELLI. Vice President and Assistant Treasurer of the Fund.
Senior Vice President of Funds Distributor Inc. From December 1989 through
November 1996, he was employed by GE Investment Services where he held
various financial, business development and compliance positions. He also
served as Treasurer of the GE Funds and as Director of GE Investment
Services. Age: 36 years old.
JOSEPH F. TOWER, III. Vice President and Assistant Treasurer of the Fund.
Senior Vice President, Treasurer and Chief Financial Officer of Funds
Distributor Inc. From July 1988 to August 1994, he was employed by TBC
where he held various positions in the Corporate Finance and Treasury
areas. Age: 35 years old.
ELBA VASQUEZ. Vice President and Assistant Secretary. Assistant Vice
President of Funds Distributor Inc. She has been employed since May 1996
as a Sales Associate in the distribution of World Equity Benchmark Shares
("WEBS"). From March 1990 to May 1996, she was employed by U.S. Trust
Company of New York. As an officer of U.S. Trust, she held various
positions in the sales and marketing of their proprietary family of mutual
funds. Age: 36 years old.
KATHLEEN K. MORRISEY. Vice President and Assistant Secretary. Vice
President and Assistant Secretary of Funds Distributor Inc. Manager of
Treasury Services Administration and an officer of certain investment
companies advised or administered by J.P. Morgan & Co. Incorporated,
Montgomery Asset Management, L.P., and Dresdner RCM Global Investors,
Inc., or their respective affiliates. From July 1994 to November 1995, she
was a Fund Accountant II for Investors Bank & Trust Company. Prior to that
she was a Finance student at Stonehill College in North Easton, MA. Age:
25 years old.
CHRISTOPHER J. KELLEY. Vice President and Assistant Secretary. Vice
President and Senior Associate General Counsel of Funds Distributor Inc.
and Premier Mutual Fund Services, Inc., and an officer of certain
investment companies advised or administered by Harris Trust and Savings
Bank, Waterhouse Asset Management, Inc., J.P. Morgan & Co. Incorporated
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and Montgomery Asset Management, L.P., or their respective affiliates.
From April 1994 to July 1996, Mr. Kelley was Assistant Counsel at Forum
Financial Group. From October 1992 to March 1994, Mr. Kelley was employed
by Putnam Investments in legal and compliance capacities. Age: 33 years
old. Address: 60 State Street, Boston, MA 02109.
Unless otherwise indicated, the address of each officer of the Fund is 200 Park
Avenue, New York, New York 10166.
The officers and Trustees of the Fund as a group owned beneficially less
than 1% of the total shares of the Fund outstanding as of April __, 1998.
No officer or employee of the Fund receives any compensation from the Fund
for serving as an officer or Trustee of the Fund. In addition, no officer or
employee of Dreyfus (or of any parent, subsidiary or affiliate thereof) serves
as an officer or Trustee of the Fund. The Fund pays each Trustee $______ per
annum (and an additional $_____ for the Chairman of the Board of Trustees of the
Fund). In addition, the Fund pays each Trustee $_____ per Board meeting attended
and reimburses each Trustee for travel and out-of-pocket expenses.
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Estimated
Aggregate Total Compensation from the
Compensation Fund and Fund Complex
Name of Board Member from Fund Paid to Board Member***
- -------------------- ----------- -----------------------
Ruth Marie Adams $ 31,500
Francis P. Brennan* $ 63,750
Joseph S. DiMartino** $ 517,075
James M. Fitzgibbons $ 31,500
J. Tomlinson Fort** none
Arthur L. Goeschel $ 37,500
Kenneth A. Himmel $ 32,500
Arch S. Jeffery** none
Stephen J. Lockwood $ 33,250
John J. Sciullo $ 32,500
Roslyn M. Watson $ 32,500
- ----------
* Compensation of Francis Brennan includes $25,000 paid by the Dreyfus/Laurel
Funds to be Chairman of the Board.
** J. Tomlinson Fort and Arch S. Jeffery are paid directly by Dreyfus for
serving as Board members of the other Dreyfus/Laurel Funds. For the fiscal
year ended October 31, 1997, the aggregate amount of fees and expenses
received by Joseph DiMartino, J. Tomlinson Fort and Arch S. Jeffery from
Dreyfus for serving as a Board member of the other Dreyfus/Laurel Funds
were $35,500, $35,500 and $34,500, respectively.
*** As of January 31, 1998, the Dreyfus Family of Funds consists of 151 funds.
Except for Mr. DiMartino, the amounts represent the total compensation
received from the Fund Complex for the twelve months ended October
31, 1997. For Mr. DiMartino, the amount represents total compensation for
the twelve months ending December 31, 1997.
PORTFOLIO TRANSACTIONS
Dreyfus assumes general supervision over placing orders on behalf of the
Fund for the purchase or sale of portfolio securities. Allocation of brokerage
transactions, including their frequency, is made in the best judgment of Dreyfus
and in a manner deemed fair and reasonable to shareholders. The primary
consideration is prompt execution of orders at the most favorable net price.
Subject to this consideration, the brokers selected will include those that
supplement Dreyfus's research facilities with statistical data, investment
information, economic facts and opinions. Information so received is in addition
to and not in lieu of services required to be performed by Dreyfus and Dreyfus's
fees are not reduced as a consequence of the receipt of such supplemental
information. Such information may be useful to Dreyfus in serving both the Fund
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and other funds which it advises and, conversely, supplemental information
obtained by the placement of business of other clients may be useful to Dreyfus
in carrying out its obligations to the Fund.
In allocating brokerage transactions, Dreyfus seeks to obtain the best
execution of orders at the most favorable net price. Subject to this
determination, Dreyfus 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 Dreyfus as factors in the selection of broker-dealers to
execute portfolio transactions for the Fund.
Sales of Fund Shares by a broker may be taken into consideration, and
brokers also will be selected because of their ability to handle special
executions such as are involved in large block trades or broad distributions,
provided the primary consideration is met. Large block trades may, in certain
cases, result from two or more funds advised or administered by Dreyfus being
engaged simultaneously in the purchase or sale of the same security. Certain of
the Fund's transactions in securities of foreign issuers may not benefit from
the negotiated commission rates available to the Fund for transactions in
securities of domestic issuers. When transactions are executed in the
over-the-counter market, the Fund will deal with the primary market makers
unless a more favorable price or execution otherwise is obtainable. Foreign
exchange transactions are made with banks or institutions in the interbank
market at prices reflecting a mark-up or mark-down and/or commission.
Portfolio turnover may vary from year to year as well as within a year. It
is anticipated that in any fiscal year the turnover rate may approach the 300%
level for the Fund. In periods in which extraordinary market conditions prevail,
Dreyfus will not be deterred from changing the Fund's investment strategy as
rapidly as needed, in which case higher turnover rates can be anticipated which
would result in greater brokerage expenses. The overall reasonableness of
brokerage commissions paid is evaluated by Dreyfus based upon its knowledge of
available information as to the general level of commissions paid by other
institutional investors for comparable services. A turnover rate of 100% is
equivalent to the Fund buying and selling all of the securities in its portfolio
once in the course of a year. Higher portfolio turnover rates usually generate
additional brokerage commissions and expenses, and the short-term gains realized
from these transactions are taxable to Shareholders as ordinary income when
distributed to them.
Investment decisions for the Fund are made independently from those of the
other investment companies advised by Dreyfus. 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.
DETERMINATION OF NET ASSET VALUE
The Fund's investments are valued after the close of regular trading on
the New York Stock Exchange on the last business day of each week, using
available market quotations or at fair value. Substantially all of the Fund's
fixed-income investments (excluding short-term investments) are valued by one or
more independent pricing services (the "Service") approved by the Board.
Securities valued by the Service for which quoted bid prices in the judgment of
the Service are readily available and are representative of the bid side of the
market are valued at the mean between the quoted bid prices (as obtained by the
Service from dealers in such securities) and asked prices (as calculated by the
Service based upon its evaluation of the market for such securities). Other
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investments valued by the Service are carried at fair value as determined by the
Service, based on methods which include consideration of: yields or prices of
securities of comparable quality, coupon, maturity and type; indications as to
values from dealers; and general market conditions. Short-term investments are
not valued by the Service and are valued at the mean price or yield equivalent
for such securities or for securities of comparable maturity, quality and type
as obtained from market makers. Other investments that are not valued by the
Service are valued at the last sales price for securities traded primarily on an
exchange or the national securities market or otherwise at the average of the
most recent bid and asked prices. Bid price is used when no asked price is
available. Any assets or liabilities initially expressed in terms of foreign
currency will be translated into U.S. dollars at the prevailing rates of
exchange or, if no such rate is quoted on such date, at the exchange rate
utilized on the previous business day or at such other quoted market exchange
rate as may be determined to be appropriate by Dreyfus. Expenses and fees,
including the management and administration fee (reduced by the expense
limitation, if any), are accrued weekly and taken into account for the purpose
of determining the net asset value of the Fund's Shares.
Restricted securities, as well as securities or other assets for which
recent market quotations are not readily available, or are not valued by the
Service, are valued at fair value as determined in good faith by the Board of
Trustees. The Board will review the method of valuation on a current basis. In
making their good faith valuation of restricted securities, the Board members
generally will take the following factors into consideration: restricted
securities which are, or are convertible into, securities of the same class of
securities for which a public market exists usually will be valued at market
value less the same percentage discount at which purchased. This discount will
be revised periodically by the Board if it believes that the discount no longer
reflects the value of the restricted securities. Restricted securities not of
the same class as securities for which a public market exists usually will be
valued initially at cost. Any subsequent adjustment from cost will be based upon
considerations deemed relevant by the Board. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day, Martin
Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Fund intends to distribute substantially all of its net investment
income monthly. All net realized capital gains, if any, either will be
distributed to the Fund's Shareholders at least annually or will be retained by
the Fund, and subject to Fund-level associated tax liabilities thereon. The Fund
will distribute to the Shareholders at least annually all net realized gains
from foreign currency transactions, if any. The Fund may make additional
distributions if necessary to avoid a 4% excise tax on certain undistributed
income and capital gain. See "Taxes." The Fund may change the foregoing
distribution policy if its experience indicates, or its Board of Trustees for
any reason determines, that changes are desirable.
Under the Investment Company Act, the Fund is not permitted to incur
indebtedness unless after such incurrence the Fund has an asset coverage of at
least 300% of the aggregate outstanding principal balance of indebtedness.
Additionally, under the Investment Company Act, the Fund may not declare any
dividend or other distribution upon any class of its capital shares, or purchase
any such capital shares, unless the aggregate indebtedness of the Fund has, at
the time of the declaration of any such dividend or other distribution or at the
time of any such purchase, an asset coverage of at least 300% after deducting
the amount of such dividend, other distribution, or purchase price, as the case
may be. While any preferred shares are outstanding, the Fund may not declare any
cash dividend or other distribution on its Shares, unless at the time of such
declaration, (1) all accumulated preferred share dividends have been paid and
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<PAGE>
(2) the net asset value of the Fund's portfolio (determined after deducting the
amount of such dividend or other distribution) is at least 200% of the
liquidation value of the outstanding preferred shares (expected to be equal to
the original purchase price per share plus any accumulated and unpaid dividends
thereon). In addition to the limitations imposed by the Investment Company Act
as described in this paragraph, certain lenders may impose additional
restrictions on the payment of dividends or other distributions on the Fund's
Shares in the event of a default on the Fund's borrowings. Any limitation on the
Fund's ability to make distributions on its Shares could in certain
circumstances impair the ability of the Fund to maintain its qualification for
taxation as a regulated investment company. See "Other Investment
Practices-Leverage" and "Taxes."
See "Automatic Dividend Reinvestment Plan" for information concerning the
manner in which dividends and other distributions to holders of Shares may be
automatically reinvested in Shares of the Fund. Dividends and other
distributions may be taxable to Shareholders whether they are reinvested in
Shares of the Fund or received in cash.
The Fund expects that it will commence paying dividends within 60 days of
the date of this Prospectus.
TAXES
The Fund intends to elect to be, and to qualify to be treated as, a
regulated investment company ("RIC") under the Internal Revenue Code of 1986, as
amended (the "Code"). For each taxable year that the Fund so qualifies, the Fund
(but not its Shareholders) will be relieved of federal income tax on that part
of its investment company taxable income (consisting generally of net investment
income, net short-term capital gain and net gains from certain foreign currency
transactions) and net capital gain that is distributed to its Shareholders.
In order to qualify for treatment as a RIC under the Code, the Fund must
make an election to be so treated and must distribute to its Shareholders for
each taxable year at least 90% of its investment company taxable income
("Distribution Requirement") and must meet several additional requirements.
These requirements include the following: (1) the Fund must derive at least 90%
of its gross income each taxable year from dividends, interest, payments with
respect to securities loans and gains from the sale or other disposition of
securities or foreign currencies, or other income (including gains from options,
futures or forward contracts) derived with respect to its business of investing
in securities or those currencies ("Income Requirement"); (2) at the close of
each quarter of the Fund's taxable year, at least 50% of the value of its total
assets must be represented by cash and cash items, U.S. government securities,
securities of other RICs and other securities that are limited, in respect of
any one issuer, to an amount that does not exceed 5% of the value of the Fund's
total assets and that does not represent more than 10% of the issuer's
outstanding voting securities; and (3) at the close of each quarter of the
Fund's taxable year, not more than 25% of the value of its total assets may be
invested in securities (other than U.S. government securities or the securities
of other RICs) of any one issuer.
The Fund will be subject to a non-deductible 4% excise tax ("Excise Tax")
to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ending on October 31st of that year, plus certain
other amounts. For these purposes, any such income retained by the Fund, and on
which it pays federal income tax, will be treated as having been distributed.
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<PAGE>
The Fund may acquire zero coupon or other securities issued with original
issue discount. As the holder of such securities, the Fund must include in its
gross income the original issue discount that accrues on the securities during
the taxable year, even if it receives no corresponding payment on the securities
during the year. The Fund also must include in its gross income each year any
"interest" distributed in the form of additional securities on payment-in-kind
securities. Because the Fund annually must distribute substantially all of its
investment company taxable income, including any accrued original issue discount
and other non-cash income, to satisfy the Distribution Requirement and to avoid
imposition of the Excise Tax, the Fund may be required in a particular year to
distribute as a dividend an amount that is greater than the total amount of cash
it actually receives. Those distributions will be made from the Fund's cash
assets or from the proceeds of sales of portfolio securities, if necessary. The
Fund may recognize capital gains or losses from those sales, which would
increase or decrease its investment company taxable income and/or net capital
gain.
The use of certain Derivatives, such as selling (writing) and purchasing
options and futures and entering into forward currency contracts, involves
complex rules that will determine for federal income tax purposes the amount,
character and timing of recognition of the gains and losses the Fund realizes in
connection therewith. These rules also may require the Fund to "mark to market"
(that is, treat as sold for their fair market value) at the end of each taxable
year certain positions in its portfolio, which may cause the Fund to recognize
income or gain without receiving cash with which to make distributions necessary
to satisfy the Distribution Requirement and to avoid imposition of the Excise
Tax.
Gains from the disposition of foreign currencies, and gains from options,
futures and forward currency contracts derived by the Fund with respect to its
business of investing in securities or foreign currencies, will be treated as
qualifying income under the Income Requirement. Under section 988 of the Code,
foreign currency gains or losses from certain forward contracts not traded in
the interbank market as well as certain other gains or losses attributable to
currency exchange rate fluctuations are typically treated as ordinary income or
loss. Such income or loss may increase or decrease (or possibly eliminate) the
Fund's income available for distribution. If, under the rules governing the tax
treatment of foreign currency gain and losses, the Fund's income available for
distribution is decreased or eliminated, all or a portion of the distributions
by the Fund may be treated for federal income tax purposes as a return of
capital or, in some circumstances, as capital gain.
Income received by the Fund from investments in foreign securities may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions. Such taxes will not be deductible or creditable by
Shareholders. Tax conventions between certain countries and the United States
may reduce or eliminate those taxes.
If the Fund has an "appreciated financial position" -- generally, an
interest (including an interest through an option, futures or forward currency
contract, or short sale) with respect to any stock, debt instrument (other than
"straight debt") or partnership interest the fair market value of which exceeds
its adjusted basis -- and enters into a "constructive sale" of the same or
substantially similar property, the Fund will be treated as having made an
actual sale thereof, with the result that gain will be recognized at that time.
A constructive sale generally consists of a short sale, an offsetting notional
principal contract or futures or forward currency contract entered into by the
Fund or a related person with respect to the same or substantially similar
property. In addition, if the appreciated financial position is itself a short
sale or such a contract, acquisition of the underlying property or substantially
similar property will be deemed a constructive sale.
Dividends from the Fund's investment company taxable income (whether
received in cash or reinvested in additional Fund Shares) generally are taxable
to its Shareholders as ordinary income to the extent of the Fund's earnings and
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profits. Distributions of the Fund's net capital gain (whether received in cash
or reinvested in additional Fund Shares), when designated as such, are taxable
to its Shareholders as long-term capital gain, regardless of how long they have
held their Fund Shares. See below for a summary of the tax rates applicable to
capital gain distributions. A participant in the Automatic Dividend Reinvestment
Plan will be treated as having received a distribution in the amount of the cash
used to purchase Shares on his or her behalf, including a pro rata portion of
the brokerage fees incurred by the Transfer Agent. Distributions by the Fund to
its Shareholders in any year that exceed the Fund's earnings and profits
generally may be applied by each Shareholder against his or her basis for the
Shares and will be taxable at capital gains rates (assuming the Shares are held
as a capital asset) to any Shareholder only to the extent the distributions to
the Shareholder exceed the Shareholder's basis for his or her Shares. The Fund
may retain for investment its net capital gain. However, if the Fund does so, it
will be subject to a tax of 35% on the amount retained. In that event, the Fund
expects to designate the retained amount as undistributed capital gain in a
notice to its Shareholders, who (i) will be required to include in income for
tax purposes, as long-term capital gain, their proportionate shares of such
undistributed amount, (ii) will be entitled to credit their proportionate shares
of the 35% tax paid by the Fund against their federal income tax liabilities, if
any, and to claim refunds to the extent the credit exceeds those liabilities,
and (iii) will increase the tax basis of their Fund Shares by an amount equal to
65% of the amount of undistributed capital gain included in their gross income.
The Fund will notify its Shareholders following the end of each calendar
year of the amounts of dividends and capital gain distributions paid (or deemed
paid) that year and undistributed capital gain designated for that year. The
information regarding capital gain distributions and undistributed capital gain
will designate the portion thereof subject to the different maximum rates of tax
applicable to noncorporate taxpayers' net capital gain indicated below.
Shareholders who are not liable for tax on their income and whose Shares are not
debt-financed generally are not required to pay tax on dividends or other
distributions they receive from the Fund.
Dividends and other distributions declared by the Fund in December of any
year and payable to Shareholders of record on a date in that month will be
deemed to have been paid by the Fund and received by the Shareholders on
December 31st if the distributions are paid by the Fund during the following
January. Accordingly, those distributions will be taxed to Shareholders for the
year in which that December 31st falls.
An investor should be aware that, if Shares are purchased shortly before
the record date for any dividend or other distribution, the investor will pay
full price for the Shares and will receive some portion of the purchase price
back as a taxable distribution.
Upon the sale or exchange of Shares (including a sale pursuant to a Share
repurchase or tender offer by the Fund), a Shareholder generally will recognize
a taxable gain or loss equal to the difference between his or her adjusted basis
for the Shares and the amount received. Any such gain or loss will be treated as
a capital gain or loss if the Shares are capital assets in the Shareholder's
hands and will be long-term capital gain or loss if the Shares have been held
for more than one year. See below for a discussion of the tax rates applicable
to capital gains. Any loss recognized on a sale or exchange of Shares that were
held for six months or less will be treated as long-term, rather than
short-term, capital loss to the extent of any capital gain distributions
previously received thereon. A loss realized on a sale or exchange of Shares
will be disallowed to the extent those Shares are replaced by other Shares
within a period of 61 days beginning 30 days before and ending 30 days after the
date of disposition of the Shares (which could occur, for example, as a result
of participation in the Automatic Dividend Reinvestment Plan). In that event,
the basis of the replacement Shares will be adjusted to reflect the disallowed
loss.
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Under the Taxpayer Relief Act of 1997 ("1997 Tax Act"), the maximum tax
rates applicable to net capital gains recognized by individuals and other
non-corporate taxpayers are (i) the same as ordinary income rates for capital
assets held for one year or less; (ii) 28% for capital assets held for more than
one year but not more than 18 months and (iii) 20% (10% for taxpayers in the 15%
marginal tax bracket) for capital assets held for more than 18 months. The 1997
Tax Act did not affect the maximum net capital gain tax rate for corporations,
which remains at 35%. The tax rates described above will apply to distributions
of net capital gain by the Fund (if, as expected, the Fund designates net
capital gain distributions as 28% rate gain distributions or 20% rate gain
distributions, in accordance with its holding periods for the securities it sold
that generated the distributed gains) as well as to sales and exchanges of
Shares. With respect to capital losses recognized on dispositions of Shares held
six months or less where such losses are treated as long-term capital losses to
the extent of prior capital gain distributions received thereon (see discussion
in the preceding paragraph), it is unclear how such capital losses offset the
capital gains referred to above. Shareholders should consult their own tax
advisers as to the application of the new capital gains rates to their
particular circumstances.
The Fund is required to withhold 31% of all dividends, capital gain
distributions and repurchase proceeds payable to any individual Shareholders and
certain other non-corporate Shareholders who do not provide the Fund with a
correct taxpayer identification number. The Fund is also required to withhold
31% of all dividends and capital gain distributions payable to such Shareholders
who otherwise are subject to backup withholding.
The foregoing is only a brief summary of some of the important federal
income tax considerations generally affecting the Fund and its Shareholders.
There may be other federal, state, local or foreign tax considerations
applicable to a particular investor. Prospective investors are urged to consult
their tax advisers regarding the specific federal income tax consequences of
purchasing, holding and disposing of Shares, as well as the effects of state,
local and foreign tax laws and any proposed tax law changes.
AUTOMATIC DIVIDEND REINVESTMENT PLAN
Pursuant to the Fund's Automatic Dividend Reinvestment Plan (the "Plan"),
unless a Shareholder otherwise elects, all dividends and capital gain
distributions will be automatically reinvested by Mellon Bank as agent for
Shareholders in administering the Plan (the "Plan Agent"), in additional Shares
of the Fund. Shareholders who elect not to participate in the Plan will receive
all dividends and other distributions in cash paid by check mailed directly to
the shareholder of record (or, if the Shares are held in street or other nominee
name, then to such nominee) by Mellon Bank as dividend disbursing agent. Such
participants may elect not to participate in the Plan and to receive all
dividends and capital gain distributions in cash by sending written instructions
to Mellon Bank, as dividend disbursing agent, at the address set forth below.
Participation in the Plan is completely voluntary and may be terminated or
resumed at any time without penalty by written notice if received by the Plan
Agent not less than ten days prior to any dividend record date; otherwise such
termination will be effective with respect to any subsequently declared dividend
or other distribution.
Whenever the Fund declares an income dividend or a capital gain
distribution (collectively referred to as "dividends") payable either in Shares
or in cash, non-participants in the Plan will receive cash and participants in
the Plan will receive the equivalent in Shares. The Shares will be acquired by
the Plan Agent for the participants' accounts, depending upon the circumstances
described below, either (i) through receipt of additional unissued but
authorized Shares from the Fund ("newly issued shares") or (ii) by purchase of
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outstanding Shares on the open market ("open-market purchases") on the NYSE or
elsewhere. If on the payment date for the dividend, the net asset value per
Share is equal to or less than the market price per Share plus estimated
brokerage commissions (such condition being referred to herein as "market
premium"), the Plan Agent will invest the dividend amount in newly issued Shares
on behalf of the participants. The number of newly issued Shares to be credited
to each participant's account will be determined by dividing the dollar amount
of the dividend by the net asset value per Share on the date the Shares are
issued, provided that the maximum discount from the then current market price
per Share on the date of issuance may not exceed 5%. If on the dividend payment
date the net asset value per Share is greater than the market value (such
condition being referred to herein as "market discount"), the Plan Agent will
invest the dividend amount in Shares acquired on behalf of the participants in
open-market purchases.
In the event of a market discount on the dividend payment date, the Plan
Agent will have until the last business day before the next date on which the
Shares trade on an "ex-dividend" basis or in no event more than 30 days after
the dividend payment date (the "last purchase date") to invest the dividend
amount in Shares acquired in open-market purchases. It is contemplated that the
Fund will pay monthly income dividends. Therefore, the period during which
open-market purchases can be made will exist only from the payment date of the
dividend through the date before the next "ex-dividend" date which typically
will be approximately ten days. If, before the Plan Agent has completed its
open-market purchases, the market price of a Share exceeds the net asset value
per Share, the average per Share purchase price paid by the Plan Agent may
exceed the net asset value of the Fund's Shares, resulting in the acquisition of
fewer Shares than if the dividend had been paid in newly issued Shares on the
dividend payment date. Because of the foregoing difficulty with respect to
open-market purchases, the Plan provides that if the Plan Agent is unable to
invest the full dividend amount in open-market purchases during the purchase
period or if the market discount shifts to a market premium during the purchase
period, the Plan Agent will cease making open-market purchases and will invest
the uninvested portion of the dividend amount in newly issued Shares at the
close of business on the last purchase date.
The Plan Agent maintains all Shareholders' accounts in the Plan and
furnishes written confirmation of all transactions in the accounts, including
information needed by Shareholders for tax records. Shares in the account of
each Plan participant will be held by the Plan Agent on behalf of the Plan
participant, and each Shareholder proxy will include those Shares purchased or
received pursuant to the Plan. The Plan Agent will forward all proxy
solicitation materials to participants and vote proxies for Shares held pursuant
to the Plan in accordance with the instructions of the participants.
In the case of Shareholders such as banks, brokers or nominees that hold
Shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of Shares certified from time to time by the
record Shareholder's name and held for the account of beneficial owners who
participate in the Plan.
There will be no brokerage charges with respect to Shares issued directly
by the Fund as a result of dividends or capital gain distributions payable
either in Shares or in cash. However, each participant will pay a pro rata share
of brokerage commissions incurred with respect to the Plan Agent's open-market
purchases in connection with the reinvestment of dividends.
The automatic reinvestment of dividends will not relieve participants of
any Federal, state or local income tax that may be payable (or required to be
withheld) on such dividends. See "Taxes."
Shareholders participating in the Plan may receive benefits not available
to Shareholders not participating in the Plan. If the market price (plus
commissions) of the Fund's Shares is above their net asset value, participants
53
<PAGE>
in the Plan will receive Shares of the Fund at less than they could otherwise
purchase them and will have Shares with a cash value greater than the value of
any cash distribution they would have received on their Shares. If the market
price plus commissions is below the net asset value, participants will receive
distributions in Shares with a net asset value greater than the value of any
cash distribution they would have received on their Shares. However, there may
be insufficient Shares available in the market to make distributions in Shares
at prices below the net asset value. Also, since the Fund does not redeem its
Shares, the price on resale may be more or less than the net asset value. See
"Taxes" for a discussion of tax consequences of the Plan.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan. There
is no direct service charge to participants in the Plan; however, the Fund
reserves the right to amend the Plan to include a service charge payable by the
participants.
All correspondence concerning the Plan should be directed to the Plan
Agent at __________________________________________________.
UNDERWRITING
The underwriters named below (the "Underwriters"), acting through
PaineWebber Incorporated, 1285 Avenue of the Americas, New York, New York as
their representative (the "Representative") have severally agreed, subject to
the terms and conditions of the Underwriting Agreement with the Fund and Dreyfus
(the "Underwriting Agreement"), to purchase from the Fund the number of Shares
set forth opposite their respective names. The Underwriters are committed to
purchase all of such Shares if any are purchased.
Underwriter Number of Shares
- ----------- ----------------
PaineWebber Incorporated _______________
Total _______________
The Fund has granted to the Underwriters an option, exercisable for 60
days from the date of this Prospectus to purchase up to an additional _______
Shares to cover over-allotments, if any, at the initial offering price. The
Underwriters may exercise such option solely for the purpose of covering
over-allotments incurred in the sale of the Shares offered hereby. To the extent
that the Underwriters exercise this option, each of the Underwriters will have a
firm commitment, subject to certain conditions, to purchase an additional number
of Shares proportionate to such Underwriter's initial commitment.
As set forth in the notes to the table on the cover page of this
Prospectus, Dreyfus or an affiliate (not the Fund) from its own assets has
agreed to pay a commission to the Underwriters in the amount of $___ per Share
(___% of the public offering price per Share) or an aggregate amount of
$___________ ($_________ assuming full exercise of the over-allotment option)
for all Shares covered by this Prospectus. Such payment will be the legal
obligation of Dreyfus (or an affiliate) and made out of its own assets and will
not in any way represent an obligation of the Fund or its Shareholders. The
Representative has advised the Fund that the Underwriters may pay up to $___ per
Share from such payment received from Dreyfus to certain dealers who sell the
Shares. In addition, the Fund has agreed to pay the Underwriters in the amount
of $250,000, in partial reimbursement of their expenses.
54
<PAGE>
Prior to this offering, there has been no public market for the Shares or
any other securities of the Fund. The Fund intends to apply to list its Shares
on the New York Stock Exchange under the symbol "DHF." In order to meet the
requirements for listing the Shares on the New York Stock Exchange, the
Underwriters have undertaken to sell lots of 100 or more Shares to a minimum of
2,000 beneficial holders. The minimum investment requirement is 100 Shares
($1,500).
The Fund and Dreyfus have each agreed to indemnify the several
Underwriters for or to contribute to the losses arising out of certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The Fund has agreed not to offer or sell any additional shares of
beneficial interest of the Fund, other than as contemplated by this Prospectus,
for a period of 180 days after the date of the Underwriting Agreement without
the prior written consent of the Underwriters.
The Underwriters may take certain actions to discourage short-term trading
of Shares during a period of time following the initial offering date. Included
in these actions is the withholding of the concession and other payments to
dealers in connection with Shares which were sold by such dealers and which are
repurchased for the account of the Underwriters during such period. In addition,
physical delivery of certificates representing Shares is required to transfer
ownership of Shares for a certain period.
Under the terms of and subject to the conditions of the Underwriting
Agreement, the Underwriters are committed to purchase and pay for all Shares
offered hereby if any are purchased. The Underwriting Agreement provides that it
may be terminated at or prior to the closing date for the purchase of the Shares
if, in the judgment of the Underwriters, payment for the delivery of the Shares
is rendered impracticable or inadvisable because (1) trading in the equity
securities of the Fund is suspended by the Securities and Exchange Commission,
by an exchange that lists the Shares, or by the National Association of
Securities Dealers Automated Quotation National Market System, (2) additional
material governmental restrictions, not in force on the date of the Underwriting
Agreement, have been imposed upon trading in securities generally or trading in
securities generally has been suspended on any U.S. securities exchange, or a
general banking moratorium has been established by Federal or New York
authorities, or (3) any outbreak or material escalation of hostilities or other
calamity or crisis occurs, the effect of which is such as to make it
impracticable to market any or all of the Shares. The Underwriting Agreement
also may be terminated if any of the conditions specified in the Underwriting
Agreement have not been fulfilled when and as required by such agreement.
The Fund anticipates that the Representative and certain other
Underwriters may from time to time act as brokers or dealers in connection with
the execution of its portfolio transactions after they have ceased to be
Underwriters and, subject to certain restrictions, may act as such brokers while
they are Underwriters. See "Management of the Fund." Dreyfus Investment Services
Corporation, an affiliate of the Fund, may act as a dealer in connection with
the offering of the Shares.
PaineWebber will provide shareholder services to the Fund pursuant to a
Shareholder Servicing Agreement with the Fund. The Fund will pay a monthly fee
on an annual basis equal to 0.10% of the average weekly Managed Assets of the
Fund (as defined herein under "Management of the Fund - Management and
Administration Agreement") for such services. See "Shareholder Servicing Agent,
Custodian and Transfer and Dividend Disbursing Agent."
55
<PAGE>
SHAREHOLDER SERVICING AGENT, CUSTODIAN AND
TRANSFER AND DIVIDEND DISBURSING AGENT
Pursuant to a Shareholder Servicing Agreement between PaineWebber
Incorporated (the "Shareholder Servicing Agent") and the Fund, the Shareholder
Servicing Agent will (i) undertake to make public information pertaining to the
Fund on an ongoing basis and to communicate to investors and prospective
investors the Fund's features and benefits (including periodic seminars or
conference calls, responses to questions from current or prospective
shareholders and specific shareholder contact where appropriate); (ii) make
available to investors and prospective investors market price, net asset value,
yield and other information regarding the Fund, if reasonably obtainable, for
the purpose of maintaining the visibility of the Fund in the investor community;
(iii) at the request of the Fund, provide certain economic research and
statistical information and reports, if reasonably obtainable, on behalf of the
Fund, and consult with representatives and Trustees of the Fund in connection
therewith, which information and reports shall include: (a) statistical and
financial market information with respect to the Fund's market performance and
(b) comparative information regarding the Fund and other closed-end management
investment companies with respect to (1) the net asset value of their respective
shares, (2) the respective market performance of the Fund and such other
companies and (3) other relevant performance indicators; and (iv) at the request
of the Fund, provide information to and consult with the Board of Trustees with
respect to applicable strategies designed to address market value discounts,
which may include share repurchase, tender offers, modifications to dividend
policies or capital structure, repositioning or restructuring of the Fund,
conversion of the Fund to an open-end investment company, liquidation or merger;
provided, however, that under the terms of the Shareholder Servicing Agreement,
the Shareholder Servicing Agent is not obligated to render any opinions,
valuations or recommendations of any kind or to perform any such similar
services. For these services, the Fund will pay the Shareholder Servicing Agent
a fee equal on an annual basis to 0.10% of the Fund's average weekly Managed
Assets (as defined above under "Management of the Fund Management and
Administration Agreement"), payable in arrears at the end of each calendar
month. Under the terms of the Shareholder Servicing Agreement, the Shareholder
Servicing Agent is relieved from liability to the Fund for any act or omission
in the course of its performance under the Shareholder Servicing Agreement, in
the absence of gross negligence or willful misconduct by the Shareholder
Servicing Agent. The Fund has agreed to indemnify the Shareholder Servicing
Agent or contribute to losses arising out of certain liabilities under the
Shareholder Servicing Agreement. The Shareholder Servicing Agreement will
continue for an initial term of two years and thereafter for successive one-year
periods unless terminated by either party upon written notice 60 days prior to
the anniversary date thereof. In this regard, as part of its ongoing oversight
responsibilities, the Board of Trustees will monitor the performance of the
Shareholder Servicing Agent and the continuing appropriateness of the
Shareholder Servicing Agreement.
Mellon Bank, located at One Mellon Bank Center, Pittsburgh, Pennsylvania
15258, will act as the Fund's Custodian. Dreyfus is a wholly-owned subsidiary of
Mellon Bank. The Custodian may employ sub-custodians outside the U.S. approved
by the Board of Trustees in accordance with regulations under the Investment
Company Act. Mellon Bank will also act as the Fund's Transfer and Dividend
Disbursing Agent.
DESCRIPTION OF SHARES
The Fund is a newly organized unincorporated business trust under the laws
of the Commonwealth of Massachusetts created pursuant to an Agreement and
Declaration of Trust (the "Trust Agreement") dated March 16, 1998. The Fund is
authorized to issue an unlimited number of shares of beneficial interest, par
value $.001 per share. Each Share has one vote and, when issued and paid for in
56
<PAGE>
accordance with the terms of the offering, will be 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.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of a Massachusetts business trust.
However, the Trust Agreement disclaims shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Fund or
a Trustee. 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 incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Fund itself would be unable to meet its obligations, a possibility
which management believes is remote. Upon payment of any liability incurred by
the Fund, the shareholder paying such liability will be entitled to
reimbursement from the general assets of the Fund. The Fund intends to conduct
its operations in such a way so as to avoid, as far as possible, ultimate
liability of the shareholders for liabilities of the Fund.
The Fund has no present intention of offering additional Shares, except as
described herein and under the Automatic Dividend Reinvestment Plan, as it may
be amended from time to time. See "Automatic Dividend Reinvestment Plan." Other
offerings of its Shares, if made, will require approval of the Fund's Board of
Trustees. Any additional offering will not be sold at a price per Share below
the then current net asset value (exclusive of underwriting discounts and
commissions) except in connection with an offering to existing Shareholders or
with the consent of a majority of the Fund's outstanding Shares.
The Fund intends to apply to list its Shares on the New York Stock
Exchange under the symbol "DHF."
ANTI-TAKEOVER PROVISIONS IN THE DECLARATION OF TRUST
The Fund's Declaration of Trust includes provisions that could have the
effect of limiting the ability of other entities or persons to acquire control
of the Fund or to change the composition of its Board of Trustees, and could
have the effect of depriving Shareholders of an opportunity to sell their Shares
at a premium over prevailing market prices by discouraging a third party from
seeking to obtain control of the Fund. These provisions may have the effect of
discouraging attempts to acquire control of the Fund, which attempts could have
the effect of increasing the expenses of the Fund and interfering with the
normal operation of the Fund. The Board of Trustees is divided into three
classes, with the terms of one class expiring at each annual meeting of
Shareholders. At each annual meeting, one class of Trustees is elected to a
three-year term. This provision could delay for up to two years the replacement
of a majority of the Board of Trustees. A Trustee may be removed from office
only for cause by a written instrument signed by at least two-thirds of the
remaining Trustees or by a vote of the holders of at least two-thirds of the
Shares.
In addition, the Declaration of Trust requires the favorable vote of the
holders of at least 75% of the outstanding Shares of each class of the Fund,
voting as a class, then entitled to vote to approve, adopt or authorize certain
transactions with 5%-or-greater holders of a class of Shares and their
associates, unless the Board of Trustees shall by resolution have approved a
memorandum of understanding with such holders, in which case normal voting
requirements would be in effect. For purposes of these provisions, a
5%-or-greater holder of a class of Shares (a "Principal Shareholder") refers to
any person who, whether directly or indirectly and whether alone or together
57
<PAGE>
with its affiliates and associates, beneficially owns 5% or more of the
outstanding shares of any class of beneficial interest of the Fund. The
transactions subject to these special approval requirements are: (i) the merger
or consolidation of the Fund or any subsidiary of the Fund with or into any
Principal Shareholder; (ii) the issuance of any securities of the Fund to any
Principal Shareholder for cash (except pursuant to the Automatic Dividend
Reinvestment Plan); (iii) the sale, lease or exchange of all or any substantial
part of the assets of the Fund to any Principal Shareholder (except assets
having an aggregate fair market value of less than $1,000,000, aggregating for
the purpose of such computation all assets sold, leased or exchanged in any
series of similar transactions within a twelve-month period); or (iv) the sale,
lease or exchange to the Fund or any subsidiary thereof, in exchange for
securities of the Fund, of any assets of any Principal Shareholder (except
assets having an aggregate fair market value of less than $1,000,000,
aggregating for the purposes of such computation all assets sold, leased or
exchanged in any series of similar transactions within a twelve-month period).
The Board of Trustees has determined that provisions with respect to the
Board of Trustees and the 75% voting requirements described above (and the
requirements relating to conversion to an open-end fund described below), which
voting requirements are greater than the minimum requirements under
Massachusetts law or the Investment Company Act, are in the best interest of
Shareholders generally. Reference should be made to the Declaration of Trust on
file with the Securities and Exchange Commission for the full text of these
provisions.
CONVERSION TO OPEN-END FUND
The Fund may be converted to an open-end investment company at any time by
an amendment to the Declaration of Trust. The Declaration of Trust provides that
such an amendment would require the approval of two-thirds of the Fund's
outstanding shares (including any preferred shares) entitled to vote on the
matter, voting as a single class (or a majority of such shares if the amendment
previously was approved, adopted or authorized by at least two-thirds of the
total number of Trustees) and, assuming the Fund has issued preferred shares, by
the affirmative vote of a majority of the outstanding preferred shares, voting
as a separate class. Such a vote also would satisfy a separate requirement in
the Investment Company Act that the change be approved by the shareholders. If
approved in the foregoing manner, conversion of the Fund could not occur until
at least 90 days after the Shareholders' meeting at which such conversion was
approved and could take significantly longer and would also require at least 30
days' prior notice to all Shareholders. Conversion of the Fund to an open-end
investment company would require the redemption of any outstanding preferred
shares and any indebtedness not constituting bank loans, which could eliminate
or alter the leveraged capital structure of the Fund with respect to the Shares.
Following any such conversion, it is also possible that certain of the Fund's
investment policies and strategies would have to be modified to assure
sufficient portfolio liquidity. In particular, the Fund would be required to
maintain its portfolio such that not more than 15% of its assets would be
invested in illiquid securities, or other illiquid assets, or securities which
are restricted as to resale (excluding, for purposes of this limitation, Rule
144A and other securities deemed liquid by Dreyfus pursuant to guidelines
established by the Board of Trustees). Such requirement could cause the Fund to
dispose of portfolio securities or other assets at a time when it is not
advantageous to do so, and could adversely affect the ability of the Fund to
meet its investment objectives. In the event of conversion, the Shares would
cease to be listed on the New York Stock Exchange or other national securities
exchange or market system. Shareholders of an open-end investment company may
require the company to redeem their shares at any time (except in certain
circumstances as authorized by or under the Investment Company Act) at their net
asset value, less such redemption charge, if any, as might be in effect at the
time of a redemption. The Fund expects to pay all such redemption requests in
cash, but intends to reserve the right to pay redemption requests in a
58
<PAGE>
combination of cash or securities. If a payment in securities were made,
investors may incur brokerage costs in converting such securities to cash. If
the Fund were converted to an open-end fund, it is likely that new common shares
would be sold at net asset value plus a sales load.
REPURCHASE OF SHARES
Shares of closed-end management investment companies often trade at a
discount to their net asset values, and the Fund's Shares may likewise trade at
a discount to their net asset value, although it is possible that they may trade
at a premium above net asset value. The market price of the Fund's Shares will
be determined by such factors as relative demand for and supply of such Shares
in the market, the Fund's net asset value, general market and economic
conditions and other factors beyond the control of the Fund. See "Determination
of Net Asset Value." Although the Fund's Shareholders will not have the right to
redeem their Shares, the Fund may take action to repurchase Shares in the open
market or make tender offers for its Shares at their net asset value. This may
have the effect of reducing any market discount from net asset value.
There is no assurance that if action is undertaken to repurchase or tender
for Shares, such action will result in the Shares' trading at a price which
approximates their net asset value. Although Share repurchases and tenders could
have a favorable effect on the market price of the Fund's Shares, it should be
recognized that the acquisition of Shares by the Fund will decrease the total
assets of the Fund and, therefore, have the effect of increasing the Fund's
expense ratio. Any Share repurchases or tender offers will be made in accordance
with requirements of the Securities Exchange Act of 1934, as amended, and the
Investment Company Act.
OTHER INFORMATION
Prior to the registration statement becoming effective, the Underwriters
or other appropriate party may distribute advertising or other solicitation
material which discusses (i) economic and market conditions and trends
generally; (ii) historical and current conditions and trends in the lower grade
securities market, and risk and reward potential in such market; (iii)
comparative information, including statistical analysis and performance-related
information, related to lower grade securities generally and investing in lower
grade securities; (iv) the special considerations and potential benefits of
investing in closed-end management investment companies; (v) information about
Dreyfus and the Fund's portfolio managers, biographical information about the
Fund's portfolio manager, including honors or awards received, and information
and commentary on investment strategy or other matters of general interest to
investors; and (vi) that Dreyfus sponsored the first short-term lower grade
securities fund in the mutual fund industry.
LEGAL OPINIONS
Certain legal matters in connection with the Shares offered hereby will be
passed upon for the Fund by Kirkpatrick & Lockhart LLP and for the Underwriters
by Skadden, Arps, Slate, Meagher & Flom LLP, and its affiliated entities.
EXPERTS
The statement of assets, liabilities and capital of the Fund included in
this Prospectus has been so included in reliance upon the report of KPMG Peat
Marwick LLP, independent auditors, and on their authority as experts in auditing
and accounting.
59
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholder of
Dreyfus High Yield Strategies Fund
We have audited the accompanying statement of assets and liabilities of Dreyfus
High Yield Strategies Fund (the "Fund") as of April __, 1998. This financial
statement is the responsibility of the Fund's management. Our responsibility is
to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of the Fund as of April __, 1998,
in conformity with generally accepted accounting principles.
April __, 1998
60
<PAGE>
APPENDIX A
RATINGS OF CORPORATE BONDS
DESCRIPTION OF CORPORATE BOND RATINGS OF STANDARD & POOR'S RATINGS GROUP:
AAA--Bonds rated AAA have the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA--Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A--Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher
rated categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
BB--Bonds rated BB have less near-term vulnerability to default than other
speculative grade debt. However, they face major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments.
B--Bonds rated B have a greater vulnerability to default but presently
have 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--Bonds rated CCC have a current identifiable vulnerability to default
and are dependent upon favorable business, financial and economic conditions to
meet timely payments of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, they are 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.
S&P's letter ratings may be modified by the addition of a plus (+) or a minus
(-) sign designation, which is used to show relative standing within the major
rating categories, except in the AAA (Prime Grade) category.
A-1
<PAGE>
DESCRIPTION OF BOND RATINGS OF MOODY'S INVESTORS SERVICE, INC.
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and generally are 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 sometime 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 the
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.
A-2
<PAGE>
==================================== =======================================
No person has been authorized to
give any information or to make any
representations other than those
contained in this Prospectus, and,
if given or made, such other
information or representations must
not be relied upon as having been
authorized by the Fund or the
Underwriters. Neither the delivery
of this Prospectus nor any sale made
hereunder shall, in any
circumstances, create any
implication that there has been no
change in the affairs of the Fund
since the date hereof or that the
information contained herein is
correct as of any time subsequent to _____ Shares
its date. However, if any material
change occurs while this Prospectus DREYFUS HIGH YIELD
is required to be delivered, this STRATEGIES FUND
Prospectus will be amended or
supplemented accordingly. This
Prospectus does not constitute an
offer to sell or a solicitation of
an offer to buy any securities other
than the registered securities to
which it relates. This Prospectus
does not constitute an offer to sell ______________
or a solicitation of an offer to buy
in any circumstances in which such PROSPECTUS
offer or solicitation is unlawful. ______________
----------------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary...............1
Fee Table.......................10
The Fund........................12 PaineWebber Incorporated
Use of Proceeds.................12
Investment Objectives and
Policies......................13
Other Investment Practices......25
Risk Factors and Special
Considerations................35
Investment Restrictions.........39
Management of the Fund..........40
Trustees and Officers of the
Fund..........................42
Portfolio Transactions..........46 April __, 1998
Determination of Net Asset
Value.........................47
Dividends and Other
Distributions.................48
Taxes...........................49
Automatic Dividend
Reinvestment Plan.............52
Underwriting....................54
Shareholder Servicing Agent,
Custodian and Transfer and
Dividend Disbursing Agent.....56
Description of Shares...........57
Other Information...............59
Legal Opinions..................60
Experts.........................60
Independent Auditors' Report....61
Statement of Assets...............
Appendix A: Ratings of
Corporate Bonds..............A-1
Until __, all dealers effecting
transactions in the Shares, whether
or not participating in this
distribution, may be required to
deliver a Prospectus. This is in
addition to the obligation of
dealers to deliver a Prospectus when
acting as Underwriters and with
respect to their unsold allotments
or subscriptions.
==================================== =======================================
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) Financial Statements:
The Selected Financial Information, Statement of Operations, Statement of
Changes in Net Assets, and Schedules II through VII, inclusive, are
omitted because the required information is included in the financial
statement included in Part A or Part B, or because the conditions
requiring their filing do not exist.
(2) Exhibits
(a) Declaration of Trust
(b) Bylaws
(c) Inapplicable
(d) (1) Form of Certificate Representing Shares of Beneficial Interest
[To be filed by Amendment]
(2) Portions of Declaration of Trust Relating to Shareholders'
Rights
(3) Portions of Bylaws Relating to Shareholders' Rights
(e) (1) Form of Terms and Conditions of Dividend Reinvestment Plan
[To be filed by Amendment]
(2) Form of Dividend Reinvestment Plan Agency Agreement
[To be filed by Amendment]
(f) Inapplicable
(g) Form of Investment Management and Administration Agreement
[To be filed by Amendment]
(h) (1) Form of Master Agreement Among Underwriters
[To be filed by Amendment]
(2) Form of Underwriting Agreement
[To be filed by Amendment]
(3) Form of Master Selected Dealers Agreement
[To be filed by Amendment]
(i) Inapplicable
(j) Form of Custodian Contract
[To be filed by Amendment]
(k) (1) Form of Shareholder Servicing Agreement
[To be filed by Amendment]
(2) Inapplicable
(l) Opinion and Consent of Counsel
[To be filed by Amendment]
(m) Inapplicable
(n) Consent of Independent Auditors
[To be filed by Amendment]
<PAGE>
(o) Inapplicable
(p) Initial Capital Agreement
[To be filed by Amendment]
(q) Inapplicable
ITEM 25. MARKETING ARRANGEMENTS
Reference is made to the Form of Underwriting Agreement for Registrant's
shares of beneficial interest to be filed by amendment to this Registration
Statement.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Securities and Exchange Commission Fees........... $.....*
NASD Fees......................................... $.....*
New York Stock Exchange Listing Fee............... $.....*
Printing.......................................... $.....*
Accounting Fees and Expenses...................... $.....*
Legal Fees........................................ $.....*
Blue Sky Fees and Expenses........................ $.....*
Miscellaneous..................................... $.....*
===============
Total $ *
===============
- ----------
*To be furnished by amendment
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
ITEM 28. NUMBER OF RECORD HOLDERS OF SECURITIES
None
ITEM 29. INDEMNIFICATION
Article V of the Registrant's Declaration of Trust provides as follows:
Section 5.1. No Shareholder shall be subject to any personal
liability whatsoever to any Person in connection with Fund Property or the acts,
obligations or affairs of the Fund. The Trustees shall have no power to bind any
Shareholder personally or to call upon any Shareholder for the payment of any
sum of money or assessment whatsoever other than such as the Shareholder may at
any time personally agree to pay by way of subscription to any Shares or
otherwise. Shareholder liability for the acts and obligations of the Fund is
hereby expressly disclaimed. Every note, bond, contract, or other undertaking
issued by or on behalf of the Fund or the Trustees relating to the Fund shall
include a notice and provision limiting the obligation represented thereby to
the Fund and its assets (but the omission of such notice and provision shall not
<PAGE>
operate to impose any liability or obligation on any Shareholder). No Trustee,
officer, employee or agent of the Fund shall be subject to any personal
liability whatsoever to any Person, in connection with the Fund Property or the
affairs of the Fund, save only that arising from bad faith, willful misfeasance,
gross negligence or reckless disregard for his or her duty to such Person; and
all such Persons shall look solely to the Fund Property for satisfaction of
claims of any nature arising in connection with the affairs of the Fund. If any
Shareholder, Trustee, officer, employee or agent, as such, of the Fund is made a
party to any suit or proceeding to enforce any such liability, he or she shall
not, on account thereof, be held to any personal liability. The Fund shall
indemnify and hold each Shareholder harmless from and against all claims and
liabilities, to which such Shareholder may become subject by reason of his or
her being or having been a Shareholder, other than by reason of his or her own
wrongful act or omission, and shall reimburse such Shareholder for all legal and
other expenses reasonably incurred by him or her in connection with any such
claim or liability. The rights accruing to a Shareholder under this Section 5.1
shall not exclude any other right to which such Shareholder may be lawfully
entitled, nor shall anything herein contained restrict the right of the Fund to
indemnify or reimburse a Shareholder in any appropriate situation even though
not specifically provided herein.
Section 5.2. No Trustee, officer, employee or agent of the Fund
shall be liable to the Fund, its Shareholders, or to any Shareholder, Trustee,
officer, employee, or agent thereof for any action or failure to act (including
without limitation the failure to compel in any way any former or acting Trustee
to redress any breach of trust) except for his or her own bad faith, willful
misfeasance, gross negligence or reckless disregard of his or her duties.
Section 5.3. (a) The Trustee shall provide for indemnification by
the Fund of any person who is, or has been, a Trustee, officer, employee or
agent of the Fund against all liability and against all expenses reasonably
incurred or paid by him in connection with any claim, action, suit or proceeding
in which he becomes involved as a party or otherwise by virtue of his being or
having been a Trustee, officer, employee or agent and against amounts paid or
incurred by him in the settlement thereof, in such manner as the Trustees may
provide from time to time in the by-laws. (b) The words "claim," "action,"
"suit," or "proceeding" shall apply to all claims, actions, suits or proceedings
(civil, criminal or other, including appeals), actual or threatened; and the
words "liability" and "expenses" shall include, without limitation, attorney's
fees, costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The directors and officers of the Registrant's investment adviser have been
engaged for the past two fiscal years in no business, vocation or employment of
a substantial nature other than as directors or officers of the investment
adviser or certain of it's corporate affiliates. The address of the investment
adviser is 200 Park Avenue, New York, New York 10166.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents of the Fund required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and rules promulgated
thereunder will be maintained at the office of the fund's custodian at One
Mellon Bank Center, Pittsburgh, Pennsylvania 15258, and the Fund's dividend
<PAGE>
disbursing agent and registrar at P.O. Box 9671, Providence, Rhode Island,
09240-9671, except that the Fund's corporate records (its articles of
incorporation, by-laws, and minutes of the meetings of its Board of Directors
and shareholders) will be maintained at the offices of the Fund's investment
advisor at 200 Park Avenue, New York, New York 10166.
ITEM 32. MANAGEMENT SERVICES
None
ITEM 33. UNDERTAKINGS
(1) The Registrant undertakes to suspend offering of its shares until it
amends its prospectus if (1) subsequent to the effective date of its
Registration Statement, the net asset value declines more than 10 percent
from its net asset value as of the effective date of the Registration
Statement or (2) the net asset value increases to an amount greater than
its net proceeds as stated in the prospectus.
(2) Inapplicable
(3) Inapplicable
(4) Inapplicable
(5) the undersigned registrant hereby undertakes that:
(a) For the purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus
filed as part of a registration statement in reliance upon Rule 430A
and contained in the form of prospectus filed by the Registrant
pursuant to Rule 42(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of the registration statement as of the
time it was declared effective.
(b) For the purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(6) Inapplicable
<PAGE>
NOTICE
A copy of the Declaration of Trust of Dreyfus High Yield Strategies Fund
is on file with the Secretary of State of the Commonwealth of
Massachusetts and notice is hereby given that this instrument is executed
on behalf of the Registrant by an officer of the Registrant as an officer
and not individually and that the obligations of or arising out of this
instrument are not binding upon any of the Trustees, officers or
shareholders individually, but are binding only upon the assets and
property of the Registrant.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on behalf of the undersigned, thereto duly authorized, in
the City of Boston, and the Commonwealth of Massachusetts on the 13th day of
March, 1998.
DREYFUS HIGH YIELD STRATEGIES FUND
By: /s/ Marie E. Connolly
--------------------------------------
Marie E. Connolly
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
on the 13th day of March, 1998.
SIGNATURE TITLE
/s/ Marie E. Connolly Principal Executive Officer,
- ---------------------------- President and Treasurer
Marie E. Connolly
/s/ Joseph F. Tower, III Principal Financial Officer,
- ---------------------------- Vice President and Assistant Treasurer
Joseph F. Tower, III
/s/ Francis P. Brennan Trustee,
- ---------------------------- Chairman of the Board of Trustees
Francis P. Brennan
DECLARATION OF TRUST
OF
DREYFUS HIGH YIELD STRATEGIES FUND
DATED: MARCH 16, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I NAME AND DEFINITIONS................................................1
Section 1.1 Name............................................................1
Section 1.2 Definitions.....................................................1
ARTICLE II TRUSTEES...........................................................3
Section 2.1 Number of Trustees..............................................3
Section 2.2 Term of Office of Trustees......................................3
Section 2.3 Resignation and Appointment of Trustees.........................4
Section 2.4 Vacancies.......................................................4
Section 2.5 Delegation of Power to Other Trustees...........................5
Section 2.6 Removal of Trustees.............................................5
ARTICLE III POWERS OF TRUSTEES................................................5
Section 3.1 General.........................................................5
Section 3.2 Investments.....................................................5
Section 3.3. Legal Title....................................................6
Section 3.4 Issuance and Repurchase of Securities...........................6
Section 3.5 Borrowing Money; Lending Fund Assets............................7
Section 3.6 Delegation; Committees..........................................7
Section 3.7 Collection and Payment..........................................7
Section 3.8 Expenses........................................................7
Section 3.9 Manner of Acting; By-Laws.......................................7
Section 3.10 Miscellaneous Powers...........................................8
Section 3.11 Principal Transactions.........................................8
Section 3.12 Litigation.....................................................8
ARTICLE IV INVESTMENT ADVISER, DISTRIBUTOR, CUSTODIAN AND TRANSFER AGENT......9
Section 4.1 Investment Adviser..............................................9
Section 4.2 Administrative Services.........................................9
Section 4.3 Distributor.....................................................9
Section 4.4 Transfer Agent and Shareholder Servicing Agent..................9
Section 4.5 Custodian......................................................10
Section 4.6 Parties to Contract............................................10
ARTICLE V LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHERS......10
Section 5.1 No Personal Liability of Shareholders, Trustees, etc...........10
Section 5.2 Non-Liability of Trustees, etc.................................11
Section 5.3 Indemnification................................................11
Section 5.4 No Bond Required of Trustees...................................11
i
<PAGE>
Section 5.5 No Duty of Investigation: Notice in Fund Instruments, etc.....11
Section 5.6 Reliance on Experts, etc.......................................12
ARTICLE VI SHARES OF BENEFICIAL INTEREST.....................................12
Section 6.1 Beneficial Interest............................................12
Section 6.2 Rights of Shareholders.........................................12
Section 6.3 Trust Only.....................................................13
Section 6.4 Issuance of Shares.............................................13
Section 6.5 Register of Shares.............................................13
Section 6.6 Transfer of Shares.............................................13
Section 6.7 Notices........................................................14
Section 6.8 Voting Powers..................................................14
ARTICLE VII DETERMINATION OF NET ASSET VALUE, NET INCOME AND DISTRIBUTIONS...15
Section 7.1 Net Asset Value.................................................15
Section 7.2 Distributions to Shareholders...................................15
Section 7.3 Determination of Net Income.....................................15
Section 7.4 Power to Modify Foregoing Procedures............................16
Section 7.5 Power to Delegate Determinations................................16
ARTICLE VIII DURATION; TERMINATION OF FUND, AMENDMENT, MERGERS, ETC..........16
Section 8.1 Duration........................................................16
Section 8.2 Termination of Fund.............................................16
Section 8.3 Amendment Procedures............................................17
Section 8.4 Merger, Consolidation and Sale of Assets........................18
Section 8.5 Incorporation and Reorganization................................18
Section 8.6 Conversion.....................................................18
Section 8.7 Certain Transactions...........................................19
ARTICLE IX REPORTS TO SHAREHOLDERS...........................................21
ARTICLE X MISCELLANEOUS......................................................21
Section 10.1 Filling........................................................21
Section 10.2 Resident Agent.................................................21
Section 10.3 Governing Law..................................................21
Section 10.4 Organizational Expenses........................................21
Section 10.5 Counterparts...................................................22
Section 10.6 Reliance by Third Parties......................................22
Section 10.7 Provisions of Conflict with Law or Regulations.................22
ii
<PAGE>
DECLARATION OF TRUST
OF
DREYFUS HIGH YIELD STRATEGIES FUND
DATED: MARCH 16, 1998
----------------------------------------
THE DECLARATION OF TRUST of Dreyfus High Yield Strategies Fund is
made the 16th day of March, 1998 by the parties signatory hereto, as Trustees
(such persons, so long as they shall continue in office in accordance with the
terms of this Declaration of Trust, and all other persons who at the time in
question have been duly elected or appointed as Trustees in accordance with the
provisions of this Declaration of Trust and are then in office, being
hereinafter called the "Trustees").
W I T N E S S E T H:
WHEREAS, the Trustees desire to form a Trust under the laws of
Massachusetts for the investment and reinvestment of funds contributed thereto;
and
WHEREAS, it is provided that the beneficial interest in the Trust
assets be divided into transferable shares of beneficial interest as hereinafter
provided;
NOW, THEREFORE, the Trustees hereby declare that they will hold in
trust all money and property contributed to the Trust, to manage and dispose of
the same for the benefit of the holders from time to time of the shares of
beneficial interest issued hereunder and subject to the provisions hereof, to
wit:
ARTICLE I
NAME AND DEFINITIONS
SECTION 1.1 NAME. The name of the Trust created hereby is the
"Dreyfus High Yield Strategies Fund," and so far as may be practicable the
Trustees shall conduct the Trust's activities, execute all documents and sue or
be sued under the name, which name (and the word "Fund" wherever herein used)
shall refer to the Trustees as trustees, and not as individuals, or personally,
and shall not refer to the officers, agents, employees or Shareholders of the
Fund. Should the Trustees determine that the use of such name is not advisable,
they may use such other name for the Fund as they deem proper and the Fund may
hold its property and conduct its activities under such other name.
SECTION 1.2 DEFINITIONS. Wherever they are used herein, the
following terms have the following respective meanings:
<PAGE>
(a) "BY-LAWS" means the By-Laws referred to in Section 3.9 hereof,
as from time to time amended.
(b) The terms "COMMISSION," "AFFILIATED PERSON" and "INTERESTED
PERSON" have the meanings given them in the 1940 Act.
(c) "DECLARATION" means this Declaration of Trust as amended from
time to time. Reference in this Declaration of Trust to
"DECLARATION," "HEREOF," "HEREIN" and "HEREUNDER" shall be
deemed to refer to this Declaration rather than the article or
section in which such words appear.
(d) "DISTRIBUTOR" means the party, other than the Fund, to a
contract described in Section 4.3 hereof.
(e) "FUND" means the Dreyfus High Yield Strategies Fund.
(f) "FUND PROPERTY" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the
account of the Fund or the Trustees.
(g) "FUNDAMENTAL POLICIES" shall mean the investment policies and
restrictions set forth in the Registration Statement and
designated as fundamental policies therein.
(h) "INVESTMENT ADVISER" means any party, other than the Fund, to
a contract described in Section 4.1 hereof.
(i) "MAJORITY SHAREHOLDER VOTE" means the vote of the holders of a
majority of Shares, which shall consist of (i) a majority of
Shares presented in person or by proxy and entitled to vote at
a meeting of Shareholders at which a quorum, as determined in
accordance with the By-laws, is present or (ii) a majority of
Shares issued and outstanding and entitled to vote when action
is taken by written consent of Shareholders, unless the action
requires the approval of a "majority of the outstanding voting
securities" under the 1940 Act, in which case such vote as
specified in the 1940 Act shall be required.
(j) "1940 ACT" means the Investment Company Act of 1940 and the
rules and regulations thereunder as amended from time to time.
(k) "PERSON" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other
entities, whether or not legal entities, and governments and
agencies and political subdivisions thereof.
(l) "REGISTRATION STATEMENT" means the Registration Statement of
the Fund under the Securities Act of 1933 as such Registration
Statement may be amended and filed with the Commission from
time to time.
2
<PAGE>
(m) "SHAREHOLDER" means a record owner of outstanding Shares.
(n) "SHARES" means the units of interest into which the beneficial
interest in the Fund shall be divided from time to time and
includes fractions of Shares as well as whole Shares.
(o) "TRANSFER AGENT" means the party, other than the Fund, to the
contract described in Section 4.4 hereof.
(p) "TRUSTEES" means the persons who have signed the Declaration,
so long as they shall continue in office in accordance with
the terms hereof, and all other persons who may from time to
time be duly elected or appointed, qualified and serving as
Trustees in accordance with the provisions hereof, and
reference herein to a Trustee or the Trustees shall refer to
such person or persons in their capacity as Trustees
hereunder.
ARTICLE II
TRUSTEES
SECTION 2.1 NUMBER OF TRUSTEES. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by a
majority of the Trustees, provided, however, that the number of Trustees shall
in no event be less than three (3) nor more than fifteen (15). No reduction in
the number of Trustees shall have the effect of removing any Trustee from office
prior to the expiration of his or her term unless the Trustee is specifically
removed pursuant to Section 2.2 of this Article II at the time of decrease.
SECTION 2.2 TERM OF OFFICE OF TRUSTEES. The Board of Trustees shall
be divided into three classes. Within the limits above specified, the number of
the Trustees in each class shall be determined by resolution of the Board of
Trustees. The term of office of all of the Trustees shall expire on the date of
the first annual or special meeting of Shareholders following the effective date
of the Registration Statement relating to the Shares under the Securities Act of
1933, as amended. The term of office of the first class shall expire on the date
of the second annual meeting of Shareholders or special meeting in lieu thereof.
The term of office of the second class shall expire on the date of the third
annual meeting of Shareholders or special meeting in lieu thereof. The term of
office of the third class shall expire on the date of the fourth annual meeting
of Shareholders or special meeting in lieu thereof. Upon expiration of the term
of office of each class as set forth above, the number of Trustees in such
class, as determined by the Board of Trustees, shall be elected for a term
expiring on the date of the third annual meeting of Shareholders or special
meeting in lieu thereof following such expiration to succeed the Trustees whose
terms of office expire. The Trustees shall be elected at an annual meeting of
the Shareholders or special meting in lieu thereof called for that purpose,
except as provided in Section 2.3 of this Article and each Trustee elected shall
hold office until his or her successor shall have been elected and shall have
qualified; except (a) that any Trustee may resign his or her trust (without need
for prior or subsequent accounting) by an instrument in writing signed by him or
her and delivered to the other Trustees, which shall take effect upon such
delivery or upon such later date as is specified therein; (b) that any Trustee
may be removed (provided the aggregate number of Trustees after such removal
3
<PAGE>
shall not be less than the number required by Section 2.1 hereof) for cause, at
any time by written instrument, signed by the remaining Trustees, specifying the
date when such removal shall become effective; and (c) that any Trustee who
requests in writing to be retired or who has become incapacitated by illness or
injury may be retired by written instrument signed by a majority of the other
Trustees, and he or she shall execute and deliver such documents as the
remaining Trustees shall require for the purpose of conveying to the Fund or the
remaining Trustees any Fund property held in the name of the resigning or
removed Trustee. Upon the incapacity or death of any Trustee, his or her legal
representative shall execute and deliver on his or her behalf such document as
the remaining Trustees shall require as provided in the preceding sentence.
SECTION 2.3 RESIGNATION AND APPOINTMENT OF TRUSTEES. In case of the
declination, death, resignation, retirement, removal or inability of any of the
Trustees, or in case a vacancy shall, by reason of any increase in number, or
for any other reason, exist, the remaining Trustees or, prior to the public
offering of Shares of the Fund, if only one Trustee shall then remain in office,
the remaining Trustee, shall fill such vacancy by appointing such other person
as they, or anyone of them, in their discretion, shall see fit. Such appointment
shall be evidenced by a written instrument signed by a majority of the remaining
Trustees or by the remaining Trustee, as the case may be. Any such appointment
shall not become effective, however, until the person named in the written
instrument or appointment shall have accepted in writing such appointment and
agreed in writing to be bound by the terms of the Declaration. Within twelve
months of such appointment, the Trustees shall cause notice of such appointment
to be mailed to each Shareholder at his or her address as recorded on the books
of the Fund. An appointment of a Trustee may be made by the Trustees then in
office and notice thereof mailed to Shareholders as aforesaid in anticipation of
a vacancy to occur by reason of retirement, resignation or increase in number of
Trustees effective at a later date, provided that said appointment shall become
effective only at or after the effective date of said retirement, resignation or
increase in number of Trustees. The power of appointment is subject to the
provisions of Section 16(a) of the 1940 Act.
SECTION 2.4 VACANCIES. The death, declination, resignation,
retirement, removal or incapacity of the Trustees, or any one of them, shall not
operate to annul the Fund or to revoke any existing agency created pursuant to
the terms of this Declaration. Whenever a vacancy in the number of Trustees
shall occur, until such vacancy is filled as provided in Section 2.3, the
Trustees in office, regardless of their number, shall have all the duties
imposed upon the Trustees by the Declaration. A written instrument certifying
the existence of such vacancy signed by a majority of the Trustees shall be
conclusive evidence of the existence of such vacancy.
SECTION 2.5 DELEGATION OF POWER TO OTHER TRUSTEES. Subject to the
provisions of the 1940 Act, any Trustee may, by power of attorney, delegate his
or her power for a period not exceeding six (6) months at any one time to any
other Trustee or Trustees; provided that in no case shall less than two (2)
Trustees personally exercise the powers granted to the Trustees under the
Declaration except as herein otherwise expressly provided.
SECTION 2.6 REMOVAL OF TRUSTEES. The Fund shall comply with the
provisions of Section 16(c) of the 1940 Act as though applicable to the Fund,
and with interpretations thereof by the Commission staff, insofar as such
provisions and interpretations provide for the removal of trustees of common-law
trusts and the calling of Shareholder meetings for such purpose; provided,
4
<PAGE>
however, that the Fund may at any time or from time to time apply to the
Commission for one or more exemptions from all or part of said Section 16(c) or
a staff interpretation thereof and, if exemptive order(s) or interpretation(s)
are issued or provided by the Commission or its staff, such order(s) or
interpretation(s) shall be deemed part of Section 16(c) for the purpose of
applying this Section 2.6.
ARTICLE III
POWERS OF TRUSTEES
SECTION 3.1 GENERAL. The Trustees shall have exclusive and absolute
control over the Fund Property and over the business of the Fund to the same
extent as if the Trustees were the sole owners of the Fund Property and business
in their own right, but with such powers of delegation as may be permitted by
the Declaration. The Trustees shall have power to conduct the business of the
Fund and carry on its operations in any and all of its branches and maintain
offices both within and without the Commonwealth of Massachusetts, in any and
all states of the United States of America, in the District of Columbia, and in
any and all commonwealths, territories, dependencies, colonies, possessions,
agencies or instrumentalities wheresoever in the world they may be located and
to do all such other things and execute all such instruments as they deem
necessary, proper or desirable in order to promote the interests of the Fund
although such things are not herein specifically mentioned. Any determination as
to what is in the interests of the Fund made by the Trustees in good faith shall
be conclusive. In construing the provisions of the Declaration, the presumption
shall be in favor of a grant of power to the Trustees.
The enumeration of any specific power herein shall not be construed
as limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
SECTION 3.2 INVESTMENTS. The Trustees shall have the power to:
(a) conduct, operate and carry on the business of an investment
company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, sell short, assign, transfer,
exchange, distribute, lend or otherwise deal in, all forms of
securities of every kind, nature, character, type and form,
and other financial instruments that may not be deemed to be
securities, including, but not limited to, futures contracts
and options thereon, forward foreign currency contracts, and
equity swaps. Such securities and other financial instruments
may include, but are not limited to, shares, stocks, bonds,
debentures, notes, script, participation certificates, rights
to subscribe, warrants, options, repurchase agreements,
commercial paper; evidences of indebtedness, certificates of
indebtedness, issued or to be issued by any corporation,
company, partnership, association, trust or entity, public or
private, whether organized under the laws of the United
States, or any state, commonwealth, territory or possession
thereof, or of any foreign country, or any state, province,
territory or possession thereof; and to exercise any and all
rights, powers and privileges of ownership or interest in
respect of any and all such investments of every kind and
description, including, without limitation, the right to
5
<PAGE>
consent and otherwise act with respect thereto, with power to
designate one or more persons, firms, associations or
corporations to exercise any of said rights, powers and
privileges in respect of any of said instruments; and the
Trustee shall be deemed to have the foregoing powers with
respect to any additional securities in which the Fund may
invest should the Fundamental Policies be amended.
The Trustee shall not be limited to investing in obligations maturing before the
possible termination of the Fund, nor shall the Trustees be limited by any law
limiting the investments which may be made by fiduciaries.
Section 3.3. LEGAL TITLE. Legal title to all the Fund Property shall
be vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Fund Property to be held by or in the name of
one or more of the Trustees, or in the name of the Fund, or in the name of any
other Person as nominee, on such terms as the Trustees may determine, provided
that the interest of the Fund therein is appropriately protected. The right,
title and interest of the Trustees in the Fund Property shall vest automatically
in each Person who may hereafter become a Trustee. Upon the resignation, removal
or death of a Trustee he or she shall automatically cease to have any right,
title or interest in any of the Fund Property, and the right, title and interest
of such Trustee in the Fund Property shall vest automatically in the remaining
Trustees. Such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered.
SECTION 3.4 ISSUANCE AND REPURCHASE OF SECURITIES. The Trustees
shall have the power to issue, sell, repurchase, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer, and otherwise deal in Shares and, subject
to the provisions set forth in Articles VII and VIII hereof, to apply to any
such repurchase, retirement, cancellation or acquisition of Shares any funds or
property of the Fund, whether capital or surplus or otherwise, to the full
extent now or hereafter permitted by the laws of the Commonwealth of
Massachusetts governing business corporations.
SECTION 3.5 BORROWING MONEY; LENDING FUND ASSETS. Subject to the
Fundamental Policies, the Trustees shall have power to borrow money or otherwise
obtain credit and to secure the same by mortgaging, pledging or otherwise
subjecting as security the assets of the Fund, to endorse, guarantee, or
undertake the performance of any obligation, contract or engagement of any other
Person and to lend Fund assets.
SECTION 3.6 DELEGATION; COMMITTEES. The Trustees shall have power,
consistent with their continuing exclusive authority over the management of the
Fund and the Fund Property, to delegate from time to time to such of their
number or to officers, employees or agents of the Fund the doing of such things
and the execution of such instruments either in the name of the Fund or the
names of the Trustees or otherwise as the Trustees deem expedient.
SECTION 3.7 COLLECTION AND PAYMENT. The Trustees shall have power to
collect all property due to the Fund; to pay all claims, including taxes,
against the Fund Property; to prosecute, defend, compromise or abandon any
claims relating to the Fund Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Fund;
and to enter into releases, agreements and other instruments.
6
<PAGE>
SECTION 3.8 EXPENSES. The Trustees shall have the power to incur and
pay any expenses which in the opinion of the Trustees are necessary or
incidental to carry out any of the purposes of the Declaration, and to pay
reasonable compensation from the funds of the Fund to themselves as Trustees.
The Trustees shall fix the compensation of all officers, employees and Trustees.
SECTION 3.9 MANNER OF ACTING; BY-LAWS. Except as otherwise provided
herein or in the By-Laws or by any provision of law, any action to be taken by
the Trustees may be taken by a majority of the Trustees present at a meeting of
Trustees (a quorum being present), including any meeting held by means of a
conference telephone circuit or similar communications equipment by means of
which all persons participating in the meeting can hear each other, or by
written consents of a majority of the Trustees. The Trustees may adopt By-Laws
not inconsistent with this Declaration to provide for the conduct of the
business of the Fund and may amend or repeal such By-Laws to the extent such
power is not reserved to the Shareholders.
SECTION 3.10 MISCELLANEOUS POWERS. The Trustees shall have the power
to: (a) employ or contract with such Persons as the Trustees may deem desirable
for the transaction of the business of the Fund; (b) enter into joint ventures,
partnerships and any other combinations or associations; (c) remove Trustees or
fill vacancies in or add to their number, elect and remove such officers and
appoint and terminate such agents or employees as they consider appropriate, and
appoint from their own number, and terminate, any one or more committees which
may exercise some or all of the power and authority of the Trustees as the
Trustees may determine; (d) purchase, and pay for out of Fund Property,
insurance policies insuring the Shareholders, Trustees, officers, employees,
agents, investment advisers, distributors, selected dealers or independent
contractors of the Fund against all claims arising by reason of holding any such
position or by reason of any action taken or omitted to be taken by any such
Person in such capacity, whether or not constituting negligence, or whether or
not the Fund would have the power to indemnify such Person against such
liability; (e) establish pension, profit-sharing, Share purchase, and other
retirement incentive and benefit plans for any Trustees, officers, employees and
agents of the Fund; (f) to the extent permitted by law, indemnify any person
with whom the Fund has dealings, including any Investment Adviser, Distributor,
Transfer Agent and selected dealers, to such extent as the Trustees shall
determine; (g) guarantee indebtedness or contractual obligations of others; (h)
determine and change the fiscal year of the Fund and the method by which its
accounts shall be kept; and (i) adopt a seal for the Fund, but the absence of
such seal shall not impair the validity of any instrument executed on behalf of
the Fund.
SECTION 3.11 PRINCIPAL TRANSACTIONS. Except in transactions
permitted by the 1940 Act or any rule or regulation thereunder, or any order of
exemption issued by the Commission, or effected to implement the provisions of
any agreement to which the Fund is a party, the Trustees shall not, on behalf of
the Fund, buy any securities (other than Shares) from or sell any securities
(other than Shares) to, or lend any assets of the Fund to, any Trustee or
officer of the Fund or any firm of which any such Trustee or officer is a member
acting as principal, or have any such dealings with any Investment Adviser,
Distributor or Transfer Agent or with any Affiliated Person of such Person; but
the Fund or any Series thereof may employ any such Person, or firm or company in
which such Person is an Interested Person, as broker, legal counsel, registrar,
transfer agent, dividend disbursing agent or custodian upon customary terms.
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SECTION 3.12 LITIGATION. The Trustees shall have the power to engage
in and to prosecute, defend, compromise, abandon, or adjust, by arbitration or
otherwise, any actions, suits, proceedings, disputes, claims, and demands
relating to the Fund, and out of the assets of the Fund to pay or to satisfy any
debts, claims or expenses incurred in connection therewith, including those of
litigation, and such power shall include without limitation the power of the
Trustees or any appropriate committee thereof, in the exercise of their or its
good faith business judgment, to dismiss any action, suit, proceeding, dispute,
claim or demand, derivative or otherwise, brought by any person, including a
Shareholder in its own name or the name of the Fund, whether or not the Fund or
any of the Trustees may be named individually therein or the subject matter
arises by reason of business for or on behalf of the Fund.
ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR,
CUSTODIAN AND TRANSFER AGENT
SECTION 4.1 INVESTMENT ADVISER. The Trustees may in their discretion
from time to time enter into one or more investment advisory or management
contracts whereby the other party or parties to any such contracts shall
undertake to furnish the Fund such management, investment advisory,
administration, accounting, legal, statistical and research facilities and
services, promotional or marketing activities, and such other facilities and
services, if any, as the Trustees shall from time to time consider desirable and
all upon such terms and conditions as the Trustees may in their discretion
determine. Notwithstanding any provisions of the Declaration, the Trustees may
authorize the Investment Advisers, or any of them, under any such contracts
(subject to such general or specific instructions as the Trustees may from time
to time adopt) to effect purchases, sales, loans or exchanges of portfolio
securities and other investments of the Fund on behalf of the Trustees or may
authorize any officer, employee or Trustee to effect such purchases, sales,
loans or exchanges pursuant to recommendations of such Investment Advisers, or
any of them (and all without further action by the Trustees). Any such
purchases, sales, loans and exchanges shall be deemed to have been authorized by
all of the Trustees.
SECTION 4.2 ADMINISTRATIVE SERVICES. The Trustees may in their
discretion from time to time contract for administrative personnel and services
whereby the other party shall agree to provide the Trustees or the Fund
administrative personnel and services to operate the Fund on a daily or other
basis, on such terms and conditions as the Trustees may in their discretion
determine. Such services may be provided by one or more persons or entities.
SECTION 4.3 DISTRIBUTOR. The Trustees may in their discretion from
time to time enter into one or more contracts, providing for the sale of Shares
whereby the Fund may either agree to sell the Shares to the other parties to the
contracts, or any of them, or appoint any such other party its sales agent for
such Shares. In either case, any such contract shall be on such terms and
conditions as the Trustees may in their discretion determine not inconsistent
with the provisions of this Article IV or the By-Laws, including, without
limitation, the provision for the repurchase or sale of Shares of the Fund by
such other party as principal or as agent of the Fund, and for entry by the
other parties to the contracts into selected dealer agreements with registered
securities dealers to further the purpose of distribution of the Shares.
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SECTION 4.4 TRANSFER AGENT AND SHAREHOLDER SERVICING AGENT. The
Trustees may in their discretion from time to time enter into a transfer agency
contract and/or shareholder servicing contract whereby the other party to such
contract shall undertake to furnish transfer agency and shareholder services to
the Fund. The contract shall have such terms and conditions as the Trustees may
in their discretion determine not inconsistent with the Declaration or the
By-Laws. Such services may be provided by one or more Persons.
SECTION 4.5 CUSTODIAN. The Trustees may appoint or otherwise engage
one or more banks or trust companies, each having an aggregate capital, surplus
and undivided profits (as shown in its last published report) of at least five
million dollars ($5,000,000) to serve as Custodian with authority as its agent,
but subject to such restrictions, limitations and other requirements, if any, as
may be contained in the By-Laws of the Fund.
SECTION 4.6 PARTIES TO CONTRACT. Any contract of the character
described in Sections 4.1, 4.2, 4.3, 4.4 or 4.5 of this Article IV and any other
contract may be entered into with any Person, although one or more of the
Trustees or officers of the Fund may be an officer, director, trustee,
shareholder, or member of such other party to the contract, and no such contract
shall be invalidated or rendered voidable by reason of the existence of any such
relationship; nor shall any Person holding such relationship be liable merely by
reason of such relationship for any loss or expense to the Fund under or by
reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was not
inconsistent with the provisions of this Article IV. The same Person may be the
other party to any contracts entered into pursuant to Sections 4.1, 4.2, 4.3,
4.4 or 4.5 above or otherwise, and any individual may be financially interested
or otherwise affiliated with Persons who are parties to any or all of the
contracts mentioned in this Section 4.6.
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
SECTION 5.1 NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Fund Property or the acts, obligations or affairs of the
Fund. The Trustees shall have no power to bind any Shareholder personally or to
call upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time personally agree
to pay by way of subscription to any Shares or otherwise. Shareholder liability
for the acts and obligations of the Fund is hereby expressly disclaimed. Every
note, bond, contract, or other undertaking issued by or on behalf of the Fund or
the Trustees relating to the Fund shall include a notice and provision limiting
the obligation represented thereby to the Fund and its assets (but the omission
of such notice and provision shall not operate to impose any liability or
obligation on any Shareholder). No Trustee, officer, employee or agent of the
Fund shall be subject to any personal liability whatsoever to any Person, in
connection with the Fund Property or the affairs of the Fund, save only that
arising from bad faith, willful misfeasance, gross negligence or reckless
disregard for his or her duty to such Person; and all such Persons shall look
solely to the Fund Property for satisfaction of claims of any nature arising in
connection with the affairs of the Fund. If any Shareholder, Trustee, officer,
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employee or agent, as such, of the Fund is made a party to any suit or
proceeding to enforce any such liability, he or she shall not, on account
thereof, be held to any personal liability. The Fund shall indemnify and hold
each Shareholder harmless from and against all claims and liabilities, to which
such Shareholder may become subject by reason of his or her being or having been
a Shareholder, other than by reason of his or her own wrongful act or omission,
and shall reimburse such Shareholder for all legal and other expenses reasonably
incurred by him or her in connection with any such claim or liability. The
rights accruing to a Shareholder under this Section 5.1 shall not exclude any
other right to which such Shareholder may be lawfully entitled, nor shall
anything herein contained restrict the right of the Fund to indemnify or
reimburse a Shareholder in any appropriate situation even though not
specifically provided herein.
SECTION 5.2 NON-LIABILITY OF TRUSTEES, ETC. No Trustee, officer,
employee or agent of the Fund shall be liable to the Fund, its Shareholders, or
to any Shareholder, Trustee, officer, employee, or agent thereof for any action
or failure to act (including without limitation the failure to compel in any way
any former or acting Trustee to redress any breach of trust) except for his or
her own bad faith, willful misfeasance, gross negligence or reckless disregard
of his or her duties.
SECTION 5.3 INDEMNIFICATION. (a) The Trustees shall provide for
indemnification by the Fund of any person who is, or had been, a Trustee,
officer, employee or agent of the Fund against all liability and against all
expenses reasonably incurred or paid by him or her in connection with any claim,
action, suit or proceeding in which he or she becomes involved as a party or
otherwise by virtue of being or having been a Trustee, officer, employee or
agent and against amounts paid or incurred by him or her in the settlement
thereof, in such manner as the Trustees may provide from time to time in the
By-Laws.
(b) The words "claim," "action," suit," or "proceeding" shall apply
to all claims, actions, suits or proceedings (civil, criminal, or other,
including appeals), actual or threatened; and the words "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and other liabilities.
SECTION 5.4 NO BOND REQUIRED OF TRUSTEES. No Trustee shall be
obligated to give any bond or other security for the performance of any of his
or her duties hereunder.
SECTION 5.5 NO DUTY OF INVESTIGATION; NOTICE IN FUND INSTRUMENTS,
ETC. No purchaser, lender, transfer agent or other Person dealing with the
Trustees or any officer, employee or agent of the Fund shall be bound to make
any inquiry concerning the validity of any transaction purporting to be made by
the Trustees or by said officer, employee or agent or be liable for the
application of money or property paid, loaned, or delivered to or on the order
of the Trustees or of said officer, employee or agent or be liable for the
application of money or property paid, loaned, or delivered to or on the order
of the Trustees or of said officer, employee or agent. Every obligation,
contract, instrument, certificate, Share, other security of the Fund or
undertaking, and every other act or thing whatsoever executed in connection with
the Fund shall be conclusively presumed to have been executed or done by the
executors thereof only in their capacity as officers, employees or agents of the
Fund. Every written obligation, contract, instrument, certificate, Share, other
security of the Fund or undertaking made or issued by the Trustees shall recite
that the same is executed or made by them not individually, but as Trustees
under the Declaration, and that the obligations of the Fund under any such
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instrument are not binding upon any of the Trustees or Shareholders,
individually, but bind only the Fund, and may contain any further recital which
they, or anyone of them, may deem appropriate, but the omission of such recital
shall not affect the validity of such obligation, contract, instrument,
certificate, share, security or undertaking and shall not operate to bind the
Trustees or Shareholders individually. The Trustees may maintain insurance for
the protection of the Fund Property, its Shareholders, Trustees, officers,
employees and agents in such amount as the Trustees shall deem adequate to cover
possible tort liability, and such other insurance as the Trustees in their sole
judgment shall deem advisable.
SECTION 5.6 RELIANCE ON EXPERTS, ETC. Each Trustee and officer or
employee of the Fund shall, in the performance of his or her duties, be fully
and completely justified and protected with regard to any act or any failure to
act resulting from reliance in good faith upon the books of account or other
records of the Fund, upon an opinion of counsel, or upon reports made to the
Fund by any of its officers or employees or by any Investment Adviser,
Distributor, Transfer Agent, selected dealers, accountants, appraisers or other
experts or consultants selected with reasonable care by the Trustees, officers
or employees of the Fund, regardless of whether such counsel or expert may also
be a Trustee.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
SECTION 6.1 BENEFICIAL INTEREST. The interest of the beneficiaries
hereunder shall be divided into transferable shares of beneficial interest of
$.001 par value. The number of such shares of beneficial interest authorized
hereunder is unlimited. All Shares issued hereunder, including Shares issued in
connection with a dividend in Shares or a split in Shares, shall be fully paid
and nonassessable.
SECTION 6.2 RIGHTS OF SHAREHOLDERS. The ownership of the Fund
Property of every description and the right to conduct any business hereinbefore
described are vested exclusively in the Trustees, and the Shareholders shall
have no interest therein other than the beneficial interest conferred by their
Shares, and they shall have no right to call for any partition or division of
any property, profits, rights or interests of the Fund nor can they be called
upon to assume any losses of the Fund or suffer an assessment of any kind by
virtue of their ownership of Shares. The Shares shall be personal property
giving only the rights in the Declaration specifically set forth. The Shares
shall not entitle the holder to preference, preemptive, appraisal, conversion or
exchange rights.
SECTION 6.3 TRUST ONLY. It is the intention of the Trustees to
create only the relationship of Trustee and beneficiary between the Trustees and
each Shareholder from time to time. It is not the intention of the Trustees to
create a general partnership, limited partnership, joint stock association,
corporation, bailment or any other form of legal relationship other than a
trust. Nothing in the Declaration shall be construed to make the Shareholders,
either by themselves or with the Trustees, partners or members of a joint stock
association.
SECTION 6.4 ISSUANCE OF SHARES. The Trustees in their discretion
may, from time to time without vote of the Shareholders, issue Shares, in
addition to the then issued and outstanding Shares and Shares held in the
treasury, to such party or parties and for such amount and type of
consideration, including cash or property, at such time or times and on such
terms as the Trustees may deem best, and may in such manner acquire other assets
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(including the acquisition of assets subject to, and in connection with, the
assumption of liabilities) and businesses. In connection with any issuance of
Shares, the Trustees may issue fractional Shares and Shares held in the
treasury. The Trustees may from time to time divide or combine the Shares into a
greater or lesser number without thereby changing the proportionate beneficial
interests in the Fund without the vote of the Shareholders. Contributions to the
Fund may be accepted for whole Shares and/or 1/1,000ths of a Share or integral
multiple thereof.
SECTION 6.5 REGISTER OF SHARES. A register shall be kept in respect
of the Fund at the principal office of the Fund or at an office of the Transfer
Agent which shall contain the names and addresses of the Shareholders and the
number of Shares held by them respectively and a record of all transfers
thereof. Such register may be in written form or any other form capable of being
converted into written from within a reasonable time for visual inspection. Such
register shall be conclusive as to who are the holders of the Shares and who
shall be entitled to receive dividends or distributions or otherwise to exercise
or enjoy the rights of Shareholders. No Shareholder shall be entitled to receive
payment of any dividend or distribution, nor to have notice given to him or her
as herein or in the By-Laws provided, until he or she has given his or her
address to the Transfer Agent or such other officer or agent of the Trustees as
shall keep the said register for entry thereon. The Trustees, in their
discretion, may authorize the issuance of Share certificates and promulgate
appropriate rules and regulations as to their use.
SECTION 6.6 TRANSFER OF SHARES. Shares shall be transferable on the
records of the Fund only by the record holder thereof or by his or her agent
thereunto duly authorized in writing, upon delivery to the Trustees or the
Transfer Agent of a duly executed instrument of transfer, together with such
evidence of the genuineness of each such execution and authorization and of
other matters as may reasonably be required. Upon such delivery the transfer
shall be recorded on the register of the Trust. Until such record is made, the
Shareholder of record shall be deemed to be the holder of such Shares for all
purposes hereunder and neither the Trustees nor any Transfer Agent or registrar
nor any officer, employee or agent of the Fund shall be affected by any notice
of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the
death, bankruptcy, or incompetence of any Shareholder, or otherwise by operation
of law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent, but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer or agent of the
Fund shall be affected by any notice of such death, bankruptcy or incompetence,
or other operation of law, except as may otherwise be provided by the laws of
the Commonwealth of Massachusetts.
SECTION 6.7 NOTICES. Any and all notices to which any Shareholders
may be entitled and any and all communications shall be deemed duly served or
given if mailed, postage prepaid, addressed to any Shareholder of record at his
or her last known address as recorded on the register of the Fund or in such
other manner as is permitted by law. Annual reports and proxy statements need
not be sent to a Shareholder if: (i) an annual report and proxy statement for
two consecutive annual meetings, or (ii) all, and at least two, checks (if sent
by first class mail) in payment of dividends or interest and Shares during a
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twelve-month period have been mailed to such Shareholder's address and have been
returned undelivered. However, delivery of such annual reports and proxy
statements shall resume once a Shareholder's current address is determined.
SECTION 6.8 VOTING POWERS. The Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Section 2.2 hereof, (ii)
for the removal of Trustees as provided in Section 2.2 hereof, (iii) with
respect to any investment advisory or management contract as provided in Section
4.1, (iv) with respect to termination of the Fund as provided in Section 8.2,
(v) with respect to any amendment of the Declaration to the extent and as
provided in Section 8.3, (vi) with respect to any merger, consolidation,
conversion or sale of assets as provided in Sections 8.4, 8.5 and 8.6, (vii)
with respect to incorporation or reorganization of the Fund to the extent and as
provided in Section 8.5, (viii) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Fund or the Shareholders, and (ix) with
respect to such additional matters relating to the Fund as may be required by
law, the Declaration, the By-Laws or any registration of the Fund with the
Commission (or any successor agency) or any state, or as and when the Trustees
may consider necessary or desirable. Each whole Share shall be entitled to one
vote as to any matter on which it is entitled to vote and each fractional Share
shall be entitled to a proportionate fractional vote, except that Shares held in
the treasury of the Fund as of the record date, as determined in accordance with
the By-Laws, shall not be voted. There shall be no cumulative voting in the
election of Trustees. Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities issued by the Fund. Until
Shares are issued, the Trustees may exercise all rights of Shareholders and may
take any action required by law, the Declaration or the By-Laws to be taken by
Shareholders. The By-Laws may include further provisions for Shareholders' votes
and meetings and related matters.
ARTICLE VII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
SECTION 7.1 NET ASSET VALUE. The net asset value of each outstanding
Share of the Fund shall be determined on such days and at such time or times as
the Trustees may determine. The method of determination of net asset value shall
be determined by the Trustees and shall be as set forth in the Registration
Statement. The Trustees may suspend the determination of net asset value to the
extent permitted by the 1940 Act.
SECTION 7.2 DISTRIBUTIONS TO SHAREHOLDERS. The Trustees shall from
time to time distribute ratably among the Shareholders of the Fund such
proportion of the net income, earnings, profits, gains, surplus (including paid
in surplus), capital, or assets of the Fund held by the Trustees as they may
deem proper. Such distribution may be made in cash or property (including
without limitation any type of obligations of the Fund or any assets thereof),
and the Trustees may distribute ratably among the Shareholders of the Fund
additional Shares issuable hereunder in such manner, at such times, on such
terms as the Trustees may deem proper. Such distributions may be among the
Shareholders of record (determined in accordance with the Registration
Statement) of the Fund at the time of declaring a distribution or may be among
the Shareholders of record of the Fund at such later date as the Trustees shall
determine. The Trustees may always retain from the net income, earnings, profits
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or gains of the Fund such amount as they may deem necessary to pay the debts or
expenses of the Fund or to meet obligations of the Fund, or as they may deem
desirable to use in the conduct of its affairs or to retain for future
requirements or extensions of the business. The Trustees may adopt and offer to
Shareholders of the Fund such dividend reinvestment plans as the Trustees deem
appropriate.
Inasmuch as the computation of net income and gains for federal
income tax purposes may vary from the computation thereof on the books, the
above provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Fund to avoid or reduce liability for taxes.
SECTION 7.3 DETERMINATION OF NET INCOME. The Trustees shall have the
power to determine the net income of the Fund and from time to time to
distribute such net income ratably among the Shareholders as dividends in cash
or additional Shares issuable hereunder. The determination of net income and the
resultant declaration of dividends shall be as set forth in the Registration
Statement. The Trustees or their delegates shall have full discretion to
determine whether any cash or property received by the Fund shall be treated as
income or as principal and whether any item of expenses shall be charged to the
income or the principal account, and their determination made in good faith
shall be conclusive upon the Shareholders. In the case of stock dividends
received, the Trustees shall have full discretion to determine, in the light of
the particular circumstances, how much, if any, of the value thereof shall be
treated as income, the balance, if any, to be treated as principal.
SECTION 7.4 POWER TO MODIFY FOREGOING PROCEDURES. Notwithstanding
any of the foregoing provisions of this Article VII, the Trustees may prescribe,
in their absolute discretion, such other bases and times for determining the per
Share net asset value of the Shares or net income, or the declaration and
payment of dividends and distributions, as they may deem necessary or desirable
to enable the Fund to comply with any provision of the 1940 Act, or any rule or
regulation thereunder, or any order of exemption issued by the Commission, all
as in effect now or hereafter amended or modified.
SECTION 7.5 POWER TO DELEGATE DETERMINATIONS. The power and duty to
make the net asset value calculations may be delegated by the Trustees to any
Investment Adviser, the Custodian, the Transfer Agent or such other person as
the Trustees by resolution may determine. The power and duty to calculate,
declare and make net income and distributions may be delegated by the Trustees
to any officer of the Fund.
ARTICLE VIII
DURATION; TERMINATION OF
FUND, AMENDMENT, MERGERS, ETC.
SECTION 8.1 DURATION. The Fund shall continue without limitation of
time but subject to the provisions of this Article VIII.
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SECTION 8.2 TERMINATION OF FUND. (a) The Fund may be terminated by
the affirmative vote of the holders of not less than two-thirds (66-2/3%) of the
Shares outstanding and entitled to vote at any meeting of Shareholders of the
Fund except that a Majority Shareholder Vote shall be sufficient if termination
of the Fund has been recommended by two-thirds of the Trustees. Upon the
termination of the Fund:
(i) The Fund shall carry on no business except for the
purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the
Fund and all of the powers of the Trustees under this Declaration shall continue
until the affairs of the Fund shall have been wound up, including the power to
fulfill or discharge the contracts of the Fund, collect its assets, sell,
convey, assign, exchange, transfer or otherwise dispose of all or any part of
the remaining Fund Property to one or more persons at public or private sale for
consideration which may consist in whole or in part of cash, securities or other
property of any kind, discharge or pay its liabilities, and to do all other acts
appropriate to liquidate its business; provided that any sale, conveyance,
assignment, exchange, transfer or other disposition of all or substantially all
the Fund Property shall require Shareholder approval in accordance with Section
8.4 hereof.
(iii) After paying or adequately providing for the payment of
all liabilities, and upon receipt of such releases, indemnities and refunding
agreements, as they deem necessary for their protection, the Trustees may
distribute the remaining Fund Property, in cash or in kind or partly each, among
the Shareholders of the Fund according to their respective rights.
(b) After termination of the Fund and distribution to the
Shareholders as herein provided, a majority of the Trustees shall execute and
lodge among the records of the Fund an instrument in writing setting forth the
fact of such termination, and the Trustees shall thereupon be discharged from
all further liabilities and duties with respect to the Fund, and the right and
interests of all Shareholders of the Fund shall thereupon cease.
SECTION 8.3 AMENDMENT PROCEDURES. (a) Except as provided in
paragraph (c) of this Section 8.3, this Declaration may be amended by a Majority
Shareholder Vote, at a meeting of Shareholders, or by written consent without a
meeting. The Trustees may also amend this Declaration without the vote or
consent of Shareholders (i) to change the name of the Fund, (ii) to supply any
omission, or cure, correct or supplement any ambiguous, defective or
inconsistent provision hereof, (iii) if they deem it necessary to conform this
Declaration to the requirements of applicable federal or state laws or
regulations or the requirements of the Internal Revenue Code, or to eliminate or
reduce any federal, state or local taxes which are or may be payable by the Fund
or the Shareholders, but the Trustees shall not be liable for failing to so, or
(iv) for any other purpose which does not adversely affect the rights of any
Shareholder with respect to which the amendment is or purports to be applicable.
(b) No amendment may be made under this Section 8.3 which would
change any rights with respect to any Shares of the Fund by reducing the amount
payable thereon upon liquidation of the Fund or by diminishing or eliminating
any voting rights pertaining thereto, except with the vote or consent of the
holders of two-thirds of the Shares of the Fund outstanding and entitled to
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vote. Nothing contained in this Declaration shall permit the amendment of this
Declaration to impair the exemption from personal liability of the Shareholders,
Trustees, officers, employees and agents of the Fund or to permit assessments
upon Shareholders set forth in Section 5.1 above.
(c) No amendment may be made under this Section 8.3 which shall
amend, alter, change or repeal any of the provisions of Sections 8.3, 8.4, 8.6
and 8.7 unless the amendment affecting such amendment, alteration, change or
repeal shall receive the affirmative vote or consent of that proportion of the
Shares outstanding and entitled to vote as would be necessary to approve the
transaction or action set forth in that respective section under circumstances
where the Board of Trustees has not recommended approval of the transaction or
action. Such affirmative vote or consent shall be in addition to the vote or
consent of the holders of Shares otherwise required by law or by the terms of
any class or series of preferred stock, whether now or hereafter authorized, or
any agreement between the Fund and any national securities exchange.
(d) A certificate signed by a majority of the Trustees or the
Secretary or any Assistant Secretary of the Fund, setting forth an amendment and
reciting that it was duly adopted by the Shareholders or by the Trustees as
aforesaid or a copy of the Declaration, as amended, and executed by a majority
of the Trustees or certified by the Secretary or any Assistant Secretary of the
Trust, shall be conclusive evidence of such amendment when lodged among the
records of the Fund. Unless such amendment or such certificate sets forth some
later time for the effectiveness of such amendment, such amendment shall be
effective when lodged among the records of the Fund.
Notwithstanding any other provision hereof, until such time as the
Registration Statement covering the first public offering of securities of the
Fund shall have become effective, this Declaration may be terminated or amended
in any respect by the affirmative vote of a majority of the Trustees or by an
instrument signed by a majority of the Trustees.
SECTION 8.4 MERGER, CONSOLIDATION AND SALE OF ASSETS. The Fund may
merge or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of the Fund
Property, including its good will, upon such terms and conditions and for such
consideration when and as authorized, at any meeting of Shareholders called for
the purpose, by the affirmative vote of the holders of not less than two-thirds
(66-2/3%) of the Shares of the Fund outstanding and entitled to vote, or by an
instrument or instruments in writing without a meeting, consented to by the
holders of not less than two-thirds (66-2/3%) of such Shares; provided, however,
that, if such merger, consolidation, sale, lease or exchange is recommended by
two-thirds of the Trustees, a Majority Shareholder Vote shall be sufficient
authorization; and any such merger, consolidation, sale, lease or exchange shall
be deemed for all purposes to have been accomplished under and pursuant to the
laws of the Commonwealth of Massachusetts. Nothing contained herein shall be
construed as requiring approval of Shareholders for any sale of assets in the
ordinary course of business of the Fund.
SECTION 8.5 INCORPORATION AND REORGANIZATION. With approval of a
Majority Shareholder Vote, the Trustees may cause to be organized or assist in
organizing a corporation or corporations under the laws of any jurisdiction or
any other trust, partnership, association or other organization to take over all
of the Fund Property or to carry on any business in which the Fund shall
directly or indirectly have any interest, and to sell, convey and transfer the
16
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Fund Property to any such corporation, trust, partnership, association or
organization in exchange for the shares or securities thereof or otherwise, and
to lend money to, subscribe for the shares or securities of, and enter into any
contracts with any such corporation, trust, partnership, association or
organization in which the Fund holds or is about to acquire shares or any other
interest. Subject to Section 8.4 hereof, the Trustees may also cause a merger or
consolidation between the Fund or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law, as provided under the law then in effect. Nothing
contained herein shall be construed as requiring approval of Shareholders for
the Trustees to organize or assist in organizing one or more corporations,
trusts, partnerships, associations or other organizations and selling, conveying
or transferring a portion of the Fund Property to such organization or entities.
SECTION 8.6 CONVERSION. The Fund may be converted at any time from a
"closed-end company" to an "open-end company" as those terms are defined by the
1940 Act, upon the approval of such a proposal, together with the necessary
amendments to the Declaration of Trust to permit such a conversion, by the
holders of not less than two-thirds (66-2/3%) of the Fund's outstanding Shares
entitled to vote, except that if such proposal is recommended by two-thirds of
the total number of Trustees then in office, such proposal may be adopted by a
Majority Shareholder Vote. From time to time, the Trustees will consider
recommending to the Shareholders a proposal to convert the Fund from a
"closed-end company" to an "open-end company." Upon the recommendation and
subsequent adoption of such a proposal and the necessary amendments to this
Declaration to permit such a conversion of the Fund's outstanding Shares
entitled to vote, the Fund shall, upon complying with any requirements of the
1940 Act and state law, become an "open-end" investment company. Such
affirmative vote or consent shall be in addition to the vote or consent of the
holders of the Shares otherwise required by law, or any agreement between the
Fund and any national securities exchange.
SECTION 8.7 CERTAIN TRANSACTIONS. (a) Notwithstanding any other
provision of this Declaration and subject to the exceptions provided in
paragraph (d) of this Section, the types of transactions described in paragraph
(c) of this Section shall require the affirmative vote or consent of the holders
of eighty percent (80%) of the Shares outstanding and entitled to vote, when a
Principal Shareholder (as defined in paragraph (b) of this Section) is a party
to the transaction. Such affirmative vote or consent shall be in addition to the
vote or consent of the holders of Shares otherwise required by law or by the
terms of any class or series of preferred stock, whether now or hereafter
authorized, or any agreement between the Fund and any national securities
exchange.
(b) The term "Principal Shareholder" shall mean any corporation,
person or other entity which is the beneficial owner, directly or indirectly, of
more than five percent (5%) of the outstanding Shares and shall include any
affiliate or associate, as such terms are defined in clause (ii) below, of a
Principal Shareholder. For the purposes of this Section, in addition to the
Shares which a corporation, person or other entity beneficially owns directly,
(a) any corporation, person or other entity shall be deemed to be the beneficial
owner of any Shares (i) which it has the right to acquire pursuant to any
agreement or upon exercise of conversion rights or warrants, or otherwise (but
excluding share options granted by the Fund) or (ii) which are beneficially
owned, directly or indirectly (including Shares deemed owned through application
of clause (i) above), by any other corporation, person or entity with which its
"affiliate" or "associate" (as defined below) has any agreement, arrangement or
17
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understanding for the purpose of acquiring, holding, voting or disposing of
Shares, or which is its "affiliate" or "associate" as those terms are defined in
Rule 12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934, and (b) the outstanding Shares shall include Shares deemed owned
through application of clauses (i) and (ii) above but shall not include any
other Shares which may be issuable pursuant to any agreement, or upon exercise
of conversion rights or warrants, or otherwise.
(c) This Section shall apply to the following transactions:
(i) The merger or consolidation of the Fund or any subsidiary
of the Fund with or into any Principal Shareholder.
(ii) The issuance of any securities of the Fund to any
Principal Shareholder for cash.
(iii) The sale, lease or exchange of all or any substantial
part of the assets of the Fund to any Principal Shareholder (except assets
having an aggregate fair market value of less than $1,000,000, aggregating for
the purpose of such computation all assets sold, leased or exchanged in any
series of similar transactions within a twelve-month period.)
(iv) The sale, lease or exchange to the Fund or any subsidiary
thereof, in exchange for securities of the Fund of any assets of any Principal
Shareholder (except assets having an aggregate fair market value of less than
$1,000,000, aggregating for the purposes of such computation all assets sold,
leased or exchanged in any series of similar transactions within a twelve-month
period).
(v) The liquidation or dissolution of the Fund.
(vi) A change in the nature of the business of the Fund so
that it would cease to be an investment company registered under the 1940 Act.
(vii) The conversion of the Fund to an "open-end company," or
any amendment to the Declaration of Trust of the Fund that makes the Shares a
"redeemable security," as such terms are defined in the 1940 Act.
(d) The provisions of this Section shall not be applicable to (i)
any of the transactions described in paragraph (c) of this Section if two-thirds
of the Board of Trustees of the Fund shall by resolution have approved a
memorandum of understanding with such Principal Shareholder with respect to and
substantially consistent with such transaction, or (ii) any such transaction
with any corporation of which a majority of the outstanding shares of all
classes of a stock normally entitled to vote in elections of directors is owned
of record or beneficially by the Fund and its subsidiaries.
(e) The Board of Trustees shall have the power and duty to determine
for the purposes of this Section on the basis of information known to the Fund
whether (i) a corporation, person or entity beneficially owns more than five
percent (5%) of the outstanding Shares, (ii) a corporation, person or entity is
an "affiliate" or "associate" (as defined above) of another, (iii) the assets
being acquired or leased to or by the Fund or any subsidiary thereof constitute
a substantial part of the assets of the Fund and have an aggregate fair market
value of less than $1,000,000, and (iv) the memorandum of understanding referred
18
<PAGE>
to in paragraph (d) hereof is substantially consistent with the transaction
covered thereby. Any such determination shall be conclusive and binding for all
purposes of this Section.
ARTICLE IX
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit or cause the
officers of the Fund to submit to the Shareholders a written financial report of
the Fund, including financial statements which shall at least annually be
certified by independent public accountants.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 FILING. This Declaration and any amendment hereto shall
be filed in the Office of the Secretary of the Commonwealth of Massachusetts and
in such other places as may be required under the laws of Massachusetts and may
also be filed or recorded in such other places as the Trustees deem appropriate.
Each amendment so filed shall be accompanied by a certificate signed and
acknowledged by a Trustee or by the Secretary or any Assistant Secretary of the
Fund stating that such action was duly taken in a manner provided herein. A
restated Declaration, integrating into a single instrument all of the provisions
of the Declaration which are then in effect and operative, may be executed from
time to time by a majority of the Trustees and shall, upon filing with the
Secretary of the Commonwealth of Massachusetts, be conclusive evidence of all
amendments contained therein and may thereafter be referred to in lieu of the
original Declaration and the various amendments thereto.
SECTION 10.2 RESIDENT AGENT. Until changed by the Trustees, the
principal office of the Fund shall be 200 Park Avenue, New York, New York 10166.
Until changed by the Trustees, 1 Boston Place, Boston, Massachusetts 02108 is
the resident office of the Fund in the Commonwealth of Massachusetts.
SECTION 10.3 GOVERNING LAW. By the executing hereof, the Trustees
agree that this Declaration shall be effective when executed by all of the
Trustees and delivered for filing to the Secretary of State of the Commonwealth
of Massachusetts with reference to the laws thereof and the rights of all
parties and the validity and construction of every provision hereof shall be
subject to and construed according to the laws of said State.
SECTION 10.4 ORGANIZATIONAL EXPENSES. In the event that any person
advances the organizational expenses of the Fund, such advances shall become an
obligation of the Fund, subject to such terms and conditions as may be fixed by,
and on a date fixed by, or determined with criteria fixed by, the Board of
Trustees, to be amortized over a period of periods to be fixed by the Board.
SECTION 10.5 COUNTERPARTS. The Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
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SECTION 10.6 RELIANCE BY THIRD PARTIES. Any certificate executed by
an individual who, according to the records of the Fund, appears to be a Trustee
hereunder, or Secretary or Assistant Secretary of the Fund, certifying to: (a)
the number or identity of Trustees or Shareholders, (b) the due authorization of
the execution of any instrument or writing, (c) the form of any vote passed at a
meeting of Trustees or Shareholders, (d) the fact that the number of Trustees or
Shareholders present at any meeting or executing any written instrument
satisfies the requirements of this Declaration, (e) the form of any By-Laws
adopted by or the identity of any officers elected by the Trustees, or (f) the
existence of any fact or facts which in any manner relate to the affairs of the
Fund shall be conclusive evidence as to the matters so certified in favor of any
person dealing with the Trustees and their successors.
SECTION 10.7 PROVISIONS OF CONFLICT WITH LAW OR REGULATIONS. (a) The
provisions of the Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provisions shall be deemed superseded by such law or regulation to
the extent necessary to eliminate such conflict; provided, however, that such
determination shall not affect any of the remaining provisions of the
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of the Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
pertain only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of the
Declaration in any jurisdiction.
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<PAGE>
IN WITNESS WHEREOF, the undersigned, the Trustees of the Fund, have
executed this instrument this 13th day of March, 1998.
/s/ Francis P. Brennan
----------------------------------
Francis P. Brennan, as Trustee
and not Individually
Massachusetts Business Development Corp.
50 Milk Street
Boston, Massachusetts 02109
STATE OF MASSACHUSETTS )
) ss.:
COUNTY OF SUFFOLK )
On this 13th day of March, 1998, Francis P. Brennan, known to me and
known to be the individual(s) described in and who executed the foregoing
instrument, personally appeared before me and they severally acknowledged the
foregoing instrument to be their free act and deed.
/s/ Kimberly A. Bowen
- --------------------------
Notary Public
My Commission Expires 2/14/03
21
BY-LAWS
OF
DREYFUS HIGH YIELD STRATEGIES FUND
(A MASSACHUSETTS BUSINESS TRUST)
ADOPTED _________
ARTICLE I
DEFINITIONS
The terms "Commission", "Declaration", "Distributor", "Fund", "Fund
Property", "Investment Adviser", "Majority Shareholder Vote", "1940 Act",
"Shareholder", "Shares", "Transfer Agent", and "Trustees" have the respective
meanings given them in the Declaration of Trust of the Fund dated March 16,
1998, as amended from time to time.
ARTICLE II
OFFICES
SECTION 2.1. PRINCIPAL OFFICE. Until changed by the Trustees, the
principal office of the Fund shall be 200 Park Avenue, New York, New York 10166.
SECTION 2.2. OTHER OFFICES. In addition to its principal office, the Fund
may have an office or offices at such other places within and without the
Commonwealth of Massachusetts as the Trustees may from time to time designate or
the business of the Fund may require.
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 3.1. PLACE OF MEETINGS. Meetings of Shareholders shall be held at
such place, within or without the Commonwealth of Massachusetts, as may be
designated from time to time by the Trustees.
SECTION 3.2. ANNUAL MEETINGS. Meetings of Shareholders, at which the
Shareholders shall elect Trustees and transact such other business as may
properly come before the meeting, shall be held annually so long as such annual
meetings shall be required by the New York Stock Exchange or the other exchange
or trading system on which Shares are principally traded.
SECTION 3.3. SPECIAL MEETINGS. Special meetings of Shareholders of the
Fund shall be held whenever called by the Board of Trustees or the Chairman of
the Fund. Special meetings of Shareholders shall also be called by the Secretary
upon the written request of the holders of Shares entitled to vote not less than
twenty-five percent (25%) of all the votes entitled to be cast at such meeting.
Such request shall state the purpose or purposes of such meeting and the matters
<PAGE>
proposed to be acted on thereat. When a meeting has been requested by
Shareholders, the Secretary shall inform such Shareholders of the reasonable
estimated cost of preparing and mailing such notice of the meeting, and, upon
payment to the Fund of such costs, the Secretary shall give notice stating the
purpose or purposes of the meeting to all entitled to vote at such meeting. No
special meeting need be called upon the request of the holders of Shares
entitled to cast less than a majority of all votes entitled to be cast at such
meeting, to consider any matter which is substantially the same as a matter
voted upon at any special meeting of Shareholders held during the preceding
twelve months.
SECTION 3.4. NOTICE OF MEETINGS. Written or printed notice of every
Shareholders' meeting, stating the place, date, and purpose or purposes thereof,
shall be given by the Secretary not less than ten (10) nor more than ninety (90)
days before such meeting to each Shareholder entitled to vote at such meeting.
Such notice shall be deemed to be given when deposited in the United States
mail, postage prepaid, directed to the Shareholder at his address as it appears
on the records of the Fund.
SECTION 3.5. QUORUM AND ADJOURNMENT OF MEETINGS. Except as otherwise
provided by law, by the Declaration or by these By-Laws, at all meetings of
Shareholders the holders of a majority of the Shares issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall be
requisite and shall constitute a quorum for the transaction of business. In the
absence of a quorum, the Shareholders present or represented by proxy and
entitled to vote thereat shall have power to adjourn the meeting from time to
time. Any adjourned meeting may be held as adjourned without further notice. At
any adjourned meeting at which a quorum shall be present, any business may be
transacted as if the meeting had been held as originally called.
SECTION 3.6. VOTING RIGHTS PROXIES. At each meeting of Shareholders, each
holder of record of Shares entitled to vote thereat shall be entitled to one
vote in person or by proxy, executed in writing by the Shareholder or his duly
authorized attorney-in-fact, for each Share of beneficial interest of the Fund
and for the fractional portion of one vote for each fractional Share entitled to
vote so registered in his name on the records of the Fund on the date fixed as
the record date for the determination of Shareholders entitled to vote at such
meeting. No proxy shall be valid after eleven months from its date, unless
otherwise provided in the proxy. At all meetings of Shareholders, unless the
voting is conducted by inspectors, all questions relating to the qualification
of voters and the validity of proxies and the acceptance or rejection of votes
shall be decided by the chairman of the meeting. Pursuant to a resolution of a
majority of the Trustees, proxies may be solicited in the name of one or more
Trustees or officers of the Fund.
SECTION 3.7. VOTE REQUIRED. Except as otherwise provided by law, by the
Declaration of Trust, or by these By-Laws, at each meeting of Shareholders at
which a quorum is present, all matters shall be decided by Majority Shareholder
Vote.
SECTION 3.8. INSPECTORS OF ELECTION. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of Shareholders may, and on the request
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<PAGE>
of any Shareholder or his proxy shall, appoint Inspectors of Election of the
meeting. In case any person appointed as Inspector fails to appear or fails or
refuses to act, the vacancy may be filled by appointment made by the Trustees in
advance of the convening of the meeting or at the meeting by the person acting
as Chairman. The Inspectors of Election shall determine the number of Shares
outstanding, the Shares represented at the meeting, the existence of a quorum,
the authenticity, validity and effect of proxies, shall receive votes, ballots
or consents, shall hear and determine all challenges and questions in any way
arising in connection with the right to vote, shall count and tabulate all votes
or consents, determine the results, and do such other acts as may be proper to
conduct the election or vote with fairness to all Shareholders. On request of
the chairman of the meeting, or of any Shareholder or his proxy, the Inspectors
of Election shall make a report in writing of any challenge or question or
matter determined by them and shall execute a certificate of any facts found by
them.
SECTION 3.9. INSPECTION OF BOOKS AND RECORDS. Shareholders shall have such
rights and procedures of inspection of the books and records of the Fund as are
granted to Shareholders under the Corporations and Associations Law of the
Commonwealth of Massachusetts.
SECTION 3.10. ACTION BY SHAREHOLDERS WITHOUT MEETING. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to be
taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Fund. Such
consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
ARTICLE IV
TRUSTEES
SECTION 4.1. MEETINGS OF THE TRUSTEES. The Trustees may in their
discretion provide for regular or special meetings of the Trustees. Regular
meetings of the Trustees may be held at such time and place as shall be
determined from time to time by the Trustees without further notice. Special
meetings of the Trustees may be called at any time by the Chairman and shall be
called by the Chairman or the Secretary upon the written request of any two (2)
Trustees.
SECTION 4.2. NOTICE OF SPECIAL MEETINGS. Written notice of special
meetings of the Trustees, stating the place, date and time thereof, shall be
given not less than two (2) days before such meeting to each Trustee,
personally, by telegram, by mail, or by leaving such notice at his place of
residence or usual place of business. If mailed, such notice shall be deemed to
be given when deposited in the United States mail, postage prepaid, directed to
the Trustee at his address as it appears on the records of the Fund. Subject to
the provisions of the 1940 Act, notice or waiver of notice need not specify the
purpose of any special meeting.
SECTION 4.3. TELEPHONE MEETINGS. Except as may otherwise be required by
law, any Trustee, or any member or members of any committee designated by the
Trustees, may participate in a meeting of the Trustees, or any such committee,
as the case may be, by means of a conference telephone or similar communications
3
<PAGE>
equipment if all persons participating in the meeting can hear each other at the
same time. Participation in a meeting by these means constitutes presence in
person at the meeting.
SECTION 4.4. QUORUM, VOTING AND ADJOURNMENT OF MEETINGS. At all meetings
of the Trustees, a majority of the Trustees shall be requisite to and shall
constitute a quorum for the transaction of business. If a quorum is present, the
affirmative vote of a majority of the Trustees present shall be the act of the
Trustees, unless the concurrence of a greater proportion is expressly required
for such action by law, the Declaration or these By-Laws. If at any meeting of
the Trustees there be less than a quorum present, the Trustees present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall have been obtained.
SECTION 4.5. ACTION BY TRUSTEES WITHOUT MEETING. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at any
meeting of the Trustees may be taken without a meeting if a consent in writing
setting forth the action shall be signed by a majority of the Trustees entitled
to vote upon the action and such written consent is filed with the minutes of
proceedings of the Trustees.
SECTION 4.6. EXPENSES AND FEES. Each Trustee may be allowed expenses, if
any, for attendance at each regular or special meeting of the Trustees, and each
Trustee who is not an officer or employee of the Fund or of its investment
manager or underwriter or of any corporate affiliate of any of said persons
shall receive for services rendered as a Trustee of the Fund such compensation
as may be fixed by the Trustees. Nothing herein contained shall be construed to
preclude any Trustee from serving the Fund in any other capacity and receiving
compensation therefor.
SECTION 4.7. EXECUTION OF INSTRUMENTS AND DOCUMENTS AND SIGNING OF CHECKS
AND OTHER OBLIGATIONS AND TRANSFERS. All instruments, documents and other papers
shall be executed in the name and on behalf of the Fund and all checks, notes,
drafts and other obligations for the payment of money by the Fund shall be
signed, and all transfer of securities standing in the name of the Fund shall be
executed, by the President, any Vice President or the Treasurer or by any one or
more officers or agents of the Fund as shall be designated for that purpose by
vote of the Trustees.
SECTION 4.8. INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS.
(a) As used in these By-Laws, the following terms shall have the
meanings set forth below:
(i) the term "indemnitee" shall mean any present or former
Trustee, officer or employee of the Fund, any present or
former Trustee, partner, Director or officer of another
trust, partnership, corporation or association whose
securities are or were owned by the Fund or of which the
4
<PAGE>
Fund is or was a creditor and who served or serves in
such capacity at the request of the Fund, and the heirs,
executors, administrators, successors and assigns of any
of the foregoing; however, whenever conduct by an
indemnitee is referred to, the conduct shall be that of
the original indemnitee rather than that of the heir,
executor, administrator, successor or assignee;
(ii) the term "covered proceeding" shall mean any threatened,
pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, to
which an indemnitee is or was a party or is threatened
to be made a party by reason of the fact or facts under
which he or it is an indemnitee as defined above;
(iii) the term "disabling conduct" shall mean willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the
office in question;
(iv) the term "covered expenses" shall mean expenses
(including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably
incurred by an indemnitee in connection with a covered
proceeding; and
(v) the term "adjudication of inability" shall mean, as to
any covered proceeding and as to any indemnitee, an
adverse determination as to the indemnitee whether by
judgment, order, settlement, conviction or upon a plea
of nolo contendere or its equivalent.
(b) The Fund shall not indemnify any indemnitee for any covered
expenses in any covered proceeding if there has been an
adjudication of liability against such indemnitee expressly
based on a finding of a disabling conduct.
(c) Except as set forth in paragraph (b) above, the Fund shall
indemnify any indemnitee for covered expenses in any covered
proceeding, whether or not there is an adjudication of
liability as to such indemnitee, such indemnification by the
Fund to be to the fullest extent now or hereafter permitted by
any applicable law unless the By-Laws limit or restrict the
indemnification to which any indemnitee may be entitled. The
Board of Trustees may adopt By-Law provisions to implement
paragraphs (a), (b) and (c) hereof.
(d) Nothing herein shall be deemed to affect the right of the Fund
and/or any indemnitee to acquire and pay for any insurance
covering any or all indemnities to the extent permitted by
5
<PAGE>
applicable law or to affect any other indemnification rights
to which any indemnitee may be entitled to the extent
permitted by applicable law. Such rights to indemnification
shall not, except as otherwise provided by law, be deemed
exclusive of any other rights to which such indemnitee may be
entitled under any statute, By-Law, contract or otherwise.
(e) In case any Shareholder or former Shareholder shall be held to
be personally liable solely by reason of his being or having
been a Shareholder and not because of his acts or omissions or
for some other reason, the Shareholder or former Shareholder
(or his heirs, executors, administrators or other legal
representatives or, in the case of a corporation or other
entity, its corporate or other general successor) shall be
entitled out of the Fund estate to be held harmless from and
indemnified against all loss and expense arising from such
liability. The Fund shall, upon request by the Shareholder,
assume the defense of any such claim made against any
Shareholder for any act or obligation of the Fund and satisfy
any judgment thereon.
ARTICLE V
COMMITTEES
SECTION 5.1. EXECUTIVE AND OTHER COMMITTEES. The Trustees, by resolution
adopted by a majority of the Trustees, may designate an Executive Committee
and/or other committees, each committee to consist of one (1) or more of the
Trustees of the Fund and may delegate to such committees, in the intervals
between meetings of the Trustees, any or all of the powers of the Trustees in
the management of the business and affairs of the Fund. In the absence of any
member of any such committee, the member(s) thereof present at any meeting,
whether or not they constitute a quorum, may appoint a Trustee to act in place
of such absent member. Each such committee shall keep a record of its
proceedings.
The Executive Committee and any other committee shall fix its own rules or
procedures, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.
All actions of the Executive Committee shall be reported to the Trustees
at the meeting thereof next succeeding to the taking of such action.
SECTION 5.2. ADVISORY COMMITTEE. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Fund in any
other capacity and which shall have advisory functions with respect to the
investments of the Fund but which shall have no power to determine that any
security or other investment shall be purchased, sold or otherwise disposed of
by the Fund. The number of persons constituting any such advisory committee
6
<PAGE>
shall be determined from time to time by the Trustees. The members of any such
advisory committee may receive compensation for their services and may be
allowed such fees and expenses for the attendance at meetings as the Trustees
may from time to time determine to be appropriate.
SECTION 5.3. COMMITTEE ACTION WITHOUT MEETING. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at any
meeting of any committee of the Trustees appointed pursuant to Section 5.1 of
these By-Laws may be taken without a meeting if a consent in writing setting
forth the action shall be signed by a majority of the members of the committee
entitled to vote upon the action and such written consent is filed with the
records of the proceedings of the committee.
ARTICLE VI
OFFICERS
SECTION 6.1. EXECUTIVE OFFICERS. The executive officers of the Fund shall
be a Chairman, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chairman shall be selected from among the Trustees but none of
the other executive officers need be a Trustee. Two or more offices, except
those of President and any Vice President, may be held by the same person, but
no officer shall execute, acknowledge or verify any instrument in more than one
capacity.
The executive officers of the Fund shall be elected annually by the
Trustees and each executive officer so elected shall hold office until his
successor is elected and has qualified.
SECTION 6.2. OTHER OFFICERS AND AGENTS. The Trustees may also elect one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers
and may elect, or may delegate to the President the power to appoint, such other
officers and agents as the Trustees shall at any time or from time to time deem
advisable.
SECTION 6.3. TERM, REMOVAL AND VACANCIES. Each officer of the Fund shall
hold office until his successor is elected and has qualified. Any officer or
agent of the Fund may be removed by the Trustees whenever, in their judgment,
the best interests of the Fund will be served thereby, but such removal shall be
without prejudice to the contractual rights, if any, of the person so removed.
SECTION 6.4. COMPENSATION OF OFFICERS. The compensation of officers and
agents of the Fund shall be fixed by the Trustees, or by the President to the
extent provided by the Trustees with respect to officers appointed by the
President.
SECTION 6.5. POWER AND DUTIES. All officers and agents of the Fund, as
between themselves and the Fund, shall have such authority and perform such
duties in the management of the Fund as may be provided in or pursuant to these
By-Laws, or to the extent not so provided, as may be prescribed by the Trustees;
7
<PAGE>
provided, that no rights of any third party shall be affected or impaired by any
such By-Law or resolution of the Trustees unless he has knowledge thereof.
SECTION 6.6. THE CHAIRMAN. The Chairman shall preside at all meetings of
the Shareholders and of the Trustees, and he shall perform such other duties as
the Trustees may from time to time prescribe.
SECTION 6.7. THE PRESIDENT. The President shall be the chief executive
officer of the Fund; he shall have general and active management of the business
of the Fund, shall see that all orders and resolutions of the Trustees are
carried into effect, and, in connection therewith, shall be authorized to
delegate to one or more Vice Presidents such of his powers and duties at such
times and in such manner as he may deem advisable.
SECTION 6.8. THE VICE PRESIDENTS. The Vice Presidents shall be of such
number and shall have such titles as may be determined from time to time by the
Trustees. The Vice President, or, if there be more than one, the Vice Presidents
in the order of their seniority as may be determined from time to time by the
Trustees or the President, shall, in the absence or disability of the President,
exercise the powers and perform the duties of the President, and he or they
shall perform such other duties as the Trustees or the President may from time
to time prescribe.
SECTION 6.9. THE ASSISTANT VICE PRESIDENTS. The Assistant Vice President,
or, if there be more than one, the Assistant Vice Presidents, shall perform such
duties and have such powers as may be assigned them from time to time by the
Trustees or the President.
SECTION 6.10. THE SECRETARY. The Secretary shall attend all meetings of
the Trustees and all meetings of the Shareholders and record all the proceedings
of the meetings of the Shareholders and of the Trustees in a book to be kept for
that purpose, and shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all meetings of the
Shareholders and special meetings of the Trustees, and shall perform such other
duties and have such powers as the Trustees, or the President, may from time to
time prescribe. He shall keep in safe custody the seal of the Fund and affix or
cause the same to be affixed to any instrument requiring it, and, when so
affixed, it shall be attested by his signature or by the signature of an
Assistant Secretary.
SECTION 6.11. THE ASSISTANT SECRETARIES. The Assistant Secretary, or, if
there be more than one, the Assistant Secretaries in the order determined by the
Trustees or the President, shall, in the absence or disability of the Secretary,
perform the duties and exercise the powers of the Secretary and shall perform
such duties and have such other powers as the Trustees or the President may from
time to time prescribe.
SECTION 6.12. THE TREASURER. The Treasurer shall be the chief financial
officer of the Fund. He shall keep or cause to be kept full and accurate
accounts of receipts and disbursements in books belonging to the Fund, and he
shall render to the Trustees and the President, whenever any of them require it,
8
<PAGE>
an account of his transactions as Treasurer and of the financial condition of
the Fund; and he shall perform such other duties as the Trustees, or the
President, may from time to time prescribe.
SECTION 6.13. THE ASSISTANT TREASURERS. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in the order determined
by the Trustees or the President, shall, in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the Treasurer and shall
perform such other duties and have such other powers as the Trustees, or the
President, may from time to time prescribe.
SECTION 6.14. DELEGATION OF DUTIES. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in Shares,
from any sources permitted by law, all as the Trustees shall from time to time
determine.
Inasmuch as the computation of net income and net profits from the sale of
securities or other properties for federal income tax purposes may vary from the
computation thereof on the records of the Fund, the Trustees shall have power,
in their discretion, to distribute as income dividends and as capital gain
distributions, respectively, amounts sufficient to enable the Fund to avoid or
reduce liability for federal income taxes.
ARTICLE VIII
CERTIFICATES OF SHARES
SECTION 8.1. CERTIFICATES OF SHARES. Certificates of Shares of the Fund
shall be in such form and of such design as the Trustees shall approve, subject
to the right of the Trustees to change such form and design at any time or from
time to time, and shall be entered in the records of the Fund as they are
issued. Each such certificate shall bear a distinguishing number; shall exhibit
the holder's name and certify the number of full Shares owned by such holder;
shall be signed by or in the name of the Fund by the President, or a Vice
President, and countersigned by the Secretary or an Assistant Secretary or the
Treasurer and an Assistant Treasurer of the Fund; shall be sealed with the seal;
and shall contain such recitals as may be required by law. Where any certificate
is signed by a Transfer Agent or by a Registrar, the signature of such officers
and the seal may be facsimile, printed or engraved. The Fund may, at its option,
determine not to issue a certificate or certificates to evidence Shares owned of
record by any Shareholder.
9
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In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Fund, whether because of
death, resignation or otherwise, before such certificate or certificates shall
have been delivered by the Fund, such certificate or certificates shall,
nevertheless, be adopted by the Fund and be issued and delivered as though the
person or persons who signed such certificate or certificates or whose facsimile
signature or signatures shall appear therein had not ceased to be such officer
or officers of the Fund.
No certificate shall be issued for any Share until such Share is fully
paid.
SECTION 8.2. TRANSFER OF SHARES. Shares shall be transferable on the books
of the Fund by the holder thereof in person or by his duly authorized attorney
or legal representative, upon surrender and cancellation of certificates, if
any, for the same number of Shares, duly endorsed or accompanied by proper
instruments of assignment and transfer, with such proof of the authenticity of
the signature as the Fund or its agent may reasonably require; in the case of
Shares not represented by certificates, the same or similar requirements may be
imposed by the Board of Trustees.
SECTION 8.3. SHARE LEDGERS. The share ledgers of the Fund, containing the
name and address of the Shareholders of the Fund and the number of Shares held
by them respectively, shall be kept at the principal offices of the Fund or, if
the Fund employs a transfer agent, at the offices of the Transfer Agent of the
Fund.
SECTION 8.4. LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. The
Trustees may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Fund alleged to have
been lost, stolen or destroyed, upon satisfactory proof of such loss, theft, or
destruction; and the Trustees may, in their discretion, require the owner of the
lost, stolen or destroyed certificate, or his legal representative, to give to
the Fund and to such Registrar, Transfer Agent and/or Transfer Clerk as may be
authorized or required to countersign such new certificate or certificates, a
bond in such sum and of such type as they may direct, and with such surety or
sureties, as they may direct, as indemnity against any claim that may be against
them or any of them on account of or in connection with the alleged loss, theft
or destruction of any such certificate.
ARTICLE IX
WAIVER OF NOTICE
Whenever any notice of the time, place or purpose of any meeting of
Shareholders, Trustees, or of any committee is required to be given in
accordance with law or under the provisions of the Declaration or these By-Laws,
a waiver thereof in writing, signed by the person or persons entitled to such
notice and filed with the records of the meeting, whether before or after the
holding thereof, or actual attendance at the meeting of Shareholders, Trustees
or committee, as the case may be, in person, shall be deemed equivalent to the
giving of such notice to such person.
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ARTICLE X
MISCELLANEOUS
SECTION 10.1. LOCATION OF BOOKS AND RECORDS. The books and records of the
Fund may be kept outside the Commonwealth of Massachusetts at such place or
places as the Trustees may from time to time determine, except as otherwise
required by law.
SECTION 10.2. RECORD DATE. The Trustees may fix in advance a date as the
record date for the purpose of determining Shareholders entitled to notice of,
or to vote at, any meeting of Shareholders, or Shareholders entitled to receive
payment of any dividend or the allotment of any rights, or in order to make a
determination of Shareholders for any other proper purpose. Such date, in any
case, shall be not more than ninety (90) days, and in case of a meeting of
Shareholders not less than ten (10) days, prior to the date on which particular
action requiring such determination of Shareholders is to be taken. In lieu of
fixing a record date, the Trustees may provide that the transfer books shall be
closed for a stated period but not to exceed, in any case, twenty (20) days. If
the transfer books are closed for the purpose of determining Shareholders
entitled to notice of a vote at a meeting of Shareholders, such books shall be
closed for at least ten (10) days immediately preceding such meeting.
SECTION 10.3. SEAL. The Trustees shall adopt a seal, which shall be in
such form and shall have such inscription thereon as the Trustees may from time
to time provide. The seal of the Fund may be affixed to any document, and the
seal and its attestation may be lithographed, engraved or otherwise printed on
any document with the same force and effect as if it had been imprinted and
attested manually in the same manner and with the same effect as if done by a
Massachusetts business trust under Massachusetts law.
SECTION 10.4. FISCAL YEAR. The fiscal year of the Fund shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time to
time.
SECTION 10.5. ORDERS FOR PAYMENT OF MONEY. All orders or instructions for
the payment of money of the Fund, and all notes or other evidences of
indebtedness issued in the name of the Fund, shall be signed by such officer or
officers or such other person or persons as the Trustees may from time to time
designate, or as may be specified in or pursuant to the agreement between the
Fund and the bank or trust company appointed as Custodian of the securities and
funds of the Fund.
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ARTICLE XI
COMPLIANCE WITH FEDERAL REGULATIONS
The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Fund is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Fund is required.
ARTICLE XII
AMENDMENTS
These By-Laws may be amended, altered, or repealed, or new By-Laws may be
adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees; provided,
however, that no By-Law may be amended, adopted or repealed by the Trustees if
such amendment, adoption or repeal requires, pursuant to law, the Declaration,
or these By-Laws, a vote of the Shareholders. The Trustees shall in no event
adopt By-Laws which are in conflict with the Declaration, and any apparent
inconsistency shall be construed in favor of the related provisions in the
Declaration.
ARTICLE XIII
DECLARATION OF TRUST
The Declaration of Trust establishing the Fund, dated March 16, 1998, a
copy of which is on file in the office of the Secretary of State of the
Commonwealth of Massachusetts, provides that the name the Dreyfus High Yield
Strategies Fund refers to the Trustees under the Declaration collectively as
Trustees, but not as individuals or personally; and no Trustee, Shareholder,
officer, employee or agent of the Fund shall be held to any personal liability,
nor shall resort be had to their private property for the satisfaction of any
obligation or claim or otherwise, in connection with the affairs of said Fund,
but the Fund Estate only shall be liable.
12
(PORTIONS OF DECLARATION OF TRUST
RELATING TO SHARHEOLDERS' RIGHTS)
DECLARATION OF TRUST
DREYFUS HIGH YIELD STRATEGIES FUND
* * * * *
ARTICLE I
NAME AND DEFINITIONS
* * * * *
(m) "SHAREHOLDER" means a record owner of outstanding Shares.
(n) "SHARES" means the units of interest into which the beneficial
interest in the Fund shall be divided from time to time and
includes fractions of Shares as well as whole Shares.
* * * * *
ARTICLE III
POWERS OF TRUSTEES
SECTION 3.1 GENERAL. The Trustees shall have exclusive and absolute
control over the Fund Property and over the business of the Fund to the same
extent as if the Trustees were the sole owners of the Fund Property and business
in their own right, but with such powers of delegation as may be permitted by
the Declaration. The Trustees shall have power to conduct the business of the
Fund and carry on its operations in any and all of its branches and maintain
offices both within and without the Commonwealth of Massachusetts, in any and
all states of the United States of America, in the District of Columbia, and in
any and all commonwealths, territories, dependencies, colonies, possessions,
agencies or instrumentalities wheresoever in the world they may be located and
to do all such other things and execute all such instruments as they deem
necessary, proper or desirable in order to promote the interests of the Fund
although such things are not herein specifically mentioned. Any determination as
to what is in the interests of the Fund made by the Trustees in good faith shall
be conclusive. In construing the provisions of the Declaration, the presumption
shall be in favor of a grant of power to the Trustees.
<PAGE>
The enumeration of any specific power herein shall not be construed
as limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
SECTION 3.2 INVESTMENTS. The Trustees shall have the power to:
(a) conduct, operate and carry on the business of an investment
company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, sell short, assign, transfer,
exchange, distribute, lend or otherwise deal in, all forms of
securities of every kind, nature, character, type and form,
and other financial instruments that may not be deemed to be
securities, including, but not limited to, futures contracts
and options thereon, forward foreign currency contracts, and
equity swaps. Such securities and other financial instruments
may include, but are not limited to, shares, stocks, bonds,
debentures, notes, script, participation certificates, rights
to subscribe, warrants, options, repurchase agreements,
commercial paper; evidences of indebtedness, certificates of
indebtedness, issued or to be issued by any corporation,
company, partnership, association, trust or entity, public or
private, whether organized under the laws of the United
States, or any state, commonwealth, territory or possession
thereof, or of any foreign country, or any state, province,
territory or possession thereof; and to exercise any and all
rights, powers and privileges of ownership or interest in
respect of any and all such investments of every kind and
description, including, without limitation, the right to
consent and otherwise act with respect thereto, with power to
designate one or more persons, firms, associations or
corporations to exercise any of said rights, powers and
privileges in respect of any of said instruments; and the
Trustee shall be deemed to have the foregoing powers with
respect to any additional securities in which the Fund may
invest should the Fundamental Policies be amended.
The Trustee shall not be limited to investing in obligations maturing before the
possible termination of the Fund, nor shall the Trustees be limited by any law
limiting the investments which may be made by fiduciaries.
Section 3.3. LEGAL TITLE. Legal title to all the Fund Property shall
be vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Fund Property to be held by or in the name of
one or more of the Trustees, or in the name of the Fund, or in the name of any
other Person as nominee, on such terms as the Trustees may determine, provided
that the interest of the Fund therein is appropriately protected. The right,
title and interest of the Trustees in the Fund Property shall vest automatically
in each Person who may hereafter become a Trustee. Upon the resignation, removal
or death of a Trustee he or she shall automatically cease to have any right,
title or interest in any of the Fund Property, and the right, title and interest
of such Trustee in the Fund Property shall vest automatically in the remaining
Trustees. Such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered.
SECTION 3.4 ISSUANCE AND REPURCHASE OF SECURITIES. The Trustees
shall have the power to issue, sell, repurchase, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer, and otherwise deal in Shares and, subject
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<PAGE>
to the provisions set forth in Articles VII and VIII hereof, to apply to any
such repurchase, retirement, cancellation or acquisition of Shares any funds or
property of the Fund, whether capital or surplus or otherwise, to the full
extent now or hereafter permitted by the laws of the Commonwealth of
Massachusetts governing business corporations.
SECTION 3.5 BORROWING MONEY; LENDING FUND ASSETS. Subject to the
Fundamental Policies, the Trustees shall have power to borrow money or otherwise
obtain credit and to secure the same by mortgaging, pledging or otherwise
subjecting as security the assets of the Fund, to endorse, guarantee, or
undertake the performance of any obligation, contract or engagement of any other
Person and to lend Fund assets.
SECTION 3.6 DELEGATION; COMMITTEES. The Trustees shall have power,
consistent with their continuing exclusive authority over the management of the
Fund and the Fund Property, to delegate from time to time to such of their
number or to officers, employees or agents of the Fund the doing of such things
and the execution of such instruments either in the name of the Fund or the
names of the Trustees or otherwise as the Trustees deem expedient.
SECTION 3.7 COLLECTION AND PAYMENT. The Trustees shall have power to
collect all property due to the Fund; to pay all claims, including taxes,
against the Fund Property; to prosecute, defend, compromise or abandon any
claims relating to the Fund Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Fund;
and to enter into releases, agreements and other instruments.
SECTION 3.8 EXPENSES. The Trustees shall have the power to incur and
pay any expenses which in the opinion of the Trustees are necessary or
incidental to carry out any of the purposes of the Declaration, and to pay
reasonable compensation from the funds of the Fund to themselves as Trustees.
The Trustees shall fix the compensation of all officers, employees and Trustees.
SECTION 3.9 MANNER OF ACTING; BY-LAWS. Except as otherwise provided
herein or in the By-Laws or by any provision of law, any action to be taken by
the Trustees may be taken by a majority of the Trustees present at a meeting of
Trustees (a quorum being present), including any meeting held by means of a
conference telephone circuit or similar communications equipment by means of
which all persons participating in the meeting can hear each other, or by
written consents of a majority of the Trustees. The Trustees may adopt By-Laws
not inconsistent with this Declaration to provide for the conduct of the
business of the Fund and may amend or repeal such By-Laws to the extent such
power is not reserved to the Shareholders.
SECTION 3.10 MISCELLANEOUS POWERS. The Trustees shall have the power
to: (a) employ or contract with such Persons as the Trustees may deem desirable
for the transaction of the business of the Fund; (b) enter into joint ventures,
partnerships and any other combinations or associations; (c) remove Trustees or
fill vacancies in or add to their number, elect and remove such officers and
appoint and terminate such agents or employees as they consider appropriate, and
appoint from their own number, and terminate, any one or more committees which
may exercise some or all of the power and authority of the Trustees as the
Trustees may determine; (d) purchase, and pay for out of Fund Property,
insurance policies insuring the Shareholders, Trustees, officers, employees,
agents, investment advisers, distributors, selected dealers or independent
contractors of the Fund against all claims arising by reason of holding any such
3
<PAGE>
position or by reason of any action taken or omitted to be taken by any such
Person in such capacity, whether or not constituting negligence, or whether or
not the Fund would have the power to indemnify such Person against such
liability; (e) establish pension, profit-sharing, Share purchase, and other
retirement incentive and benefit plans for any Trustees, officers, employees and
agents of the Fund; (f) to the extent permitted by law, indemnify any person
with whom the Fund has dealings, including any Investment Adviser, Distributor,
Transfer Agent and selected dealers, to such extent as the Trustees shall
determine; (g) guarantee indebtedness or contractual obligations of others; (h)
determine and change the fiscal year of the Fund and the method by which its
accounts shall be kept; and (i) adopt a seal for the Fund, but the absence of
such seal shall not impair the validity of any instrument executed on behalf of
the Fund.
SECTION 3.11 PRINCIPAL TRANSACTIONS. Except in transactions
permitted by the 1940 Act or any rule or regulation thereunder, or any order of
exemption issued by the Commission, or effected to implement the provisions of
any agreement to which the Fund is a party, the Trustees shall not, on behalf of
the Fund, buy any securities (other than Shares) from or sell any securities
(other than Shares) to, or lend any assets of the Fund to, any Trustee or
officer of the Fund or any firm of which any such Trustee or officer is a member
acting as principal, or have any such dealings with any Investment Adviser,
Distributor or Transfer Agent or with any Affiliated Person of such Person; but
the Fund or any Series thereof may employ any such Person, or firm or company in
which such Person is an Interested Person, as broker, legal counsel, registrar,
transfer agent, dividend disbursing agent or custodian upon customary terms.
SECTION 3.12. LITIGATION. The Trustees shall have the power to
engage in and to prosecute, defend, compromise, abandon, or adjust, by
arbitration or otherwise, any actions, suits, proceedings, disputes, claims, and
demands relating to the Fund, and out of the assets of the Fund to pay or to
satisfy any debts, claims or expenses incurred in connection therewith,
including those of litigation, and such power shall include without limitation
the power of the Trustees or any appropriate committee thereof, in the exercise
of their or its good faith business judgment, to dismiss any action, suit,
proceeding, dispute, claim or demand, derivative or otherwise, brought by any
person, including a Shareholder in its own name or the name of the Fund, whether
or not the Fund or any of the Trustees may be named individually therein or the
subject matter arises by reason of business for or on behalf of the Fund.
* * * * *
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
SECTION 5.1 NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Fund Property or the acts, obligations or affairs of the
Fund. The Trustees shall have no power to bind any Shareholder personally or to
call upon any Shareholder for the payment of any sum of money or assessment
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<PAGE>
whatsoever other than such as the Shareholder may at any time personally agree
to pay by way of subscription to any Shares or otherwise. Shareholder liability
for the acts and obligations of the Fund is hereby expressly disclaimed. Every
note, bond, contract, or other undertaking issued by or on behalf of the Fund or
the Trustees relating to the Fund shall include a notice and provision limiting
the obligation represented thereby to the Fund and its assets (but the omission
of such notice and provision shall not operate to impose any liability or
obligation on any Shareholder). No Trustee, officer, employee or agent of the
Fund shall be subject to any personal liability whatsoever to any Person, in
connection with the Fund Property or the affairs of the Fund, save only that
arising from bad faith, willful misfeasance, gross negligence or reckless
disregard for his or her duty to such Person; and all such Persons shall look
solely to the Fund Property for satisfaction of claims of any nature arising in
connection with the affairs of the Fund. If any Shareholder, Trustee, officer,
employee or agent, as such, of the Fund is made a party to any suit or
proceeding to enforce any such liability, he or she shall not, on account
thereof, be held to any personal liability. The Fund shall indemnify and hold
each Shareholder harmless from and against all claims and liabilities, to which
such Shareholder may become subject by reason of his or her being or having been
a Shareholder, other than by reason of his or her own wrongful act or omission,
and shall reimburse such Shareholder for all legal and other expenses reasonably
incurred by him or her in connection with any such claim or liability. The
rights accruing to a Shareholder under this Section 5.1 shall not exclude any
other right to which such Shareholder may be lawfully entitled, nor shall
anything herein contained restrict the right of the Fund to indemnify or
reimburse a Shareholder in any appropriate situation even though not
specifically provided herein.
SECTION 5.2 NON-LIABILITY OF TRUSTEES, ETC. No Trustee, officer,
employee or agent of the Fund shall be liable to the Fund, its Shareholders, or
to any Shareholder, Trustee, officer, employee, or agent thereof for any action
or failure to act (including without limitation the failure to compel in any way
any former or acting Trustee to redress any breach of trust) except for his or
her own bad faith, willful misfeasance, gross negligence or reckless disregard
of his or her duties.
SECTION 5.3 INDEMNIFICATION. (a) The Trustees shall provide for
indemnification by the Fund of any person who is, or had been, a Trustee,
officer, employee or agent of the Fund against all liability and against all
expenses reasonably incurred or paid by him or her in connection with any claim,
action, suit or proceeding in which he or she becomes involved as a party or
otherwise by virtue of being or having been a Trustee, officer, employee or
agent and against amounts paid or incurred by him or her in the settlement
thereof, in such manner as the Trustees may provide from time to time in the
By-Laws.
(b) The words "claim," "action," suit," or "proceeding" shall apply
to all claims, actions, suits or proceedings (civil, criminal, or other,
including appeals), actual or threatened; and the words "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and other liabilities.
* * * * *
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ARTICLE VI
SHARES OF BENEFICIAL INTEREST
SECTION 6.1 BENEFICIAL INTEREST. The interest of the beneficiaries
hereunder shall be divided into transferable shares of beneficial interest of
$.001 par value. The number of such shares of beneficial interest authorized
hereunder is unlimited. All Shares issued hereunder, including Shares issued in
connection with a dividend in Shares or a split in Shares, shall be fully paid
and nonassessable.
SECTION 6.2 RIGHTS OF SHAREHOLDERS. The ownership of the Fund
Property of every description and the right to conduct any business hereinbefore
described are vested exclusively in the Trustees, and the Shareholders shall
have no interest therein other than the beneficial interest conferred by their
Shares, and they shall have no right to call for any partition or division of
any property, profits, rights or interests of the Fund nor can they be called
upon to assume any losses of the Fund or suffer an assessment of any kind by
virtue of their ownership of Shares. The Shares shall be personal property
giving only the rights in the Declaration specifically set forth. The Shares
shall not entitle the holder to preference, preemptive, appraisal, conversion or
exchange rights.
* * * * *
SECTION 6.8 VOTING POWERS. The Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Section 2.2 hereof, (ii)
for the removal of Trustees as provided in Section 2.2 hereof, (iii) with
respect to any investment advisory or management contract as provided in Section
4.1, (iv) with respect to termination of the Fund as provided in Section 8.2,
(v) with respect to any amendment of the Declaration to the extent and as
provided in Section 8.3, (vi) with respect to any merger, consolidation,
conversion or sale of assets as provided in Sections 8.4, 8.5 and 8.6, (vii)
with respect to incorporation or reorganization of the Fund to the extent and as
provided in Section 8.5, (viii) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Fund or the Shareholders, and (ix) with
respect to such additional matters relating to the Fund as may be required by
law, the Declaration, the By-Laws or any registration of the Fund with the
Commission (or any successor agency) or any state, or as and when the Trustees
may consider necessary or desirable. Each whole Share shall be entitled to one
vote as to any matter on which it is entitled to vote and each fractional Share
shall be entitled to a proportionate fractional vote, except that Shares held in
the treasury of the Fund as of the record date, as determined in accordance with
the By-Laws, shall not be voted. There shall be no cumulative voting in the
election of Trustees. Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities issued by the Fund. Until
Shares are issued, the Trustees may exercise all rights of Shareholders and may
take any action required by law, the Declaration or the By-Laws to be taken by
Shareholders. The By-Laws may include further provisions for Shareholders' votes
and meetings and related matters.
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* * * * *
ARTICLE VIII
DURATION; TERMINATION OF
FUND, AMENDMENT, MERGERS, ETC.
SECTION 8.1 DURATION. The Fund shall continue without limitation of
time but subject to the provisions of this Article VIII.
SECTION 8.2 TERMINATION OF FUND. (a) The Fund may be terminated by
the affirmative vote of the holders of not less than two-thirds (66-2/3%) of the
Shares outstanding and entitled to vote at any meeting of Shareholders of the
Fund except that a Majority Shareholder Vote shall be sufficient if termination
of the Fund has been recommended by two-thirds of the Trustees. Upon the
termination of the Fund:
(i) The Fund shall carry on no business except for the
purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the
Fund and all of the powers of the Trustees under this Declaration shall continue
until the affairs of the Fund shall have been wound up, including the power to
fulfill or discharge the contracts of the Fund, collect its assets, sell,
convey, assign, exchange, transfer or otherwise dispose of all or any part of
the remaining Fund Property to one or more persons at public or private sale for
consideration which may consist in whole or in part of cash, securities or other
property of any kind, discharge or pay its liabilities, and to do all other acts
appropriate to liquidate its business; provided that any sale, conveyance,
assignment, exchange, transfer or other disposition of all or substantially all
the Fund Property shall require Shareholder approval in accordance with Section
8.4 hereof.
(iii) After paying or adequately providing for the payment of
all liabilities, and upon receipt of such releases, indemnities and refunding
agreements, as they deem necessary for their protection, the Trustees may
distribute the remaining Fund Property, in cash or in kind or partly each, among
the Shareholders of the Fund according to their respective rights.
(b) After termination of the Fund and distribution to the
Shareholders as herein provided, a majority of the Trustees shall execute and
lodge among the records of the Fund an instrument in writing setting forth the
fact of such termination, and the Trustees shall thereupon be discharged from
all further liabilities and duties with respect to the Fund, and the right and
interests of all Shareholders of the Fund shall thereupon cease.
SECTION 8.3 AMENDMENT PROCEDURES. (a) Except as provided in
paragraph (c) of this Section 8.3, this Declaration may be amended by a Majority
Shareholder Vote, at a meeting of Shareholders, or by written consent without a
meeting. The Trustees may also amend this Declaration without the vote or
consent of Shareholders (i) to change the name of the Fund, (ii) to supply any
omission, or cure, correct or supplement any ambiguous, defective or
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inconsistent provision hereof, (iii) if they deem it necessary to conform this
Declaration to the requirements of applicable federal or state laws or
regulations or the requirements of the Internal Revenue Code, or to eliminate or
reduce any federal, state or local taxes which are or may be payable by the Fund
or the Shareholders, but the Trustees shall not be liable for failing to so, or
(iv) for any other purpose which does not adversely affect the rights of any
Shareholder with respect to which the amendment is or purports to be applicable.
(b) No amendment may be made under this Section 8.3 which would
change any rights with respect to any Shares of the Fund by reducing the amount
payable thereon upon liquidation of the Fund or by diminishing or eliminating
any voting rights pertaining thereto, except with the vote or consent of the
holders of two-thirds of the Shares of the Fund outstanding and entitled to
vote. Nothing contained in this Declaration shall permit the amendment of this
Declaration to impair the exemption from personal liability of the Shareholders,
Trustees, officers, employees and agents of the Fund or to permit assessments
upon Shareholders set forth in Section 5.1 above.
(c) No amendment may be made under this Section 8.3 which shall
amend, alter, change or repeal any of the provisions of Sections 8.3, 8.4, 8.6
and 8.7 unless the amendment affecting such amendment, alteration, change or
repeal shall receive the affirmative vote or consent of that proportion of the
Shares outstanding and entitled to vote as would be necessary to approve the
transaction or action set forth in that respective section under circumstances
where the Board of Trustees has not recommended approval of the transaction or
action. Such affirmative vote or consent shall be in addition to the vote or
consent of the holders of Shares otherwise required by law or by the terms of
any class or series of preferred stock, whether now or hereafter authorized, or
any agreement between the Fund and any national securities exchange.
(d) A certificate signed by a majority of the Trustees or the
Secretary or any Assistant Secretary of the Fund, setting forth an amendment and
reciting that it was duly adopted by the Shareholders or by the Trustees as
aforesaid or a copy of the Declaration, as amended, and executed by a majority
of the Trustees or certified by the Secretary or any Assistant Secretary of the
Trust, shall be conclusive evidence of such amendment when lodged among the
records of the Fund. Unless such amendment or such certificate sets forth some
later time for the effectiveness of such amendment, such amendment shall be
effective when lodged among the records of the Fund.
Notwithstanding any other provision hereof, until such time as the
Registration Statement covering the first public offering of securities of the
Fund shall have become effective, this Declaration may be terminated or amended
in any respect by the affirmative vote of a majority of the Trustees or by an
instrument signed by a majority of the Trustees.
SECTION 8.4 MERGER, CONSOLIDATION AND SALE OF ASSETS. The Fund may
merge or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of the Fund
Property, including its good will, upon such terms and conditions and for such
consideration when and as authorized, at any meeting of Shareholders called for
the purpose, by the affirmative vote of the holders of not less than two-thirds
(66-2/3%) of the Shares of the Fund outstanding and entitled to vote, or by an
instrument or instruments in writing without a meeting, consented to by the
holders of not less than two-thirds (66-2/3%) of such Shares; provided, however,
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<PAGE>
that, if such merger, consolidation, sale, lease or exchange is recommended by
two-thirds of the Trustees, a Majority Shareholder Vote shall be sufficient
authorization; and any such merger, consolidation, sale, lease or exchange shall
be deemed for all purposes to have been accomplished under and pursuant to the
laws of the Commonwealth of Massachusetts. Nothing contained herein shall be
construed as requiring approval of Shareholders for any sale of assets in the
ordinary course of business of the Fund.
SECTION 8.5 INCORPORATION AND REORGANIZATION. With approval of a
Majority Shareholder Vote, the Trustees may cause to be organized or assist in
organizing a corporation or corporations under the laws of any jurisdiction or
any other trust, partnership, association or other organization to take over all
of the Fund Property or to carry on any business in which the Fund shall
directly or indirectly have any interest, and to sell, convey and transfer the
Fund Property to any such corporation, trust, partnership, association or
organization in exchange for the shares or securities thereof or otherwise, and
to lend money to, subscribe for the shares or securities of, and enter into any
contracts with any such corporation, trust, partnership, association or
organization in which the Fund holds or is about to acquire shares or any other
interest. Subject to Section 8.4 hereof, the Trustees may also cause a merger or
consolidation between the Fund or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law, as provided under the law then in effect. Nothing
contained herein shall be construed as requiring approval of Shareholders for
the Trustees to organize or assist in organizing one or more corporations,
trusts, partnerships, associations or other organizations and selling, conveying
or transferring a portion of the Fund Property to such organization or entities.
SECTION 8.6 CONVERSION. The Fund may be converted at any time from a
"closed-end company" to an "open-end company" as those terms are defined by the
1940 Act, upon the approval of such a proposal, together with the necessary
amendments to the Declaration of Trust to permit such a conversion, by the
holders of not less than two-thirds (66-2/3%) of the Fund's outstanding Shares
entitled to vote, except that if such proposal is recommended by two-thirds of
the total number of Trustees then in office, such proposal may be adopted by a
Majority Shareholder Vote. From time to time, the Trustees will consider
recommending to the Shareholders a proposal to convert the Fund from a
"closed-end company" to an "open-end company." Upon the recommendation and
subsequent adoption of such a proposal and the necessary amendments to this
Declaration to permit such a conversion of the Fund's outstanding Shares
entitled to vote, the Fund shall, upon complying with any requirements of the
1940 Act and state law, become an "open-end" investment company. Such
affirmative vote or consent shall be in addition to the vote or consent of the
holders of the Shares otherwise required by law, or any agreement between the
Fund and any national securities exchange.
SECTION 8.7 CERTAIN TRANSACTIONS. (a) Notwithstanding any other
provision of this Declaration and subject to the exceptions provided in
paragraph (d) of this Section, the types of transactions described in paragraph
(c) of this Section shall require the affirmative vote or consent of the holders
of eighty percent (80%) of the Shares outstanding and entitled to vote, when a
Principal Shareholder (as defined in paragraph (b) of this Section) is a party
to the transaction. Such affirmative vote or consent shall be in addition to the
vote or consent of the holders of Shares otherwise required by law or by the
terms of any class or series of preferred stock, whether now or hereafter
authorized, or any agreement between the Fund and any national securities
exchange.
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(b) The term "Principal Shareholder" shall mean any corporation,
person or other entity which is the beneficial owner, directly or indirectly, of
more than five percent (5%) of the outstanding Shares and shall include any
affiliate or associate, as such terms are defined in clause (ii) below, of a
Principal Shareholder. For the purposes of this Section, in addition to the
Shares which a corporation, person or other entity beneficially owns directly,
(a) any corporation, person or other entity shall be deemed to be the beneficial
owner of any Shares (i) which it has the right to acquire pursuant to any
agreement or upon exercise of conversion rights or warrants, or otherwise (but
excluding share options granted by the Fund) or (ii) which are beneficially
owned, directly or indirectly (including Shares deemed owned through application
of clause (i) above), by any other corporation, person or entity with which its
"affiliate" or "associate" (as defined below) has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of
Shares, or which is its "affiliate" or "associate" as those terms are defined in
Rule 12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934, and (b) the outstanding Shares shall include Shares deemed owned
through application of clauses (i) and (ii) above but shall not include any
other Shares which may be issuable pursuant to any agreement, or upon exercise
of conversion rights or warrants, or otherwise.
(c) This Section shall apply to the following transactions:
(i) The merger or consolidation of the Fund or any subsidiary
of the Fund with or into any Principal Shareholder.
(ii) The issuance of any securities of the Fund to any
Principal Shareholder for cash.
(iii) The sale, lease or exchange of all or any substantial
part of the assets of the Fund to any Principal Shareholder (except assets
having an aggregate fair market value of less than $1,000,000, aggregating for
the purpose of such computation all assets sold, leased or exchanged in any
series of similar transactions within a twelve-month period.)
(iv) The sale, lease or exchange to the Fund or any subsidiary
thereof, in exchange for securities of the Fund of any assets of any Principal
Shareholder (except assets having an aggregate fair market value of less than
$1,000,000, aggregating for the purposes of such computation all assets sold,
leased or exchanged in any series of similar transactions within a twelve-month
period).
(v) The liquidation or dissolution of the Fund.
(vi) A change in the nature of the business of the Fund so
that it would cease to be an investment company registered under the 1940 Act.
(vii) The conversion of the Fund to an "open-end company," or
any amendment to the Declaration of Trust of the Fund that makes the Shares a
"redeemable security," as such terms are defined in the 1940 Act.
(d) The provisions of this Section shall not be applicable to (i)
any of the transactions described in paragraph (c) of this Section if two-thirds
of the Board of Trustees of the Fund shall by resolution have approved a
memorandum of understanding with such Principal Shareholder with respect to and
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<PAGE>
substantially consistent with such transaction, or (ii) any such transaction
with any corporation of which a majority of the outstanding shares of all
classes of a stock normally entitled to vote in elections of directors is owned
of record or beneficially by the Fund and its subsidiaries.
(e) The Board of Trustees shall have the power and duty to determine
for the purposes of this Section on the basis of information known to the Fund
whether (i) a corporation, person or entity beneficially owns more than five
percent (5%) of the outstanding Shares, (ii) a corporation, person or entity is
an "affiliate" or "associate" (as defined above) of another, (iii) the assets
being acquired or leased to or by the Fund or any subsidiary thereof constitute
a substantial part of the assets of the Fund and have an aggregate fair market
value of less than $1,000,000, and (iv) the memorandum of understanding referred
to in paragraph (d) hereof is substantially consistent with the transaction
covered thereby. Any such determination shall be conclusive and binding for all
purposes of this Section.
* * * * *
11
(PORTIONS OF BY-LAWS OF
DREYFUS HIGH YIELD STRATEGIES FUND
RELATING TO SHAREHOLDERS' RIGHTS)
* * * * *
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 3.1. PLACE OF MEETINGS. Meetings of Shareholders shall be held at
such place, within or without the Commonwealth of Massachusetts, as may be
designated from time to time by the Trustees.
SECTION 3.2. ANNUAL MEETINGS. Meetings of Shareholders, at which the
Shareholders shall elect Trustees and transact such other business as may
properly come before the meeting, shall be held annually so long as such annual
meetings shall be required by the New York Stock Exchange or the other exchange
or trading system on which Shares are principally traded.
SECTION 3.3. SPECIAL MEETINGS. Special meetings of Shareholders of the
Fund shall be held whenever called by the Board of Trustees or the Chairman of
the Fund. Special meetings of Shareholders shall also be called by the Secretary
upon the written request of the holders of Shares entitled to vote not less than
twenty-five percent (25%) of all the votes entitled to be cast at such meeting.
Such request shall state the purpose or purposes of such meeting and the matters
proposed to be acted on thereat. When a meeting has been requested by
Shareholders, the Secretary shall inform such Shareholders of the reasonable
estimated cost of preparing and mailing such notice of the meeting, and, upon
payment to the Fund of such costs, the Secretary shall give notice stating the
purpose or purposes of the meeting to all entitled to vote at such meeting. No
special meeting need be called upon the request of the holders of Shares
entitled to cast less than a majority of all votes entitled to be cast at such
meeting, to consider any matter which is substantially the same as a matter
voted upon at any special meeting of Shareholders held during the preceding
twelve months.
SECTION 3.4. NOTICE OF MEETINGS. Written or printed notice of every
Shareholders' meeting, stating the place, date, and purpose or purposes thereof,
shall be given by the Secretary not less than ten (10) nor more than ninety (90)
days before such meeting to each Shareholder entitled to vote at such meeting.
Such notice shall be deemed to be given when deposited in the United States
mail, postage prepaid, directed to the Shareholder at his address as it appears
on the records of the Fund.
SECTION 3.5. QUORUM AND ADJOURNMENT OF MEETINGS. Except as otherwise
provided by law, by the Declaration or by these By-Laws, at all meetings of
Shareholders the holders of a majority of the Shares issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall be
<PAGE>
requisite and shall constitute a quorum for the transaction of business. In the
absence of a quorum, the Shareholders present or represented by proxy and
entitled to vote thereat shall have power to adjourn the meeting from time to
time. Any adjourned meeting may be held as adjourned without further notice. At
any adjourned meeting at which a quorum shall be present, any business may be
transacted as if the meeting had been held as originally called.
SECTION 3.6. VOTING RIGHTS PROXIES. At each meeting of Shareholders, each
holder of record of Shares entitled to vote thereat shall be entitled to one
vote in person or by proxy, executed in writing by the Shareholder or his duly
authorized attorney-in-fact, for each Share of beneficial interest of the Fund
and for the fractional portion of one vote for each fractional Share entitled to
vote so registered in his name on the records of the Fund on the date fixed as
the record date for the determination of Shareholders entitled to vote at such
meeting. No proxy shall be valid after eleven months from its date, unless
otherwise provided in the proxy. At all meetings of Shareholders, unless the
voting is conducted by inspectors, all questions relating to the qualification
of voters and the validity of proxies and the acceptance or rejection of votes
shall be decided by the chairman of the meeting. Pursuant to a resolution of a
majority of the Trustees, proxies may be solicited in the name of one or more
Trustees or officers of the Fund.
SECTION 3.7. VOTE REQUIRED. Except as otherwise provided by law, by the
Declaration of Trust, or by these By-Laws, at each meeting of Shareholders at
which a quorum is present, all matters shall be decided by Majority Shareholder
Vote.
SECTION 3.8. INSPECTORS OF ELECTION. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of Shareholders may, and on the request
of any Shareholder or his proxy shall, appoint Inspectors of Election of the
meeting. In case any person appointed as Inspector fails to appear or fails or
refuses to act, the vacancy may be filled by appointment made by the Trustees in
advance of the convening of the meeting or at the meeting by the person acting
as Chairman. The Inspectors of Election shall determine the number of Shares
outstanding, the Shares represented at the meeting, the existence of a quorum,
the authenticity, validity and effect of proxies, shall receive votes, ballots
or consents, shall hear and determine all challenges and questions in any way
arising in connection with the right to vote, shall count and tabulate all votes
or consents, determine the results, and do such other acts as may be proper to
conduct the election or vote with fairness to all Shareholders. On request of
the chairman of the meeting, or of any Shareholder or his proxy, the Inspectors
of Election shall make a report in writing of any challenge or question or
matter determined by them and shall execute a certificate of any facts found by
them.
SECTION 3.9. INSPECTION OF BOOKS AND RECORDS. Shareholders shall have such
rights and procedures of inspection of the books and records of the Fund as are
granted to Shareholders under the Corporations and Associations Law of the
Commonwealth of Massachusetts.
SECTION 3.10. ACTION BY SHAREHOLDERS WITHOUT MEETING. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to be
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taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Fund. Such
consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
* * * * *
ARTICLE VIII
CERTIFICATES OF SHARES
SECTION 8.1. CERTIFICATES OF SHARES. Certificates of Shares of the Fund
shall be in such form and of such design as the Trustees shall approve, subject
to the right of the Trustees to change such form and design at any time or from
time to time, and shall be entered in the records of the Fund as they are
issued. Each such certificate shall bear a distinguishing number; shall exhibit
the holder's name and certify the number of full Shares owned by such holder;
shall be signed by or in the name of the Fund by the President, or a Vice
President, and countersigned by the Secretary or an Assistant Secretary or the
Treasurer and an Assistant Treasurer of the Fund; shall be sealed with the seal;
and shall contain such recitals as may be required by law. Where any certificate
is signed by a Transfer Agent or by a Registrar, the signature of such officers
and the seal may be facsimile, printed or engraved. The Fund may, at its option,
determine not to issue a certificate or certificates to evidence Shares owned of
record by any Shareholder.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Fund, whether because of
death, resignation or otherwise, before such certificate or certificates shall
have been delivered by the Fund, such certificate or certificates shall,
nevertheless, be adopted by the Fund and be issued and delivered as though the
person or persons who signed such certificate or certificates or whose facsimile
signature or signatures shall appear therein had not ceased to be such officer
or officers of the Fund.
No certificate shall be issued for any Share until such Share is fully
paid.
SECTION 8.2. TRANSFER OF SHARES. Shares shall be transferable on the books
of the Fund by the holder thereof in person or by his duly authorized attorney
or legal representative, upon surrender and cancellation of certificates, if
any, for the same number of Shares, duly endorsed or accompanied by proper
instruments of assignment and transfer, with such proof of the authenticity of
the signature as the Fund or its agent may reasonably require; in the case of
Shares not represented by certificates, the same or similar requirements may be
imposed by the Board of Trustees.
SECTION 8.3. SHARE LEDGERS. The share ledgers of the Fund, containing the
name and address of the Shareholders of the Fund and the number of Shares held
by them respectively, shall be kept at the principal offices of the Fund or, if
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the Fund employs a transfer agent, at the offices of the Transfer Agent of the
Fund.
SECTION 8.4. LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. The
Trustees may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Fund alleged to have
been lost, stolen or destroyed, upon satisfactory proof of such loss, theft, or
destruction; and the Trustees may, in their discretion, require the owner of the
lost, stolen or destroyed certificate, or his legal representative, to give to
the Fund and to such Registrar, Transfer Agent and/or Transfer Clerk as may be
authorized or required to countersign such new certificate or certificates, a
bond in such sum and of such type as they may direct, and with such surety or
sureties, as they may direct, as indemnity against any claim that may be against
them or any of them on account of or in connection with the alleged loss, theft
or destruction of any such certificate.
* * * * *
ARTICLE X
MISCELLANEOUS
* * * * *
SECTION 10.2. RECORD DATE. The Trustees may fix in advance a date as the
record date for the purpose of determining Shareholders entitled to notice of,
or to vote at, any meeting of Shareholders, or Shareholders entitled to receive
payment of any dividend or the allotment of any rights, or in order to make a
determination of Shareholders for any other proper purpose. Such date, in any
case, shall be not more than ninety (90) days, and in case of a meeting of
Shareholders not less than ten (10) days, prior to the date on which particular
action requiring such determination of Shareholders is to be taken. In lieu of
fixing a record date, the Trustees may provide that the transfer books shall be
closed for a stated period but not to exceed, in any case, twenty (20) days. If
the transfer books are closed for the purpose of determining Shareholders
entitled to notice of a vote at a meeting of Shareholders, such books shall be
closed for at least ten (10) days immediately preceding such meeting.
* * * * *
4
