File Nos. 2-55614
811-2625
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 34 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 34 [ X ]
(Check appropriate box or boxes.)
Dreyfus A Bonds Plus, Inc.
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6000
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
---- immediately upon filing pursuant to paragraph (b)
---- on (date) pursuant to paragraph (b)
---- 60 days after filing pursuant to paragraph (a)(i)
--X-- on August 1, 1998 pursuant to paragraph (a)(i)
---- 75 days after filing pursuant to paragraph (a)(ii)
---- on (date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
--- this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
Dreyfus A Bonds Plus, Inc.
Cross-Reference Sheet Pursuant to Rule 495(a)
Items in
Part A of
Form N-1A Caption Page
- --------- ------- ----
1 Cover Page Cover Page
2 Synopsis *
3 Condensed Financial Information *
4 General Description of Registrant 5
5 Management of the Fund 7
5(a) Management's Discussion of Fund's Performance *
6 Capital Stock and Other Securities 8
7 Purchase of Securities Being Offered 8
8 Redemption or Repurchase 13
9 Pending Legal Proceedings *
Items in
Part B of
FORM N-1A
10 Cover Page Cover
11 Table of Contents Cover
12 General Information and History *
13 Investment Objectives and Policies B-2
14 Management of the Fund B-14
15 Control Persons and Principal Holders
of Securities B-17
16 Investment Advisory and Other Services B-19
17 Brokerage Allocation *
18 Capital Stock and Other Securities *
19 Purchase, Redemption and Pricing of
Securities Being Offered B-20
20 Tax Status *
21 Underwriters *
22 Calculations of Performance Data *
23 Financial Statements *
Items in
Part C of
FORM N-1A
24 Financial Statements and Exhibits *
25 Persons Controlled by or Under Common
Control with Registrant C-*
26 Number of Holders of Securities C-*
27 Indemnification C-3
28 Business and Other Connections of
Investment Adviser C-5
29 Principal Underwriters C-10
30 Location of Accounts and Records C-13
31 Management Services C- *
32 Undertakings C-3
- ---------
*Omitted since answer is negative or inapplicable.
<PAGE>
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PROSPECTUS August 1, 1998
Dreyfus A Bonds Plus, Inc.
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DREYFUS A BONDS PLUS, INC. (THE "FUND") IS AN OPEN-END, DIVERSIFIED,
MANAGEMENT INVESTMENT COMPANY, KNOWN AS A MUTUAL FUND. THE FUND'S INVESTMENT
OBJECTIVE IS TO PROVIDE YOU WITH THE MAXIMUM AMOUNT OF CURRENT INCOME TO THE
EXTENT CONSISTENT WITH THE PRESERVATION OF CAPITAL AND THE MAINTENANCE OF
LIQUIDITY.
THE FUND INVESTS PRINCIPALLY IN DEBT OBLIGATIONS OF CORPORATIONS, THE
U.S. GOVERNMENT AND ITS AGENCIES AND INSTRUMENTALITIES, AND MAJOR U.S. BANKING
INSTITUTIONS. AT LEAST 80% OF THE FUND'S PORTFOLIO IS INVESTED IN BONDS RATED AT
LEAST A BY MOODY'S INVESTORS SERVICE, INC. OR STANDARD & POOR'S RATINGS GROUP.
YOU CAN INVEST, REINVEST OR REDEEM SHARES AT ANY TIME WITHOUT CHARGE
OR PENALTY.
THE FUND PROVIDES FREE REDEMPTION CHECKS, WHICH YOU CAN USE IN AMOUNTS
OF $500 OR MORE FOR CASH OR TO PAY BILLS. YOU CONTINUE TO EARN INCOME ON THE
AMOUNT OF THE CHECK UNTIL IT CLEARS. YOU CAN PURCHASE OR REDEEM SHARES BY
TELEPHONE USING DREYFUS TELETRANSFER.
THE DREYFUS CORPORATION PROFESSIONALLY MANAGES THE FUND'S PORTFOLIO.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED AUGUST 1, 1998, WHICH
MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF CERTAIN AREAS
IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST TO SOME INVESTORS.
IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND IS
INCORPORATED HEREIN BY REFERENCE. THE SECURITIES AND EXCHANGE COMMISSION
MAINTAINS A WEB SITE (HTTP://WWW.SEC.GOV) THAT CONTAINS THE STATEMENT OF
ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY REFERENCE, AND OTHER
INFORMATION REGARDING THE FUND. FOR A FREE COPY OF THE STATEMENT OF ADDITIONAL
INFORMATION, WRITE TO THE FUND AT 144 GLENN CURTISS BOULEVARD, UNIONDALE, NEW
YORK 11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK FOR OPERATOR 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. MUTUAL
FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL. THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM TIME TO
TIME.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page Page
<S> <C> <C> <C>
Annual Fund Operating Expenses...... 3 How to Redeem Shares.................... 13
Condensed Financial Information..... 4 Shareholder Services Plan............... 16
Description of the Fund............. 5 Dividends, Distributions and Taxes...... 16
Management of the Fund.............. 7 Performance Information................. 17
How to Buy Shares.................. 8 General Information..................... 18
Shareholder Services................ 10 Appendix................................ 19
[This Page Intentionally Left Blank]
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees........................................................................... .__%
Other Expenses ........................................................................... .__%
Total Fund Operating Expenses............................................................. .__%
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the
end of each time period: $__ $__ $__ $___
</TABLE>
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THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF
PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN, THE FUND'S
ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN GREATER OR LESS
THAN 5%.
- ------------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in understanding
the costs and expenses borne by the Fund, the payment of which will reduce
investors' annual return. You can purchase Fund shares without charge directly
from the Fund's distributor; you may be charged a fee if you effect transactions
in Fund shares through a securities dealer, bank or other financial institution.
See "Management of the Fund," "How to Buy Shares" and "Shareholder Services
Plan."
CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited by Ernst &
Young LLP, the Fund's independent auditors, whose report thereon appears in the
Statement of Additional Information. Further financial data and related notes
are included in the Statement of Additional Information, available upon request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
common stock outstanding, total investment return, ratios to average net assets
and other supplemental data for each year indicated. This information has been
derived from the Fund's financial statements.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
PER SHARE DATA:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year............... $13.78 $13.24 $13.45 $13.65 $14.35 $15.43 $14.38 $13.75 $14.47 _______
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
INVESTMENT OPERATIONS:
Investment income-net............. 1.19 1.18 1.15 1.11 1.05 .98 .94 .92 .88 _______
Net realized and unrealized gain
(loss) on investments........... (.53) .21 .20 .70 1.29 (.46) (.56) .73 (.34) _______
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Total from Investment Operations.. .66 1.39 1.35 1.81 2.34 .52 .38 1.65 .54 _______
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
DISTRIBUTIONS:
Dividends from investment
income-net...................... (1.20) (1.18) (1.15) (1.11) (1.05) (.99) (.94) (.93) (.88) _______
Dividends from net realized gain on
investments..................... ._ ._ ._ ._ (.21) (.58) (.07) ._ ._ _______
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Total Distributions............. (1.20) (1.18) (1.15) (1.11) (1.26) (1.57) (1.01) (.93) (.88) _______
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Net asset value, end of year........ $13.24 $13.45 $13.65 $14.35 $15.43 $14.38 $13.75 $14.47 $14.13 _______
====== ====== ====== ====== ====== ====== ====== ====== ====== =======
TOTAL INVESTMENT RETURN............... 5.03% 10.66% 10.60% 13.75% 17.09% 3.09% 3.01% 12.12% 3.88% _______
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets...................... .94% .86% .85% .88% .93% .90% .99% .93% .96% _______
Ratio of net investment income
to average net assets........... 8.90% 8.52% 8.59% 7.88% 7.07% 6.30% 6.89% 6.32% 6.12% _______
Portfolio Turnover Rate............. 65.72% 39.77% 25.90% 66.82% 81.15% 93.67% 172.60% 165.50% 415.69% _______
Net Assets, end of year
(000's omitted)................. $262,367 $299,783 $339,935 $446,869 $574,431 $593,615 $539,140 $598,551 $571,580 _______
</TABLE>
Further information about the Fund's performance is contained in the
Fund's annual report, which may be obtained without charge by writing to the
address or calling the number set forth on the cover page of this Prospectus.
DEBT OUTSTANDING
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,(1)
-----------------------
<S> <C> <C>
PER SHARE DATA: 1997 1998
----- ----
Amount of debt outstanding at end of year (in thousands)...................... _____ ____
Average amount of debt outstanding throughout year (in thousands)(2).......... $422 $___
Average number of shares outstanding throughout year (in thousands)(3)...... 41,624 ___
Average amount of debt per share throughout year.............................. $ .01 $___
(1)From April 1, 1987 through March 31, 1996, the Fund had no outstanding debt.
(2)Based upon daily outstanding borrowings.
(3)Based upon month-end balances.
</TABLE>
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund's investment objective is to provide you with the maximum
amount of current income to the extent consistent with the preservation of
capital and the maintenance of liquidity. The Fund's investment objective cannot
be changed without approval by the holders of a majority (as defined in the
Investment Company Act of 1940, as amended (the "1940 Act")) of the Fund's
outstanding voting shares. There can be no assurance that the Fund's investment
objective will be achieved.
MANAGEMENT POLICIES
The Fund invests principally in debt obligations and securities with
debt-like characteristics. These securities include bonds, debentures, notes,
money market instruments, mortgage-related securities, asset-backed securities,
municipal obligations, zero coupon securities, preferred stocks, convertible
debt obligations and convertible preferred stocks. The issuers of these
obligations may include corporations, partnerships, trusts or similar entities,
governments or their political subdivisions, agencies or instrumentalities, and
supranational entities. At least 65% of the value of the Fund's net assets
(except when maintaining a temporary defensive position) will be invested in
bonds, debentures and other debt instruments. The Fund may invest up to 10% of
its assets in securities of foreign issuers. See "Investment Considerations and
Risks - Foreign Securities" below. The Fund also may invest in the securities of
other investment companies as described herein. See "Appendix - Certain
Portfolio Securities."
At least 80% of the value of the Fund's net assets will consist of
obligations of corporations which, at the time of purchase by the Fund, are
rated at least A by Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's Ratings Group ("S&P"), or determined to be of comparable quality by The
Dreyfus Corporation, and securities issued or guaranteed as to principal and
interest by the U.S. Government or its agencies or instrumentalities. The Fund
may invest up to 20% of the value of its net assets in obligations rated below A
and as low as the lowest rating assigned by Moody's and S&P or, if unrated,
deemed to be of comparable quality by The Dreyfus Corporation. Obligations rated
Baa by Moody's or BBB by S&P are considered investment grade obligations which
lack outstanding investment characteristics and may have speculative
characteristics as well. Investments rated Ba or lower by Moody's and BB or
lower by S&P ordinarily provide higher yields but involve greater risk because
of their speculative characteristics. The Fund may invest in obligations rated C
by Moody's or D by S&P which is such rating organizations' lowest rating and
indicates that the obligation is in default and interest and/or repayment of
principal is in arrears. See "Investment Considerations and Risks - Lower Rated
Securities" below for a discussion of certain risks and "Appendix" in the
Statement of Additional Information.
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, as set forth under "Appendix -
Certain Portfolio Securities - Money Market Instruments." Under normal market
conditions, the Fund does not expect to have more than 20% of its net assets
invested in money market instruments and does not intend to invest more than 5%
of its assets in any one of these types of instruments. However, when The
Dreyfus Corporation determines that adverse market conditions exist, the Fund
may adopt a temporary defensive posture and invest all of its assets in money
market instruments.
The Fund's annual portfolio turnover rate for the current fiscal year
is not expected to exceed 300%. 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 transaction costs and the short-term gains realized
from these transactions are taxable to shareholders as ordinary income. The Fund
may engage in various investment techniques, such as transactions in foreign
currency, options and futures, leveraging, short-selling and lending portfolio
securities. For a discussion of the investment techniques and their related
risks, see "Investment Considerations and Risks" and "Appendix-Investment
Techniques" below and "Investment Objective and Management Policies" in the
Statement of Additional Information.
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL - The net asset value per share of the Fund should be expected to
fluctuate. Investors should consider the Fund as a supplement to an overall
investment program and should invest only if they are willing to undertake the
risks involved. See "Investment Objective and Management Policies" in the
Statement of Additional Information for a further discussion of certain risks.
FIXED-INCOME SECURITIES - Even though interest-bearing securities are
investments which promise a stable stream of income, the prices of such
securities generally are inversely affected by changes in interest rates and,
therefore, are subject to the risk of market price fluctuations. Certain
securities that may be purchased by the Fund, such as those with interest rates
that fluctuate directly or indirectly 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 possibly loss of principal.
The values of fixed- income securities also may be affected by changes in the
credit rating or financial condition of the issuer. Certain securities purchased
by the Fund, such as those rated Baa or lower by Moody's and BBB or lower by
S&P, may be subject to such risk with respect to the issuing entity and to
greater market fluctuations than certain lower yielding, higher rated
fixed-income securities. Once the rating of a portfolio security has been
changed, the Fund will consider all circumstances deemed relevant in determining
whether to continue to hold the security. See "Lower Rated Securities" and
"Appendix-Certain Portfolio Securities-Ratings" below and "Appendix" in the
Statement of Additional Information.
MORTGAGE-RELATED SECURITIES - 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 complex derivative instruments, subject to both credit and
prepayment risk, and may be more volatile and less liquid than more traditional
debt securities. 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. Some mortgage-related securities
have structures that make their reactions to interest rate changes and other
factors difficult to predict, making their value highly volatile. See
"Appendix-Certain Portfolio Securities-Mortgage-Related Securities."
LOWER RATED SECURITIES - The Fund may invest up to 20% of the value of its net
assets in higher yielding (and, therefore, higher risks) debt securities such as
those rated Ba by Moody's or BBby S&P, or as low as the lowest rating assigned
by Moody's or S&P. They may be subject to certain risks with respect to the
issuing entity and to greater market fluctuations than certain lower yielding,
higher rated fixed income securities. The retail secondary market for these
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. See "Appendix - Certain Portfolio Securities - Ratings"
below.
FOREIGN SECURITIES - The Fund may invest up to 10% of its assets in foreign
securities. 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 or 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.
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.
USE OF DERIVATIVES - The Fund may invest in, or enter into, derivatives
("Derivatives"). These are financial instruments which 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 and futures,
mortgage-related securities and asset-backed securities. While Derivatives can
be used effectively in furtherance of the Fund's investment objective, under
certain market conditions, they can increase the volatility of the Fund's net
asset value, decrease the liquidity of the Fund's portfolio and make more
difficult the accurate pricing of the Fund's portfolio. See "Appendix -
Investment Techniques - Use of Derivatives" below and "Investment Objective and
Management Policies - Management Policies - Derivatives" in the Statement of
Additional Information.
SIMULTANEOUS INVESTMENTS - Investment decisions for the Fund are made
independently from those of the other investment companies advised by The
Dreyfus Corporation. If, however, such other investment companies desire to
invest in, or dispose of, the same securities as the Fund, available investments
or opportunities for sales will be allocated equitably to each investment
company. In some cases, this procedure may adversely affect the size of the
position obtained for or disposed of by the Fund or the price paid or received
by the Fund.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER - The Dreyfus Corporation, located at 200 Park Avenue, New
York, New York 10166, was formed in 1947 and serves as the Fund's investment
adviser. The Dreyfus Corporation is a wholly-owned subsidiary of Mellon Bank,
N.A., which is a wholly-owned subsidiary of Mellon Bank Corporation ("Mellon").
As of June 30, 1998, The Dreyfus Corporation managed or administered
approximately $_ billion in assets for approximately ___ million investor
accounts nationwide.
The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the Fund,
subject to the authority of the Fund's Board in accordance with Maryland law.
The investment decisions of the Fund are made by the Taxable Fixed-Income
Committee of The Dreyfus Corporation, and no person is primarily responsible for
making recommendations to that Committee. The portfolio managers comprising the
Taxable Fixed-Income Committee are identified in the Statement of Additional
Information. The Dreyfus Corporation also provides research services for the
Fund and for other funds advised by The Dreyfus Corporation through a
professional staff of portfolio managers and securities analysts.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international markets.
Mellon is among the twenty-five largest bank holding companies in the United
States based on total assets. Mellon's principal wholly-owned subsidiaries are
Mellon Bank, N.A., Mellon Bank (DE) National Association, Mellon Bank (MD), The
Boston Company, Inc., AFCO Credit Corporation and a number of companies known as
Mellon Financial Services Corporations. Through its subsidiaries, including The
Dreyfus Corporation, Mellon managed more than $___ billion in assets as of March
31, 1998, including approximately $___ billion in proprietary mutual fund
assets. As of March 31, 1998, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services, for more
than $______ trillion in assets, including approximately $60 billion in mutual
fund assets.
For the fiscal year ended March 31, 1998, the Fund paid The Dreyfus
Corporation a monthly management fee at the annual rate of ___ of 1% of the
value of the Fund's average daily net assets. From time to time, The Dreyfus
Corporation may waive receipt of its fees and/or voluntarily assume certain
expenses of the Fund, which would have the effect of lowering the expense ratio
of the Fund and increasing yield to investors. The Fund will not pay The Dreyfus
Corporation at a later time for any amounts it may waive, nor will the Fund
reimburse The Dreyfus Corporation for any amounts it may assume.
In allocating brokerage transactions, The Dreyfus Corporation seeks to
obtain the best execution of orders at the most favorable net price. Subject to
this determination, The Dreyfus Corporation may consider, among other things,
the receipt of research services and/or the sale of shares of the Fund or other
funds managed, advised or administered by The Dreyfus Corporation as factors in
the selection of broker-dealers to execute portfolio transactions for the Fund.
The Dreyfus Corporation may pay the Fund's distributor for shareholder
services from The Dreyfus Corporation's own assets, including past profits but
not including the management fee paid by the Fund. The Fund's distributor may
use part or all of such payments to pay securities dealers, banks or other
financial institutions in respect of these services.
DISTRIBUTOR - The Fund's distributor is Premier Mutual Fund Services, Inc. (the
"Distributor"), located at 60 State Street, Boston, Massachusetts 02109. The
Distributor's ultimate parent is Boston Institutional Group, Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN - Dreyfus Transfer, Inc., a
wholly-owned subsidiary of The Dreyfus Corporation, P.O. Box 9671, Providence,
Rhode Island 02940-9671, is the Fund's Transfer and Dividend Disbursing Agent
(the "Transfer Agent"). Mellon Bank, N.A., One Mellon Center, Pittsburgh,
Pennsylvania 15258, serves as the Fund's Custodian.
HOW TO BUY SHARES
Fund shares are sold without a sales charge. You may be charged a fee
if you effect transactions in Fund shares through a securities dealer, bank or
other financial institution. Stock certificates are issued only upon your
written request. No certificates are issued for fractional shares. The Fund
reserves the right to reject any purchase order. See "Appendix-Additional
Information About Purchases, Exchanges and Redemptions."
The minimum initial investment is $2,500, or $1,000 if you are a
client of a securities dealer, bank or other financial institution which
maintains an omnibus account in the Fund and has made an aggregate minimum
initial purchase for its customers of $2,500. Subsequent investments must be at
least $100. However, the minimum initial investment for Dreyfus-sponsored Keogh
Plans, IRAs, SEP-IRAs and 403(b)(7) Plans with only one participant is $750,
with no minimum for subsequent purchases. Individuals who open an IRA also may
open a non-working spousal IRA with a minimum initial investment of $250.
Subsequent investments in a spousal IRA must be at least $250. The initial
investment must be accompanied by the Account Application. For full-time or
part-time employees of The Dreyfus Corporation or any of its affiliates or
subsidiaries, directors of The Dreyfus Corporation, Board members of a fund
advised by The Dreyfus Corporation, including members of the Fund's Board, or
the spouse or minor child of any of the foregoing, the minimum initial
investment is $1,000. For full-time or part-time employees of The Dreyfus
Corporation or any of its affiliates or subsidiaries who elect to have a portion
of their pay directly deposited into their accounts, the minimum initial
investment is $50. The Fund reserves the right to offer Fund shares without
regard to minimum purchase requirements to employees participating in certain
qualified or non-qualified employee benefit plans or other programs where
contributions or account information can be transmitted in a manner and form
acceptable to the Fund. The Fund reserves the right to vary further the initial
and subsequent investment minimum requirements at any time. Fund shares also are
offered without regard to the minimum initial investment requirements through
Dreyfus-AUTOMATIC Asset Builder(R), Dreyfus Government Direct Deposit Privilege
or Dreyfus Payroll Savings Plan pursuant to the Dreyfus Step Program described
under "Shareholder Services." These services enable you to make regularly
scheduled investments and may provide you with a convenient way to invest for
long-term financial goals. You should be aware, however, that periodic
investment plans do not guarantee a profit and will not protect an investor
against loss in a declining market.
You may purchase Fund shares by check or wire, or through the Dreyfus
TELETRANSFER Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds," or, if for Dreyfus retirement plan accounts, to "The
Dreyfus Trust Company, Custodian." Payments to open new accounts which are
mailed should be sent to The Dreyfus Family of Funds, P.O. Box 9387, Providence,
Rhode Island 02940-9387, together with your Account Application. For subsequent
investments, your Fund account number should appear on the check and an
investment slip should be enclosed and sent to The Dreyfus Family of Funds, P.O.
Box 105, Newark, New Jersey 07101-0105. For Dreyfus retirement plan accounts,
both initial and subsequent investments should be sent to The Dreyfus Trust
Company, Custodian, P.O. Box 6427, Providence, Rhode Island 02940-6427. Neither
initial nor subsequent investments should be made by third party check. Purchase
orders may be delivered in person only to a Dreyfus Financial Center. THESE
ORDERS WILL BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT
THEREBY. For the location of the nearest Dreyfus Financial Center, please call
one of the telephone numbers listed under "General Information."
Wire payments may be made if your bank account is in a commercial bank
that is a member of the Federal Reserve System or any other bank having a
correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, DDA #8900051868/Dreyfus A Bonds
Plus, Inc., for purchase of Fund shares in your name. The wire must include your
Fund account number (for new accounts, your Taxpayer Identification Number
("TIN") should be included instead), account registration and dealer number, if
applicable. If your initial purchase of Fund shares is by wire, please call
1-800-645-6561 after completing your wire payment to obtain your Fund account
number. Please include your Fund account number on the Account Application and
promptly mail the Account Application to the Fund, as no redemptions will be
permitted until the Account Application is received. You may obtain further
information about remitting funds in this manner from your bank. All payments
should be made in U.S. dollars and, to avoid fees and delays, should be drawn
only on U.S. banks. A charge will be imposed if any check used for investment in
your account does not clear. The Fund makes available to certain large
institutions the ability to issue purchase instructions through compatible
computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member. You must direct the
institution to transmit immediately available funds through the Automated
Clearing House to The Bank of New York with instructions to credit your Fund
account. The instructions must specify your Fund account registration and your
Fund account number PRECEDED BY THE DIGITS "1111."
Fund shares are sold on a continuous basis at the net asset value per
share next determined after an order in proper form is received by the Transfer
Agent or other agent. Net asset value per share is determined as of the close of
trading on the floor of the New York Stock Exchange (currently 4:00 p.m., New
York time), on each day the New York Stock Exchange is open for business. Net
asset value per share is computed by dividing the value of the Fund's net assets
(i.e., the value of its assets less liabilities) by the total number of shares
outstanding. The Fund's investments are valued generally by using available
market quotations or at fair value which may be determined by one or more
independent pricing services approved by the Fund's Board. Each pricing
service's procedures are reviewed under the general supervision of the Fund's
Board. For further information regarding the methods employed in valuing the
Fund's investments, see "Determination of Net Asset Value" in the Statement of
Additional Information.
For certain institutions that have entered into agreements with the
Distributor, payment for the purchase of Fund shares may be transmitted, and
must be received by the Transfer Agent, within three business days after the
order is placed. If such payment is not received within three business days
after the order is placed, the order may be canceled and the institution could
be held liable for resulting fees and/or losses.
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have a
minimum of 250 employees eligible for participation in such plans or programs,
or (ii) such plan's or program's aggregate investment in the Dreyfus Family of
Funds or certain other products made available by the Distributor to such plans
or programs exceeds $1,000,000 ("Eligible Benefit Plans"). Shares of funds in
the Dreyfus Family of Funds then held by Eligible Benefit Plans will be
aggregated to determine the fee payable. The Distributor reserves the right to
cease paying these fees at any time. The Distributor will pay such fees from its
own funds, other than amounts received from the Fund, including past profits or
any other source available to it.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
the Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service ("IRS").
DREYFUS TELETRANSFER PRIVILEGE - You may purchase Fund shares (minimum $500,
maximum $150,000 per day) by telephone if you have checked the appropriate box
and supplied the necessary information on the Account Application or have filed
a Shareholder Services Form with the Transfer Agent. The proceeds will be
transferred between the bank account designated in one of these documents and
your Fund account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be so designated.
The Fund may modify or terminate this Privilege at any time or charge a service
fee upon notice to shareholders. No such fee currently is contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of shares by calling 1-800-645-6561 or,
if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES
FUND EXCHANGES - You may purchase, in exchange for shares of the Fund, shares of
certain other funds managed or administered by The Dreyfus Corporation, to the
extent such shares are offered for sale in your state of residence. These funds
have different investment objectives which may be of interest to you. If you
desire to use this service, please call 1-800-645-6561 to determine if it is
available and whether any conditions are imposed on its use.
To request an exchange, you must give exchange instructions to the
Transfer Agent in writing or by telephone. Before any exchange, you must obtain
and should review a copy of the current prospectus of the fund into which the
exchange is being made. Prospectuses may be obtained by calling 1-800-645-6561.
Except in the case of personal retirement plans, the shares being exchanged must
have a current value of at least $500; furthermore, when establishing a new
account by exchange, the shares being exchanged must have a value of at least
the minimum initial investment required for the fund into which the exchange is
being made. The ability to issue exchange instructions by telephone is given to
all shareholders automatically, unless you check the applicable "No" box on the
Account Application indicating that you specifically refuse this privilege. The
Telephone Exchange Privilege may be established for an existing account by
written request signed by all shareholders on the account, by a separate signed
Shareholder Services Form, available by calling 1-800-645-6561, or by oral
request from any of the authorized signatories on the account by calling
1-800-645-6561. If you have established the Telephone Exchange Privilege, you
may telephone exchange instructions (including over The Dreyfus Touch(R)
automated telephone system) by calling 1-800-645-6561. If you are calling from
overseas, call 516-794-5452. See "How to Redeem Shares - Procedures." Upon an
exchange into a new account, the following shareholder services and privileges,
as applicable and where available, will be automatically carried over to the
fund into which the exchange is made: Telephone Exchange Privilege, Check
Redemption Privilege, Wire Redemption Privilege, Telephone Redemption Privilege,
Dreyfus TELETRANSFER Privilege, and the dividend/capital gain distribution
option (except for Dreyfus Dividend Sweep) selected by the investor.
Shares will be exchanged at the next determined net asset value;
however, a sales load may be charged with respect to exchanges into funds sold
with a sales load. If you are exchanging into a fund that charges a sales load,
you may qualify for share prices which do not include the sales load or which
reflect a reduced sales load, if the shares you are exchanging were: (a)
purchased with a sales load, (b) acquired by a previous exchange from shares
purchased with a sales load, or (c) acquired through reinvestment of dividends
or distributions paid with respect to the foregoing categories of shares. To
qualify, at the time of the exchange you must notify the Transfer Agent. Any
such qualification is subject to confirmation of your holdings through a check
of appropriate records. See "Shareholder Services" in the Statement of
Additional Information. No fees currently are charged shareholders directly in
connection with exchanges, although the Fund reserves the right, upon not less
than 60 days' written notice, to charge shareholders a nominal administrative
fee in accordance with rules promulgated by the Securities and Exchange
Commission. The Fund reserves the right to reject any exchange request in whole
or in part. See "Appendix-Additional Information About Purchases, Exchanges and
Redemptions." The availability of Fund Exchanges may be modified or terminated
at any time upon notice to shareholders. See "Dividends, Distributions and
Taxes."
DREYFUS AUTO-EXCHANGE PRIVILEGE - Dreyfus Auto-Exchange Privilege enables you to
invest regularly (on a semi-monthly, monthly, quarterly or annual basis), in
exchange for shares of the Fund, in shares of certain other funds in the Dreyfus
Family of Funds of which you are a shareholder. The amount you designate, which
can be expressed either in terms of a specific dollar or share amount ($100
minimum), will be exchanged automatically on the first and/or fifteenth of the
month according to the schedule you have selected. Shares will be exchanged at
the then-current net asset value; however a sales load may be charged with
respect to exchanges into funds sold with a sales load. See "Shareholder
Services" in the Statement of Additional Information. The right to exercise this
Privilege may be modified or cancelled by the Fund or the Transfer Agent. You
may modify or cancel your exercise of this Privilege at any time by mailing
written notification to The Dreyfus Family of Funds, P.O. Box 9671, Providence,
Rhode Island 02940-9671. The Fund may charge a service fee for the use of this
Privilege. No such fee currently is contemplated. For more information
concerning this Privilege and the funds in the Dreyfus Family of Funds eligible
to participate in this Privilege, or to obtain a Dreyfus Auto-Exchange
Authorization Form, please call toll free 1-800-645-6561. See "Dividends,
Distributions and Taxes."
DREYFUS-AUTOMATIC ASSET BUILDER(R) - Dreyfus-Automatic Asset Builder permits
you to purchase shares (minimum of $100 and maximum of $150,000 per transaction)
at regular intervals selected by you. Fund shares are purchased by transferring
funds from the bank account designated by you. At your option, the bank account
designated by you will be debited in the specified amount, and Fund shares will
be purchased, once a month, on either the first or fifteenth day, or twice a
month, on both days. Only an account maintained at a domestic financial
institution which is an Automated Clearing House member may be so designated.
To establish a Dreyfus-Automatic Asset Builder account you must file
an authorization form with the Transfer Agent. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may cancel this Privilege or
change the amount of your purchase at any time by mailing written notification
to The Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode Island
02940-9671, or, if for Dreyfus retirement plan accounts, to The Dreyfus Trust
Company, Custodian, P.O. Box 6427, Providence, Rhode Island 02940-6427. The
notification will be effective three business days following receipt. The Fund
may modify or terminate this Privilege at any time or charge a service fee upon
notice to shareholders. No such fee currently is contemplated.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE - Dreyfus Government Direct Deposit
Privilege enables you to purchase shares (minimum of $100 and maximum of $50,000
per transaction) by having Federal salary, Social Security, or certain
veterans', military or other payments from the Federal government automatically
deposited into your Fund account. You may deposit as much of such payments as
you elect. To enroll in Dreyfus Government Direct Deposit, you must file with
the Transfer Agent a completed Direct Deposit Sign-Up Form for each type of
payment that you desire to include in this Privilege. The appropriate form may
be obtained by calling 1-800-645-6561. Death or legal incapacity will terminate
your participation in this Privilege. You may elect at any time to terminate
your participation by notifying in writing the appropriate Federal agency.
Further, the Fund may terminate your participation upon 30 days' notice to you.
DREYFUS PAYROLL SAVINGS PLAN - Dreyfus Payroll Savings Plan permits you to
purchase shares (minimum of $100 per transaction) automatically on a regular
basis. Depending upon your employer's direct deposit program, you may have part
or all of your paycheck transferred to your existing Dreyfus account
electronically through the Automated Clearing House system at each pay period.
To establish a Dreyfus Payroll Savings Plan account, you must file an
authorization form with your employer's payroll department. Your employer must
complete the reverse side of the form and return it to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. You may obtain the
necessary authorization form by calling 1-800-645-6561. You may change the
amount of purchase or cancel the authorization only by written notification to
your employer. It is the sole responsibility of your employer, not the
Distributor, The Dreyfus Corporation, the Fund, the Transfer Agent or any other
person, to arrange for transactions under the Dreyfus Payroll Savings Plan. The
Fund may modify or terminate this Privilege at any time or charge a service fee.
No such fee currently is contemplated.
DREYFUS STEP PROGRAM - Dreyfus Step Program enables you to purchase Fund shares
without regard to the Fund's minimum initial investment requirements through
Dreyfus-Automatic Asset Builder(R), Dreyfus Government Direct
Deposit Privilege or Dreyfus Payroll Savings Plan. To establish a Dreyfus Step
Program account, you must supply the necessary information on the Account
Application and file the required authorization form(s) with the Transfer Agent.
For more information concerning this Program, or to request the necessary
authorization form(s), please call toll free 1-800-782-6620. You may terminate
your participation in this Program at any time by discontinuing your
participation in Dreyfus-AUTOMATIC Asset Builder, Dreyfus Government Direct
Deposit Privilege or Dreyfus Payroll Savings Plan, as the case may be, or as
provided under the terms of such Privilege(s). The Fund may modify or terminate
this Program at any time. Investors who wish to purchase Fund shares through the
Dreyfus Step Program in conjunction with a Dreyfus-sponsored retirement plan may
do so only for IRAs, SEP-IRAs and IRA "Rollover Accounts."
DREYFUS DIVIDEND OPTIONS - Dreyfus Dividend Sweep enables you to invest
automatically dividends or dividends and capital gain distributions, if any,
paid by the Fund in shares of another fund in the Dreyfus Family of Funds of
which you are a shareholder. Shares of the other fund will be purchased at the
then-current net asset value; however, a sales load may be charged with respect
to investments in shares of a fund sold with a sales load. If you are investing
in a fund that charges a sales load, you may qualify for share prices which do
not include the sales load or which reflect a reduced sales load. If you are
investing in a fund that charges a contingent deferred sales charge, the shares
purchased will be subject on redemption to the contingent deferred sales charge,
if any, applicable to the shares purchased. See "Shareholder Services" in the
Statement of Additional Information. Dreyfus Dividend ACH permits you to
transfer electronically dividends or dividends and capital gain distributions,
if any, from the Fund to a designated bank account. Only an account maintained
at a domestic financial institution which is an Automated Clearing House member
may be so designated. Banks may charge a fee for this service.
For more information concerning these privileges or to request a
Dividend Options Form, please call toll free 1-800-645-6561. You may cancel
these privileges by mailing written notification to The Dreyfus Family of Funds,
P.O. Box 6527, Providence, Rhode Island 02940-6527. To select a new fund after
cancellation, you must submit a new Dividend Options Form. Enrollment in or
cancellation of these privileges is effective three business days following
receipt. These privileges are available only for existing accounts and may not
be used to open new accounts. Minimum subsequent investments do not apply for
Dreyfus Dividend Sweep. The Fund may modify or terminate these privileges at any
time or charge a service fee. No such fee currently is contemplated. Shares held
under Keogh Plans, IRAs or other retirement plans are not eligible for
DreyfusDividend Sweep.
AUTOMATIC WITHDRAWAL PLAN - The Automatic Withdrawal Plan permits you to request
withdrawal of a specified dollar amount (minimum of $50) on either a monthly or
quarterly basis if you have a $5,000 minimum account. An Automatic Withdrawal
Plan may be established by filing an Automatic Withdrawal Plan application with
the Transfer Agent or by oral request from any of the authorized signatories on
the account by calling 1-800-645-6561. The Automatic Withdrawal Plan may be
ended at any time by you, the Fund or the Transfer Agent. Shares for which
certificates have been issued may not be redeemed through the Automatic
Withdrawal Plan.
RETIREMENT PLANS - The Fund offers a variety of prototype pension and
profit-sharing plans, including Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover
Accounts," 401(k) Salary Reduction Plans and 403(b)(7) Plans. Plan support
services are also available. You can obtain details on the various plans by
calling the following numbers toll free: for Keogh Plans, please call
1-800-358-5566; for IRAs and IRA "Rollover Accounts," please call
1-800-645-6561; or for SEP-IRAs, 401(k) Salary Reduction Plans and 403(b)(7)
Plans, please call 1-800-322-7880.
HOW TO REDEEM SHARES
GENERAL
You may request redemption of your shares at any time. Redemption requests
should be transmitted to the Transfer Agent as described below. When a request
is received in proper form, the Fund will redeem the shares at the next
determined net asset value. See "Appendix-Additional Information About
Purchases, Exchanges and Redemptions."
The Fund imposes no charges when shares are redeemed. Securities
dealers, banks and other financial institutions may charge their clients a fee
for effecting redemptions of Fund shares. Any certificates representing Fund
shares being redeemed must be submitted with the redemption request. The value
of the shares redeemed may be more or less than their original cost, depending
upon the Fund's then-current net asset value.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in proper
form, except as provided by the rules of the Securities and Exchange Commission.
HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY DREYFUS TELETRANSFER
PRIVILEGE OR THROUGH DREYFUS-AUTOMATIC ASSET BUILDER(R) AND SUBSEQUENTLY SUBMIT
A WRITTEN REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION PROCEEDS WILL
BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR PURCHASE CHECK,
DREYFUS TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC ASSET BUILDER ORDER, WHICH
MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL NOT HONOR
REDEMPTION CHECKS UNDER THE CHECK REDEMPTION PRIVILEGE, AND WILL REJECT REQUESTS
TO REDEEM SHARES BY WIRE OR TELEPHONE OR PURSUANT TO THE DREYFUS TELETRANSFER
PRIVILEGE, FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER
AGENT OF THE PURCHASE CHECK, THE DREYFUS TELETRANSFER PURCHASE OR THE
DREYFUS-AUTOMATIC ASSET BUILDER ORDER AGAINST WHICH SUCH REDEMPTION IS
REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY WIRE
PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT
TO COVER THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE,
DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED TO
EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares will not be
redeemed until the Transfer Agent has received your Account Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if the number of shares held in your
account is 50 shares or less and remains so during the notice period.
PROCEDURES
You may redeem shares by using the regular redemption procedure
through the Transfer Agent, or through the Telephone Redemption Privilege or the
Check Redemption Privilege, which are granted automatically unless you
specifically refuse them by checking the applicable "No" box on the Account
Application. The Telephone Redemption Privilege and the Check Redemption
Privilege may be established for an existing account by a separate signed
Shareholder Services Form or, with respect to the Telephone Redemption
Privilege, by oral request from any of the authorized signatories on the account
by calling 1-800-645-6561. You also may redeem shares through the Wire
Redemption Privilege or the Dreyfus TELETRANSFER Privilege, if you have checked
the appropriate box and supplied the necessary information on the Account
Application or have filed a Shareholder Services Form with the Transfer Agent.
The Fund makes available to certain large institutions the ability to issue
redemption instructions through compatible computer facilities. The Fund
reserves the right to refuse any request made by wire or telephone, including
requests made shortly after a change of address, and may limit the amount
involved or the number of such requests. The Fund may modify or terminate any
redemption Privilege at any time or charge a service fee upon notice to
shareholders. No such fee is contemplated. Shares held under Keogh Plans, IRAs
or other retirement plans, and shares for which certificates have been issued,
are not eligible for the Check Redemption, Wire Redemption, Telephone Redemption
or Dreyfus TELETRANSFER Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including over
The Dreyfus Touch(R) automated telephone system) from any person representing
himself or herself to be you, and reasonably believed by the Transfer Agent to
be genuine. The Fund will require the Transfer Agent to employ reasonable
procedures, such as requiring a form of personal identification, to confirm that
instructions are genuine and, if it does not follow such procedures, the Fund or
the Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Fund nor the Transfer Agent will be liable
for following telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to request a
redemption or exchange of Fund shares. In such cases, you should consider using
the other redemption procedures described herein. Use of these other redemption
procedures may result in your redemption request being processed at a later time
than it would have been if telephone redemption had been used. During the delay,
the Fund's net asset value may fluctuate.
REGULAR REDEMPTION - Under the regular redemption procedure, you may redeem
shares by written request mailed to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671, or, if for Dreyfus retirement plan
accounts, to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427. Redemption requests may be delivered in person only to
a Dreyfus Financial Center. THESE REQUESTS WILL BE FORWARDED TO THE FUND AND
WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For the location of the nearest
Dreyfus Financial Center, please call one of the telephone numbers listed under
"General Information." Redemption requests must be signed by each shareholder,
including each owner of a joint account, and each signature must be guaranteed.
The Transfer Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations,
as well as from participants in the New York Stock Exchange Medallion Signature
Program, the Securities Transfer Agents Medallion Program ("STAMP") and the
Stock Exchanges Medallion Program. If you have any questions with respect to
signature-guarantees, please call one of the telephone numbers listed under
"General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
CHECK REDEMPTION PRIVILEGE - You may write Redemption Checks drawn on your Fund
account. Redemption Checks may be made payable to the order of any person in the
amount of $500 or more. Potential fluctuations in the net asset value of the
Fund's shares should be considered in determining the amount of the check.
Redemption Checks should not be used to close your account. Redemption Checks
are free, but the Transfer Agent will impose a fee for stopping payment of a
Redemption Check upon your request or if the Transfer Agent cannot honor a
Redemption Check because of insufficient funds or other valid reason. You should
date your Redemption Checks with the current date when you write them. Please do
not postdate your Redemption Checks. If you do, the Transfer Agent will honor,
upon presentment, even if presented before the date of the check, all postdated
Redemption Checks which are dated within six months of presentment for payment,
if they are otherwise in good order. If you hold shares in a Dreyfus-sponsored
IRA account, you may be permitted to make withdrawals from your IRA account
using checks furnished to you by The Dreyfus Trust Company. This Privilege will
be terminated immediately, without notice, with respect to any account which is,
or becomes, subject to backup withholding on redemptions (see "Dividends,
Distributions and Taxes"). Any Redemption Check written on an account which has
become subject to backup withholding on redemptions will not be honored by the
Transfer Agent. The Check Redemption Privilege is granted automatically unless
you refuse it.
WIRE REDEMPTION PRIVILEGE - You may request by wire, telephone or letter that
redemption proceeds (minimum $1,000) be wired to your account at a bank which is
a member of the Federal Reserve System, or a correspondent bank if your bank is
not a member. Holders of jointly registered Fund or bank accounts may have
redemption proceeds of not more than $250,000 wired within any 30-day period.
You may telephone redemption requests by calling 1-800-645-6561 or, if you are
calling from overseas, call 516-794-5452. The Statement of Additional
Information sets forth instructions for transmitting redemption requests by
wire.
TELEPHONE REDEMPTION PRIVILEGE - You may request by telephone that redemption
proceeds (maximum $150,000 per day) be paid by check and mailed to your address.
You may telephone redemption instructions by calling 1-800-645-6561 or, if you
are calling from overseas, call 516-794-5452. The Telephone Redemption Privilege
is granted automatically unless you refuse it.
DREYFUS TELETRANSFER PRIVILEGE - You may request by telephone that redemption
proceeds (minimum $500 per day) be transferred between your Fund account and
your bank account. Only such an account maintained in a domestic financial
institution which is an Automated Clearing House member may be designated.
Redemption proceeds will be on deposit in your account at an Automated Clearing
House member bank ordinarily two days after receipt of the redemption request.
Holders of jointly registered Fund or bank accounts may redeem through the
Dreyfus TELETRANSFER Privilege for transfer to their bank account not more than
$250,000 within any 30-day period.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of shares by calling 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan pursuant to which it
reimburses Dreyfus Service Corporation, a wholly-owned subsidiary of The Dreyfus
Corporation, an amount not to exceed an annual rate of .25 of 1% of the value of
the Fund's average daily net assets for certain allocated expenses of providing
personal services and/or maintaining shareholder accounts. The services provided
may include personal services relating to shareholder accounts, such as
answering shareholder inquiries regarding the Fund and providing reports and
other information, and services related to the maintenance of shareholder
accounts.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily pays monthly dividends from net investment income
and makes distributions from net realized securities gains, if any, once a year,
but it may make distributions on a more frequent basis to comply with the
distribution requirements of the Internal Revenue Code of 1986, as amended (the
"Code"), in all events in a manner consistent with the provisions of the 1940
Act. The Fund will not make distributions from net realized securities gains
unless capital loss carryovers, if any, have been utilized or have expired. You
may choose whether to receive dividends or distributions in cash or to reinvest
in additional Fund shares at net asset value. If you elect to receive dividends
and distributions in cash, and your dividend or distribution check is returned
to the Fund as undeliverable or remains uncashed for six months, the Fund
reserves the right to reinvest such dividend or distribution and all future
dividends and distributions payable to you in additional Fund shares at net
asset value. No interest will accrue on amounts represented by uncashed
distribution or redemption checks. All expenses are accrued daily and deducted
before declaration of dividends to investors.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a portion
of any gain realized from the sale or other disposition of certain market
discount bonds, paid by the Fund will be taxable to U.S. shareholders as
ordinary income whether received in cash or reinvested in additional shares. No
dividend paid by the Fund will qualify for the dividends received deduction
allowable to certain U.S. corporations. Distributions from net realized
long-term securities gains of the Fund will be taxable to U.S. shareholders as
long-term capital gains for Federal income tax purposes, regardless of how long
shareholders have held their Fund shares and whether such distributions are
received in cash or reinvested in additional shares. The Code provides that an
individual generally will be taxed on his or her net capital gain at a maximum
rate of 28% with respect to capital gain from securities held for more than one
year but not more than 18 months and at a maximum rate of 20% with respect to
capital gain from securities held for more than 18 months. The Code, however,
does not address the application of these rules to distributions by regulated
investment companies; consequently, shareholders should consult their tax
advisers as to the treatment of distributions of net capital gain from the Fund.
Dividends and distributions may be subject to state and local taxes.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a portion
of any gain realized from the sale of or other disposition of certain market
discount bonds, paid by the Fund to a foreign investor generally are subject to
U.S. nonresident withholding taxes at the rate of 30%, unless the foreign
investor claims the benefit of a lower rate specified in a tax treaty.
Distributions from net realized long-term securities gains paid by the Fund to a
foreign investor as well as the proceeds of any redemptions from a foreign
investor's account, regardless of the extent to which gain or loss may be
realized, generally will not be subject to U.S. nonresident withholding tax.
However, such distributions and redemption proceeds may be subject to backup
withholding, as described below, unless the foreign investor certifies his
non-U.S. residency status.
Notice as to the tax status of your dividends and distributions will
be mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions from
securities gains, if any, paid during the year.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by the
shareholder and, therefore, an exchanging shareholder may realize a taxable gain
or loss.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends, distributions
from net realized securities gains and the proceeds of any redemption,
regardless of the extent to which gain or loss may be realized, paid to a
shareholder if such shareholder fails to certify either that the TIN furnished
in connection with opening an account is correct, or that such shareholder has
not received notice from the IRS of being subject to backup withholding as a
result of a failure to properly report taxable dividend or interest income on a
Federal income tax return. Furthermore, the IRS may notify the Fund to institute
backup withholding if the IRS determines a shareholder's TIN is incorrect or if
a shareholder has failed to properly report taxable dividend and interest income
on a Federal income tax return.
A TIN is either the Social Security number, IRS individual taxpayer
identification number, or employer identification number of the record owner of
the account. Any tax withheld as a result of backup withholding does not
constitute an additional tax imposed on the record owner of the account, and may
be claimed as a credit on the record owner's Federal income tax return.
Management of the Fund believes that the Fund has qualified for the
fiscal year ended March 31, 1997 as a "regulated investment company" under the
Code. The Fund intends to continue to so qualify, if such qualification is in
the best interests of its shareholders. Such qualification relieves the Fund of
any liability for Federal income tax to the extent its earnings are distributed
in accordance with applicable provisions of the Code. The Fund is subject to a
non-deductible 4% excise tax, measured with respect to certain undistributed
amounts of taxable investment income and capital gains, if any.
You should consult your tax adviser regarding specific questions as to
Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance may be calculated on several
bases, including current yield, average annual total return and/or total return.
Current yield refers to the Fund's annualized net investment income
per share over a 30-day period, expressed as a percentage of the net asset value
per share at the end of the period. For purposes of calculating current yield,
the amount of net investment income per share during that 30-day period,
computed in accordance with regulatory requirements, is compounded by assuming
that it is reinvested at a constant rate over a six-month period. An identical
result is then assumed to have occurred during a second six-month period which,
when added to the result for the first six months, provides an "annualized"
yield for an entire one-year period.
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment in the Fund was purchased with an
initial payment of $1,000 and that the investment was redeemed at the end of a
stated period of time, after giving effect to the reinvestment of dividends and
distributions during the period. The return is expressed as a percentage rate
which, if applied on a compounded annual basis, would result in the redeemable
value of the investment at the end of the period. Advertisements of the Fund's
performance will include the Fund's average annual total return for one, five
and ten year periods.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is expressed
as a percentage rate which is calculated by combining the income and principal
changes for a specified period and dividing by the net asset value per share at
the beginning of the period. Advertisements may include the percentage rate of
total return or may include the value of a hypothetical investment at the end of
the period which assumes the application of the percentage rate of total return.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a basis
for comparison with other investments or other investment companies using a
different method of calculating performance.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Consumer Price
Index, Lipper Analytical Services, Inc., Moody's Bond Survey Bond Index, Lehman
Brothers Corporate Bond Index, Salomon Brothers High Grade Index, Morningstar,
Inc., IBC Bond Fund Report and other industry publications.
GENERAL INFORMATION
The Fund was incorporated under Maryland law on February 23, 1976. The
Fund is authorized to issue 100 million shares of Common Stock, par value $.01
per share. Each share has one vote.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Board members or
the appointment of auditors. However, pursuant to the Fund's By-Laws, the
holders of at least 10% of the shares outstanding and entitled to vote may
require the Fund to hold a special meeting of shareholders for purposes of
removing a Board member from office and the holders of at least 25% of such
shares may require the Fund to hold a special meeting of shareholders for any
other purpose. Fund shareholders may remove a Board member by the affirmative
vote of a majority of the Fund's outstanding voting shares. In addition, the
Fund's Board will call a meeting of shareholders for the purpose of electing
Board members if, at any time, less than a majority of the Board members then
holding office have been elected by shareholders.
The Transfer Agent maintains a record of your ownership and sends you
confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561. In New York City, call 1-718-895-1206; outside the U.S., call
516-794-5452.
APPENDIX
INVESTMENT TECHNIQUES
LENDING PORTFOLIO SECURITIES - The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to borrow
securities to complete certain transactions. The Fund continues to be entitled
to payments in amounts equal to the interest or other distributions payable on
the loaned securities which affords the Fund an opportunity to earn interest on
the amount of the loan and on the loaned securities' collateral. Loans of
portfolio securities may not exceed 33 1\3% of the value of the Fund's total
assets, and the Fund will receive collateral consisting of cash, U.S. Government
securities or irrevocable letters of credit which will be maintained at all
times in an amount equal to at least 100% of the current market value of the
loaned securities. Such loans are terminable by the Fund at any time upon
specified notice. The Fund might experience risk of loss if the institution with
which it has engaged in a portfolio loan transaction breaches its agreement with
the Fund.
LEVERAGE - Leveraging exaggerates the effect on net asset value of any increase
or decrease in the market value of the Fund's portfolio. Money borrowed for
leveraging will be limited to 33 1\3% of the value of the Fund's total assets.
These borrowings would be subject to interest costs which may or may not be
recovered by appreciation of the securities purchased; in certain cases,
interest costs may exceed the return received on the securities purchased.
The Fund may enter into reverse repurchase agreements with banks,
brokers or dealers. This form of borrowing involves the transfer by the Fund of
an underlying debt instrument in return for cash proceeds based on a percentage
of the value of the security. The Fund retains the right to receive interest and
principal payments on the security. At an agreed upon future date, the Fund
repurchases the security at principal plus accrued interest. Except for these
transactions, the Fund's borrowings generally will be unsecured.
USE OF DERIVATIVES - The Fund may invest in, or enter into, the types of
Derivatives enumerated under "Description of the Fund - Investment
Considerations and Risks - Use of Derivatives." These instruments and certain
related risks are described more specifically under "Investment Objective and
Management Policies - Management Policies - Derivatives" in the Statement of
Additional Information.
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 risks, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Fund can increase or decrease the level of
risk, or change the character of the risk, of its portfolio by making
investments in specific securities.
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 correalated with its other investments, or if the Fund were unable to
liquidate its position because of an illiquid secondary market. The market for
many Derivatives is, or suddenly can become, illiquid. Changes in liquidity may
result in significant, rapid and unpredictable changes in the prices for
Derivatives.
Although the Fund will not be a commodity pool, certain Derivatives
subject the Fund to the rules of the Commodity Futures Trading Commission which
limit the extent to which the Fund can invest in such Derivatives. The Fund may
invest in futures contracts and options with respect thereto for hedging
purposes without limit. However, the Fund may not invest in such contracts and
options for other purposes if the sum of the amount of initial margin deposits
and premiums paid for unexpired options with respect to such contracts, other
than for bona fide hedging purposes, exceeds 5% of the liquidation value of the
Fund's assets, after taking into account unrealized profits and unrealized
losses on such contracts and options; provided, however, that in the case of an
option that is in-the-money at the time of purchase, the in-the-money amount may
be excluded in calculating the 5% limitation.
The Fund may purchase call and put options and write (i.e., sell)
covered call and put option contracts. When required by the Securities and
Exchange Commission, the Fund will set aside permissible liquid assets in a
segregated account to cover its obligations relating to its transactions in
Derivatives. To maintain this required cover, the Fund may have to sell
portfolio securities at disadvantageous prices or times since it may not be
possible to liquidate a Derivative position at a reasonable price.
FORWARD ROLL TRANSACTIONS - To enhance current income, the Fund may enter into
forward roll transactions with respect to mortgage-related securities. In a
forward roll transaction, the Fund sells a mortgage-related security to a
financial institution, such as a bank or broker-dealer, and simultaneously
agrees to purchase a similar security from the institution at a later date at an
agreed upon price. The securities that are purchased will bear the same interest
rate as those sold, but generally will be collateralized by different pools of
mortgages with different pre-payment histories than those sold. During the
period between the sale and purchase, the Fund will not be entitled to receive
interest and principal payments on the securities sold. Proceeds of the sale
typically will be invested in short-term instruments, particularly repurchase
agreements, and the income from these investments, together with any additional
fee income received on the sale, will generate income for the Fund exceeding the
yield on the securities sold. Forward roll transactions involve the risk that
the market value of the securities sold by the Fund may decline below the
purchase price of those securities. The Fund will set aside in a segregated
account permissible liquid assets at least equal to the amount of the repurchase
price (including accrued interest).
FORWARD COMMITMENTS - The Fund may purchase or sell securities on a forward
commitment, when-issued or delayed delivery basis, which means delivery and
payment take place a number of days after the date of the commitment to purchase
or sell the securities at a predetermined price and/or yield. Typically, no
interest accrues to the purchaser until the security is delivered. When
purchasing a security on a forward commitment basis, the Fund assumes the rights
and risks of ownership of the security, including the risk of price and yield
fluctuations, and takes such fluctuations into account when determining its net
asset value. Because the Fund is not required to pay for these securities until
the delivery date, these risks are in addition to the risks associated with the
Fund's other investments. If the Fund is fully or almost fully invested when
forward commitment purchases are outstanding, such purchases may result in a
form of leverage. The Fund may engage in forward commitments to increase its
portfolio's financial exposure to the types of securities in which it invests.
Leveraging the portfolio in this manner will increase the Fund's exposure to
changes in interest rates and will increase the volatility of its returns. The
Fund will set aside in a segregated account permissible liquid assets at least
equal at all times to the amount of the commitments. At no time will the Fund
have more than 33 1\3% of its assets committed to purchase securities on a
forward commitment basis.
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. At no time will more than
15% of the value of the Fund's net assets be in deposits on short sales against
the box.
FOREIGN CURRENCY TRANSACTIONS - The Fund may enter into foreign currency
transactions for a variety of purposes, including: to fix in U.S. dollars,
between trade and settlement date, the value of a security the Fund has agreed
to buy or sell; to hedge the U.S. dollar value of securities the Fund already
owns, particularly if it expects a decrease in the value of the currency in
which the foreign security is denominated; or to gain exposure to the foreign
currency in an attempt to realize gains.
Foreign currency transactions may involve, for example, the Fund's
purchase of foreign currencies for U.S. dollars or the maintenance of short
positions in foreign currencies, which would involve the Fund agreeing to
exchange an amount of a currency it did not currently own for another currency
at a future date in anticipation of a decline in the value of the currency sold
relative to the currency the Fund contracted to receive in the exchange. The
Fund's success in these transactions will depend principally on The Dreyfus
Corporation's ability to predict accurately the future exchange rates between
foreign currencies and the U.S. dollar.
Currency exchange rates may fluctuate significantly over short periods
of time. They generally are determined by the forces of supply and demand in the
foreign exchange markets and the relative merits of investments in different
countries, actual or perceived changes in interest rates and other complex
factors, as seen from an international perspective. Currency exchange rates also
can be affected unpredictably by intervention by U.S. or foreign governments or
central banks, or the failure to intervene, or by currency controls or political
developments in the United States or abroad.
CERTAIN PORTFOLIO SECURITIES
U.S. TREASURY SECURITIES - U.S Treasury securities include Treasury
Inflation-Protection Securities ("TIPS"), which are newly created securities
issued by the U.S. Treasury designed to provide investors a long term investment
vehicle that is not vulnerable to inflation. The interest rate paid by TIPS is
fixed, while the principal value rises or falls semi-annually based on changes
in a published Consumer Price Index. Thus, if inflation occurs, the principal
and interest payments on the TIPS are adjusted accordingly to protect investors
from inflationary loss. During a deflationary period, the principal and interest
payments decrease, although the TIPS' principal will not drop below its face
amount at maturity.
In exchange for the inflation protection, TIPS generally pay lower
interest rates than typical Treasury securities. Only if inflation occurs will
TIPS offer a higher real yield than a conventional Treasury bond of the same
maturity. In addition, it is not possible to predict with assurance how the
market for TIPS will develop; initially, the secondary market for these
securities may not be as active or liquid as the secondary market for
conventional Treasury securities. Principal appreciation and interest payments
on TIPS will be taxed annually as ordinary interest income for Federal income
tax calculations. As a result, any appreciation in principal must be counted as
interest income in the year the increase occurs, even though the investor will
not receive such amounts until the TIPS are sold or mature. Principal
appreciation and interest payments will be exempt from state and local income
taxes.
MUNICIPAL OBLIGATIONS - Municipal obligations are debt obligations issued by
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities, or
multistate agencies or authorities. 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 on Fund shares which are attributable to interest income received
by the Fund from municipal obligations generally will be subject to Federal
income tax. The Fund will 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 obligations.
However, this percentage may be varied from time to time without shareholder
approval.
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, real estate investment trusts ("REITs"), including debt and preferred
stock issued by REITs, as well as other real estate-related securities.
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 nationally recognized
statistical rating organization. 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.
RESIDENTIAL MORTGAGE-RELATED SECURITIES. The Fund may invest in
mortgage-related securities representing participation interests in pools of
one- to four-family residential mortgage loans issued or guaranteed by
governmental agencies or instrumentalities, such as the Government National
Mortgage Association ("GNMA"), the Federal National Mortgage Association
("FNMA"), and the Federal Home Loan Mortgage Corporation ("FHLMC"), or issued by
private entities. Similar to commercial mortgage-related securities, residential
mortgage-related securities have been issued using a variety of structures,
including multi-class structures featuring senior and subordinated classes.
COMMERCIAL MORTGAGE-RELATED SECURITIES. The Fund may invest in
commercial mortgage-related securities, which 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' investors against potential losses on the underlying
mortgage loans. This protection is generally 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.
SUBORDINATED SECURITIES. 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.
COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTI-CLASS PASS-THROUGH
SECURITIES. Collateralized mortgage obligations or "CMOs" are multiclass bonds
backed by pools of mortgage pass-through certificates or mortgage loans. CMOs
may be collateralized by (a) pass-through certificates issued or guaranteed by
GNMA, FNMA or FHLMC, (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
the 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.
STRIPPED MORTGAGE-BACKED SECURITIES. The Fund also may invest in
stripped mortgage-backed securities which 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 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 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 subject to heavy
cash flow dependency, defaults by borrowers or tenants, self-liquidation and the
possibility of failing to qualify for tax-free status under the Code or to
maintain exemption from the 1940 Act.
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.
ASSET-BACKED SECURITIES - Asset-backed securities are a form of Derivative. The
securitization techniques used for asset-backed securities are similar to those
used for mortgage-related securities. These securities include debt securities
and securities with debt-like characteristics. 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.
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 common stock, of the
same issuer. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar non-convertible securities.
MONEY MARKET INSTRUMENTS - The Fund may invest in the following types of money
market instruments.
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 U.S. 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.
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 a fund which invests only in debt obligations of U.S. domestic
issuers. See "Description of the Fund - Investment Considerations and Risks -
Foreign Securities."
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period of
time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven days)
at a stated interest rate.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments reflect
the obligation both of the bank and the drawer to pay the face amount of the
instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
COMMERCIAL PAPER. Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs. The commercial paper
purchased by the Fund will consist only of direct obligations 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 A by Moody's or S&P, or if (c) unrated, determined by
The Dreyfus Corporation to be of comparable quality to those rated obligations
which may be purchased by the Fund.
ZERO COUPON SECURITIES - The Fund may invest in zero coupon U.S. Treasury
securities, which are Treasury Notes and 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. Zero
coupon securities also are issued by corporations and financial institutions
which constitute a proportionate ownership of the issuer's pool of underlying
U.S. Treasury securities. A zero coupon 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 zero coupon securities generally are more volatile than the
market prices of securities that pay interest periodically and are likely to
respond to a greater degree to changes in interest rates than non-zero coupon
securities having similar maturities and credit qualities.
INVESTMENT COMPANIES - The Fund may invest in securities issued by other
investment companies to the extent consistent with its investment objective.
Under the 1940 Act, the Fund's investment in such securities, subject to certain
exceptions, currently is limited to (i) 3% of the total voting stock of any one
investment company, (ii) 5% of the Fund's total assets with respect to any one
investment company and (iii) 10% of the Fund's total assets in the aggregate.
Investments in the securities of other investment companies may involve
duplication of advisory fees and certain other expenses.
ILLIQUID SECURITIES - The Fund may invest up to 15% of the value of its net
assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Fund's investment objective.
Such securities may include securities that are not readily marketable, such as
certain securities that are subject to legal or contractual restrictions on
resale, repurchase agreements providing for settlement in more than seven days
after notice, and certain mortgage-related securities. As to these securities,
the Fund is subject to a risk that should the Fund desire to sell them when a
ready buyer is not available at a price the Fund deems representative of their
value, the value of the Fund's net assets could be adversely affected.
RATINGS - 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 BBby S&P are regarded as having predominately speculative characteristics
and, while such obligations have less near-term vulnerability to default than
other speculative grade debt, 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 Caa by Moody's are of poor standing and may be in default or there may be
present elements of danger with respect to principal or interest. S&P typically
assigns a CCC rating to debt which has a current identifiable vulnerability to
default and is dependent upon favorable business, financial and economic
conditions to meet timely payments of interest and repayment of principal.
Securities rated C by Moody's are regarded as having extremely poor prospects of
ever attaining any real investment standing. Securities rated D by S&P are in
default, and payment of interest and/or repayment of principal is in arrears.
Such securities, though high yielding, are characterized by great risk. See
"Appendix" in the Statement of Additional Information for a general description
of securities ratings.
The ratings of Moody's and S&P 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, The Dreyfus Corporation also will evaluate
these securities and the ability of the issuers of such securities to pay
interest and principal. The Fund's ability to achieve its investment objective
may be more dependent on The Dreyfus Corporation's credit analysis than might be
the case for a fund that invested in higher rated securities. Additional
Information About Purchases, Exchanges and Redemptions. The Fund is intended to
be a long-term investment vehicle and is not designed to provide investors with
a means of speculation on short-term market movements. A pattern of frequent
purchases and exchanges can be disruptive to efficient portfolio management and,
consequently, can be detrimental to the Fund's performance and its shareholders.
Accordingly, if the Fund's management determines that an investor is engaged in
excessive trading, the Fund, with or without prior notice, may temporarily or
permanently terminate the availability of Fund Exchanges, or reject in whole or
part any purchase or exchange request, with respect to such investor's account.
Such investors also may be barred from purchasing other funds in the Dreyfus
Family of Funds. Generally, an investor who makes more than four exchanges out
of the Fund during any calendar year (for calendar year 1998, beginning on
January 15th) or who makes exchanges that appear to coincide with an active
market-timing strategy may be deemed to be engaged in excessive trading.
Accounts under common ownership or control will be considered as one account for
purposes of determining a pattern of excessive trading. In addition, the Fund
may refuse or restrict purchase or exchange requests by any person or group if,
in the judgment of the Fund's management, the Fund would be unable to invest the
money effectively in accordance with its investment objective and policies or
could otherwise be adversely affected or if the Fund receives or anticipates
receiving simultaneous orders that may significantly affect the Fund (e.g.,
amounts equal to 1% or more of the Fund's total assets). If an exchange request
is refused, the Fund will take no other action with respect to the shares until
it receives further instructions from the investor. The Fund may delay
forwarding redemption proceeds for up to seven days if the investor redeeming
shares is engaged in excessive trading or if the amount of the redemption
request otherwise would be disruptive to efficient portfolio management or would
adversely affect the Fund. The Fund's policy on excessive trading applies to
investors who invest in the Fund directly or through financial intermediaries,
but does not apply to the Dreyfus Auto-Exchange Privilege, to any automatic
investment or withdrawal privilege described herein, or to employer-sponsored
retirement plans.
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange requests
based on their separate components - redemption orders with a simultaneous
request to purchase the other fund's shares. In such a case, the redemption
request would be processed at the Fund's next determined net asset value but the
purchase order would be effective only at the net asset value next determined
after the fund being purchased receives the proceeds of the redemption, which
may result in the purchase being delayed.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE FUND'S
OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S SHARES,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
A Bonds Plus, Inc.
Prospectus(R)
Copy Rights1998, Dreyfus Service Corporation 084p0898
<PAGE>
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DREYFUS A BONDS PLUS, INC.
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
AUGUST 1, 1998
- -------------------------------------------------------------------------------
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Dreyfus A Bonds Plus, Inc. (the "Fund"), dated August 1, 1998, as may be revised
from time to time. To obtain a copy of the Fund's Prospectus, please write to
the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or call
the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452
The Dreyfus Corporation (the "Manager") serves as the Fund's
investment adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
PAGE
Investment Objective and Management Policies............................. B-2
Management of the Fund................................................... B-14
Management Agreement..................................................... B-19
Purchase of Shares....................................................... B-20
Shareholder Services Plan................................................ B-22
Redemption of Shares..................................................... B-22
Shareholder Services..................................................... B-24
Portfolio Transactions................................................... B-27
Determination of Net Asset Value......................................... B-28
Dividends, Distributions and Taxes....................................... B-29
Performance Information.................................................. B-31
Information About the Fund............................................... B-31
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors............................... B-32
Financial Statements and Report of Independent Auditors.................. B-32
Appendix................................................................. B-33
<PAGE>
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTIONS IN THE FUND'S PROSPECTUS ENTITLED "DESCRIPTION OF
THE FUND" AND "APPENDIX."
PORTFOLIO SECURITIES
REPURCHASE AGREEMENTS. The Fund's custodian or sub-custodian will have
custody of, and will hold in a segregated account, securities acquired by the
Fund under a repurchase agreement. Repurchase agreements are considered by the
staff of the Securities and Exchange Commission to be loans by the Fund. In an
attempt to reduce the risk of incurring a loss on a repurchase agreement, the
Fund will enter into repurchase agreements only with domestic banks with total
assets in excess of $1 billion, or primary government securities dealers
reporting to the Federal Reserve Bank of New York, with respect to securities of
the type in which the Fund may invest, and will require that additional
securities be deposited with it if the value of the securities purchased should
decrease below the resale price.
COMMERCIAL PAPER AND 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 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.
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,
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 and
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.
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 stocks. 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 appreciation 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 appreciation, 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 appreciation. In connection with the purchases of convertible
securities, the Fund from time to time may hold common stock received upon the
conversion of the security. The Fund does not intend to retain the common stock
in its portfolio and will sell it as promptly as it can and in a manner which it
believes will reduce the risk to the Fund of loss in connection with the sale.
MORTGAGE-RELATED SECURITIES. Mortgage-related securities are a form of
Derivative collaterialized 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 collaterialized mortgage
obligations and stripped mortgage-backed securities, mortgage pass-through
securities, interests in REMICs or other kinds of mortgage-backed securities,
including those with fixed, floating and variable interest rates, those with
interests 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.
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 stockholders. 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 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. The Fund will not invest more than
5% of its assets in such private entity securities issued by any one issuer,
including any one bank or savings and loan institution.
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 class 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
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 multiclass bond
backed by a pool of mortgage pass-through certificates or mortgage loans. CMOs
may be collateralized by (a) pass-through certificates issued or guaranteed by
GNMA, FNMA or FHLMC, (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 the 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 factors. The markets for
inverse floating rate CMOs with highly leveraged characteristics may at times 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. It should be noted
that 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.
STRIPPED MORTGAGE-BACKED SECURITIES -- The Fund also my 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
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 form 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 depend 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 tax-free status
under the Code or to maintain exemption from the Investment Company Act of 1940,
as amended (the "1940 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 instrumentality's 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.
ZERO COUPON SECURITIES. The Fund may invest in zero coupon U.S.
Treasury securities, which are Treasury Notes and 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. Receipts include "Treasury Receipts" ("TR's"), "Treasury Investment
Growth Receipts" ("TIGR's"), "Liquid Yield Option Notes" ("LYON's"), and
"Certificates of Accrual on Treasury Securities" ("CATS"). TIGR's, LYON's and
CATS are interests in private proprietary accounts while TR's are interests in
accounts sponsored by the U.S. Treasury.
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
instrumentality's that are determined by the Manager to be of comparable quality
to the other obligations in which the Fund may invest. Such securities also
include debt obligations of supranational entities. 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.
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 the Manager to monitor carefully the Fund's investments in such
securities with particular regard to trading activity, availability of reliable
price information and other relevant information. To the extent that, for a
period of time, qualified institutional buyers cease purchasing restricted
securities pursuant to Rule 144A, the Fund's investing in such securities may
have the effect of increasing the level of illiquidity in its investment
portfolio during such period.
MANAGEMENT POLICIES
LEVERAGE THROUGH BORROWING. For borrowings for investment purposes,
the Investment Company Act of 1940, as amended (the "1940 Act"), requires the
Fund to maintain continuous asset coverage (that is, total assets including
borrowings, less liabilities exclusive of borrowings) of 300% of the amount
borrowed. If the required coverage should decline as a result of market
fluctuations or other reasons, the Fund may be required to sell some of its
portfolio holdings within three days to reduce the debt and restore the 300%
asset coverage, even though it may be disadvantageous from an investment
standpoint to sell at that time. The Fund also may be required to maintain
minimum average balances in connection with such borrowing or to pay a
commitment or other fee to maintain a line of credit; either of those
requirements would increase the cost of borrowing over the stated interest rate.
To the extent the Fund enters into a reverse repurchase agreement, the Fund will
maintain in a segregated account permissible liquid assets at least equal to the
aggregate amount of its reverse repurchase obligations, plus accrued interest,
in certain cases, in accordance with releases promulgated by the Securities and
Exchange Commission. The Securities and Exchange Commission views reverse
repurchase transactions as collateralized borrowings by the Fund.
LENDING PORTFOLIO SECURITIES. In connection with its securities
lending transactions, the Fund may return to the borrower or a third party which
is unaffiliated with the Fund, and which is acting as a "placing broker," a part
of the interest earned from the investment of collateral received for securities
loaned.
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; and (5) the Fund may
pay only reasonable custodian fees in connection with the loan.
SHORT-SELLING. The Fund may engage in short-selling. Until the Fund
closes its short position or replaces the borrowed security, the Fund 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.
DERIVATIVES. The Fund may invest in, or enter into, Derivatives (as
defined in the Fund's Prospectus) 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. See also "Portfolio
Securities--Mortgage-Related Securities" above.
Derivatives may be purchased on established exchanges or through
privately negotiated transactions referred to as over-the-counter Derivatives.
Exchange-traded Derivatives generally are guaranteed by the clearing agency
which is the issuer or counterparty to such Derivatives. This guarantee usually
is supported by a daily 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, the Manager will consider the
creditworthiness of counterparties to over-the-counter Derivatives in the same
manner as it would review the credit quality of a security to be purchased by
the Fund. Over-the-counter Derivatives are less liquid than exchange-traded
Derivatives since the other party to the transaction may be the only investor
with sufficient understanding of the Derivative to be interested in bidding for
it.
FUTURES TRANSACTIONS. The Fund may enter into futures contracts in
U.S. domestic markets. Engaging in these transactions involves risk of loss to
the Fund which could adversely affect the value of the Fund's net assets.
Although the Fund intends to purchase or sell futures contracts only if there is
an active market for such contracts, no assurance can be given that a liquid
market will exist for any particular contract at any particular time. Many
futures exchanges and boards of trade limit the amount of fluctuation permitted
in futures contract prices during a single trading day. Once the daily limit has
been reached in a particular contract, no trades may be made that day at a price
beyond that limit or trading may be suspended for specified periods during the
trading day. Futures contract prices could move to the limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of futures positions and potentially subjecting the Fund to
substantial losses.
Successful use of futures by the Fund also is subject to the Manager's
ability to predict correctly movements in the direction of the relevant market
and, to the extent the transaction is entered into for hedging purposes, to
ascertain the appropriate correlation between the transaction being hedged and
the price movements of the futures contract. For example, if the Fund uses
futures to hedge against the possibility of a decline in the market value of
securities held in its portfolio and the prices of such securities instead
increase, the Fund will lose part or all of the benefit of the increased value
of securities which it has hedged because it will have offsetting losses in its
futures positions. Furthermore, if in such circumstances the Fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements. The Fund may have to sell such securities at a time when it may be
disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities
and Exchange Commission, the Fund may be required to segregate permissible
liquid assets in connection with its commodities 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.
The Fund may purchase and sell interest rate futures contracts. An
interest rate future obligates the Fund to purchase or sell an amount of a
specific debt security at a future date at a specific price.
OPTIONS. 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 securities. A put option written by the
Fund is covered when, among other things, cash or liquid securities 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 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.
The Fund may purchase cash-settled options on interest rate 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 Manager's
ability to predict correctly movements in interest rates and prices of
securities underlying options. To the extent the Manager's predictions are
incorrect, the Fund may incur losses.
FUTURE DEVELOPMENTS. The Fund may take advantage of opportunities in
the area of options and futures contracts and options on futures contract and
any other Derivatives which are not presently contemplated for use by the Fund
or which are not currently available but which may be developed, to the extent
such opportunities are both consistent with the Fund's investment objective and
legally permissible for the Fund. Before entering into such transactions or
making any such investment, the Fund will provide appropriate disclosure in its
Prospectus or Statement of Additional Information.
FORWARD 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.
INVESTMENT CONSIDERATIONS AND RISKS
LOWER RATED SECURITIES. The Fund may invest up to 20% of its assets in
higher yielding (and therefore higher risk) debt securities such as those rated
Ba by Moody's Investors Service, Inc. ("Moody's") or BB by Standard & Poor's
Ratings Group ("S&P"), or as low as the lowest rating assigned by Moody's or
S&P. Such securities, though higher yielding, are characterized by risk. See
"Appendix" for a general description of Moody's and S&P ratings. Although
ratings may be useful in evaluating the safety of interest and principal
payments, they do not evaluate the market value risk of these securities. The
Fund will rely on the Manager's judgment, analysis and experience in evaluating
the creditworthiness of an issuer.
Investors should be aware that the market values of many of these
securities tend to be more sensitive to economic conditions than are higher
rated securities. These securities generally are considered by S&P and Moody's
to be predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation and generally
will involve more credit risk than securities in the higher rating categories.
Companies that issue certain of these securities often are highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risk associated with acquiring the securities of such
issuers generally is greater than is the case with higher rated securities. For
example, during an economic downturn or a sustained period of rising interest
rates, highly leveraged issuers of these securities may not have sufficient
revenues to meet their interest payment obligations. The issuer's ability to
service its debt obligations also may be affected adversely by specific
corporate developments, or the issuer's inability to meet specific projected
business forecasts, or the unavailability of additional financing. The risk of
loss because of default by the issuer is significantly greater for the holders
of these securities because such securities generally are unsecured and often
are subordinated to other creditors of the issuer.
Because there is no established retail secondary market for many of
these securities, the Fund anticipates that such securities could be sold only
to a limited number of dealers or institutional investors. To the extent a
secondary trading market for these securities does exist, it generally is not as
liquid as the secondary market for higher rated securities. The lack of a liquid
secondary market may have an adverse impact on market price and yield and the
Fund's ability to dispose of particular issues when necessary to meet liquidity
needs or in response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. The lack of a liquid secondary market for
certain securities also may make it more difficult for the Fund to obtain
accurate market quotations for purposes of valuing the Fund's portfolio and
calculating its net asset value. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the values and
liquidity of these securities. In such cases, judgment may play a greater role
in valuation because less reliable, objective data may be available.
These 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 Fund may acquire these securities during an initial offering. Such
securities may involve special risks because they are new issues. The Fund has
no arrangement with any persons concerning the acquisition of such securities,
and the Manager will review carefully the credit and other characteristics
pertinent to such new issues.
The credit risk factors pertaining to lower rated securities also
apply to lower rated zero coupon securities and pay-in-kind bonds, in which the
Fund may invest up to 5% of its total assets. Pay-in-kind bonds pay interest
through the issuance of additional securities. Zero coupon securities and
pay-in-kind bonds carry an additional risk in that, unlike bonds which pay
interest throughout the period to maturity, the Fund will realize no cash until
the cash payment date unless a portion of such securities are sold and, if the
issuer defaults, the Fund may obtain no return at all on its investment.
INVESTMENT RESTRICTIONS
The Fund has adopted investment restrictions numbered 1 through 8 as
fundamental policies, which cannot be changed without approval by the holders of
a majority (as defined in the 1940 Act) of the Fund's outstanding voting shares.
Investment restrictions numbered 9 through 12 are not fundamental policies and
may be changed by vote of a majority of the Fund's Board members at any time.
The Fund may not:
1. Borrow money, except to the extent permitted under the 1940 Act
(which currently limits borrowing to no more than 33-1/3% of the value of the
Fund's total assets). For purposes of this Investment Restriction, the entry
into options, forward contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices shall not constitute
borrowing.
2. Underwrite the 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, and except that the
Fund may bid separately or as part of a group for the purchase of municipal
obligations directly from an issuer for its own portfolio to take advantage of
the lower purchase price available.
3. Purchase or sell real estate, commodities or oil and gas interests,
provided that the Fund may purchase and sell securities that are secured by real
estate or interests therein or issued by companies that invest or deal in real
estate or interests therein or real estate investment trusts and hold and sell
real estate as a result of ownership of such securities or instruments, and
provided further that the Fund may purchase and sell options, forward contracts,
futures contracts, including those relating to indices, and options on futures
contracts or indices.
4. Make loans to others, except through the purchase of debt
obligations or 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 the
Fund's 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.
5. With respect to 75% of the value of its total assets, invest more
than 5% of its assets in the securities of any one issuer or hold more than 10%
of the outstanding voting securities of such issuer, except for securities
issued or guaranteed by the U.S. Government or any of its agencies or
institutions which may be purchased without limitation.
6. Invest more than 25% of its assets in any particular 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.
7. Issue any senior security (as such term is defined in Section 18(f)
of the 1940 Act), except to the extent that the activities permitted in
Investment Restriction Nos. 1, 3, 8 and 12 may be deemed to give rise to a
senior security.
8. Purchase securities on margin, but the Fund may make margin
deposits in connection with transactions in options, forward contracts, futures
contracts, including those related to indices, and options on futures contracts
or indices.
9. Invest in companies for the purpose of exercising control.
10. Invest in securities of other investment companies, except to the
extent permitted under the 1940 Act.
11. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid if, in
the aggregate, more than 15% of the value of the Fund's net assets would be so
invested.
12. Pledge, mortgage, hypothecate or otherwise encumber its assets,
except to the extent necessary to secure permitted borrowings and to the extent
related to the deposit of assets in escrow in connection with the purchase of
securities on a when-issued or delayed-delivery basis and collateral and initial
or variation margin arrangements with respect to options, forward contracts,
futures contracts, including those related to indices, and options on futures
contracts or indices.
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from a change in values of assets will not
constitute a violation of such restriction.
The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Fund shares in certain states. Should
the Fund determine that a commitment is no longer in the best interests of the
Fund and its shareholders, the Fund reserves the right to revoke the commitment
by terminating the sale of Fund shares in the state involved.
MANAGEMENT OF THE FUND
Board members and officers of the Fund, together with information as
to their principal business occupations during at least the last five years, are
shown below.
BOARD MEMBERS OF THE FUND
JOSEPH S. DiMARTINO, CHAIRMAN OF THE BOARD. Since January 1995, Chairman of the
Board of various funds in the Dreyfus Family of Funds. He is also Chairman
of the Board of Directors of Noel Group, Inc., a venture capital company,
and Staffing Resources, Inc., a temporary placement service agency; and a
director of The Muscular Dystrophy Association, HealthPlan Services
Corporation, a provider of marketing, administrative and risk management
services to health and other benefit programs, Carlyle Industries, Inc.
(formerly, Belding Heminway Company, Inc.), a button packager and
distributor, and Curtis Industries, Inc., a national distributor of
security products, chemicals, and automotive and other hardware. For more
than five years prior to January 1995, he was President, and a director
and, until August 1994, Chief Operating Officer of the Manager, and
Executive Vice President and a director of Dreyfus Service Corporation, a
wholly- owned subsidiary of the Manager and, until August 24, 1994, the
Fund's distributor. From August 1994 to December 31, 1994, he was a
director of Mellon Bank Corporation. Mr. DiMartino is 54 years old and his
address is 200 Park Avenue, New York, New York 10166.
DAVID P. FELDMAN, BOARD MEMBER. Trustee of Corporate Property Investors, a real
estate investment company, and a director of several mutual funds in the 59
Wall Street Mutual Funds Group and the Jeffrey Company, a private
investment company. From July 1961 until his retirement in April 1997, he
was employed by AT&T Investment Management Corporation, principally serving
as Chairman and Chief Executive Officer. Mr. Feldman is 58 years old and
his address is c/o AT&T, One Oak Way, Berkeley Heights, New Jersey 07922.
JOHN M. FRASER, JR., BOARD MEMBER. President of Fraser Associates, a service
company for planning and arranging corporate meetings and other events.
From September 1975 to June 1978, he was Executive Vice President of
Flagship Cruises, Ltd. Prior thereto, he was Senior Vice President and
Resident Director of the Swedish-American Line for the United States and
Canada. Mr. Fraser is 76 years old and his address is 133 East 64th Street,
New York, New York 10021.
ROBERT R. GLAUBER, BOARD MEMBER. Research Fellow, Center for Business and
Government at the John F. Kennedy School of Government, Harvard University,
since January 1992. He is also a director of Mid Ocean Reinsurance Co.,
Ltd., Cooke & Bieler, Inc., investment counselors, NASD Regulation, Inc.
and the Federal Reserve Bank of Boston. He was Under Secretary of the
Treasury for Finance at the U.S. Treasury Department from May 1989 to
January 1992. For more than five years prior thereto, he was a Professor of
Finance at the Graduate School of Business Administration of Harvard
University. He is 58 years old and his address is 79 John F. Kennedy
Street, Cambridge, Massachusetts 02138.
JAMES F. HENRY, BOARD MEMBER. President of the CPR Institute for Dispute
Resolution, a non-profit organization principally engaged in the
development of alternatives to business litigation. He was of counsel to
the law firm of Lovejoy, Wasson & Ashton from October 1975 to December 1976
and from October 1979 to June 1983, and was a partner of that firm from
January 1977 to September 1979. He was President and a director of the Edna
McConnell Clark Foundation, a philanthropic organization, from September
1971 to December 1976. Mr. Henry is 66 years old and his address is c/o CPR
Institute for Dispute Resolution, 366 Madison Avenue, New York, New York
10017.
ROSALIND GERSTEN JACOBS, BOARD MEMBER. Director of Merchandise and Marketing for
Corporate Property Investors, a real estate investment company. From 1974
to 1976, she was owner and manager of a merchandise and marketing
consulting firm. Prior to 1974, she was a Vice President of Macy's, New
York. Mrs. Jacobs is 72 years old and her address is c/o Corporate Property
Investors, 305 East 47th Street, New York, New York 10017.
IRVING KRISTOL, BOARD MEMBER. John M. Olin Distinguished Fellow of the American
Enterprise Institute for Public Policy Research, co-editor of THE PUBLIC
INTEREST magazine and an author or co-editor of several books. From May
1981 to December 1994, he was a consultant to the Manager on economic
matters; from 1969 to 1988, he was Professor of Social Thought at the
Graduate School of Business Administration, New York University; and from
September 1969 to August 1979, he was Henry R. Luce Professor of Urban
Values at New York University. Mr. Kristol is 77 years old and his address
is c/o THE PUBLIC INTEREST, 1112 16th Street, N.W., Suite 530, Washington,
D.C. 20036.
DR. PAUL A. MARKS, BOARD MEMBER. President and Chief Executive Officer of
Memorial Sloan-Kettering Cancer Center. He is also director emeritus of
Pfizer, Inc., a pharmaceutical company, where he served as a director from
1978 to 1996; a director of Tularik, Inc., a biotechnology company; and a
general partner of LINC Venture Lease Partners II, L.P., a limited
partnership engaged in leasing. He was Vice President for Health Sciences
and Director of the Cancer Center at Columbia University from 1973 to
September 1980; Professor of Medicine and of Human Genetics and Development
at Columbia University from 1968 to 1982; and a director of Life
Technologies Inc., a life service company producing products for cell and
molecular biology and microbiology from 1986 to 1996, Biotechnology
General, Inc., a biotechnology development company from 1992 to 1993; and
National Health Laboratories, a national clinical diagnostic laboratory
from 1991 to 1995. Dr. Marks is 71 years old and his address is c/o
Memorial Sloan-Kettering Cancer Center, 1275 York Avenue, New York, New
York 10021.
DR. MARTIN PERETZ, BOARD MEMBER. Editor-in-Chief of THE NEW REPUBLIC magazine
and a lecturer in social studies at Harvard University, where he has been a
member of the faculty since 1965. He is a trustee of the Center for Blood
Research at the Harvard Medical School and of the Academy for Liberal
Education, an accrediting agency for colleges and universities certified by
the U.S. Department of Education, a director of LeukoSite Inc., a
biopharmaceutical company, and Co-chairman of TheStreet.com, a financial
daily on the Web. From 1988 to 1989, he was a director of Bank Leumi Trust
Company of New York; and from 1988 to 1991, he was a director of Carmel
Container Corporation. Dr. Peretz is 58 years old and his address is c/o
THE NEW REPUBLIC, 1220 19th Street, N.W., Washington, D.C. 20036.
BERT W. WASSERMAN, BOARD MEMBER. Financial Consultant. He is also a director of
The New Germany Fund, Mountasia Entertainment International, Inc., the
Lillian Vernon Corporation, Winstar Communications, Inc. and International
Discounts Telecommunications Corporation. From January 1990 to March 1995,
Executive Vice President and Chief Financial Officer, and from January 1990
to March 1993, a director, of Time Warner Inc.; from 1981 to 1990, he was a
member of the office of the President and a director of Warner
Communications, Inc. Mr. Wasserman is 64 years old and his address is 126
East 56th Street, Suite 12 North, New York, New York 10022-3613.
For so long as the Fund's plan described in the section captioned
"Shareholder Services Plan" remains in effect, the Board members of the Fund who
are not "interested persons" of the Fund, as defined in the 1940 Act, will be
selected and nominated by the Board members who are not "interested persons" of
the Fund.
The Fund typically pays its Board members an annual retainer and a per
meeting fee and reimburses them for their expenses. The Chairman of the Board
receives an additional 25% of such compensation. Emeritus Board members are
entitled to receive an annual retainer and a per meeting fee of one-half the
amount paid to them as Board members. The aggregate amount of compensation paid
to each Board member by the Fund for the fiscal year ended March 31, 1998 and by
all other funds in the Dreyfus Family of Funds for which such person is a Board
member (the number of which is set forth in parenthesis next to each Board
member's total compensation) for the year ended December 31, 1997, were as
follows:
Total
Compensation from
Aggregate Fund and Fund
Name of Board Compensation from Complex Paid to
Member Fund* Board Members
- -------------- ----------------- ----------------
Joseph S. DiMartino
David P. Feldman
John M. Fraser, Jr.
Robert R. Glauber
James F. Henry
Rosalind Gersten Jacobs
Irving Kristol
Dr. Paul A. Marks
Dr. Martin Peretz
Bert W. Wasserman
- ---------------------------
* Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $ for all Board members as a group.
OFFICERS OF THE FUND
MARIE E. CONNOLLY, PRESIDENT AND TREASURER. President, Chief Executive Officer
and a director of the Distributor and Funds Distributor, Inc., the ultimate
parent of which is Boston Institutional Group, Inc., and an officer of
other investment companies advised or administered by the Manager. She is
40 years old.
RICHARD W. INGRAM, VICE PRESIDENT AND ASSISTANT TREASURER. Executive Vice
President of the Distributor and Funds Distributor, Inc., and an officer of
other investment companies advised or administered by the Manager. From
March 1994 to November 1995, he was Vice President and Division Manager of
First Data Investor Services Group; and from 1989 to 1994, he was Vice
President, Assistant Treasurer and Tax Director - Mutual Funds of The
Boston Company. He is 42 years old.
MARY A. NELSON, VICE PRESIDENT AND ASSISTANT TREASURER. Vice President of the
Distributor and Funds Distributor, Inc., and an officer of other investment
companies advised or administered by the Manager. From September 1989 to
July 1994, she was an Assistant Vice President and Client Manager for The
Boston Company. She is 33 years old.
MICHAEL S. PETRUCELLI, VICE PRESIDENT AND ASSISTANT TREASURER. Senior Vice
President of Funds Distributor, Inc., and an officer of other investment
companies advised or administered by the Manager. From December 1989
through November 1996, he was employed by GE Investments where he held
various financial, business development and compliance positions. He also
served as Treasurer of the GE Funds and a director of GE Investment
Services. He is 36 years old.
JOSEPH F. TOWER, III, VICE PRESIDENT AND ASSISTANT TREASURER. Senior Vice
President, Treasurer and Chief Financial Officer and a director of the
Distributor and Funds Distributor, Inc., and an officer of other investment
companies advised or administered by the Manager. From July 1988 to August
1994, he was employed by The Boston Company, Inc. where he held various
management positions in the Corporate Finance and Treasury areas. He is 35
years old.
DOUGLAS C. CONROY, VICE PRESIDENT AND ASSISTANT SECRETARY. Assistant Vice
President of Funds Distributor, Inc., and an officer of other investment
companies advised or administered by the Manager. From April 1993 to
January 1995, he was a Senior Fund Accountant for Investors Bank & Trust
Company; and from December 1991 to March 1993, he was employed as a Fund
Accountant at The Boston Company, Inc.. He is 28 years old.
ELIZABETH A. KEELEY, VICE PRESIDENT AND ASSISTANT SECRETARY. Vice President of
the Distributor and Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. She has been
employed by the Distributor since September 1995. She is 28 years old.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
The Fund's Board members and officers, as a group, owned less than 1%
of the Fund's shares outstanding on _________, 1998.
As of ___________, 1998, owned beneficially ______% of the Fund's
outstanding shares.
MANAGEMENT AGREEMENT
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "MANAGEMENT OF
THE FUND."
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") dated August 24, 1994, with the Fund, which is
subject to annual approval by (i) the Fund's Board or (ii) vote of a majority
(as defined in the 1940 Act) of the outstanding voting securities of the Fund,
provided that in either event its continuance also is approved by a majority of
the Board members who are not "interested persons" (as defined in the 1940 Act)
of the Fund or the Manager, by vote cast in person at a meeting called for the
purpose of voting on such approval. Shareholders approved the Agreement on
August 2, 1994. The Fund's Board, including a majority of its members who are
not "interested persons" of any party to the Agreement, last voted to renew the
Agreement at a meeting held on September 9, 1996. The Agreement is terminable
without penalty, on 60 days' notice, by the Fund's Board or by vote of a
majority of the Fund's shares or, upon not less than 90 days notice, by the
Manager. The Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act).
The following persons are officers and/or directors of the Manager: 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
Chairman--Distribution and a director; 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 C. Borgelt, Frank V. Cahouet and Richard F. Syron,
directors.
The Manager manages the Fund's portfolio of investments in accordance
with the stated policies of the Fund, subject to the approval of the Fund's
Board. The Manager is responsible for investment decisions and provides the Fund
with portfolio managers who are authorized by the Board to execute purchases and
sales of securities. The Fund's portfolio managers, who comprise the Manager's
Taxable Fixed-Income Committee, are Kevin M. McClintock, Michael Hoeh, Roger
King, C. Matthew Olson and Gerald E. Thunelius. The Manager also maintains a
research department with a professional staff of portfolio managers and
securities analysts who provide research services for the Fund and for other
funds advised by the Manager.
The Manager maintains office facilities on behalf of the Fund and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager may make such advertising and promotional
expenditures, using its own resources, as it from time to time deems
appropriate.
The Manager, from time to time, from its own funds, other than the
management fee paid by the Fund, but including past profits, may make payments
to the Distributor for shareholder servicing. The Distributor in turn may pay
part or all of such compensation to securities dealers or other persons for
their servicing assistance.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager. The expenses
borne by the Fund include: taxes, interest, brokerage fees and commissions, if
any, fees of directors who are not officers, directors, employees or holders of
5% or more of the outstanding voting securities of the Manager, Securities and
Exchange Commission fees, state Blue Sky qualification fees, advisory fees,
charges of custodians, transfer and dividend disbursing agents' fees, certain
insurance premiums, industry association fees, outside auditing and legal
expenses, costs of independent pricing services, costs of maintaining corporate
existence, costs attributable to investor services (including, without
limitation, telephone and personnel expenses), costs of shareholders' reports
and meetings, costs of preparing and printing prospectuses and statements of
additional information for regulatory purposes and for distribution to existing
shareholders, and any extraordinary expenses.
As compensation for the Manager's services, the Fund has agreed to pay
the Manager a monthly management fee at the annual rate of .65 of 1% of the
value of the Fund's average daily net assets. All expenses are accrued daily and
deducted before declaration of dividends to investors. The management fees paid
by the Fund to the Manager for the fiscal years ended March 31, 1995, 1996, 1997
and 1998 amounted to $3,422,106, $3,798,630 and $3,885,766, respectively.
The Manager has agreed that if the aggregate expenses of the Fund,
excluding taxes, brokerage commissions and, with the prior written consent of
the necessary state securities commissions, extraordinary expenses, but
including the management fee, exceed 1 1/2% of the average value of the Fund's
net assets for the fiscal year, the Fund may deduct from the fees to be paid to
the Manager, or the Manager will bear such excess expenses. No expense
reimbursement was required under the Agreement for fiscal 1995, 1996 and 1997.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of the Fund's net assets increases.
PURCHASE OF SHARES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "HOW TO BUY
SHARES."
THE DISTRIBUTOR. The Distributor serves as the Fund's distributor on a
best efforts basis pursuant to an agreement which is renewable annually. The
Distributor also acts as distributor for the other funds in the Dreyfus Family
of Funds and for certain other investment companies.
DREYFUS TELETRANSFER PRIVILEGE. Dreyfus TELETRANSFER purchase orders
may be made at any time. Purchase orders received by 4:00 p.m., New York time,
on any business day that Dreyfus Transfer, Inc., the Fund's transfer and
dividend disbursing agent (the "Transfer Agent"), and the New York Stock
Exchange are open for business will be credited to the shareholder's Fund
account on the next bank business day following such purchase order. Purchase
orders made after 4:00 p.m., New York time, on any business day the Transfer
Agent and the New York Stock Exchange are open for business, or orders made on
Saturday, Sunday or any Fund holiday (e.g., when the New York Stock Exchange is
not open for business), will be credited to the shareholder's Fund account on
the second bank business day following such purchase order. To qualify to use
the Dreyfus TELETRANSFER Privilege, the initial payment for purchase of shares
must be drawn on, and redemption proceeds paid to, the same bank and account as
are designated on the Account Application or Shareholder Services Form on file.
If the proceeds of a particular redemption are to be wired to an account at any
other bank, the request must be in writing and signature-guaranteed. See
"Redemption of Shares--Dreyfus TELETRANSFER Privilege."
TRANSACTIONS THROUGH SECURITIES DEALERS. Fund shares may be purchased
and redeemed through securities dealers which may charge a fee for such
services. Some dealers will place the Fund's shares in an account with their
firm. Dealers also may require the following: that the customer invest more than
the $1,000 minimum investment through dealers; the customer not take physical
delivery of stock certificates; the customer not request redemption checks to be
issued in the customer's name; fractional shares not be purchased; monthly
income distributions be taken in cash; or other conditions.
There is no sales or service charge by the Fund or the Distributor,
although investment dealers, banks and other financial institutions may make
reasonable charges to investors for their services. The services provided and
the applicable fees are established by each dealer or other institution acting
independently of the Fund. The Fund has been given to understand that these fees
may be charged for customer services including, but not limited to, same-day
investment of client funds; same-day access to client funds; advice to customers
about the status of their accounts, yield currently being paid or income earned
to date; provision of periodic account statements showing security and money
market positions; other services available from the dealer, bank or other
institution; and assistance with inquiries related to their investment. Any such
fees will be deducted monthly from the investor's account, which on smaller
accounts could constitute a substantial portion of distributions. Small,
inactive, long-term accounts involving monthly service charges may not be in the
best interest of investors. Investors should be aware that they may purchase
shares of the Fund directly from the Fund without imposition of any maintenance
or service charges, other than those already described herein.
REOPENING AN ACCOUNT. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the calendar
year the account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.
SHAREHOLDER SERVICES PLAN
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "SHAREHOLDER
SERVICES PLAN."
The Fund has adopted a Shareholder Services Plan (the "Plan") pursuant
to which the Fund reimburses Dreyfus Service Corporation for certain allocated
expenses of providing personal services and/or maintaining shareholder accounts.
The services provided may include personal services related to shareholder
accounts, such as answering shareholder inquiries regarding the Fund and
providing reports and other information, and services related to the maintenance
of shareholder accounts.
A quarterly report of the amounts expended under the Plan, and the
purposes for which such expenditures were incurred, must be made to the Board
for its review. In addition, the Plan provides that material amendments of the
Plan must be approved by the Board and by the Board, members who are not
"interested persons" (as defined in the 1940 Act) of the Fund and have no direct
or indirect financial interest in the operation of the Plan by vote cast in
person at a meeting called for the purpose of considering such amendments. The
Plan is subject to annual approval by such vote of the Board members cast in
person at a meeting called for the purpose of voting on the Plan. The Plan was
last so approved on May 29, 1996. The Plan is terminable at any time by vote of
a majority of the Board members who are not "interested persons" and have no
direct or indirect financial interest in the operation of the Plan.
For the fiscal year ended March 31, 1998, the Fund was charged
$___________ pursuant to the Plan.
REDEMPTION OF SHARES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "HOW TO REDEEM
SHARES."
CHECK REDEMPTION PRIVILEGE. The Fund provides Redemption Checks
("Checks") automatically upon opening an account, unless the investor
specifically refuses the Check Redemption Privilege by checking the applicable
"No" box on the Account Application. Checks will be sent only to the registered
owner(s) of the account and only to the address of record. The Check Redemption
Privilege may be established for an existing account by a separate signed
Shareholder Services Form. The Account Application or Shareholder Services Form
must be manually signed by the registered owner(s). Checks are drawn on the
investor's Fund account and may be made payable to the order of any person in an
amount of $500 or more. When a Check is presented to the Transfer Agent for
payment, the Transfer Agent, as the investor's agent, will cause the Fund to
redeem a sufficient number of shares in the investor's account to cover the
amount of the Check. Dividends are earned until the Check clears. After
clearance, a copy of the Check will be returned to the investor. Shareholders
generally will be subject to the same rules and regulations that apply to
checking accounts, although the election of this Privilege creates only a
shareholder-transfer agent relationship with the Transfer Agent.
If the amount of the Check is greater than the value of the shares in
the investor's account, the Check will be returned marked insufficient funds.
Checks should not be used to close an account.
WIRE REDEMPTION PRIVILEGE. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone or letter redemption
instructions (including over The Dreyfus Touch(R) automated telephone system)
from any person representing himself or herself to be the investor and
reasonably believed by the Transfer Agent to be genuine. Ordinarily, the Fund
will initiate payment for shares redeemed pursuant to this Privilege on the next
business day after receipt if the Transfer Agent receives the redemption request
in proper form. Redemption proceeds ($1,000 minimum) will be transferred by
Federal Reserve wire only to the commercial bank account specified by the
investor on the Account Application or Shareholder Services Form, or to a
correspondent bank if the investor's bank is not a member of the Federal Reserve
System. Fees ordinarily are imposed by such bank and borne by the investor.
Immediate notification by the correspondent bank to the investor's bank is
necessary to avoid a delay in crediting the funds to the investor's bank
account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code which
may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Answer Back Sign
----------- ----------------
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at 1-800-654-7171,
toll free. Investors should advise the operator that the above transmitted code
must be used and should also inform the operator of the Transfer Agent's answer
back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent. This
request must be signed by each shareholder, with each signature guaranteed as
described below under "Stock Certificates; Signatures."
DREYFUS TELETRANSFER PRIVILEGE. Investors should be aware that if they
have selected the Dreyfus TELETRANSFER Privilege, any request for a wire
redemption will be effected as a Dreyfus TELETRANSFER transaction through the
Automated Clearing House ("ACH") system unless more prompt transmittal
specifically is requested. Redemption proceeds will be on deposit in the
investor's account at an ACH member bank ordinarily two business days after
receipt of the redemption request. See "Purchase of Shares--Dreyfus TELETRANSFER
Privilege."
STOCK CERTIFICATES; SIGNATURES. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request. Written
redemption requests must be signed by each shareholder, including each owner of
a joint account, and each signature must be guaranteed. Signatures on endorsed
certificates submitted for redemption also must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations,
as well as from participants in the New York Stock Exchange Medallion Signature
Program, the Securities Transfer Agents Medallion Program ("STAMP") and the
Stock Exchanges Medallion Program. Guarantees must be signed by an authorized
signatory of the guarantor and "Signature-Guaranteed" must appear with the
signature. The Transfer Agent may request additional documentation from
corporations, executors, administrators, trustees or guardians, and may accept
other suitable verification arrangements from foreign investors, such as
consular verification. For more information with respect to
signature-guarantees, please call one of the telephone numbers listed on the
cover.
REDEMPTION COMMITMENT. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record, limited in amount during
any 90-day period to the lesser of $250,000 or 1% of the value of the Fund's net
assets at the beginning of such period. Such commitment is irrevocable without
the prior approval of the Securities and Exchange Commission. In the case of
requests for redemption in excess of such amount, the Fund's Board reserves the
right to make payments in whole or part in securities or other assets of the
Fund in case of an emergency or any time a cash distribution would impair the
liquidity of the Fund to the detriment of the existing shareholders. In such
event, the securities would be valued in the same manner as the Fund's portfolio
is valued. If the recipient sold such securities, brokerage charges might be
incurred.
SUSPENSION OF REDEMPTIONS. The right of redemption may be suspended or
the date of payment postponed (a) during any periods when the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (b) when
trading in the markets the Fund ordinarily utilizes is restricted, or when an
emergency exists as determined by the Securities and Exchange Commission so that
disposal of the Fund's investments or determination of its net asset value is
not reasonably practicable, or (c) for such other periods as the Securities and
Exchange by order may permit to protect the Fund's shareholders.
SHAREHOLDER SERVICES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "SHAREHOLDER
SERVICES."
FUND EXCHANGES. Shares of other funds purchased by exchange will be
purchased on the basis of net asset value per share as follows:
A. Exchanges for shares of funds that are offered without a sales load
will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged for
shares of other funds sold with a sales load, and the applicable sales
load will be deducted.
C. Shares of funds previously purchased with a sales load may be
exchanged without a sales load for shares of other funds sold without
a sales load.
D. Shares of funds purchased with a sales load, shares of funds acquired
by a previous exchange from shares purchased with a sales load, and
additional shares acquired through reinvestment of dividends or
distributions of any such funds (collectively referred to herein as
"Purchased Shares") may be exchanged for shares of other funds sold
with a sales load (referred to herein as "Offered Shares"), provided
that, if the sales load applicable to the Offered Shares exceeds the
maximum sales load that could have been imposed in connection with the
Purchased Shares (at the time the Purchased Shares were acquired),
without giving effect to any reduced loads, the difference will be
deducted.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their account
number.
To request an exchange, an investor must give exchange instructions to
the Transfer Agent in writing or by telephone. The ability to issue exchange
instructions by telephone is given to all Fund shareholders automatically,
unless the investor checks the applicable "No" box on the Account Application,
indicating that the investor specifically refuses this privilege. By using the
Telephone Exchange Privilege, the investor authorizes the Transfer Agent to act
on telephonic instructions (including over The Dreyfus Touch(R) automated
telephone system) from any person representing himself or herself to be the
investor, and reasonably believed by the Transfer Agent to be genuine. Telephone
exchanges may be subject to limitations as to the amount involved or the number
of telephone exchanges permitted. Shares issued in certificate form are not
eligible for telephone exchange.
To establish a personal retirement plan by exchange, shares of the
fund being exchanged must have a value of at least the minimum initial
investment required for the fund into which the exchange is being made. For
Dreyfus-sponsored Keogh Plans, IRAs and IRAs set up under a Simplified Employee
Pension Plan ("SEP-IRAs") with only one participant, the minimum initial
investment is $750. To exchange shares held in corporate plans, 403(b)(7) Plans
and SEP-IRAs with more than one participant, the minimum initial investment is
$100 if the plan has at least $2,500 invested among the funds in the Dreyfus
Family of Funds. To exchange shares held in personal retirement plans, the
shares exchanged must have a current value of at least $100.
DREYFUS AUTO-EXCHANGE PRIVILEGE. Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of the Fund, shares of
certain other funds in the Dreyfus Family of Funds. This Privilege is available
only for existing accounts. Shares will be exchanged on the basis of relative
net asset value set forth above under "Fund Exchanges." Enrollment in or
modification or cancellation of this Privilege is effective three business days
following notification by the investor. An investor will be notified if his
account falls below the amount designated to be exchanged under this Privilege.
In this case, an investor's account will fall to zero unless additional
investments are made in excess of the designated amount prior to the next
Dreyfus Auto-Exchange transaction. Shares held under IRA and other retirement
plans are eligible for this Privilege. Exchanges of IRA shares may be made
between IRA accounts and from regular accounts to IRA accounts, but not from IRA
accounts to regular accounts. With respect to all other retirement accounts,
exchanges may be made only among those accounts.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available
to shareholders resident in any state in which shares of the fund being acquired
legally may be sold. Shares may be exchanged only between accounts having
identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject any
exchange request in whole or in part. The Fund Exchanges service or Dreyfus
Auto-Exchange Privilege may be modified or terminated any time upon notice to
shareholders.
AUTOMATIC WITHDRAWAL PLAN. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the yield on
the shares. If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and eventually may be
depleted. Automatic Withdrawal may be terminated at any time by the investor,
the Fund or the Transfer Agent. Shares for which certificates have been issued
may not be redeemed through the Automatic Withdrawal Plan.
DREYFUS DIVIDEND SWEEP. Dreyfus Dividend Sweep allows investors to
invest automatically their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of another fund in the Dreyfus
Family of Funds of which the investor is a shareholder. Shares of other funds
purchased pursuant to this privilege will be purchased on the basis of relative
net asset value per share as follows:
A. Dividends and distributions paid by a fund may be invested without
imposition of a sales load in shares of other funds that are offered
without a sales load.
B. Dividends and distributions paid by a fund which does not charge a
sales load may be invested in shares of other funds sold with a sales
load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges a sales load
may be invested in shares of other funds sold with a sales load
(referred to herein as "Offered Shares"), provided that, if the sales
load applicable to the Offered Shares exceeds the maximum sales load
charged by the fund from which dividends or distributions are being
swept, without giving effect to any reduced loads, the difference will
be deducted.
D. Dividends and distributions paid by a fund may be invested in shares
of other funds that impose a contingent deferred sales charge ("CDSC")
and the applicable CDSC, if any, will be imposed upon redemption of
such shares.
CORPORATE PENSION/PROFIT-SHARING AND PERSONAL RETIREMENT PLANS. The
Fund makes available to corporations a variety of prototype pension and
profit-sharing plans including a 401(k) Salary Reduction Plan. In addition, the
Fund makes available Keogh Plans, IRAs, including SEP-IRAs, IRA "Rollover
Accounts" and 403(b)(7) Plans. Plan support services also are available.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request forms for
adoption of such plans from the Distributor.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or
IRAs may charge a fee, payment of which could require the liquidation of shares.
All fees charged are described in the appropriate form.
SHARES MAY BE PURCHASED IN CONNECTION WITH THESE PLANS ONLY BY DIRECT
REMITTANCE TO THE ENTITY ACTING AS CUSTODIAN. PURCHASES FOR THESE PLANS MAY NOT
BE MADE IN ADVANCE OF RECEIPT OF FUNDS.
The minimum initial investment for corporate plans, Salary Reduction
Plans, 403(b)(7) Plans and SEP-IRAs with more than one participant is $2,500,
with no minimum on subsequent purchases. The minimum initial investment for
Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs and 403(b)(7) Plans with only one
participant is normally $750, with no minimum on subsequent purchases.
Individuals who open an IRA may also open a non-working spousal IRA with a
minimum investment of $250.
The investor should read the Prototype Retirement Plan and the form of
Custodial Agreement for further details on eligibility, service fees and tax
implications, and should consult a tax adviser.
PORTFOLIO TRANSACTIONS
Purchases and sales of portfolio securities usually are principal
transactions. Portfolio securities ordinarily are purchased directly from the
issuer or from an underwriter or a market maker for the securities. Usually no
brokerage commissions are paid by the Fund for such purchases. Purchases of
portfolio securities from underwriters include a commission or concession paid
by the issuer to the underwriter and the purchase price paid to market makers
for the securities may include the spread between the bid and asked price. No
brokerage commissions or concessions were paid by the Fund during the 1995, 1996
and 1997 fiscal years.
Transactions are allocated to various dealers by the Fund's portfolio
managers in their best judgment. The primary consideration is prompt and
effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected for research, statistical or
other services to enable the Manager to supplement its own research and analysis
with the views and information of other securities firms. Sales of shares of the
Fund and other funds in the Dreyfus Family of Funds by a broker may be taken
into consideration in allocating brokerage transactions.
Research services furnished by brokers through which the Fund effects
securities transactions may be used by the Manager in advising other funds it
advises and, conversely, research services furnished to the Manager by brokers
in connection with other funds the Manager advises may be used by the Manager in
advising the Fund. Although it is not possible to place a dollar value on these
services, it is the opinion of the Manager that the receipt and study of such
services should not reduce the overall expenses of its research department.
The Fund anticipates that its annual portfolio turnover rate generally
will not exceed 300%. For the fiscal years ended March 31, 1997 and 1998, the
Fund's portfolio turnover rate was % and ______%, respectively. The increase in
the Fund's portfolio turnover rate in fiscal 1997 was attributable to the
restructuring of the Fund's portfolio and to the volatile interest rate
environment which necessitated more frequent adjustments to the duration of the
Fund's portfolio.
DETERMINATION OF NET ASSET VALUE
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "HOW TO BUY
SHARES."
VALUATION OF PORTFOLIO SECURITIES. Substantially all of the Fund's
investments (excluding short-term investments) are valued each business day by
an independent pricing service (the "Service") approved by the Fund's 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
investments (which constitute a majority of the portfolio of securities) 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 carried at amortized cost, which approximates value. Other
investments that are not valued by the Service are valued at the average of the
most recent bid and asked prices in the market in which such investments are
primarily traded, or at the last sales price for securities traded primarily on
an exchange. In the absence of reported sales of investments traded primarily on
an exchange, the average of the most recent bid and asked prices is used. Bid
price is used when no asked price is available. Investments traded in foreign
currencies are translated to U.S. dollars at the prevailing rates of exchange.
Expenses and fees, including the management fee (reduced by the expense
limitation, if any), are accrued daily and are taken into account for the
purpose of determining the net asset value of Fund shares.
NEW YORK STOCK EXCHANGE CLOSINGS. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "DIVIDENDS,
DISTRIBUTIONS AND TAXES."
Management believes that the Fund qualified as a "regulated investment
company" under the Code for the fiscal year ended March 31, 1998. The Fund
intends to continue to so qualify if such qualification is in the best interests
of its shareholders. As a regulated investment company, the Fund will pay no
Federal income tax on its net investment income and net realized capital gains
to the extent such income and gains are distributed to shareholders in
accordance with applicable provisions of the Code. The term "regulated
investment company" does not imply the supervision of management or investment
practices or policies by any government agency.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain or loss. However, all or a portion of any gain
realized from the sale or other disposition of certain market discount bonds
will be treated as ordinary income under Section 1276 of the Code.
Any dividend or distribution from net realized long-term securities
gains (i.e., "capital gain distribution") paid shortly after an investor's
purchase may have the effect of reducing the aggregate net asset value of his
shares below the cost of his investment. Such a dividend or capital gain
distribution would be a return on investment in an economic sense, although
taxable as stated above. In addition, the Code provides that if a shareholder
holds shares of the Fund for six months (or shorter period as the Internal
Revenue Service may prescribe by regulation) and has received a capital gain
distribution with respect to such shares, any loss incurred on the sale of such
shares will be treated as long-term capital loss to the extent of the capital
gain distribution received.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gains and losses. However, a portion of the gain or loss
realized from the disposition of non-U.S. dollar denominated securities
(including debt instruments, certain financial futures and options, and certain
preferred stock) may be treated as ordinary income or loss under Section 988 of
the Code. In addition, all or a portion of any gains realized from the sale or
other disposition of certain market discount bonds will be treated as ordinary
income under Section 1276 of the Code. Finally, all or a portion of the gain
realized from engaging in "conversion transactions" may be treated as ordinary
income under Section 1258 of the Code. "Conversion transactions" are defined to
include certain forward, futures, option and "straddle" transactions,
transactions marketed or sold to produce capital gains, or transactions
described in Treasury regulations to be issued in the future.
Under Section 1256 of the Code, any gain or loss the Fund realizes
from certain forward contracts and options transactions will be treated as 60%
long-term capital gain or loss and 40% short-term capital gain or loss. Gain or
loss will arise upon exercise or lapse of such contracts and options as well as
from closing transactions. In addition, any such contracts or options remaining
unexercised at the end of the Fund's taxable year will be treated as sold for
their then fair market value, resulting in additional gain or loss to the Fund
characterized in the manner described above.
Offsetting positions held by the Fund involving certain foreign
currency forward contracts or options may be considered, for tax purposes,
constitute "straddles." "Straddles" are defined to include "offsetting
positions" in actively traded personal property. The tax treatment of
"straddles" is governed by Sections 1092 and 1258 of the Code, which, in certain
circumstances, override or modify the provisions of Sections 1256 and 988 of the
Code.
If the Fund were treated as entering into "straddles" by reason of its
engaging in certain forward contracts or options transactions, such "straddles"
would be characterized as "mixed straddles" if the forward contracts or options
transactions comprising a part of such "straddles" were governed by Section 1256
of the Code. The Fund may make one or more elections with respect to "mixed
straddles." Depending on which election is made, if any, the results to the Fund
may differ. If no election is made, to the extent the "straddle" rules apply to
positions established by the Fund, losses realized by the Fund will be deferred
to the extent of unrealized gain in the offsetting position. Moreover, as a
result of the "straddle" rules, short-term capital loss on "straddle" positions
may be recharacterized as long-term capital loss, and long-term capital gain may
be recharacterized as short-term capital gain or ordinary income.
The taxpayer Relief Act of 1997 included constructive sale provisions
that generally will apply if the Fund either (1) holds an appreciated financial
position with respect to stock, certain debt obligations, or partnership
interests ("appreciated financial position") and then enters into a short sale,
futures, forward, or offsetting notional principal contract (collectively, a
"Contract") respecting the same or substantially identical property or (2) holds
an appreciated financial position that is a Contract and then acquires property
that is the same as, or substantially identical to, the underlying property. In
each instance, with certain exceptions, the Fund generally will be taxed as if
the appreciated financial position were sold at its fair market value on the
date the Fund enters into the financial position or acquires the property,
respectively. Transactions that are identified hedging or straddle transactions
under other provisions of the Code can be subject to the constructive sale
provisions.
Investment by the Fund in securities issued at a discount or providing
for deferred interest or for payment of interest in the form of additional
obligations could, under special tax rules, affect the amount, timing and
character of distributions to shareholders. For example, the Fund could be
required to recognize annually a portion of the discount (or deemed discount) at
which such securities were issued and to distribute such portion in order to
maintain its qualification as a regulated investment company. In such case, the
Fund may be required to dispose of securities which it might otherwise have
continued to hold in order to generate cash to satisfy these distribution
requirements.
PERFORMANCE INFORMATION
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "PERFORMANCE
INFORMATION."
The Fund's current yield for the 30-day period ended March 31, 1998
was _____%. Current yield is computed pursuant to a formula which operates as
follows: The amount of the Fund's expenses accrued for the 30-day period is
subtracted from the amount of the dividends and interest earned (computed in
accordance with regulatory requirements) by the Fund during the period. That
result is then divided by the product of: (a) the average daily number of shares
outstanding during the period that were entitled to receive dividends, and (b)
the net asset value per share on the last day of the period less any
undistributed earned income per share reasonably expected to be declared as a
dividend shortly thereafter. The quotient is then added to 1, and that sum is
raised to the 6th power, after which 1 is subtracted. The current yield is then
arrived at by multiplying the result by 2.
The Fund's average annual total return for the one, five and ten year
periods ended March 31, 1998 was _____%, ______% and _______%, respectively.
Average annual total return is calculated by determining the ending redeemable
value of an investment purchased with a hypothetical $1,000 payment made at the
beginning of the period (assuming the reinvestment of dividends and
distributions), dividing by the amount of the initial investment, taking the
"n"th root of the quotient (where "n" is the number of years in the period) and
subtracting 1 from the result.
The Fund's total return for the period June 25, 1976 to March 31, 1998
was ______%. Total return is calculated by subtracting the amount of the Fund's
net asset value per share at the beginning of a stated period from the net asset
value per share at the end of the period (after giving effect to the
reinvestment of dividends and distributions during the period), and dividing the
result by the net asset value per share at the beginning of the period.
INFORMATION ABOUT THE FUND
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "GENERAL
INFORMATION."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and nonassessable. Fund
shares are of one class and have equal rights as to dividends and in
liquidation. Shares have no preemptive, subscription or conversion rights and
are freely transferable.
The Fund sends annual and semi-annual financial statements to all its
shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN,
COUNSEL AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, P.O.
Box 9671, Providence, Rhode Island 02940-9671, is the Fund's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Fund, the
Transfer Agent arranges for the maintenance of shareholder account records for
the Fund, the handling of certain communications between shareholders and the
Fund and the payment of dividends and distributions payable by the Fund. For
these services, the Transfer Agent receives a monthly fee computed on the basis
of the number of shareholder accounts it maintains for the Fund during the
month, and is reimbursed for certain out-of-pocket expenses. For the fiscal year
ended March 31, 1998, the Fund paid the Transfer Agent $_______.
Mellon Bank, N.A. (the "Custodian"), the Manager's parent, One Mellon
Bank Center, Pittsburgh, Pennsylvania 15258, serves as custodian of the Fund's
investments. Under a custody agreement with the Fund, the Custodian holds the
Fund's securities and keeps all necessary accounts and records. For its custody
services, the Custodian receives a monthly fee based on the market value of the
Fund's assets held in custody and receives certain securities transactions
charges. For the fiscal year ended March 31, 1998, the Fund paid the Custodian
$_________.
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York
10038-4982, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the shares
being sold pursuant to the Fund's Prospectus.
Ernst & Young LLP, independent auditors, 787 Seventh Avenue, New York,
New York 10019, have been selected as the Fund's auditors.
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT AUDITORS
The Fund's Annual Report to Shareholders for the fiscal year ended
March 31, 1998 is a separate document supplied with this Statement of Additional
Information, and the financial statement, accompanying notes and report of
independent auditors appearing therein are incorporated by reference into this
Statement of Additional Information.
<PAGE>
APPENDIX
Description of certain Standard & Poor's Ratings Group ("S&P") and
Moody's Investors Service, Inc. ("Moody's") ratings:
S&P
DEBT RATINGS
AAA
Bonds rated AAA have the highest rating assigned to a debt obligation.
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 bonds 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 bonds. 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.
BB, B, CCC, CC, C
Debt rated BB, B, CCC, CC and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicated the least degree of speculation and C the highest degree
of speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB
Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments.
B
Debt rated B has a greater vulnerability to default but presently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC
Debt rated CCC has a current identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic conditions to
meet timely payments of principal. In the event of adverse business, financial
or economic conditions, it is not likely to have the capacity to pay interest
and repay principal.
CC
The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC-debt rating.
D
Bonds rated D are in default, and payment of interest and/or repayment
of principal is in arrears.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by
the additional of a plus or minus sign to show relative standing within the
major ratings categories.
S&P's letter rating may be modified by the addition of a plus or a
minus sign, which is used to show relative standing within the major rating
categories, except in the AAA (Prime Grade) category.
COMMERCIAL PAPER RATINGS
The rating A is the highest rating and is assigned by S&P to issues
that are regarded as having the greatest capacity for timely payment. Issues in
this category are delineated with the numbers 1, 2 and 3 to indicate the
relative degree of safety. Paper rated A-1 indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted with a
plus (+) sign designation. Paper rated A-1 must have the following
characteristics: liquidity ratios are adequate to meet cash requirements,
long-term senior debt is rated "A" or better, the issuer has access to at least
two additional channels of borrowing, and basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry; the reliability and quality of management are unquestioned.
Moody's
DEBT RATING
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally 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 desired
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 ratings categories, except in the Aaa category and in
categories below B. The modifier 1 indicates a ranking for the security in the
higher end of a rating category; the modifier 2 indicates a mid-range ranking;
and the modifier 3 indicates a ranking in the lower end of a rating category.
COMMERCIAL PAPER RATING
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. issuers of P-1 paper must have a superior capacity for
repayment of short-term promissory obligations, and ordinarily will be evidenced
by leading market positions in well established industries, high rates of return
on funds employed, conservative capitalization structures with moderate reliance
on debt and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a range of financial markets and assured sources of alternate liquidity.
Issuers (or related supporting institutions) rated Prime-2 (P-2) have
a strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
<PAGE>
DREYFUS A BONDS PLUS, INC.
PART C. OTHER INFORMATION
-------------------------
Item 24. Financial Statements and Exhibits. - List
(a) Financial Statements:
Included in Part A of the Registration Statement*
Included in Part B of the Registration Statement*
- --------------
* To be filed by Amendment.
(b) Exhibits
(1)(a) Registrant's Certificate of Incorporation is incorporated by
reference to Exhibit (1)(a) of Post-Effective Amendment No. 32 to
the Fund's Registration Statement on Form N-14, filed on July 24,
1996.
(b) Articles Supplementary are incorporated by reference to Exhibit
(1)(b) of Post-Effective Amendment No. 32 to the Fund's
Registration Statement on Form N-1A, filed on July 24, 1996.
(2) Registrant's By-Laws are incorporated by reference to Exhibit (2)
of Post-Effective Amendment No. 32 to the Fund's Registration
Statement on Form N-14, filed on July 24, 1996.
(5) Management Agreement is incorporated by reference to Exhibit (5)
of Post-Effective No. 30 to the Fund's Registration Statement on
Form N-1A, filed on July 27, 1995.
(6) Distribution Agreement is incorporated by reference to Exhibit
(6) of Post-Effective No. 30 to the Fund's Registration Statement
on Form N-1A, filed on July 27, 1995.
(8) Custody Agreement is incorporated by reference to Exhibit (8) of
Post-Effective Amendment No. 32 to the Fund's Registration
Statement on Form N-14, filed on July 24, 1996.
(9) Shareholder Services Plan is incorporated by reference to Exhibit
(9) of Post-Effective No. 30 to the Fund's Registration Statement
on Form N-1A, filed on July 27, 1995.
(10) Opinion and consent of Registrant's counsel is incorporated by
reference to Exhibit (10) of Post-Effective Amendment No. 32 to
the Fund's Registration Statement on Form N-14, filed on July 24,
1996.
(11) Consent of Independent Auditors.
(12) Financial Data Schedule to be filed by Amendment.
(16) Schedules of Computation of Performance Data are incorporated
herein by reference to Exhibit 16 of Post-Effective Amendment No.
29 to the Registration Statement on Form N-1A, filed on May 24,
1994.
Other Exhibits:
(a) Powers of Attorney
(b) Certificate of Secretary
ITEM 25. Persons Controlled by or Under Common Control with Registrant
Not Applicable
ITEM 26. Number of Holders of Securities
(1) (2)
Number of Record
Title of Class Holders as of May 29, 1998
Common Stock,
par value $.01
per share 19,583
ITEM 27. Indemnification
Reference is made to Article SEVENTH of the Registrant's Article
of Incorporation filed as Exhibit 1(a), incorporated by reference
to Exhibit 1(a) of Post-Effective Amendment No. 32, filed on July
24, 1996, and to Section 2-418 of the Maryland General
Corporation law. The application of these provisions is limited
by Article VIII of the Registrant's By-Laws filed as Exhibit 2,
incorporated by reference to Exhibit (2) of Post- Effective
Amendment No. 32, filed on July 24, 1996, and by the following
undertaking set forth in the rules promulgated by the Securities
and Exchange Commission:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public
policy as expressed in such Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as
expressed in such Act and will be governed by the final
adjudication of such issue.
Reference is also made to the Distribution Agreement, as
amended, and is incorporated herein by reference to Exhibit
(6), filed on July 27, 1995.
Item 28. Business and Other Connections of Investment Adviser.
- ------- ----------------------------------------------------
The Dreyfus Corporation ("Dreyfus") and subsidiary companies
comprise a financial service organization whose business consists
primarily of providing investment management services as the
investment adviser, manager and distributor for sponsored
investment companies registered under the Investment Company Act
of 1940 and as an investment adviser to institutional and
individual accounts. Dreyfus also serves as sub-investment
adviser to and/or administrator of other investment companies.
Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus, serves primarily as a registered broker-dealer of shares
of investment companies sponsored by Dreyfus and of other
investment companies for which Dreyfus acts as investment
adviser, sub-investment adviser or administrator. Dreyfus
Management, Inc., another wholly-owned subsidiary, provides
investment management services to various pension plans,
institutions and individuals.
Officers and Directors of Investment Adviser
____________________________________________
Name and Position
with Dreyfus Other Businesses
_________________ ________________
MANDELL L. BERMAN Real estate consultant and private investor
Director 29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034;
Past Chairman of the Board of Trustees:
Skillman Foundation;
Member of The Board of Vintners Intl.
BURTON C. BORGELT Chairman Emeritus of the Board and
Director Past Chairman, Chief Executive Officer and
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405;
Director:
DeVlieg-Bullard, Inc.
1 Gorham Island
Westport, Connecticut 06880
Mellon Bank Corporation***;
Mellon Bank, N.A.***
FRANK V. CAHOUET Chairman of the Board, President and
Director Chief Executive Officer:
Mellon Bank Corporation***;
Mellon Bank, N.A.***;
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067
W. KEITH SMITH Chairman and Chief Executive Officer:
Chairman of the Board The Boston Company****;
Vice Chairman of the Board:
Mellon Bank Corporation***;
Mellon Bank, N.A.***;
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
CHRISTOPHER M. CONDRON Vice Chairman:
President, Chief Mellon Bank Corporation***;
Executive Officer, The Boston Company****;
Chief Operating Deputy Director:
Officer and a Mellon Trust***;
Director Chief Executive Officer:
The Boston Company Asset Management,
Inc.****;
President:
Boston Safe Deposit and Trust Company****
STEPHEN E. CANTER Director:
Vice Chairman and The Dreyfus Trust Company++;
Chief Investment Officer, Formerly, Chairman and Chief Executive Officer:
and a Director Kleinwort Benson Investment Management
Americas Inc.*
LAWRENCE S. KASH Chairman, President and Chief
Vice Chairman-Distribution Executive Officer:
and a Director The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109;
Executive Vice President and Director:
Dreyfus Service Organization, Inc.**;
Director:
Dreyfus America Fund+++;
The Dreyfus Consumer Credit Corporation*;
The Dreyfus Trust Company++;
Dreyfus Service Corporation*;
President:
The Boston Company****;
Laurel Capital Advisors***;
Boston Group Holdings, Inc.;
Executive Vice President:
Mellon Bank, N.A.***;
Boston Safe Deposit and Trust
Company****
RICHARD F. SYRON Chairman of the Board and
Director Chief Executive Officer:
American Stock Exchange
86 Trinity Place
New York, New York 10006;
Director:
John Hancock Mutual Life Insurance Company
John Hancock Place, Box 111
Boston, Massachusetts 02117;
Thermo Electron Corporation
81 Wyman Street, Box 9046
Waltham, Massachusetts 02254-9046;
American Business Conference
1730 K Street, NW, Suite 120
Washington, D.C. 20006;
Trustee:
Boston College - Board of Trustees
140 Commonwealth Ave.
Chestnut Hill, Massachusetts 02167-3934
J. DAVID OFFICER Vice Chairman:
Vice Chairman The Dreyfus Corporation*;
Director:
Dreyfus Financial Services Corporation*****;
Dreyfus Investment Services Corporation*****;
Mellon Trust of Florida
2875 Northeast 191st Street
North Miami Beach, Florida 33180;
Mellon Preferred Capital Corporation****;
Boston Group Holdings, Inc.****;
Mellon Trust of New York
1301 Avenue of the Americas - 41st Floor
New York, New York 10019;
Mellon Trust of California
400 South Hope Street
Los Angeles, California 90071-2806;
Executive Vice President:
Mellon Bank, N.A.***;
Vice Chairman and Director:
The Boston Company, Inc.****;
President and Director:
RECO, Inc.****;
The Boston Company Financial Services,
Inc.****;
Boston Safe Deposit and Trust Company****;
RONALD P. O'HANLEY Vice Chairman:
Vice Chairman The Dreyfus Corporation*;
Director:
The Boston Company Asset Management, LLC****;
TBCAM Holding, Inc.****;
Franklin Portfolio Holdings, Inc.
Two International Place - 22nd Floor
Boston, Massachusetts 02110;
Mellon Capital Management Corporation
595 Market Street, Suite #3000
San Francisco, California 94105;
Certus Asset Advisors Corporation
One Bush Street, Suite 450
San Francisco, California 94104;
Mellon-France Corporation***;
Chairman and Director:
Boston Safe Advisors, Inc.****;
Partner Representative:
Pareto Partners
271 Regent Street
London, England W1R 8PP;
Chairman and Trustee:
Mellon Bond Associates, LLP***;
Mellon Equity Associates, LLP***;
Trustee:
Laurel Capital Advisors, LLP***;
Chairman, President and Chief Executive Officer:
Mellon Global Investing Corp.***;
Partner:
McKinsey & Company, Inc.
Boston, Massachusetts
WILLIAM T. SANDALLS, JR. Director:
Senior Vice President and Dreyfus Partnership Management, Inc.*;
Chief Financial Officer Seven Six Seven Agency, Inc.*;
Chairman and Director:
Dreyfus Transfer, Inc.
One American Express Plaza
Providence, Rhode Island 02903;
President and Director:
Lion Management, Inc.*;
Executive Vice President and Director:
Dreyfus Service Organization, Inc.*;
Vice President, Chief Financial Officer and
Director:
Dreyfus America Fund+++;
Vice President and Director:
The Dreyfus Consumer Credit Corporation*;
The Truepenny Corporation*;
Treasurer, Financial Officer and Director:
The Dreyfus Trust Company++;
Treasurer and Director:
Dreyfus Management, Inc.*;
Dreyfus Service Corporation*;
Formerly, President and Director:
Sandalls & Co., Inc.
MARK N. JACOBS Vice President, Secretary and Director:
Vice President, Lion Management, Inc.*;
General Counsel Secretary:
and Secretary The Dreyfus Consumer Credit Corporation*;
Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization, Inc.**;
Major Trading Corporation*;
The Truepenny Corporation*
PATRICE M. KOZLOWSKI None
Vice President-
Corporate Communications
MARY BETH LEIBIG None
Vice President-
Human Resources
JEFFREY N. NACHMAN President and Director:
Vice President-Mutual Dreyfus Transfer, Inc.
Fund Accounting One American Express Plaza
Providence, Rhode Island 02903
ANDREW S. WASSER Vice President:
Vice President-Information Mellon Bank Corporation***
Services
WILLIAM V. HEALEY President:
Assistant Secretary The Truepenny Corporation*;
Vice President and Director:
The Dreyfus Consumer Credit Corporation*;
Secretary and Director:
Dreyfus Partnership Management Inc.*;
Director:
The Dreyfus Trust Company++;
Assistant Secretary:
Dreyfus Service Corporation*;
Dreyfus Investment Advisors, Inc.*;
Assistant Clerk:
Dreyfus Insurance Agency of Massachusetts,
Inc.+++++
______________________________________
* The address of the business so indicated is 200 Park Avenue, New York,
New York 10166.
** The address of the business so indicated is 131 Second Street,
Lewes, Delaware 19958.
*** The address of the business so indicated is One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258.
**** The address of the business so indicated is One Boston Place,
Boston, Massachusetts 02108.
***** The address of the business so indicated is Union Trust Building,
501 Grant Street, Room 179, Pittsburgh, Pennsylvania 15259;
+ The address of the business so indicated is Atrium Building,
80 Route 4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144.
+++ The address of the business so indicated is 69, Route `d'Esch, L-
1470 Luxembourg.
++++ The address of the business so indicated is 69, Route `d'Esch, L-
2953 Luxembourg.
+++++ The address of the business so indicated is 53 State Street, Boston,
Massachusetts 02103.
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal
underwriter or exclusive distributor:
1. Comstock Partners Funds, Inc.
2. Dreyfus A Bonds Plus, Inc.
3. Dreyfus Appreciation Fund, Inc.
4. Dreyfus Asset Allocation Fund, Inc.
5. Dreyfus Balanced Fund, Inc.
6. Dreyfus BASIC GNMA Fund
7. Dreyfus BASIC Money Market Fund, Inc.
8. Dreyfus BASIC Municipal Fund, Inc.
9. Dreyfus BASIC U.S. Government Money Market Fund
10. Dreyfus California Intermediate Municipal Bond Fund
11. Dreyfus California Tax Exempt Bond Fund, Inc.
12. Dreyfus California Tax Exempt Money Market Fund
13. Dreyfus Cash Management
14. Dreyfus Cash Management Plus, Inc.
15. Dreyfus Connecticut Intermediate Municipal Bond Fund
16. Dreyfus Connecticut Municipal Money Market Fund, Inc.
17. Dreyfus Florida Intermediate Municipal Bond Fund
18. Dreyfus Florida Municipal Money Market Fund
19. The Dreyfus Fund Incorporated
20. Dreyfus Global Bond Fund, Inc.
21. Dreyfus Global Growth Fund
22. Dreyfus GNMA Fund, Inc.
23. Dreyfus Government Cash Management Funds
24. Dreyfus Growth and Income Fund, Inc.
25. Dreyfus Growth and Value Funds, Inc.
26. Dreyfus Growth Opportunity Fund, Inc.
27. Dreyfus Income Funds
28. Dreyfus Index Funds, Inc.
29. Dreyfus Institutional Money Market Fund
30. Dreyfus Institutional Preferred Money Market Fund
31. Dreyfus Institutional Short Term Treasury Fund
32. Dreyfus Insured Municipal Bond Fund, Inc.
33. Dreyfus Intermediate Municipal Bond Fund, Inc.
34. Dreyfus International Funds, Inc.
35. Dreyfus Investment Grade Bond Funds, Inc.
36. The Dreyfus/Laurel Funds, Inc.
37. The Dreyfus/Laurel Funds Trust
38. The Dreyfus/Laurel Tax-Free Municipal Funds
39. Dreyfus Lifetime Portfolios, Inc.
40. Dreyfus Liquid Assets, Inc.
41. Dreyfus Massachusetts Intermediate Municipal Bond Fund
42. Dreyfus Massachusetts Municipal Money Market Fund
43. Dreyfus Massachusetts Tax Exempt Bond Fund
44. Dreyfus MidCap Index Fund
45. Dreyfus Money Market Instruments, Inc.
46. Dreyfus Municipal Bond Fund, Inc.
47. Dreyfus Municipal Cash Management Plus
48. Dreyfus Municipal Money Market Fund, Inc.
49. Dreyfus New Jersey Intermediate Municipal Bond Fund
50. Dreyfus New Jersey Municipal Bond Fund, Inc.
51. Dreyfus New Jersey Municipal Money Market Fund, Inc.
52. Dreyfus New Leaders Fund, Inc.
53. Dreyfus New York Insured Tax Exempt Bond Fund
54. Dreyfus New York Municipal Cash Management
55. Dreyfus New York Tax Exempt Bond Fund, Inc.
56. Dreyfus New York Tax Exempt Intermediate Bond Fund
57. Dreyfus New York Tax Exempt Money Market Fund
58. Dreyfus 100% U.S. Treasury Intermediate Term Fund
59. Dreyfus 100% U.S. Treasury Long Term Fund
60. Dreyfus 100% U.S. Treasury Money Market Fund
61. Dreyfus 100% U.S. Treasury Short Term Fund
62. Dreyfus Pennsylvania Intermediate Municipal Bond Fund
63. Dreyfus Pennsylvania Municipal Money Market Fund
64. Dreyfus Premier California Municipal Bond Fund
65. Dreyfus Premier Equity Funds, Inc.
66. Dreyfus Premier International Funds, Inc.
67. Dreyfus Premier GNMA Fund
68. Dreyfus Premier Worldwide Growth Fund, Inc.
69. Dreyfus Premier Insured Municipal Bond Fund
70. Dreyfus Premier Municipal Bond Fund
71. Dreyfus Premier New York Municipal Bond Fund
72. Dreyfus Premier State Municipal Bond Fund
73. Dreyfus Premier Value Fund
74. Dreyfus Short-Intermediate Government Fund
75. Dreyfus Short-Intermediate Municipal Bond Fund
76. The Dreyfus Socially Responsible Growth Fund, Inc.
77. Dreyfus Stock Index Fund, Inc.
78. Dreyfus Tax Exempt Cash Management
79. The Dreyfus Third Century Fund, Inc.
80. Dreyfus Treasury Cash Management
81. Dreyfus Treasury Prime Cash Management
82. Dreyfus Variable Investment Fund
83. Dreyfus Worldwide Dollar Money Market Fund, Inc.
84. General California Municipal Bond Fund, Inc.
85. General California Municipal Money Market Fund
86. General Government Securities Money Market Fund, Inc.
87. General Money Market Fund, Inc.
88. General Municipal Bond Fund, Inc.
89. General Municipal Money Market Fund, Inc.
90. General New York Municipal Bond Fund, Inc.
91. General New York Municipal Money Market Fund
(b)
Positions and offices Positions and
Name and principal with the offices with
Business Address Distributor Registrant
Marie E. Connolly+ Director, President, Chief President and
Executive Officer and Treasurer
Compliance Officer
Joseph F. Tower, III+ Director, Senior Vice Vice President
President, Treasurer and Chief and Assistant
Financial Officer Treasurer
Richard W. Ingram++ Executive Vice President Vice President
and Assistant
Treasurer
Mary A. Nelson+ Vice President Vice President
and Assistant
Treasurer
Paul Prescott+ Vice President None
Jean M. O'Leary+ Assistant Secretary and None
Assistant Clerk
John W. Gomez+ Director None
William J. Nutt+ Director None
- ---------------------------------
+ Principal business address is 60 State Street, Boston,
Massachusetts 02109.
++ Principal business address is 200 Park Avenue, New York,
New York 10166.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
1. First Data Investor Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671
2. Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
3. Dreyfus Transfer Inc.
P.O. Box 9671
Providence, Rhode Island 02940-9671
4. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
ITEM 31. Management Services
Not Applicable
ITEM 32. Undertakings
(1) To call a meeting of shareholders for the purpose of
voting upon the question of removal of a Board member
or Board members when requested in writing to do so
by the holders of at least 10% of the Registrant's
outstanding shares and in connection with such
meeting to comply with the provisions of Section
16(c) of the Investment Company Act of 1940 relating
to shareholder communications.
(2) To furnish each person to whom a prospectus is
delivered with a copy of the Fund's latest Annual
Report to Shareholders, upon request and without
charge.
<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 Amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, and State of New York on the
1st day of June, 1998.
DREYFUS A BONDS PLUS, INC.
BY: /s/Marie E. Connolly*
------------------------------
MARIE E. CONNOLLY, PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signatures Title Date
- -------------------------- ------------------------- --------
/s/Marie E. Connolly* President and Treasurer 6/1/98
_____________________________ (Principal Executive Officer
Marie E. Connolly and Financial Officer)
/s/Joseph F. Tower* Assistant Treasurer (Principal 6/1/98
_____________________________ Accounting Officer)
Joseph F. Tower
/s/Joseph S. DiMartino* Director 6/1/98
_____________________________
Joseph S. DiMartino
/s/David P. Feldman* Director 6/1/98
_____________________________
David P. Feldman
/s/John M. Fraser, Jr.* Director 6/1/98
_____________________________
John M. Fraser, Jr.
/s/Robert R. Glauber* Director 6/1/98
_____________________________
Robert R. Glauber
/s/James F. Henry* Director 6/1/98
_____________________________
James F. Henry
/s/Rosalind Gersten Jacobs* Director 6/1/98
_____________________________
Rosalind Gersten Jacobs
/s/Irving S. Kristol* Director 6/1/98
_____________________________
Irving S. Kristol
/s/Paul A. Marks* Director 6/1/98
_____________________________
Paul A. Marks
/s/Martin Peretz* Director 6/1/98
_____________________________
Martin Peretz
/s/Bert W. Wasserman* Director 6/1/98
_____________________________
Bert W. Wasserman
*BY: /s/ Michael S. Petrucelli
__________________________
Michael S. Petrucelli,
Attorney-in-Fact
<PAGE>
INDEX OF EXHIBITS
-----------------
(11) Consent of Independent Auditors
OTHER EXHIBITS
(a) Power of Attorney
(b) Certificate of Secretary
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Condensed
Financial Information" and "Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors" and to the use of our report dated May 11,
1998, which is incorporated by reference, in this Registration Statement (Form
N-1A No. 2-55614) of Dreyfus A Bonds Plus, Inc.
ERNST & YOUNG LLP
New York, New York
May 26, 1998
EXHIBIT (a)
POWER OF ATTORNEY
The undersigned hereby constitute and appoint Marie E. Connolly,
Richard W. Ingram, Christopher J. Kelley, Kathleen K. Morrisey, Michael S.
Petrucelli and Elba Vasquez, and each of them, with full power to act without
the other, his or her true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him or her, and in his or her
name, place and stead, in any and all capacities (until revoked in writing) to
sign any and all amendments to the Registration Statement of Dreyfus A Bonds
Plus, Inc.(including post-effective amendments and amendments thereto), and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in- fact and agents, and each of them, full power and authority to do
and perform each and every act and thing ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his or her substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Joseph S. DiMartino February 13, 1998
Joseph S. DiMartino
/s/ David P. Feldman February 13, 1998
David P. Feldman
/s/ John M. Fraser, Jr. February 13, 1998
John M. Fraser, Jr.
/s/ Robert R. Glauber February 13, 1998
Robert R. Glauber
/s/ James F. Henry February 13, 1998
James F. Henry
/s/ Rosalind G. Jacobs February 13, 1998
Rosalind G. Jacobs
/s/ Irving Kristol February 13, 1998
Irving Kristol
/s/ Paul A. Marks February 13, 1998
Paul A. Marks
/s/ Martin Peretz February 13, 1998
Martin Peretz
/s/ Bert Wasserman February 13, 1998
Bert W. Wasserman
EXHIBIT (b)
ASSISTANT SECRETARY'S CERTIFICATE
I, Elba Vasquez, Assistant Secretary of Dreyfus A Bonds Plus,
Inc. hereto (the "Fund"), hereby certify that by Written Consent dated February
13, 1998, the following resolution was adopted and remains in full force and
effect:
RESOLVED, that the Registration Statement and any and all amendments
and supplements thereto may be signed by any one of Marie E. Connolly,
Richard W. Ingram, Christopher J. Kelley, Kathleen K. Morrisey,
Michael S. Petrucelli and Elba Vasquez, as the attorney-in-fact for
the proper officers of the Fund, with full power of substitution and
resubstitution; and that the appointment of each of such persons as
such attorney-in-fact hereby is authorized and approved; and that such
attorneys-in-fact, and each of them, shall have full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection with such Registration Statement
and any and all amendments and supplements thereto, as whom he or she
is acting as attorney-in-fact, might or could do in person.
IN WITNESS WHEREOF, I have hereunto set my hand as Assistant Secretary
of the Funds and affixed the seal this 28th day of May, 1998.
ELBA VASQUEZ
(SEAL)
DREYFUS A BONDS PLUS, INC.
