Registration No. 333-___
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Pre-Effective Amendment No. __ Post-Effective Amendment No. __
(Check appropriate box or boxes)
DREYFUS A BONDS PLUS, INC.
(Exact Name of Registrant as Specified in Charter)
(212) 922-6000
(Area Code and Telephone Number)
c/o The Dreyfus Corporation
200 PARK AVENUE, NEW YORK, NEW YORK 10166
(Address of Principal Executive Offices: Number,
Street, City, State, Zip Code)
(Name and Address of Agent for Service)
Mark N. Jacobs, Esq.
c/o The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
copy to:
Lewis G. Cole, Esq.
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038-4982
Approximate Date of Proposed Public Offering: As soon as practicable after
this Registration Statement is declared effective.
It is proposed that this filing will become effective on July 31, 2000
pursuant to Rule 488.
Registrant has registered an indefinite number of shares of its common
stock pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended. Accordingly, no filing fee is being paid at this time.
DREYFUS A BONDS PLUS, INC.
Form N-14
Cross Reference Sheet
Pursuant to Rule 481(a) Under the Securities Act of 1933
FORM N-14 ITEM NO. PROSPECTUS/PROXY STATEMENT CAPTION
PART A
Item 1. Beginning of Registration Statement Cover Page
and Outside Front Cover
Page of Prospectus
Item 2. Beginning and Outside Back Cover Page Cover Page
of Prospectus
Item 3. Synopsis Information and Risk Factors Summary
Item 4. Information About the Transaction Letter to
Stockholders;
Summary; Reasons for
the Exchange;
Information About
the Exchange
Item 5. Information About the Registrant Letter to
Stockholders;
Summary; Reasons for
the Exchange;
Information About
the Exchange;
Additional
Information About
the Fund and the
Acquiring Fund
Item 6. Information About the Company Being Acquired Letter to
Stockholders;
Reasons for the
Exchange;
Information About
the Exchange;
Additional
Information About
the Fund and the
Acquiring Fund
Item 7. Voting Information Letter to
Stockholders; Cover
Page; Voting
Information
Item 8. Interest of Certain Persons and Experts Not Applicable
Item 9. Additional Information Required for Not Applicable
Reoffering by Persons Deemed to be
Underwriters
STATEMENT OF ADDITIONAL INFORMATION
PART B CAPTION
Item 10. Cover Page Cover Page
Item 11. Table of Contents Not Applicable
Item 12. Additional Information about Statement of Additional
the Registrant Information of Dreyfus
A Bonds Plus, Inc. dated
August 1, 1999, as
revised on March 9,
2000(1)
Item 13. Additional Information about the Not Applicable
Company being Acquired
Item 14. Financial Statements Annual Report of Dreyfus
A Bonds Plus, Inc. dated
March 31, 2000; Annual
Report and Semi-Annual
Report of Dreyfus
Strategic Governments
Income, Inc. dated
November 30, 1999 and May
31, 2000, respectively
PART C
Item 15. Indemnification
Item 16 Exhibits
Item 17. Undertakings
(1) Incorporated herein by reference to the Registration Statement of the
Registrant on Form N-1A (File No. 2-55614).
<PAGE>
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
c/o The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Dear Stockholder:
As a stockholder of Dreyfus Strategic Governments Income, Inc. (the
"Fund"), you are entitled to vote on the proposal described below and in the
enclosed materials.
The Fund's Board of Directors has determined that it would be in the
best interests of the Fund and its stockholders if the Fund were to exchange its
assets (subject to liabilities) for shares of Dreyfus A Bonds Plus, Inc. (the
"Acquiring Fund"), an open-end investment company advised by The Dreyfus
Corporation that has a similar investment objective and similar management
policies as the Fund. The Fund's shares have traded on the New York Stock
Exchange at an average discount from net asset value of more than 10% for
approximately 15 consecutive months through May 2000, ranging from approximately
15% to 20% from late 1999 through June 16, 2000. After having considered several
alternatives, the Board has determined that merging the Fund into the larger
Acquiring Fund is currently the most appropriate way for the Fund to eliminate
the market discount. Following the June 22, 2000 announcement of the Board's
approval of the merger, the Fund's shares traded at a discount from net asset
value that ranged from __% to __% through __, 2000. The Board believes that the
new shares will offer greater liquidity and additional benefits.
The proposal provides that the Fund exchange all of its assets,
subject to liabilities, for shares of the Acquiring Fund (the "Exchange").
Promptly thereafter, the Fund will distribute pro rata the Acquiring Fund shares
received in the Exchange to its stockholders in complete liquidation of the
Fund. Thus, each Fund stockholder will receive for his or her Fund shares a
number of Acquiring Fund shares equal to the aggregate NET ASSET VALUE of the
stockholder's Fund shares as of the date of the Exchange.
Here are some facts about the Exchange that will be useful to you as
you vote:
o There will be no cost to you to become a stockholder of the
Acquiring Fund
o In the opinion of counsel, the Exchange will be free from Federal
income taxes to you, the Fund and the Acquiring Fund
o The holding period and aggregate tax basis of the Acquiring Fund
shares you receive in the Exchange will be the same as the
holding period and aggregate tax basis of your Fund shares
o You will be able to redeem your shares of the Acquiring Fund for
cash at net asset value without any redemption fees or required
holding period
o Shares of the Acquiring Fund are priced on each day the New York
Stock Exchange is open for business and you may redeem all or a
part of your shares at the then-current net asset value per share
o As a stockholder of the Acquiring Fund, you will have the ability
to exchange your shares for shares of other open-end funds in the
Dreyfus Family of Funds
Further information about the transaction is contained in the enclosed
materials, which you should review carefully.
Please take the time to consider the enclosed materials and then vote
by completing, dating and signing the enclosed proxy card. A self-addressed,
postage-paid envelope has been enclosed for your convenience.
THE FUND'S BOARD OF DIRECTORS RECOMMENDS THAT THE FUND'S STOCKHOLDERS
VOTE IN FAVOR OF THE PROPOSED TRANSACTION.
If you have any questions after considering the enclosed materials,
please call [1-800-334-6899].
Sincerely,
Stephen E. Canter
President
August __, 2000
<PAGE>
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
--------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
---------------------------
To the Stockholders:
A Special Meeting of Stockholders of Dreyfus Strategic Governments
Income, Inc. (the "Fund") will be held at the offices of The Dreyfus
Corporation, 200 Park Avenue, 7th Floor, New York, New York 10166, on Friday,
September 15, 2000, at 10:00 a.m. for the following purposes:
1. To consider an Agreement and Plan of Reorganization providing for
the transfer of all of the assets, subject to liabilities, of the
Fund to Dreyfus A Bonds Plus, Inc. (the "Acquiring Fund") in
exchange for Acquiring Fund shares and the assumption by the
Acquiring Fund of the Fund's stated liabilities (the "Exchange").
The shares of the Acquiring Fund received in the Exchange will be
distributed by the Fund to its stockholders in liquidation of the
Fund, after which the Fund will be dissolved; and
2. To transact such other business as may properly come before the
meeting, or any adjournment or adjournments thereof.
Stockholders of record at the close of business on July __, 2000, will
be entitled to receive notice of and to vote at the meeting.
By Order of the Board of Directors
John B. Hammalian
Secretary
New York, New York
August __, 2000
===============================================================================
WE NEED YOUR PROXY VOTE IMMEDIATELY
A STOCKHOLDER MAY THINK HIS OR HER VOTE IS NOT IMPORTANT, BUT IT IS
VITAL. BY LAW, THE MEETING OF STOCKHOLDERS OF THE FUND WILL HAVE TO BE ADJOURNED
WITHOUT CONDUCTING ANY BUSINESS IF LESS THAN A QUORUM OF ITS SHARES ELIGIBLE TO
VOTE IS REPRESENTED. IN THAT EVENT, THE FUND, AT ITS STOCKHOLDERS' EXPENSE,
WOULD CONTINUE TO SOLICIT VOTES IN AN ATTEMPT TO ACHIEVE A QUORUM. CLEARLY, YOUR
VOTE COULD BE CRITICAL TO ENABLE THE FUND TO HOLD THE MEETING AS SCHEDULED, SO
PLEASE RETURN YOUR PROXY CARD IMMEDIATELY. YOU AND ALL OTHER STOCKHOLDERS WILL
BENEFIT FROM YOUR COOPERATION.
===============================================================================
<PAGE>
______________, 2000
ACQUISITION OF THE ASSETS OF
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
BY AND IN EXCHANGE FOR SHARES OF
DREYFUS A BONDS PLUS, INC.
PROSPECTUS/PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, SEPTEMBER 15, 2000
This Prospectus/Proxy Statement is furnished in connection with a
solicitation of proxies by the Board of Directors of Dreyfus Strategic
Governments Income, Inc. (the "Fund") to be used at the Special Meeting of
Stockholders (the "Meeting") of the Fund to be held on Friday, September 15,
2000, at 10:00 a.m., at the offices of The Dreyfus Corporation, 200 Park Avenue,
7th Floor, New York, New York 10166, for the purposes set forth in the
accompanying Notice of Special Meeting of Stockholders. Stockholders of record
at the close of business on July __, 2000 are entitled to receive notice of and
to vote at the Meeting.
It is proposed that the Fund transfer all of its assets, subject to
liabilities, to Dreyfus A Bonds Plus, Inc. (the "Acquiring Fund") in exchange
for shares of the Acquiring Fund, all as more fully described in this
Prospectus/Proxy Statement (the "Exchange"). Upon consummation of the Exchange,
the Acquiring Fund shares received by the Fund will be distributed to Fund
stockholders, with each stockholder receiving a pro rata distribution of
Acquiring Fund shares (or fractions thereof) for Fund shares held prior to the
Exchange. Thus, it is contemplated that each stockholder will receive for his or
her Fund shares a number of Acquiring Fund shares (or fractions thereof) equal
in value to the aggregate NET ASSET VALUE of the stockholder's Fund shares as of
the date of the Exchange.
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely information about the Acquiring Fund that Fund
stockholders should know before voting on the proposal or investing in the
Acquiring Fund.
A Statement of Additional Information ("SAI") dated ______, 2000,
relating to this Prospectus/Proxy Statement, has been filed with the Securities
and Exchange Commission (the "Commission") and is incorporated by reference in
its entirety. The Commission maintains a Web site (HTTP://WWW.SEC.GOV) that
contains the SAI, material incorporated in this Prospectus/Proxy Statement by
reference, and other information regarding the Acquiring Fund and the Fund. A
copy of the SAI is available without charge by calling 1-800-645-6561, or
writing to the Acquiring Fund at its offices located at 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144.
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MUTUAL FUND SHARES ARE NOT BANK DEPOSITS AND ARE NOT INSURED OR GUARANTEED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. MUTUAL
FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
-------------------------------------------------------------------------------
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS
PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------------------------------------------------------------
The Acquiring Fund is an open-end, diversified management investment
company advised by The Dreyfus Corporation ("Dreyfus"). The Fund is a
closed-end, non-diversified management investment company advised by Dreyfus;
the Fund's shares trade on the New York Stock Exchange under the symbol "DSI."
The Acquiring Fund and the Fund have a similar investment objective and similar
management policies. The substantive differences between the Fund and the
Acquiring Fund are set forth in this Prospectus/Proxy Statement.
The Acquiring Fund's Prospectus dated August 1, 2000, and the
Acquiring Fund's Annual Report for its fiscal year ended March 31, 2000,
including its audited financial statements for the fiscal year, each accompany
this Prospectus/Proxy Statement. Such Prospectus and financial statements are
incorporated in this Prospectus/Proxy Statement by reference. FOR A FREE COPY OF
THE FUND'S ANNUAL REPORT FOR ITS FISCAL YEAR ENDED NOVEMBER 30, 1999, AND THE
FUND'S SEMI-ANNUAL REPORT FOR THE SIX MONTHS ENDED MAY 31, 2000, WRITE TO THE
FUND AT ITS OFFICES LOCATED AT 144 GLENN CURTISS BOULEVARD, UNIONDALE, NEW YORK
11556-0144, OR CALL 1-800-334-6899.
Stockholders are entitled to one vote for each Fund share held and
fractional votes for each fractional Fund share held. Fund shares represented by
executed and unrevoked proxies will be voted in accordance with the
specifications made thereon. If the enclosed form of proxy is executed and
returned, it nevertheless may be revoked by giving another proxy or by letter or
telegram directed to the Fund, which must indicate the stockholder's name. To be
effective, such revocation must be received before the Meeting. Also, any
stockholder who attends the Meeting in person may vote by ballot at the Meeting,
thereby canceling any proxy previously given. As of July __, 2000, __________
shares of the Fund's common stock were issued and outstanding.
Proxy materials will be mailed to stockholders of record on or about
August 11, 2000.
TABLE OF CONTENTS
Summary..................................................................... 1
Reasons for the Exchange.....................................................16
Information about the Exchange...............................................18
Additional Information about the Fund and the Acquiring Fund.................22
Voting Information...........................................................23
Financial Statements and Experts.............................................26
Other Matters................................................................26
Notice to Banks, Broker/Dealers and Voting Trustees and Their Nominees.......26
Exhibit A: Agreement and Plan of Reorganization............................A-1
<PAGE>
APPROVAL OF AN AGREEMENT AND PLAN OF REORGANIZATION
PROVIDING FOR THE TRANSFER OF ALL OF THE ASSETS OF
THE FUND TO THE ACQUIRING FUND
SUMMARY
This Summary is qualified by reference to the more complete
information contained elsewhere in this Prospectus/Proxy Statement, the
Acquiring Fund's Prospectus and Annual Report, and the Fund's Prospectus dated
June 23, 1988, as amended to date, and Annual and Semi-Annual Reports, and the
form of Agreement and Plan of Reorganization attached to this Prospectus/Proxy
Statement as Exhibit A.
PROPOSED TRANSACTION. The Fund's Board, including the Board members
who are not "interested persons" (as defined in the Investment Company Act of
1940, as amended (the "1940 Act")), has approved an Agreement and Plan of
Reorganization (the "Plan"). The Plan provides that, subject to the requisite
approval of the Fund's stockholders, on the date of the Exchange the Fund will
assign, transfer and convey to the Acquiring Fund all of the assets (subject to
liabilities) of the Fund, including all securities and cash, in exchange for
shares of the Acquiring Fund having an aggregate net asset value equal to the
value of the Fund's net assets. The Fund will distribute all Acquiring Fund
shares received by it among its stockholders so that each stockholder will
receive a pro rata distribution of Acquiring Fund shares (or fractions thereof)
having an aggregate net asset value equal to the aggregate net asset value of
the stockholder's Fund shares as of the date of the Exchange. Thereafter, the
Fund will be dissolved.
As a result of the Exchange, each Fund stockholder will cease to be a
stockholder of the Fund and will become a stockholder of the Acquiring Fund as
of the close of business on the date of the Exchange.
The Fund's Board has concluded that the Exchange would be in the best
interests of the Fund and its stockholders, and the interests of existing
stockholders of the Fund would not be diluted as a result of the transactions
contemplated by the Exchange. See "Reasons for the Exchange."
TAX CONSEQUENCES. As a condition to the closing of the Exchange, the
Fund and the Acquiring Fund will receive an opinion of counsel to the effect
that, for Federal income tax purposes, (a) no gain or loss will be recognized by
the Fund's stockholders as a result of the Exchange, (b) the holding period and
aggregate tax basis of Acquiring Fund shares received by a Fund stockholder will
be the same as the holding period and aggregate tax basis of the stockholder's
Fund shares, and (c) the holding period and tax basis of the Fund's assets
transferred to the Acquiring Fund as a result of the Exchange will be the same
as the holding period and tax basis of such assets held by the Fund immediately
prior to the Exchange. See "Information about the Exchange--Federal Income Tax
Consequences."
COMPARISON OF THE FUND AND THE ACQUIRING FUND. The following
discussion is primarily a summary of certain parts of the Fund's Prospectus, as
amended, and the Acquiring Fund's Prospectus. Information contained in this
Prospectus/Proxy Statement is qualified by the more complete information set
forth in such Prospectuses, which are incorporated herein by reference.
GOAL/APPROACH. The Fund and the Acquiring Fund have similar investment
goals. Each seeks to maximize current income to the extent consistent with the
preservation of capital and, for the Acquiring Fund, the maintenance of
liquidity. Despite similar investment goals, however, there are some differences
in the investment policies the two funds pursue to fulfill their investment
goals.
To pursue its goal, the Fund invests primarily in obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities ("U.S.
Government Securities"), and in obligations issued or guaranteed by one or more
foreign governments (including those located in emerging markets) or any of
their political subdivisions, agencies or instrumentalities ("Foreign Government
Securities"). The Fund invests at least 65% of its total assets in U.S. and
Foreign Government Securities, and may invest up to 50% of its total assets in
Foreign Government Securities. The U.S. Government Securities in which the Fund
may invest include mortgage-related securities issued or guaranteed by U.S.
Government agencies and instrumentalities. The Fund also may invest up to 35% of
its total assets in other debt securities, including investment grade corporate
bonds and municipal obligations, commercial paper, zero coupon securities,
collateralized mortgage obligations ("CMOs") and other mortgage-related
securities, and repurchase agreements.
To pursue its goal, the Acquiring Fund invests at least 80% of its net
assets in fixed-income securities that, when purchased, are rated A or better,
or are the unrated equivalent as determined by Dreyfus, and in U.S. Government
Securities. The remainder of the Acquiring Fund's assets may be invested in
fixed-income securities rated lower than A or the unrated equivalent as
determined by Dreyfus. The fixed-income securities in which the Acquiring Fund
may invest include: bonds, debentures and notes; mortgage-related securities,
including CMOs; asset-backed securities; convertible debt obligations; preferred
stock and convertible preferred stock; municipal obligations and zero coupon
bonds; and money-market instruments. The Acquiring Fund may invest up to 10% of
its net assets in foreign securities.
The Acquiring Fund may invest up to 15% of its assets in illiquid
securities; the Fund may invest without limitation in illiquid securities. The
Acquiring Fund and Fund may engage in futures and options, and foreign currency
transactions. The Fund, but not the Acquiring Fund, also may purchase and sell
currency futures contracts, options on currency futures, and options on foreign
currency. The Fund and Acquiring Fund may lend portfolio securities -- up to 30%
of the Fund's total assets and up to 33-1/3% of the Acquiring Fund's total
assets. The Fund and the Acquiring Fund may borrow money to the extent permitted
by the 1940 Act, which permits an investment company to borrow in an amount up
to 33-1/3% of the value of its total assets. The Acquiring Fund can buy
securities with borrowed money (a form of leverage); the Fund's policy is to
borrow money only for temporary or emergency purposes or for clearance of
transactions in amounts not exceeding 15% of its total assets and in connection
with repurchases of, or tenders for, its shares. The Acquiring Fund may sell
securities short, which involves selling a security it does not own in
anticipation of a decline in the market price of the security; the Fund may not
sell short. The Acquiring Fund also may engage in forward roll transactions and
enter into reverse repurchase agreements (selling securities held and
concurrently agreeing to repurchase the same securities at a specified price and
future date), each of which is a form of leverage.
Another difference is that the Fund is a non-diversified management
investment company and the Acquiring Fund is a diversified management investment
company. In order to be classified as a diversified fund, the Acquiring Fund may
not, with respect to 75% of its assets, invest more than 5% of its total assets
in the securities of one issuer or own more than 10% of the outstanding voting
securities of any one issuer. As a non-diversified fund, the Fund is not subject
to these restrictions. However, each of the Acquiring Fund and Fund conducts its
operations so as to qualify as a "regulated investment company" for purposes of
the Internal Revenue Code of 1986, as amended (the "Code"), which relieves it of
any liability for Federal income tax to the extent its earnings are distributed
to stockholders. To qualify as a regulated investment company, a fund, among
other things, must limit its investments so that, at the close of each quarter
of its taxable year (1) not more than 25% of the market value of the fund's
total assets will be invested in the securities of a single issuer and (2) with
respect to 50% of the market value of its total assets, not more than 5% of the
market value of the fund's total assets will be invested in the securities of a
single issuer. Investments in U.S. Government Securities are not subject to
these limitations. For a more complete discussion of the Acquiring Fund's
management policies, see "Goal/Approach" in the Acquiring Fund's Prospectus.
MAIN RISKS. The risks associated with an investment in the Fund and
the Acquiring Fund are similar and include interest rate, income, credit, market
and liquidity risks. As a result, the value of your investment in the Acquiring
Fund, as in the Fund, will fluctuate, which means that you could lose money.
The Acquiring Fund may invest a greater portion of its assets in
corporate bonds than the Fund. Prices of bonds tend to move inversely with
changes in interest rates. While a rise in rates may allow the Acquiring Fund to
invest for higher yields, the most immediate effect is usually a drop in bond
prices, and therefore in the Acquiring Fund's share price as well. If an issuer
fails to make timely interest or principal payments or there is a decline in the
credit quality of a bond, or perception of a decline, the bond's value could
fall, potentially lowering the Acquiring Fund's share price. Although the
Acquiring Fund invests primarily in high quality bonds (rated A or better), it
may invest up to 20% of the value of its net assets in higher yielding (and,
therefore, higher risk) debt securities (commonly known as junk bonds). High
yield bonds involve greater credit risk, including the risk of default, than
investment grade bonds. They tend to be more volatile in price and less liquid
and are considered speculative. The prices of high yield bonds can fall in
response to bad news about the issuer, the issuer's industry or the economy in
general. The Fund may invest only in investment grade corporate bonds.
The Acquiring Fund also may invest a greater portion of its assets in
mortgage-related securities than the Fund. Prices and yields of mortgage-related
securities assume the securities will be redeemed at a given time. When interest
rates decline, mortgage-related securities experience higher prepayments because
the underlying mortgages are repaid earlier than expected. This may force the
portfolio manager to invest the proceeds from prepaid mortgage-related
securities at lower rates, which would result in a lower return. When interest
rates increase, mortgage-related securities experience lower prepayments because
the underlying mortgages may be repaid later than expected. This typically
reduces the value of the underlying securities. Most mortgage-related securities
are a form of derivative. Derivatives can be illiquid and highly sensitive to
changes in their underlying securities and, as a result, can be highly volatile.
As a closed-end investment company, shares of the Fund can and
frequently have traded at a discount from their net asset value, but in some
cases they can and have traded at a premium. Shares of the Acquiring Fund are
purchased and sold at their net asset value and do not trade at a premium or
discount to their net asset value.
A greater portion of the Fund's assets are invested in U.S. Government
Securities than the Acquiring Fund. Certain U.S. Government Securities, such as
those backed by the U.S. Treasury or the full faith and credit of the United
States, are guaranteed only as to the timely payment of interest and principal
when held to maturity. The market prices for such securities are not guaranteed
and will fluctuate. The Fund is subject to the risk that interest rates could
rise sharply, causing the Fund's net asset value and share price to drop.
Certain U.S. Government agency securities are backed by the right of the issuer
to borrow from the U.S. Treasury, or are supported only by the credit of the
issuer or instrumentality. While the U.S. Government provides financial support
to U.S. Government-sponsored agencies or instrumentalities, no assurance can be
given that it will always do so.
The Fund may invest up to 50% of its assets in Foreign Government
Securities; the Acquiring Fund may invest up to 10% of its assets in foreign
securities. Foreign securities may be riskier than comparable U.S. securities
for reasons ranging from political and economic instability to changes in
currency exchange rates. In addition, emerging markets may be more volatile and
less liquid than the markets of more mature economies, and the securities of
issuers located in emerging markets often are subject to rapid and large price
changes.
In addition to mortgage-related securities, the Fund and the Acquiring
Fund, at times, may invest in other derivative securities, such as futures and
options. When employed, these practices may be used to increase returns, but
they may reduce returns or increase volatility. Derivatives can be illiquid and
highly sensitive to changes in their underlying instrument, interest rate or
index. A small investment in certain derivatives could have a potentially large
impact on a fund's performance. The Fund, but not the Acquiring Fund, may
purchase and sell currency futures contracts, options or currency futures and
options on foreign currency. Unlike trading on domestic commodity exchanges,
trading on foreign commodity exchanges is not regulated by the Commodity Futures
Trading Commission and may be subject to greater risks than trading on domestic
exchanges. For example, some foreign exchanges are principal markets so that no
common clearing facility exists and a trader may look only to the broker for
performance of the contract. In addition, unless the Fund hedges against
fluctuations in the exchange rate between the U.S. dollar and the currencies in
which trading is done on foreign exchanges (which the Fund may not do if it is
seeking to profit from fluctuations in exchange rates), any profits that the
Fund might realize in trading could be eliminated by adverse changes in the
exchange rate, or the Fund could incur losses as a result of those changes.
In addition, the Fund is not restricted in its ability to purchase
securities for which a liquid trading market does not exist. The Acquiring Fund
may invest up to 15% of its net assets in illiquid securities. Illiquid
securities may be difficult to resell at approximately the price they are valued
in the ordinary course of business in seven days or less. When investments
cannot be sold readily at the desired time or price, the Fund may have to accept
a lower price or may not be able to sell the security at all, or forego other
investment opportunities, all of which may have an adverse effect on the Fund's
performance.
The Fund is non-diversified, which means that a relatively high
percentage of the Fund's assets may be invested in a limited number of issuers.
Therefore, with respect to its investments in other than U.S. Government
Securities, the Fund's performance may be more vulnerable to changes in the
market value of a single issuer or a group of issuers than that of the Acquiring
Fund which is diversified.
See "Main Risks" in the Acquiring Fund's Prospectus for a more
complete description of investment risks applicable to an investment in the
Acquiring Fund.
FEES AND EXPENSES. The fees and expenses of the Fund and the Acquiring
Fund set forth below are for the fiscal year ended November 30, 1999 for the
Fund, and March 31, 2000 for the Acquiring Fund. The "Pro Forma After Exchange"
information is based on net assets and fund accruals of the Fund and the
Acquiring Fund as of __________, 2000. Annual fund operating expenses are paid
out of fund assets, so their effect is reflected in the fund's net asset value
per share. The Acquiring Fund has no sales charge (load) or Rule 12b-1
distribution fees.
ANNUAL FUND
OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)
(percentage of average net assets):
<TABLE>
<CAPTION>
Pro Forma
After
Exchange
Fund Acquiring Fund Acquiring Fund
SHARES SHARES SHARES
<S> <C> <C> <C>
Management fees 0.70% 0.65% 0.65%
Shareholder services fee None 0.16% 0.14%
Other expenses 0.12% 0.21% 0.21%
Total 0.92% 1.02% 1.00%
</TABLE>
EXAMPLE
This example shows what you could pay in expenses over time. It will
help you compare the costs of investing in the Acquiring Fund with the costs of
investing in other mutual funds. It uses the same hypothetical conditions other
funds use in their prospectuses: $10,000 initial investment, 5% total return
each year and no changes in expenses. The figures shown would be the same
whether you sold your shares at the end of a period or kept them. Because actual
return and expenses will be different, the example is for comparison only.
Pro Forma After
Fund Acquiring Fund Exchange Acquiring Fund
1 Year $ 94 $ 104 $ 102
3 Years $ 293 $ 325 $ 318
5 Years $ 509 $ 563 $ 552
10 Years $1,131 $1,248 $1,225
PAST PERFORMANCE. The bar chart and table below show some of the risks
of investing in the Acquiring Fund. The bar chart shows the changes in the
Acquiring Fund's performance from year to year. The table compares the Acquiring
Fund's average annual total return to that of the Lehman Brothers Aggregate Bond
Index and the Merrill Lynch Domestic Master Index, which are unmanaged indices
reflecting the performance of investment grade corporate debt, U.S. Government
Securities and mortgage-related securities, with maturities of at least one
year. The chart and table assume reinvestment of dividends and distributions.
For performance information of the Fund, see the Fund's Annual Report. Of
course, past performance is no guarantee of future results. YEAR-BY-YEAR TOTAL
RETURN AS OF 12/31 EACH YEAR (%) SHARES OF THE ACQUIRING FUND
<TABLE>
<CAPTION>
4.80% 18.76% 8.21% 14.95% -6.16% 20.31% 2.63% 9.55% 2.68% 1.77%
------------- ----------- ----------- ------------ ----------- ------------ ---------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99
Best Quarter: Q2 '95 +7.36%
Worst Quarter: Q1 '94 -4.32%
</TABLE>
The Acquiring Fund's year-to-date total return as of 6/30/00 was ____%.
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99
1 Year 5 Years 10 Years
Acquiring Fund 1.77% 7.17% 7.46%
Lehman Brothers Aggregate Bond
Index(*) -0.86% 7.73% 7.70%
Merrill Lynch Domestic Master
Index -0.96% 7.74% 7.75%
* The Lehman Brothers Aggregate Bond Index is the Acquiring Fund's primary
index because such index provides more frequent statistical information
than the Merrill Lynch Domestic Master Index.
SHARE DISTRIBUTION AND PURCHASE PROCEDURES. The shares of the Fund and
the Acquiring Fund are distributed differently and have different purchase
procedures. These differences stem primarily from the fact that the Fund is a
closed-end management investment company and the Acquiring Fund is an open-end
management investment company. The Fund's shares are traded on the New York
Stock Exchange ("NYSE") at prevailing market prices, which may be equal to, less
than, or more than their net asset value. These shares may be purchased by
placing an order with any broker who effects trades in NYSE listed stocks. The
market price of the Fund's shares may be determined by, among other things, the
relative demand for and supply of the shares in the market, the Fund's
investment performance, the Fund's dividends and yield and investor perception
of the Fund's overall attractiveness as an investment as compared with other
investment alternatives.
The Acquiring Fund's shares may be purchased at their net asset value
on any day the NYSE is open. The Acquiring Fund continuously offers new shares
to investors at a price equal to the net asset value of the shares at the time
of purchase. The Acquiring Fund's net asset value per share is determined as of
close of regular trading on the NYSE, on each day that the NYSE is open, by
dividing the value of the Acquiring Fund's net assets by the total number of
shares outstanding. The Acquiring Fund's investments generally are valued based
on market value or, where market quotations are not readily available, based on
fair value as determined in good faith by the Acquiring Fund's Board. See "Your
Investment--Account Policies--Buying Shares" in the Acquiring Fund's Prospectus.
SHARE REDEMPTION PROCEDURES. The Fund and Acquiring Fund also differ
with respect to redemption rights and procedures. A stockholder of the Fund has
no right to redeem his or her shares. Fund stockholders generally may sell their
shares only in the secondary market at the then current market price, which may
be more or less than the Fund's net asset value per share. In contrast, a
stockholder of the Acquiring Fund may redeem his or her shares from the
Acquiring Fund at any time during which the Acquiring Fund is open for business
by tendering such shares to the Acquiring Fund. The redemption price the
Acquiring Fund will pay for such shares is equal to their net asset value next
determined after receipt of a proper request for redemption. See "Your
Investment--Account Policies--Selling Shares" in the Acquiring Fund's
Prospectus.
EXCHANGE PRIVILEGES AND OTHER SHAREHOLDER SERVICES. The Fund and
Acquiring Fund differ with respect to the shareholder services offered to
investors, such as an exchange privilege. Stockholders of the Acquiring Fund may
exchange at net asset value all or a portion of their shares for shares of
certain other funds of the Dreyfus Family of Funds. Any exchange will be a
taxable event for which a stockholder may have to recognize a gain or a loss
under Federal income tax provisions. Stockholders of the Fund do not have any
exchange privileges. In addition to the exchange privilege, the Acquiring Fund
offers other services typically offered by open-end investment companies to
their shareholders. These include: Dreyfus Automatic Asset Builder(R); Dreyfus
Payroll Savings Plan; Dreyfus Government Direct Deposit Privilege; Dreyfus
Dividend Sweep; Dreyfus Auto-Exchange Privilege; and Dreyfus Automatic
Withdrawal Plan. See "Your Investment--Services For Fund Investors" in the
Acquiring Fund's Prospectus.
INVESTMENT ADVISER. The investment adviser for the Fund and the
Acquiring Fund is Dreyfus, located at 200 Park Avenue, New York, New York 10166.
Founded in 1947, Dreyfus manages more than $129 billion in over 160 mutual fund
portfolios. Dreyfus is the primary mutual fund business of Mellon Financial
Corporation, a global financial services company with approximately $2.5
trillion of assets under management, administration or custody, including
approximately $500 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania. Dreyfus has engaged Sinopia Asset Management to provide day-to-day
management for a portion of the Fund's assets (generally, those assets invested
in Foreign Government Securities). Dreyfus has agreed to pay Sinopia a
sub-investment advisory fee at the annual rate of 0.20% of the value of the
Fund's assets.
PRIMARY PORTFOLIO MANAGERS. The Fund's primary portfolio manager is
Gerald Thunelius; he has held that position since _____ , and has been employed
by Dreyfus since 1989. The Dreyfus taxable fixed income team, which consists of
sector specialists, collectively makes investment decisions for the Acquiring
Fund. The team's specialists focus on, and monitor conditions in, the different
sectors of the fixed income market. Once different factors have been analyzed,
the sector specialists then decide on allocation weights for the portfolio and
recommend securities for investment. One of the portfolio managers comprising
the team is Mr. Thunelius. The other members of the Dreyfus taxable fixed income
team are identified in the Acquiring Fund's Statement of Additional Information.
BOARD MEMBERS. Joseph S. DiMartino is Chairman of the Board and
Rosalind Gersten Jacobs is a Board member of the Fund and the Acquiring Fund.
Other than Mr. DiMartino and Ms. Jacobs, the composition of each Board is
different. The Fund's Board is divided into three classes of Directors, with one
class being elected each year to serve for three years. The classified Board is
intended, in part, to reduce the Fund's vulnerability to an unsolicited takeover
proposal or similar action, by making it more difficult and time-consuming to
change majority control of the Board of Directors without its consent. The
Acquiring Fund's Board is not classified. The Acquiring Fund is not required to,
and does not, hold annual meetings to elect Directors. A description of the
Acquiring Fund's Directors is set forth in its Statement of Additional
Information.
CAPITALIZATION. The following table sets forth as of May 31, 2000
(1) the capitalization of the Fund's shares, (2) the capitalization of the
Acquiring Fund's shares and (3) the pro forma capitalization of the Acquiring
Fund's shares, as adjusted showing the effect of the Exchange had it occurred on
such date.
<TABLE>
<CAPTION>
Pro Forma
After
Exchange
Fund Acquiring Fund Acquiring Fund
SHARES SHARES SHARES
<S> <C> <C> <C>
Total net assets $ 138,322,531 $ 435,310,332 $ 573,632,863
Net asset value
per share $ 9.45 $ 13.35 $ 13.35
Shares outstanding 14,640,617 32,595,469 42,959,052
</TABLE>
SHAREHOLDER SERVICES PLAN. The Acquiring Fund has adopted a
Shareholder Services Plan to reimburse its distributor for the provision of
certain services to its shareholders. Pursuant to such plan, the Acquiring Fund
reimburses Dreyfus Service Corporation an amount not to exceed an annual rate of
0.25% of the value of the Acquiring Fund's average daily net assets for certain
allocated expenses of providing personal services and maintaining shareholder
accounts. The Fund has not adopted a shareholder services plan. See "Shareholder
Services Plan" in the Acquiring Fund's Statement of Additional Information for a
discussion of the Acquiring Fund's plan.
DIVIDENDS AND OTHER DISTRIBUTIONS. Each of the Fund and the Acquiring
Fund distributes to its stockholders net investment income and any net realized
short-term capital gains monthly, and net realized long-term capital gains, if
any, at least annually.
The Fund has a Dividend Reinvestment and Cash Purchase Plan (the
"DRIP"). Under the DRIP, a stockholder who has Fund shares registered in his or
her name has all distributions reinvested automatically by the DRIP agent in
additional shares of the Fund's common stock at the lower of prevailing market
price or net asset value (but not less than 95% of market value at the time of
valuation), unless such stockholder elects to receive cash (but not less than
95% of the market value at the time of valuation). If market price is equal to
or exceeds net asset value, shares are issued at net asset value. If net asset
value exceeds market price or if a dividend or other distribution payable only
in cash is declared, the DRIP agent buys Fund shares in the open market. A
shareholder who owns Fund shares registered in the name of his or her
broker/dealer or other nominee (i.e., in "street name") may not participate
directly in the DRIP, but may elect to have cash distributions reinvested by his
or her broker/dealer or other nominee in additional Fund shares if such service
is provided by the broker/dealer or other nominee; otherwise such distributions
are treated like any other cash dividend.
A DRIP participant who has Fund shares registered in his or her name
has the option of making additional cash payments to the DRIP agent,
semi-annually, in any amount from $100 to $500, for investment in the Fund's
shares in the open market on or about January 15 and July 15.
Participants pay a DRIP agent's fee of $.50 per reinvestment of
dividends and distributions, a pro rata share of brokerage commissions incurred
with respect to the DRIP agent's open market purchases and purchases from
voluntary cash payments, and a $3.00 fee for each purchase made from a voluntary
cash payment. A stockholder who has Fund shares registered in his or her name
may elect to withdraw from the Plan at any time for a $5.00 fee and thereby
elect to receive cash in lieu of shares.
Dividends and distributions paid by the Acquiring Fund are
automatically reinvested in the Acquiring Fund shares at net asset value, unless
the stockholder requests cash. There are no fees or sales charges on
reinvestments. See "Distributions and Taxes" in the Acquiring Fund Prospectus
and "Dividends, Distributions and Taxes" in the Acquiring Fund's Statement of
Additional Information. [DIVIDENDS PAID INFORMATION TO COME]
STOCKHOLDER RIGHTS. Both the Acquiring Fund and the Fund are Maryland
corporations and thus their stockholders have the same rights due them under
state law. However, because the shares of the Fund are listed on the NYSE, the
Fund currently holds annual meetings of stockholders. The Acquiring Fund does
not currently hold annual meetings of stockholders and has no current intention
to hold such meetings, except as required by the 1940 Act. Under the 1940 Act,
the Acquiring Fund is required to hold a stockholder meeting if, among other
reasons, the numbers of Directors elected by stockholders is less than a
majority of the total number of Directors, or if the Acquiring Fund seeks to
change its fundamental investment policies. In addition, holders of at least 10%
of the Acquiring Fund's outstanding shares may require the Acquiring Fund to
hold a stockholder meeting for the purpose of voting on the removal of any
Director.
REASONS FOR THE EXCHANGE
The Boards of Directors of the Fund and the Acquiring Fund have
concluded that the Exchange is in the best interests of the respective
stockholders of the Fund and the Acquiring Fund. Each Board believes that the
Exchange will permit stockholders to pursue similar investment goals in a larger
fund without diluting stockholders' interests. For stockholders of the Fund, the
combination of the Fund and the Acquiring Fund is expected to eliminate the
market discount at which the shares of the Fund have often traded and offer
stockholders more liquidity in their investment. This will be accomplished
because stockholders of the Fund will receive shares of the Acquiring Fund,
pursuant to the Exchange, in an amount equal to the net asset value of their
holdings in the Fund. As an open-end investment company, the Acquiring Fund
redeems its shares at net asset value at any time it is open for business.
The following table sets forth the high and low sales prices for the
shares of the Fund, the net asset value per share and the discount or premium to
net asset value represented by the quotation for the last two years.
<TABLE>
<CAPTION>
Quarterly High Price Quarterly Low Price
----------------------------------------- -----------------------------------------
Net Asset NYSE Price Discount to Net Asset NYSE Price Discount to
Value NAV Value NAV
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ $ % $ $ %
--------------------------------------------------------------------------------------------------------------
</TABLE>
As of ________, 2000, the price of the Fund's common stock as quoted
on the NYSE was $_____, representing a ____% discount from the common stock's
net asset value calculated on that day.
In considering various alternatives to eliminate the market discount
at which the Fund's shares have traded, the Fund's Board of Directors chose the
option of combining the Fund with an open-end fund because, among other reasons,
it would afford stockholders more flexibility in deciding whether they wished to
recognize gain or loss for tax purposes on the disposition of their shares. One
of the other alternatives the Board considered was to convert the Fund to an
open-end investment company. The Board believes, however, that conversion to an
open-end investment company could expose the Fund to the risk of a substantial
reduction in its asset size, a possible loss of economies of scale and an
increase in the Fund's expenses as a percentage of net asset value. The Board
also believes that the effects of such conversion could adversely affect
portfolio management and investment performance.
In determining whether to recommend approval of the Exchange, each
Board considered the following factors, among others: (1) the compatibility of
the Acquiring Fund's and the Fund's investment objective and management
policies, as well as stockholder services offered by the Acquiring Fund and
Fund; (2) the terms and conditions of the Exchange and whether the Exchange
would result in dilution of stockholder interests; (3) expense ratios and
information regarding the fees and expenses of the Acquiring Fund and the Fund,
as well as the expense ratios of similar funds and the estimated expense ratio
of the combined fund; (4) the tax consequences of the Exchange; and (5) the
estimated costs to be incurred by the Acquiring Fund and the Fund as a result of
the Exchange.
INFORMATION ABOUT THE EXCHANGE
PLAN OF EXCHANGE. The following summary of the Plan is qualified in
its entirety by reference to the form of Plan attached to this Prospectus/Proxy
Statement as Exhibit A. The Plan provides that the Acquiring Fund will acquire
all of the assets of the Fund at net asset value, in exchange for Acquiring Fund
shares and the assumption by the Acquiring Fund of the Fund's stated liabilities
on ____, 2000 or such later date as may be agreed upon by the parties (the
"Closing Date"). The number of Acquiring Fund shares to be issued to the Fund
will be determined on the basis of the relative net asset values per share and
aggregate net assets of the shares of the Acquiring Fund and the Fund, generally
computed as of the close of trading on the floor of the NYSE (currently at 4:00
p.m., New York time) on the Closing Date. Portfolio securities of the Fund and
the Acquiring Fund will be valued in accordance with the valuation practices of
the Acquiring Fund, which are described for the Acquiring Fund under the caption
"Account Policies--Buying Shares" in the Acquiring Fund's Prospectus and under
the caption "Determination of Net Asset Value" in the Acquiring Fund's Statement
of Additional Information.
Prior to the Closing Date, the Fund will declare a dividend or
dividends which, together with all previous such dividends, will have the effect
of distributing to Fund stockholders all of the Fund's previously undistributed
investment company taxable income, if any, for the fiscal period ending on or
prior to the Closing Date (computed without regard to any deduction for
dividends paid), its net exempt interest income for the fiscal period ending on
or prior to the Closing Date, and all of its previously undistributed net
capital gain realized in the fiscal period ending on or prior to the Closing
Date (after reduction for any capital loss carry forward).
As conveniently as practicable after the Closing Date, the Fund will
liquidate and distribute pro rata to its stockholders of record as of the close
of business on the Closing Date, the shares received by it in the Exchange. Such
liquidation and distribution will be accomplished by establishing accounts on
the share records of the Acquiring Fund in the name of each Fund stockholder,
each account representing the respective pro rata number of Acquiring Fund
shares due to the stockholder. After such distribution and the winding up of its
affairs, the Fund will be dissolved. Some of the outstanding shares of the Fund
are represented by physical certificates; however, in the interest of economy
and convenience, shares of the Acquiring Fund issued to Fund stockholders
pursuant to the Exchange will be in uncertificated form. After the Closing Date,
any outstanding certificates representing Fund shares will be void.
The Plan may be amended at any time prior to the Exchange. The Fund
will provide its stockholders with information describing any material amendment
to the Plan prior to stockholder consideration. The obligations of the Fund and
the Acquiring Fund under the Plan are subject to various conditions, including
approval by Fund stockholders holding the requisite number of Fund shares and
the continuing accuracy of various representations and warranties of the Fund
and the Acquiring Fund being confirmed by the respective parties.
The total expenses of the Exchange are expected to be approximately
$__________, which will be borne pro rata according to the aggregate net assets
of the Acquiring Fund and the Fund on the date of the Exchange.
If the Exchange is not approved by Fund stockholders, the Fund will
promptly hold its annual meeting of stockholders. Since the Fund's shares traded
at a market discount to their net asset value of more than 10% for the last
twelve calendar weeks of 1999, the Fund's charter requires the Fund to submit to
stockholders at the annual meeting a proposal to convert the Fund to an open-end
investment company. In the past, the Board has not recommended that stockholders
vote in favor of such a proposal.
FEDERAL INCOME TAX CONSEQUENCES. The exchange of the Fund's assets for
the Acquiring Fund shares is intended to qualify for Federal income tax purposes
as a tax-free reorganization under Section 368(a) of the Code. As a condition to
the closing of the Exchange, the Fund and the Acquiring Fund will receive the
opinion of Stroock & Stroock & Lavan LLP, counsel to the Fund and the Acquiring
Fund, to the effect that, on the basis of the existing provisions of the Code,
Treasury regulations issued thereunder, current administrative regulations and
pronouncements and court decisions, and certain facts, assumptions and
representations, for Federal income tax purposes: (1) the transfer of all of the
Fund's assets in exchange for Acquiring Fund shares and the assumption by the
Acquiring Fund of the Fund's liabilities will constitute a "reorganization"
within the meaning of Section 368(a)(1)(C) of the Code with respect to the Fund;
(2) no gain or loss will be recognized by the Acquiring Fund upon the receipt of
the Fund's assets solely in exchange for Acquiring Fund shares and the
assumption by the Acquiring Fund of liabilities of the Fund; (3) no gain or loss
will be recognized by the Fund upon the transfer of its assets to the Acquiring
Fund in exchange for shares and the assumption by the Acquiring Fund of the
Fund's liabilities or upon the distribution (whether actual or constructive) of
Acquiring Fund shares to Fund stockholders in exchange for their Fund shares;
(4) no gain or loss will be recognized by Fund stockholders upon the exchange of
Fund shares for Acquiring Fund shares; (5) the aggregate tax basis for Acquiring
Fund shares received by each Fund stockholder pursuant to the Exchange will be
the same as the aggregate tax basis for Fund shares held by such stockholder
immediately prior to the Exchange, and the holding period of Acquiring Fund
shares to be received by a Fund stockholder will include the period during which
Fund shares surrendered in exchange therefor were held by such stockholder
(provided Fund shares were held as capital assets on the date of the Exchange);
and (6) the tax basis of Fund assets acquired by the Acquiring Fund will be the
same as the tax basis of such assets to the Fund immediately prior to the
Exchange, and the holding period of Fund assets in the hands of the Acquiring
Fund will include the period during which those assets were held by the Fund.
NEITHER THE FUND NOR THE ACQUIRING FUND HAS SOUGHT A TAX RULING FROM
THE INTERNAL REVENUE SERVICE ("IRS"). THE OPINION OF COUNSEL IS NOT BINDING ON
THE IRS NOR DOES IT PRECLUDE THE IRS FROM ADOPTING A CONTRARY POSITION. Fund
stockholders should consult their tax advisers regarding the effect, if any, of
the proposed Exchange in light of their individual circumstances. Since the
foregoing discussion relates only to the Federal income tax consequences of the
Exchange, Fund stockholders also should consult their tax advisers as to state
and local tax consequences, if any, of the Exchange.
REQUIRED VOTE AND BOARD'S RECOMMENDATION
The Fund's Board has approved the Plan and the Exchange and has
determined that (i) participation in the Exchange is in the best interests of
the Fund and its stockholders and (ii) the interests of stockholders of the Fund
will not be diluted as a result of the Exchange. Pursuant to the Fund's charter
documents, an affirmative vote of a majority of the Fund's shares outstanding
and entitled to vote is required to approve the Plan and the Exchange.
THE FUND'S BOARD OF DIRECTORS, INCLUDING THE "NON-INTERESTED"
DIRECTORS, RECOMMENDS THAT THE FUND'S STOCKHOLDERS VOTE "FOR"
APPROVAL OF THE PLAN AND THE EXCHANGE.
ADDITIONAL INFORMATION ABOUT THE FUND AND THE ACQUIRING FUND
Information about the Fund is incorporated by reference into this
Prospectus/Proxy Statement from the Fund's Prospectus forming a part of its
Registration Statement on Form N-2 (File No. 33-21578), as amended. Information
about the Acquiring Fund is incorporated by reference into this Prospectus/Proxy
Statement from the Acquiring Fund's Prospectus forming a part of its
Registration Statement on Form N-1A (File No. 2-55614).
The Fund and the Acquiring Fund are subject to the requirements of the
1940 Act, and file reports, proxy statements and other information with the
Commission. These materials may be inspected and copied at the Public Reference
Facilities of the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549 and at the Northeast regional office of the Commission at 7 World
Trade Center, Suite 1300, New York, New York 10048. Copies of such material also
can be obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services, Securities and Exchange Commission, Washington, D.C.
20549, at prescribed rates.
VOTING INFORMATION
In addition to the use of the mails, proxies may be solicited
personally, or by telephone, and the Fund may pay persons holding Fund shares in
their names or those of their nominees for their expenses in sending soliciting
materials to their principals. The Fund may retain an outside firm to assist in
the solicitation of proxies primarily by contacting stockholders by telephone,
the cost of which is estimated to be approximately $20,000. Authorizations to
execute proxies may be obtained by telephonic or electronically transmitted
instructions in accordance with procedures designed to authenticate the
stockholder's identity. In all cases where a telephonic proxy is solicited, the
stockholder will be asked to provide his or her address, social security number
(in the case of an individual) or taxpayer identification number (in the case of
a non-individual) and the number of shares owned and to confirm that the
stockholder has received the Prospectus/Proxy Statement and proxy card in the
mail. Within 72 hours of receiving a stockholder's telephonic or electronically
transmitted voting instructions, a confirmation will be sent to the stockholder
to ensure that the vote has been taken in accordance with the stockholder's
instructions and to provide a telephone number to call immediately if the
stockholder's instructions are not correctly reflected in the confirmation. Any
stockholder giving a proxy may revoke it at any time before it is exercised by
submitting to the Fund a written notice of revocation or a subsequently executed
proxy or by attending the Meeting and voting in person.
If a proxy is properly executed and returned accompanied by
instructions to withhold authority to vote, represents a broker "non-vote" (that
is, a proxy from a broker or nominee indicating that such person has not
received instructions from the beneficial owner or other person entitled to vote
Fund shares on a particular matter with respect to which the broker or nominee
does not have discretionary power) or is marked with an abstention
(collectively, "abstentions"), the Fund shares represented thereby will be
considered to be present at a Meeting for purposes of determining the existence
of a quorum for the transaction of business. Abstentions will have the effect of
a "no" vote for the purpose of obtaining requisite approval for the Proposal.
If a quorum is not present at the Meeting, or a quorum is present but
sufficient votes to approve the Proposal are not received, the persons named as
proxies may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. In determining whether to adjourn the Meeting, the
following factors may be considered: the nature of the Proposal, the percentage
of votes actually cast, the percentage of negative votes actually cast, the
nature of any further solicitation and the information to be provided to Fund
stockholders with respect to the reasons for the solicitation. Any adjournment
will require the affirmative vote of a majority of those shares affected by the
adjournment that are represented at the Meeting in person or by proxy. If a
quorum is present, the persons named as proxies will vote those proxies which
they are entitled to vote "FOR" the Proposal in favor of such adjournment, and
will vote those proxies required to be voted "AGAINST" the Proposal against any
adjournment. The holders of a majority of the Fund's shares entitled to vote,
represented in person or by proxy at the Meeting, will constitute a quorum, and
a majority of the Fund's shares entitled to vote on the Proposal is necessary to
approve the Plan and Exchange.
The votes of the Acquiring Fund's stockholders are not being solicited
since their approval or consent is not necessary for the Exchange.
As of June 30, 2000, no stockholders were known by the Fund to
beneficially own 5% or more of the outstanding voting shares of the Fund.
As of June 28, 2000, the following were known by the Acquiring Fund to
own of record 5% or more of the outstanding voting shares of the Acquiring Fund:
NAME AND ADDRESS PERCENTAGE OUTSTANDING
Before After
EXCHANGE EXCHANGE
Nationwide QPVA 19.02% __%
C/O IPO CO 67
P.O. Box 182029 7.81% __%
Columbus, OH 43218
Charles Schwab & Co. Inc.
Reinvest Account
101 Montgomery Street
San Francisco, CA 94104
As of June 30, 2000, Directors and officers of the Acquiring Fund,
as a group, owned less than 1% of the Acquiring Fund's outstanding shares. As of
June 30, 2000, Directors and officers of Fund, as a group, owned less than 1%
of the Fund's outstanding shares.
FINANCIAL STATEMENTS AND EXPERTS
The audited financial statements of the Fund for its fiscal year ended
November 30, 1999, and the audited financial statements of the Acquiring Fund
for its fiscal year ended March 31, 2000, have been incorporated in this
Prospectus/Proxy Statement by reference in reliance upon the authority of the
reports given by Ernst & Young LLP, the Fund's and the Acquiring Fund's
independent auditors, as experts in accounting and auditing. In addition, the
unaudited financial statements of the Fund for the six months ended May 31, 2000
have been incorporated herein by reference.
OTHER MATTERS
The Fund's Directors are not aware of any other matters which may come
before the Meeting. However, should any such matters properly come before the
Meeting, it is the intention of the persons named in the accompanying form of
proxy to vote the proxy in accordance with their judgment on such matters.
NOTICE TO BANKS, BROKER/DEALERS AND VOTING TRUSTEES
AND THEIR NOMINEES
Please advise the Fund, in care of Mellon Bank, N.A., c/o Proxy
Services Corporation, Attention: Dreyfus Strategic Governments Income, Inc., 115
Amity Street, Jersey City, New Jersey 07304, whether other persons are the
beneficial owners of Fund shares for which proxies are being solicited from you,
and, if so, the number of copies of the Prospectus/Proxy Statement and other
soliciting material you wish to receive in order to supply copies to the
beneficial owners of Fund shares.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE,
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND IN PERSON ARE URGED TO COMPLETE, DATE,
SIGN AND RETURN THE PROXY CARD IN THE ENCLOSED STAMPED ENVELOPE.
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated June 27, 2000 (the
"Agreement"), between DREYFUS STRATEGIC GOVERNMENTS INCOME, INC., a Maryland
corporation (the "Fund"), and DREYFUS A BONDS PLUS, INC., a Maryland corporation
(the "Acquiring Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all of the
assets of the Fund in exchange solely for shares of the Acquiring Fund and the
assumption by the Acquiring Fund of certain liabilities of the Fund and the
distribution, after the Closing Date hereinafter referred to, of the Acquiring
Fund shares to the shareholders of the Fund in liquidation of the Fund as
provided herein, all upon the terms and conditions hereinafter set forth in this
Agreement.
WHEREAS, the Acquiring Fund is a registered, diversified, open-end
management investment company, and the Fund is a registered, non-diversified,
closed-end management investment company, and the Fund owns securities which are
assets of the character in which the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquiring Fund and the Fund are authorized to issue
their shares of common stock;
WHEREAS, the Board of Directors of the Acquiring Fund has determined
that the exchange of all of the assets of the Fund and certain liabilities of
the Fund for shares of the Acquiring Fund and the assumption of such liabilities
is in the best interests of the Acquiring Fund's shareholders and that the
interests of the Acquiring Fund's existing shareholders would not be diluted as
a result of this transaction; and
WHEREAS, the Board of Directors of the Fund has determined that the
exchange of all of the assets and certain of the liabilities of the Fund for
shares of the Acquiring Fund and the assumption of such liabilities is in the
best interests of the Fund's shareholders and that the interests of the Fund's
existing shareholders would not be diluted as a result of this transaction:
NOW THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties agree as follows:
1. TRANSFER OF ASSETS OF THE FUND IN EXCHANGE FOR THE ACQUIRING FUND
SHARES AND ASSUMPTION OF FUND LIABILITIES AND LIQUIDATION OF THE FUND.
1.1 Subject to the terms and conditions contained herein, the Fund
agrees to assign, transfer and convey to the Acquiring Fund all of the assets of
the Fund, including all securities and cash (subject to liabilities), and the
Acquiring Fund agrees in exchange therefor (i) to deliver to the Fund the number
of Acquiring Fund shares, including fractional Acquiring Fund shares, determined
as set forth in paragraph 2.3; and (ii) to assume certain liabilities of the
Fund, as set forth in paragraph 1.2. Such transactions shall take place at the
closing (the "Closing") on the closing date (the "Closing Date") provided for in
paragraph 3.1. In lieu of delivering certificates for the Acquiring Fund shares,
the Acquiring Fund shall credit the Acquiring Fund shares to the Fund's account
on the books of the Acquiring Fund and shall deliver a confirmation thereof to
the Fund.
1.2 The Fund will endeavor to discharge all of its known liabilities
and obligations prior to the Closing Date. The Acquiring Fund shall assume all
liabilities, expenses, costs, charges and reserves reflected on an unaudited
statement of assets and liabilities of the Fund prepared by The Dreyfus
Corporation, as of the Valuation Date (as defined in paragraph 2.1), in
accordance with generally accepted accounting principles consistently applied
from the prior audited period. The Acquiring Fund shall assume only those
liabilities of the Fund reflected in that unaudited statement of assets and
liabilities and shall not assume any other liabilities, whether absolute or
contingent.
1.3 Delivery of the assets of the Fund to be transferred shall be made
on the Closing Date and shall be delivered to Mellon Bank, N.A., One Mellon Bank
Center, Pittsburgh, Pennsylvania 15258, the Acquiring Fund's custodian (the
"Custodian"), for the account of the Acquiring Fund, with all securities not in
bearer or book-entry form duly endorsed, or accompanied by duly executed
separate assignments or stock powers, in proper form for transfer, with
signatures guaranteed, and with all necessary stock transfer stamps, sufficient
to transfer good and marketable title thereto (including all accrued interest
and dividends and rights pertaining thereto) to the Custodian for the account of
the Acquiring Fund free and clear of all liens, encumbrances, rights,
restrictions and claims. All cash delivered shall be in the form of immediately
available funds payable to the order of the Custodian for the account of the
Acquiring Fund.
1.4 The Fund will pay or cause to be paid to the Acquiring Fund any
interest received on or after the Closing Date with respect to assets
transferred to the Acquiring Fund hereunder. The Fund will transfer to the
Acquiring Fund any distributions, rights or other assets received by the Fund
after the Closing Date as distributions on or with respect to the securities
transferred. Such assets shall be deemed included in assets transferred to the
Acquiring Fund on the Closing Date and shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable (the
"Liquidation Date"), the Fund will liquidate and distribute pro rata to the
Fund's shareholders of record, determined as of the close of business on the
Closing Date, Acquiring Fund shares received by the Fund pursuant to paragraph
1.1. Such liquidation and distribution will be accomplished by the transfer of
the applicable Acquiring Fund shares then credited to the account of the Fund on
the books of the Acquiring Fund to open accounts on the share records of the
Acquiring Fund in the names of the Fund's shareholders and representing the
respective pro rata number of the applicable Acquiring Fund shares due such
shareholders. All issued and outstanding shares of the Fund simultaneously will
be canceled on the books of the Fund.
1.6 Ownership of Acquiring Fund shares will be shown on the books of
the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be issued
in the manner described in the Acquiring Fund's current prospectus and statement
of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund
shares in a name other than the registered holder of the Acquiring Fund shares
on the books of the Fund as of that time shall, as a condition of such issuance
and transfer, be paid by the person to whom such Acquiring Fund shares are to be
issued and transferred.
1.8 Any reporting responsibility of the Fund is and shall remain the
responsibility of the Fund up to and including the Closing Date and such later
date on which the Fund is dissolved.
2. VALUATION.
2.1 The value of the Fund's assets to be acquired by the Acquiring
Fund hereunder shall be the value of such assets computed as of the close of
trading on the floor of the New York Stock Exchange (currently, 4:00 p.m., New
York time), except that options and futures contracts will be valued 15 minutes
after the close of trading on the floor of the New York Stock Exchange, on the
Closing Date (such time and date being hereinafter called the "Valuation Date"),
using the valuation procedures set forth in the Acquiring Fund's Articles of
Incorporation, as amended, (the "Acquiring Fund's Charter"), and then-current
prospectus or statement of additional information. In no event shall the same
security held by both the Fund and the Acquiring Fund be valued at different
prices.
2.2 The net asset value of an Acquiring Fund share shall be the net
asset value per share computed as of the Valuation Date, using the valuation
procedures set forth in the Acquiring Fund's Charter and then-current prospectus
or statement of additional information.
2.3 The number of Acquiring Fund shares to be issued (including
fractional shares, if any) in exchange for the Fund's net assets shall be
determined by dividing the value of the net assets of the Fund determined using
the same valuation procedures referred to in paragraph 2.1 by the net asset
value of one Acquiring Fund share, determined in accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund.
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be ______, 2000 or such later date as the
parties may mutually agree. All acts taking place at the Closing shall be deemed
to take place simultaneously as of the close of business on the Closing Date
unless otherwise provided. The Closing shall be held at 10:00 a.m., New York
time, at the offices of The Dreyfus Corporation, 200 Park Avenue, New York, New
York, or such other time and/or place as the parties may mutually agree.
3.2 The Custodian shall deliver at the Closing a certificate of an
authorized officer stating that: (a) the Fund's portfolio securities, cash and
any other assets have been delivered in proper form to the Acquiring Fund within
two business days prior to or on the Closing Date; and (b) all necessary taxes
including all applicable stock transfer stamps have been paid, or provision for
payment shall have been made, in conjunction with the delivery of portfolio
securities.
3.3 If on the Valuation Date (a) the New York Stock Exchange or
another primary trading market for portfolio securities of the Acquiring Fund or
the Fund shall be closed to trading or trading thereon shall be restricted, or
(b) trading or the reporting of trading on said Exchange or elsewhere shall be
disrupted so that accurate appraisal of the value of the net assets of the
Acquiring Fund or the Fund is impracticable, the Closing Date shall be postponed
until the first business day after the day when trading shall have been fully
resumed and reporting shall have been restored.
3.4 The transfer agent for the Fund shall deliver at the Closing a
certificate of an authorized officer stating that its records contain the names
and addresses of the Fund's shareholders and the number and percentage ownership
of outstanding shares, respectively, owned by each such shareholder immediately
prior to the Closing. The Acquiring Fund shall issue and deliver a confirmation
evidencing the Acquiring Fund shares to be credited on the Closing Date to the
Secretary of the Fund, or provide evidence satisfactory to the Fund that such
Acquiring Fund shares have been credited to the Fund's account on the books of
the Acquiring Fund. At the Closing, each party shall deliver to the other such
bills of sale, checks, assignments, receipts or other documents as such other
party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES.
4.1 The Fund represents and warrants to the Acquiring Fund as follows:
(a) The Fund is a corporation duly organized and validly existing
under the laws of the State of Maryland and has power to own all of its
properties and assets and to carry out its obligations under this Agreement.
(b) The Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as a closed-end, non-diversified, management
investment company, and such registration has not been revoked or rescinded and
is in full force and effect.
(c) The Fund is not, and the execution, delivery and performance
of this Agreement will not result, in material violation of the Fund's Articles
of Incorporation, as amended (the "Fund's Charter"), or its Bylaws or of any
agreement, indenture, instrument, contract, lease or other undertaking to which
the Fund is a party or by which it is bound.
(d) The Fund has no material contracts or other commitments
outstanding (other than this Agreement) which will be terminated with liability
to it on or prior to the Closing Date.
(e) No litigation or administrative proceeding or investigation
of or before any court or governmental body is currently pending or to its
knowledge threatened against the Fund or any of its properties or assets which,
if adversely determined, would materially and adversely affect its financial
condition or the conduct of its business. The Fund knows of no facts which might
form the basis for the institution of such proceedings, and is not a party to or
subject to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or its
ability to consummate the transactions herein contemplated.
(f) The Statements of Assets and Liabilities of the Fund for the
five fiscal years ended November 30, 1999 have been audited by Ernst & Young
LLP, independent auditors, and are in accordance with generally accepted
accounting principles, consistently applied, and such statements (copies of
which have been furnished to the Acquiring Fund) fairly reflect the financial
condition of the Fund as of such dates, and there are no known contingent
liabilities of the Fund as of such dates not disclosed therein.
(g) Since November 30, 1999, there has not been any material
adverse change in the Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or any
incurrence by the Fund of indebtedness maturing more than one year from the date
such indebtedness was incurred, except as disclosed on the statement of assets
and liabilities referred to in Section 1.2 hereof.
(h) At the Closing Date, all Federal and other tax returns and
reports of the Fund required by law to have been filed by such dates shall have
been filed, and all Federal and other taxes shall have been paid so far as due,
or provision shall have been made for the payment thereof, and to the best of
the Fund's knowledge no such return is currently under audit and no assessment
has been asserted with respect to such returns.
(i) For each fiscal year of its operation, the Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company.
(j) All issued and outstanding shares of the Fund are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable. All of the issued and outstanding shares of the Fund will, at
the time of Closing, be held by the persons and in the amounts set forth in the
records of the transfer agent as provided in paragraph 3.4. The Fund does not
have outstanding any options, warrants or other rights to subscribe for or
purchase any of the Fund shares, nor is there outstanding any security
convertible into any of the Fund shares.
(k) On the Closing Date, the Fund will have full right, power and
authority to sell, assign, transfer and deliver the assets to be transferred by
it hereunder.
(l) The execution, delivery and performance of this Agreement
will have been duly authorized prior to the Closing Date by all necessary action
on the part of the Fund's Board of Directors and, subject to the approval of
shareholders of the Fund, this Agreement will constitute the valid and legally
binding obligation of the Fund, enforceable in accordance with its terms,
subject to the effect of bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws relating to or affecting creditors'
rights generally and court decisions with respect thereto, and to general
principles of equity and the discretion of the court (regardless of whether the
enforceability is considered in a proceeding in equity or at law).
(m) The proxy statement of the Fund (the "Proxy Statement"),
included in the Registration Statement referred to in paragraph 5.5 (other than
information therein that has been furnished by the Acquiring Fund) will, on the
effective date of the Registration Statement and on the Closing Date, not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not materially
misleading.
4.2 The Acquiring Fund represents and warrants as follows:
(a) The Acquiring Fund is a corporation duly organized and
validly existing under the laws of the State of Maryland and has power to carry
on its business as it is now being conducted and to carry out its obligations
under this Agreement.
(b) The Acquiring Fund is registered under the 1940 Act as an
open-end, diversified management investment company, and such registration has
not been revoked or rescinded and is in full force and effect.
(c) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Securities and
Exchange Commission thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not materially misleading.
(d) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of the
Acquiring Fund's Charter or its Bylaws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquiring Fund is
a party or by which it is bound.
(e) No litigation or administrative proceeding or investigation
of or before any court or governmental body is currently pending or to its
knowledge threatened against the Acquiring Fund or any of its properties or
assets which, if adversely determined, would materially and adversely affect its
financial condition or the conduct of its business. The Acquiring Fund knows of
no facts which might form the basis for the institution of such proceedings, and
is not a party to or subject to the provisions of any order, decree or judgment
of any court or governmental body which materially and adversely affects its
business or its ability to consummate the transactions contemplated herein.
(f) The Statements of Assets and Liabilities of the Acquiring
Fund for the five fiscal years ended March 31, 2000 have been audited by Ernst &
Young LLP, independent auditors, and are in accordance with generally accepted
accounting principles, consistently applied, and such statements (copies of
which have been furnished to the Fund) fairly reflect the financial condition of
the Acquiring Fund as of such dates.
(g) Since March 31, 2000, there has not been any material adverse
change in the Acquiring Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or any
incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as disclosed on the
statement of assets and liabilities referred to in Section 4.2(f) hereof.
(h) At the Closing Date, all Federal and other tax returns and
reports of the Acquiring Fund required by law then to be filed shall have been
filed, and all Federal and other taxes shown as due on said returns and reports
shall have been paid or provision shall have been made for the payment thereof.
(i) For each fiscal year of its operation, the Acquiring Fund has
met the requirements of Subchapter M of the Code for qualification and treatment
as a regulated investment company. (j) All issued and outstanding shares of the
Acquiring Fund are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any of the Acquiring Fund's shares, nor is there outstanding any security
convertible into any Acquiring Fund shares.
(k) The execution, delivery and performance of this Agreement
will have been duly authorized prior to the Closing Date by all necessary action
on the part of the Acquiring Fund's Board of Directors, and this Agreement will
constitute the valid and legally binding obligation of the Acquiring Fund
enforceable in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other similar
laws relating to or affecting creditors' rights generally and court decisions
with respect thereto, and to general principles of equity and the discretion of
the court (regardless of whether the enforceability is considered in a
proceeding in equity or at law).
(l) The Proxy Statement included in the Registration Statement
(only insofar as it relates to the Acquiring Fund and is based on information
furnished by the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which such statements were made, not materially misleading.
5. COVENANTS OF THE ACQUIRING FUND AND THE FUND.
5.1 The Acquiring Fund and the Fund each will operate its business in
the ordinary course between the date hereof and the Closing Date, it being
understood that such ordinary course of business will include payment of
customary dividends and distributions.
5.2 The Fund will call a meeting of Fund shareholders to consider and
act upon this Agreement and to take all other action necessary to obtain
approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund
and the Fund will each take, or cause to be taken, all action, and do or cause
to be done, all things reasonably necessary, proper or advisable to consummate
and make effective the transactions contemplated by this Agreement.
5.4 As promptly as practicable, but in any case within sixty days
after the Closing Date, the Fund shall furnish the Acquiring Fund, in such form
as is reasonably satisfactory to the Acquiring Fund, a statement of the earnings
and profits of the Fund for Federal income tax purposes which will be carried
over to the Acquiring Fund as a result of Section 381 of the Code and which will
be certified by the Fund's President or its Vice President and Treasurer.
5.5 The Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement, referred to in paragraph 4.1(m), all to
be included in a Registration Statement on Form N-14 of the Acquiring Fund (the
"Registration Statement"), in compliance with the 1933 Act, the Securities
Exchange Act of 1934, as amended, and the 1940 Act in connection with the
meeting of the Fund shareholders to consider approval of this Agreement and the
transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and such
of the state Blue Sky or securities laws as it may deem appropriate in order to
continue its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by the
Fund of all the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of the Fund contained in this
Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date.
6.2 The Fund shall have delivered to the Acquiring Fund a statement of
the Fund's assets and liabilities, together with a list of the Fund's portfolio
securities showing the tax basis of such securities by lot and the holding
periods of such securities, as of the Closing Date, certified by the Treasurer
of the Fund.
6.3 The Fund shall have delivered to the Acquiring Fund on the Closing
Date a certificate executed in its name by the Fund's President or Vice
President and its Treasurer, in form and substance satisfactory to the Acquiring
Fund, to the effect that the representations and warranties of the Fund made in
this Agreement are true and correct at and as of the Closing Date, except as
they may be affected by the transactions contemplated by this Agreement, and as
to such other matters as the Acquiring Fund shall reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE FUND.
The obligations of the Fund to consummate the transactions provided
for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Acquiring Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions contemplated
by this Agreement, as of the Closing Date with the same force and effect as if
made on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Fund on the Closing
Date a certificate executed in its name by its President or Vice President and
its Treasurer, in form and substance reasonably satisfactory to the Fund, to the
effect that the representations and warranties of the Acquiring Fund made in
this Agreement are true and correct at and as of the Closing Date, except as
they may be affected by the transactions contemplated by this Agreement, and as
to such other matters as the Acquiring Fund shall reasonably request.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND
THE FUND.
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Fund or the Acquiring Fund, the other party to
this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement.
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Fund in accordance with the provisions of the Fund's Charter.
8.2 On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those of
the Securities and Exchange Commission and of state Blue Sky and securities
authorities) deemed necessary by the Acquiring Fund or the Fund to permit
consummation, in all material respects, of the transactions contemplated hereby
shall have been obtained, except where failure to obtain any such consent, order
or permit would not involve a risk of a material adverse effect on the assets or
properties of the Acquiring Fund or the Fund, provided that either party hereto
may for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act.
8.5 The Fund shall have declared a dividend or dividends which,
together with all previous such dividends, shall have the effect of distributing
to the Fund's shareholders all of the Fund's investment company taxable income
for all taxable years or periods ending on or prior to the Closing Date
(computed without regard to any deduction for dividends paid); the excess of its
interest income excludable from gross income under Section 103(a) of the Code
over its disallowed deductions under Sections 265 and 171(a)(2) of the Code, for
all taxable years or periods ending on or prior to the Closing Date; and all of
its net capital gain realized in all taxable years or periods ending on or prior
to the Closing Date (after reduction for any capital loss carry forward).
8.6 The parties shall have received an opinion of Stroock & Stroock &
Lavan LLP substantially to the effect that for Federal income tax purposes:
(a) The transfer of all or substantially all of the Fund's assets
in exchange for the Acquiring Fund shares and the assumption by the Acquiring
Fund of certain identified liabilities of the Fund will constitute a
"reorganization" within the meaning of Section 368(a)(1)(C) of the Code; (b) No
gain or loss will be recognized by the Acquiring Fund upon the receipt of the
assets of the Fund solely in exchange for the Acquiring Fund shares and the
assumption by the Acquiring Fund of certain identified liabilities of the Fund;
(c) No gain or loss will be recognized by the Fund upon the transfer of the
Fund's assets to the Acquiring Fund in exchange for the Acquiring Fund shares
and the assumption by the Acquiring Fund of certain identified liabilities of
the Fund or upon the distribution (whether actual or constructive) of the
Acquiring Fund shares to Fund shareholders in exchange for their shares of the
Fund; (d) No gain or loss will be recognized by Fund shareholders upon the
exchange of their Fund shares for the Acquiring Fund shares; (e) The aggregate
tax basis for the Acquiring Fund shares received by each of the Fund's
shareholders pursuant to the Reorganization will be the same as the aggregate
tax basis of the Fund shares held by such shareholder immediately prior to the
Reorganization, and the holding period of the Acquiring Fund shares to be
received by each Fund shareholder will include the period during which the Fund
shares exchanged therefor were held by such shareholder (provided the Fund
shares were held as capital assets on the date of the Reorganization); and (f)
The tax basis of the Fund assets acquired by the Acquiring Fund will be the same
as the tax basis of such assets to the Fund immediately prior to the
Reorganization, and the holding period of the assets of the Fund in the hands of
the Acquiring Fund will include the period during which those assets were held
by the Fund.
No opinion will be expressed as to the effect of the Reorganization on
(i) the Fund or the Acquiring Fund with respect to any asset as to which any
unrealized gain or loss is required to be recognized for Federal income tax
purposes at the end of a taxable year (or on the termination or transfer
thereof) under a mark-to-market system of accounting, and (ii) any shareholder
of the Fund that is required to recognize unrealized gains and losses for
Federal income tax purposes under a mark-to-market system of accounting.
9. TERMINATION OF AGREEMENT.
9.1 This Agreement and the transaction contemplated hereby may be
terminated and abandoned by resolution of the Board of the Fund or of the
Acquiring Fund, as the case may be, at any time prior to the Closing Date (and
notwithstanding any shareholder vote) if circumstances should develop that, in
the opinion of either Board, make proceeding with the Agreement inadvisable.
9.2 If this Agreement is terminated and the transaction contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this Agreement
shall become void and have no effect, without any liability on the part of any
party hereto or the directors, officers or shareholders of the Acquiring Fund or
of the Fund, as the case may be, in respect of this Agreement, except that the
parties shall bear the aggregate expenses of the transaction contemplated hereby
in proportion to their respective net assets as of the date this Agreement is
terminated or the exchange contemplated hereby is abandoned.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing conditions
may be waived by the Board of the Fund or of the Acquiring Fund if, in the
judgment of either, such waiver will not have a material adverse effect on the
benefits intended under this Agreement to the shareholders of the Fund or of the
Acquiring Fund, as the case may be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided
for herein shall survive consummation of the transactions contemplated hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and merges
and supersedes all prior discussions, agreements and understandings of every
kind and nature between them relating to the subject matter hereof. Neither
party shall be bound by any condition, definition, warranty or representation,
other than as set forth or provided in this Agreement or as may be, on or
subsequent to the date hereof, set forth in a writing signed by the party to be
bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the State of New York, without giving effect to principles
of conflict of laws; provided, however, that the due authorization, execution
and delivery of this Agreement by the Fund and the Acquiring Fund shall be
governed and construed in accordance with the internal laws of the State of
Maryland without giving effect to principles of conflict of laws.
11.4 This Agreement may be executed in counterparts, each of which,
when executed and delivered, shall be deemed to be an original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
<PAGE>
IN WITNESS WHEREOF, the Acquiring Fund and the Fund have caused this
Agreement and Plan of Reorganization to be executed and attested on its behalf
by its duly authorized representatives as of the date first above written.
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
By: ___________________________________
Stephen E. Canter
President
ATTEST: __________________
John B. Hammalian
Secretary
DREYFUS A BONDS PLUS, INC.
By: ___________________________________
Stephen E. Canter
President
ATTEST: ____________________
Robert R. Mullery
Assistant Secretary
<PAGE>
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
The undersigned stockholder of Dreyfus Strategic Governments Income,
Inc. (the "Fund") hereby appoints Emile R. Molineaux and Robert R. Mullery, and
each of them, the attorneys and proxies of the undersigned, with full power of
substitution, to vote, as indicated herein, all of the shares of common stock of
the Fund standing in the name of the undersigned at the close of business on
July __, 2000, at a Special Meeting of Stockholders to be held at the offices of
The Dreyfus Corporation, 200 Park Avenue, 7th Floor, New York, New York 10166,
at 10:00 a.m. on Friday, September 15, 2000, and at any and all adjournments
thereof, with all of the powers the undersigned would possess if then and there
personally present and especially (but without limiting the general
authorization and power hereby given) to vote as indicated on the proposal, as
more fully described in the Prospectus/Proxy Statement for the meeting.
Please mark boxes in blue or black ink.
1. To approve an Agreement and Plan of Reorganization between the Fund
and Dreyfus A Bonds Plus, Inc. (the "Acquiring Fund"), providing for the
transfer of all of the assets of the Fund, subject to its liabilities, in
exchange for shares of the Acquiring Fund and the assumption by the Acquiring
Fund of the Fund's liabilities, and the pro rata distribution of those shares to
Fund shareholders and subsequent dissolution of the Fund.
FOR AGAINST ABSTAIN
2. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting, or any adjournment(s)
thereof.
THIS PROXY IS SOLICITED BY THE FUND'S BOARD OF DIRECTORS AND WILL BE VOTED FOR
THE ABOVE PROPOSAL UNLESS OTHERWISE INDICATED.
Signature(s) should be exactly as name or names
appearing on this proxy. If shares are held jointly,
each holder should sign. If signing is by attorney,
executor, administrator, trustee or guardian, please
give full title.
Dated: , 2000
___________________________
Signature(s)
___________________________
Signature(s)
Sign, Date and Return the Proxy Card
Promptly Using the Enclosed Envelope
<PAGE>
DREYFUS A BONDS PLUS, INC.
STATEMENT OF ADDITIONAL INFORMATION
________________ __, 2000
Acquisition of the Assets of
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
144 Glenn Curtiss Boulevard
Uniondale, New York 11556-0144
1-800-334-6899
By and in Exchange for Class A Shares of
DREYFUS A BONDS PLUS, INC.
144 Glenn Curtiss Boulevard
Uniondale, New York 11556-0144
1-800-645-6561
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the Prospectus/Proxy
Statement dated _____________ __, 2000, relating specifically to the proposed
transfer of all of the assets and liabilities of Dreyfus Strategic Governments
Income, Inc. (the "Fund") in exchange for shares of Dreyfus A Bonds Plus, Inc.
(the "Acquiring Fund"). The transfer is to occur pursuant to an Agreement and
Plan of Reorganization. This Statement of Additional Information consists of
this cover page and the following documents attached hereto:
1. The Acquiring Fund's Statement of Additional Information dated
August 1, 2000.
2. The Acquiring Fund's Annual Report for the fiscal year ended
March 31, 2000.
3. The Fund's Annual Report for the fiscal year ended November 30,
1999.
4. The Fund's Semi-Annual Report for the six-month period ended May
31, 2000.
5. Pro Forma Financial Statements of the Acquiring Fund and Fund
giving effect to the proposed Exchange described in the
Prospectus/Proxy Statement.
The Acquiring Fund's Statement of Additional Information, the Pro
Forma Financial Statements and the financial statements included in the
Acquiring Fund's Annual Report and the Fund's Annual Report and Semi-Annual
Report are incorporated herein by reference. The Prospectus/Proxy Statement
dated ____________, 2000 may be obtained by writing to the Fund or Acquiring
Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144.
<PAGE>
DREYFUS A BONDS PLUS, INC.
STATEMENT OF ADDITIONAL INFORMATION
AUGUST 1, 1999
AS REVISED MARCH 9, 2000
-------------------------------------------------------------------------------
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, 1999, 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
one of 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 Fund's most recent Annual Report and Semi-Annual Report to
Shareholders are separate documents supplied with this Statement of Additional
Information, and the financial statements, accompanying notes and report of
independent auditors appearing in the Annual Report are incorporated by
reference into this Statement of Additional Information.
TABLE OF CONTENTS
PAGE
Description of the Fund.................................................B-2
Management of the Fund..................................................B-2
Management Arrangements.................................................B-2
How to Buy Shares.......................................................B-2
Shareholder Services Plan...............................................B-2
How to Redeem Shares....................................................B-2
Shareholder Services....................................................B-2
Portfolio Transactions..................................................B-2
Determination of Net Asset Value........................................B-2
Dividends, Distributions and Taxes......................................B-2
Performance Information.................................................B-2
Information About the Fund..............................................B-2
Counsel and Independent Auditors........................................B-2
Appendix................................................................B-1
<PAGE>
DESCRIPTION OF THE FUND
The Fund is a Maryland corporation that was organized on February 23,
1976. The Fund is an open-end management investment company, known as a mutual
fund. The Fund is a diversified fund, which means that, with respect to 75% of
the Fund's total assets, the Fund will not invest more than 5% of its assets in
the securities of any single issuer.
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.
CERTAIN PORTFOLIO SECURITIES
The following information supplements and should be read in
conjunction with the Fund's Prospectus.
CORPORATE DEBT SECURITIES. Corporate debt securities include corporate
bonds, debentures, notes and other similar instruments, including certain
convertible securities. Debt securities may be acquired with warrants attached.
Corporate income-producing securities also may include forms of preferred or
preference stock. The rate of interest on a corporate debt security may be
fixed, floating or variable, and may vary inversely with respect to a reference
rate. The rate of return or return of principal on some debt obligations may be
linked or indexed to the level of exchange rates between the U.S. dollar and a
foreign currency or currencies.
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.
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.
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, the interest from
which, in the opinion of bond counsel to the issuer, is exempt from Federal
income tax. 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 that do not carry the pledge
of the credit of the issuing municipality, but generally are guaranteed by the
corporate entity on whose behalf they are issued. Notes are short-term
instruments which are obligations of the issuing municipalities or agencies and
are sold in anticipation of a bond sale, collection of taxes or receipt of other
revenues. Municipal obligations include municipal lease/purchase agreements
which are similar to installment purchase contracts for property or equipment
issued by municipalities. Municipal obligations bear fixed, floating or variable
rates of interest, which are determined in some instances by formulas under
which the municipal obligation's interest rate will change directly or inversely
to changes in interest rates or an index, or multiples thereof, in many cases
subject to a maximum and minimum. 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 obligation 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 may invest in municipal obligations, the ratings of which
correspond with the ratings of other permissible Fund investments. The Fund
currently intends to invest no more than 25% of its assets in municipal
obligations. However, this percentage may be varied from time to time without
shareholder approval.
VARIABLE AND FLOATING RATE SECURITIES. Variable and floating rate
securities provide for a periodic adjustment in the interest rate paid on the
obligations. The terms of such obligations must provide that interest rates are
adjusted periodically based upon an interest rate adjustment index as provided
in the respective obligations. The adjustment intervals may be regular, and
range from daily up to annually, or may be event based, such as based on a
change in the prime rate.
The Fund may invest in floating rate debt instruments ("floaters").
The interest rate on a floater is a variable rate which is tied to another
interest rate, such as a money-market index or Treasury bill rate. The interest
rate on a floater resets periodically, typically every six months. Because of
the interest rate reset feature, floaters provide the Fund with a certain degree
of protection against rises in interest rates, although the Fund will
participate in any declines in interest rates as well.
The Fund also may invest in inverse floating rate debt instruments
("inverse floaters"). The interest rate on an inverse floater resets in the
opposite direction from the market rate of interest to which the inverse floater
is indexed or inversely to a multiple of the applicable index. An inverse
floating rate security may exhibit greater price volatility than a fixed rate
obligation of similar credit quality.
MORTGAGE-RELATED SECURITIES. Mortgage-related securities are a form of
derivative collateralized by pools of commercial or residential mortgages. Pools
of mortgage loans are assembled as securities for sale to investors by various
governmental, government-related and private organizations. These securities may
include complex instruments such as collateralized mortgage obligations and
stripped mortgage-backed securities, mortgage pass-through securities, interests
in real estate mortgage investment conduits ("REMICs"), adjustable rate
mortgages, real estate investment trusts ("REITs"), or other kinds of
mortgage-backed securities, including those with fixed, floating and variable
interest rates, those with interest rates 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.
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.
Residential mortgage-related securities may be issued using a variety of
structures, including multi-class structures featuring senior and subordinated
classes.
Mortgage-related securities issued by 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 certificates also
are supported by the authority of GNMA to borrow funds from the U.S. Treasury to
make payments under its guarantee. Mortgage-related securities issued by 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. Fannie Maes are
guaranteed as to timely payment of principal and interest by FNMA.
Mortgage-related securities issued by FHLMC include FHLMC Mortgage Participation
Certificates (also known as "Freddie Macs" or "PCs"). 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.
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.
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 ("CMOS") AND MULTI-CLASS
PASS-THROUGH-SECURITIES--A CMO is a multiclass bond backed by a pool of mortgage
pass-through certificates or mortgage loans. CMOs may be collateralized by (a)
Ginnie Mae, Fannie Mae, or Freddie Mac pass-through certificates, (b)
unsecuritized mortgage loans insured by the Federal Housing Administration or
guaranteed by the Department of Veterans' Affairs, (c) unsecuritized
conventional mortgages, (d) other mortgage-related securities, or (e) any
combination thereof.
Each class of CMOs, often referred to as a "tranche," is issued at a
specific coupon rate and has a stated maturity or final distribution date.
Principal prepayments on collateral underlying a CMO may cause it to be retired
substantially earlier than the stated maturities or final distribution dates.
The principal and interest on the underlying mortgages may be allocated among
the several classes of a series of a CMO in many ways. One or more tranches of a
CMO may have coupon rates which reset periodically at a specified increment over
an index, such as the London Interbank Offered Rate ("LIBOR") (or sometimes more
than one index). These floating rate CMOs typically are issued with lifetime
caps on the coupon rate thereon. The Fund also may invest in inverse floating
rate CMOs. Inverse floating rate CMOs constitute a tranche of a CMO with a
coupon rate that moves in the reverse direction to an applicable index such as
LIBOR. Accordingly, the coupon rate thereon will increase as interest rates
decrease. Inverse floating rate CMOs are typically more volatile than fixed or
floating rate tranches of CMOs.
Many inverse floating rate CMOs have coupons that move inversely to a
multiple of the applicable indexes. The effect of the coupon varying inversely
to a multiple of an applicable index creates a leverage factor. Inverse floaters
based on multiples of a stated index are designed to be highly sensitive to
changes in interest rates and can subject the holders thereof to extreme
reductions of yield and loss of principal. The markets for inverse floating rate
CMOs with highly leveraged characteristics at times may be very thin. The Fund's
ability to dispose of its positions in such securities will depend on the degree
of liquidity in the markets for such securities. It is impossible to predict the
amount of trading interest that may exist in such securities, and therefore the
future degree of liquidity.
STRIPPED MORTGAGE-BACKED SECURITIES--The Fund also may invest in stripped
mortgage-backed securities 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 securities'
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 IO 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 from rents
from real property or interest on loans secured by mortgages on real property,
and distribute to shareholders annually a substantial portion of its otherwise
taxable income.
REITs are characterized as equity REITs, mortgage REITs and hybrid
REITs. Equity REITs, which may include operating or finance companies, own real
estate directly and the value of, and income earned by, the REITs 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.
PRIVATE ENTITY SECURITIES--These mortgage-related securities are issued by
commercial banks, savings and loan institutions, mortgage bankers, private
mortgage insurance companies and other nongovernmental 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.
OTHER MORTGAGE-RELATED SECURITIES--Other mortgage-related securities include
securities other than those described above that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage loans
on real property, including CMO residuals. Other mortgage-related securities may
be equity or debt securities issued by agencies or instrumentalities of the U.S.
Government or by private originators of, or investors in, mortgage loans,
including savings and loan associations, homebuilders, mortgage banks,
commercial banks, investment banks, partnerships, trusts and special purpose
entities of the foregoing.
ASSET-BACKED SECURITIES. Asset-backed securities are a form of
derivative. 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.
U.S. TREASURY INFLATION PROTECTION SECURITIES. The Fund may invest in
U.S. Treasury securities including Treasury Inflation-Protection Securities
("TIPS"), which are 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.
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" ("TRs"), "Treasury Investment
Growth Receipts" ("TIGRs"), "Liquid Yield Option Notes" ("LYONs"), and
"Certificates of Accrual on Treasury Securities" ("CATS"). TIGRs, LYONs and CATS
are interests in private proprietary accounts while TRs are interests in
accounts sponsored by the U.S. Treasury.
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.
FOREIGN SECURITIES; FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF
SUPRANATIONAL ENTITIES. The Fund may invest up to 10% of net assets in foreign
securities. Issuers organized outside the United States that have a majority of
their assets or derive a majority of their annual revenue in the United States
shall be deemed to be U.S. issuers and not foreign issuers for purposes of the
Fund's policy of investing up to 10% of its assets in foreign securities. 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. 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.
These securities may include securities that are not readily marketable, such as
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 privately negotiated, non-exchange traded options and
securities used to cover such options. 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.
MONEY MARKET INSTRUMENTS. The Fund may invest in money market
instruments consisting of U.S. Government securities, certificates of deposit,
time deposits, bankers' acceptances, short-term investment grade corporate bonds
and other short-term debt instruments, and repurchase agreements. Under normal
market conditions, the Fund does not expect to have 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 Manager determines that adverse market conditions exist, the Fund may adopt
a temporary defensive position and invest up to 100% of its assets in money
market instruments.
INVESTMENT TECHNIQUES
The following information supplements and should be read in
conjunction with the Fund's Prospectus.
LEVERAGE. Leveraging (that is, buying securities using borrowed money)
exaggerates the effect on net asset value of any increase or decrease in the
market value of the Fund's portfolio. These borrowings will be subject to
interest costs which may or may not be recovered by appreciation of the
securities purchased; in certain cases, interest costs may exceed the return
received on the securities purchased. For borrowings for investment purposes,
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 amount of its
borrowings and restore the 300% asset coverage, even though it may be
disadvantageous from an investment standpoint to sell securities at that time.
The Fund also may be required to maintain minimum average balances in connection
with such borrowing or pay a commitment or other fee to maintain a line of
credit; either of these requirements would increase the cost of borrowing over
the stated interest rate.
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. Reverse repurchase
agreements may be preferable to a regular sale and later repurchase of the
securities because it avoids certain market risks and transaction costs. Such
transactions, however, may increase the risk of potential fluctuations in the
market value of the Fund's assets. In addition, interest costs on the cash
received may exceed the return on the securities purchased. To the extent the
Fund enters into a reverse repurchase agreement, the Fund will segregate
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. Except for these transactions, the Fund's
borrowings generally will be unsecured.
SHORT-SELLING. In these transactions, the Fund sells a security it
does not own 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 also may make short sales "against the box," in which the
Fund enters into a short sale of a security it owns.
Until the Fund closes its short position or replaces the borrowed
security, it will: (a) segregate permissible liquid assets at such a level that
the amount segregated, together with the amount deposited with the broker as
collateral, always equals the current value of the security sold short; or (b)
otherwise cover its short position.
LENDING PORTFOLIO SECURITIES. The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to borrow
securities to complete certain transactions. The Fund continues to be entitled
to payments in amounts equal to the interest, dividends or other distributions
payable on the loaned securities, which affords the Fund an opportunity to earn
interest on the amount of the loan and on the loaned securities' collateral.
Loans of portfolio securities may not exceed 33-1/3% of the value of the Fund's
total assets, and the Fund will receive collateral consisting of cash, U.S.
Government securities or irrevocable letters of credit which will be maintained
at all times in an amount equal to at least 100% of the current market value of
the loaned securities. Such loans are terminable by the Fund at any time upon
specified notice. The Fund might experience risk of loss if the institution with
which it has engaged in a portfolio loan transaction breaches its agreement with
the Fund. In connection with its securities lending transactions, the Fund may
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.
DERIVATIVES. The Fund may invest in, or enter into, derivatives, such
as options and futures, mortgage-related securities and asset-backed securities,
for a variety of reasons, including to hedge certain market risks, to provide a
substitute for purchasing or selling particular securities or to increase
potential income gain. Derivatives may provide a cheaper, quicker or more
specifically focused way for the Fund to invest than "traditional" securities
would.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular derivative and the
portfolio as a whole. Derivatives permit the Fund to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Fund can increase or decrease the level of
risk, or change the character of the risk, of its portfolio by making
investments in specific securities. However, derivatives may entail investment
exposures that are greater than their cost would suggest, meaning that a small
investment in derivatives could have a large potential impact on the Fund's
performance.
If the Fund invests in derivatives at inopportune times or judges
market conditions incorrectly, such investments may lower the Fund's return or
result in a loss. The Fund also could experience losses if its derivatives were
poorly correlated with its other investments, or if the Fund were unable to
liquidate its position because of an illiquid secondary market. The market for
many derivatives is, or suddenly can become, illiquid. Changes in liquidity may
result in significant, rapid and unpredictable changes in the prices for
derivatives.
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, no Fund may 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.
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--IN GENERAL. The Fund may enter into futures contracts in
U.S. domestic markets, such as the Chicago Board of Trade and the International
Monetary Market of the Chicago Mercantile Exchange. 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 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. In addition,
the segregation of such assets will have the effect of limiting the Fund's
ability otherwise to invest those assets.
SPECIFIC FUTURES TRANSACTIONS. The Fund may purchase and sell stock index
futures contracts. A stock index future obligates the Fund to pay or receive an
amount of cash equal to a fixed dollar amount specified in the futures contract
multiplied by the difference between the settlement price of the contract on the
contract's last trading day and the value of the index based on the stock prices
of the securities that comprise it at the opening of trading in such securities
on the next business day.
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--IN GENERAL. The Fund may purchase call and put options and write (i.e.,
sell) covered call and put option contracts. 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 segregated
to fulfill the obligation undertaken. The principal reason for writing covered
call and put options is to realize, through the receipt of premiums, a greater
return than would be realized on the underlying securities alone. The Fund
receives a premium from writing covered call or put options which it retains
whether or not the option is exercised.
There is no assurance that sufficient trading interest to create a
liquid secondary market on a securities exchange will exist for any particular
option or at any particular time, and for some options no such secondary market
may exist. A liquid secondary market in an option may cease to exist for a
variety of reasons. In the past, for example, higher than anticipated trading
activity or order flow, or other unforeseen events, at times have rendered
certain of the clearing facilities inadequate and resulted in the institution of
special procedures, such as trading rotations, restrictions on certain types of
orders or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If, as a
covered call option writer, the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise or it otherwise covers its position.
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 such predictions are incorrect, the
Fund may incur losses.
FUTURE DEVELOPMENTS. The Fund may take advantage of opportunities in
the area of options and futures contracts and options on futures contracts and
any other derivatives 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 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 be expected to
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 segregate 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 intends to 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 segregate permissible liquid assets at
least equal at all times to the amount of the Fund's purchase 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.
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.
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 Manager'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.
INVESTMENT CONSIDERATIONS AND 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 Investors Service, Inc.
("Moody's") and BBB or lower by Standard & Poor's Rating Group ("S&P"), Fitch
IBCA, Inc. ("Fitch") and Duff & Phelps Credit Rating Co. ("Duff"), 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.
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 or BB by S&P, Fitch or Duff, or as low as the lowest rating
assigned by Moody's, S&P, Fitch or Duff. 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 would disrupt severely the
market for such securities and have an adverse impact on the value of such
securities, and could adversely affect the ability of the issuers of such
securities to repay principal and pay interest thereon, which would 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 average distribution of investments of the Fund in corporate bonds
(excluding convertible preferred stock and convertible bonds) by ratings for the
fiscal year ended March 31, 1999, calculated monthly on a dollar weighted basis,
was as follows:
MOODY'S OR S&P, FITCH OR DUFF PERCENTAGE
------- ------------------ ----------
Aaa AAA 42.6%
Aa AA 10.5%
A A 31.4%
Baa BBB 8.4%
Ba BB 6.5%
B B .3%
NR NR 1.4%*
-----
101.1%**
---------------------
* Included in the Not Rated category are securities comprising 1.4% of the
Fund's market value which, while not rated, have been determined by the
Manager to be of comparable quality to securities in the following rating
categories: A/A .1%, Baa/BBB 1.1%, B/B .1% and Caa/CCC .1%.
** The Fund also owns convertible preferred stocks - AAA .3%, BBB .5% and BB
.1%. Approximately (2.0%) of the Fund's assets were invested in cash or
cash equivalents.
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.
MORTGAGE-RELATED SECURITIES. 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 generally are subject to credit risks associated
with the performance of the underlying mortgage properties. 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 CMOs, 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.
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 foreign securities usually are held
outside the United States, the Fund investing in such securities will be subject
to additional risks which include possible adverse political and economic
developments, seizure or nationalization of foreign deposits and adoption of
governmental restrictions which might adversely affect or restrict the payment
of principal and interest on the foreign securities to investors located outside
the country of the issuer, whether from currency blockage or otherwise.
Moreover, foreign securities held by the Fund may trade on days when the Fund
does not calculate its net asset value and thus affect the Fund's net asset
value on days when investors have no access to the Fund.
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.
SIMULTANEOUS INVESTMENTS. Investment decisions for the Fund are made
independently from those of the other investment companies advised by the
Manager. 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.
INVESTMENT RESTRICTIONS
The Fund's investment objective is a fundamental policy, 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. In addition, the Fund has adopted
investment restrictions numbered 1 through 8 as fundamental policies. 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 instrumentality's.
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.
MANAGEMENT OF THE FUND
The Fund's Board is responsible for the management and supervision of
the Fund. The Board approves all significant agreements between the Fund and
those companies that furnish services to the Fund. These companies are as
follows:
The Dreyfus Corporation..Investment Adviser
Premier Mutual Fund Services, Inc.Distributor
Dreyfus Transfer, Inc....Transfer Agent
Mellon Bank, N.ACustodian
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 also is
a director of The Noel Group, Inc., a venture capital company (for
which, from February 1995 until November 1997, he was Chairman of the
Board), 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, Career Blazers Inc. (formerly, Staffing
Resources), a temporary placement firm and Century Business Services,
Inc., a provider of various outsourcing functions for small and medium
sized companies. For more than five years prior to January 1995, he
was President, a director and, until August 1994, Chief Operating
Officer of the Manager and Executive Vice President and a director of
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager
and, until August 24, 1994, the Fund's distributor. From August 1994
until December 31, 1994, he was a director of Mellon Bank Corporation.
He is 55 years old and his address is 200 Park Avenue, New York, New
York 10166.
DAVID P. FELDMAN, BOARD MEMBER. A director of several mutual funds in the 59
Wall Street Mutual Funds Group, and of the Jeffrey Company, a private
investment company. He was employed by AT&T from July 1961 to his
retirement in May 1997, most recently serving as Chairman and Chief
Executive Officer of AT&T Investment Management Corporation. He is 59
years old and his address is 466 Lexington Avenue, New York, New York
10017.
JOHN M. FRASER, JR., BOARD MEMBER. Retired 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. He is 78 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 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 and, from 1985 to 1989, Chairman of its Advancement
Management Program. He is Chairman of The Measurisk Group, a risk
measurement advisory and software development firm, Co-Chairman of the
Investment Committee for Massachusetts State Retirement Fund, and a
director of the Dun & Bradstreet Corp., Excel Limited, a Bermuda -
based insurance company, Cooke & Bieler, investment counselors, NASD
Regulation, Inc. and the Federal Reserve Bank of Boston. He is 60
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 a partner
of Lovejoy, Wasson & Ashton from January 1977 to September 1979. He
was President and director of the Edna McConnell Clark Foundation, a
philanthropic organization, from September 1971 to December 1976. He
is 68 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. Merchandise and marketing Consultant.
From 1997 to 1998, Director of Merchandise and Marketing of Corporate
Property Investors, a real estate investment company. From 1974 to
1976, she was owner and manager of a merchandise and marketing
consulting firm. Prior to 1974, she was a Vice President of Macy's,
New York. She is 74 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 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; from September 1969 to August 1979, he was Henry R. Luce
Professor of Urban Values at New York University; from 1975 to 1990,
he was a director of Lincoln National Corporation, an insurance
company; and from 1977 to 1990, he was a director of Warner-Lambert
Company, a pharmaceutical and consumer products company. He is 79
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 a director emeritus
of Pfizer, Inc., a pharmaceutical company, where he served as a
director from 1978 to 1996; and a director of Tulerik, Inc., a
biotechnology company, and Genos, Inc., a genomics company. He was
Vice President for Health Sciences and Director of the Cancer Center
at Columbia University from 1973 to September 1980, and Professor of
Medicine and of Human Genetics and Development at Columbia University
from 1968 to 1982. He was a director of Life Technologies, Inc., a
life science company producing products for cell and molecular biology
and microbiology from 1986 to 1996. He is 72 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; and a
director of LeukoSite Inc., a biopharmaceutical company. Dr. Peretz is
also Co-chairman of THE STREET.COM, a financial daily on the Web and a
director of The Electronic Newsstand, a distributor of magazines 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 60 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 Malibu Entertainment International, Inc., the Lillian
Vernon Corporation and Winstar Communications, Inc. He was, 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. He is 66
years old and his address is 126 East 57th 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, 1999 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, 1998, was as
follows:
<TABLE>
<CAPTION>
TOTAL COMPENSATION
AGGREGATE FROM FUND AND FUND COMPLEX
NAME OF BOARD MEMBER COMPENSATION FROM FUND** PAID TO BOARD MEMBERS
-------------------- ------------------------ ------------------------
<S> <C> <C>
Joseph S. DiMartino $6,875 $619,660(187)
David P. Feldman $5,000 $106,750(56)
John M. Fraser, Jr. $5,000 $ 75,750(42)
Robert R. Glauber $5,000 $ 88,250(41)
James F. Henry $5,500 $ 54,250(28)
Rosalind Gersten Jacobs $5,000 $ 84,000(44)
Irving Kristol $5,000 $ 50,000(28)
Dr. Paul A. Marks $5,000 $ 50,000(28)
Dr. Martin Peretz $5,500 $ 54,250(28)
Bert W. Wasserman $5,500 $ 54,250(28)
</TABLE>
---------------------------
* Represents the number of separate portfolios comprising the investment
companies in the Fund Complex, including the Fund, for which the Board
member serves.
** Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $3,036 for all Board members as a group.
OFFICERS OF THE FUND
MARIE E. CONNOLLY, PRESIDENT AND TREASURER. President, Chief Executive
Officer, Chief Compliance 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 42 years old.
MARGARET W. CHAMBERS, VICE PRESIDENT AND SECRETARY. Senior Vice President and
General Counsel of Funds Distributor Inc., and an officer of other
investment companies advised or administered by the Manager. From
August 1996 to March 1998, she was Vice President and Assistant
General Counsel for Loomis, Sayles & Company, L.P. From January 1986
to July 1996, she was an associate with the law firm of Ropes & Gray.
She is 39 years old.
FREDERICK C. DEY, VICE PRESIDENT AND ASSISTANT SECRETARY AND ASSISTANT
TREASURER. Vice President, New Business Development of Funds
Distributor, Inc. and an officer of other investment companies advised
or administered by the Manager. From 1988 to August 1994, he was
Manager of High Performance Fabrics Division of Springs Industries,
Inc., where he was responsible for sales and marketing. Prior to
joining Springs Industries, he served as an analyst at Lebow
Industries. He is 38 years old.
STEPHANIE D. PIERCE, VICE PRESIDENT, ASSISTANT TREASURER 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. From April 1997 to March, 1998, she was
employed as a Relationship Manager with Citibank, N.A. From August
1995 to April 1997, she was an Assistant Vice President with Hudson
Valley Bank, and from September 1990 to August 1995, she was Second
Vice President with Chase Manhattan Bank. She is 30 years old.
JOHN P. COVINO, VICE PRESIDENT AND ASSISTANT TREASURER. Vice President and
Treasury Group Manager of Treasury Servicing and Administration of
Funds Distributor, Inc. and an officer of other investment companies
advised or administered by the Manager. From December 1995 to November
1998, he was employed by Fidelity Investments where he held multiple
positions in their Institutional Brokerage Group. Prior to joining
Fidelity, he was employed by SunGard Brokerage systems where he was
responsible for the technology and development of the accounting
product group. He is 36 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, Inc. She is 35 years old.
GEORGE A. RIO, VICE PRESIDENT AND ASSISTANT TREASURER. Executive Vice
President and Client Service Director of Funds Distributor, Inc., and
an officer of other investment companies advised or administered by
the Manager. From June 1995 to March 1998, he was Senior Vice
President and Senior Key Account Manager for Putnam Mutual Funds. From
May 1994 to June 1995, he was Director of Business Development for
First Data Corporation. He is 44 years old.
JOSEPH F. TOWER, III, VICE PRESIDENT AND ASSISTANT TREASURER. Senior Vice
President, Treasurer, 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 37 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. He is 30 years old.
CHRISTOPHER J. KELLEY, VICE PRESIDENT AND ASSISTANT SECRETARY. Vice President
and Senior Associate General Counsel of Funds Distributor, Inc., and
an officer of other investment companies advised or administered by
the Manager. From April 1994 to July 1996, he was Assistant Counsel at
Forum Financial Group. He is 34 years old.
KATHLEEN K. MORRISEY, VICE PRESIDENT AND ASSISTANT SECRETARY. Manager of
Treasury Services Administration of Funds Distributor, Inc., and an
officer of other investment companies advised or administered by the
Manager. From July 1994 to November 1995, she was the Fund Accountant
for Investors Bank & Trust Company. She is 27 years old.
ELBA VASQUEZ, 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
March 1990 to May 1996, she was employed by U.S. Trust Company of New
York where she held various sales and marketing positions. She is 37
years old.
KAREN JACOPPO-WOOD, VICE PRESIDENT AND ASSISTANT SECRETARY. Vice President
and Senior Counsel of Funds Distributor, Inc. and an officer of other
investment companies advised or administered by the Manager. From June
1994 to January 1996, she was Manager of SEC Registration at Scudder,
Stevens & Clark, Inc. She is 33 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 July 13, 1999.
The following shareholders owned, either beneficially or of record, 5%
or more of the outstanding voting securities of the Fund on July 13, 1999:
Nationwide QPVA c/o IPO CO 67, Columbus, Ohio 43218 - 17.34%; Charles Schwab &
Co., Inc. Reinvest Account, San Francisco California 94104 - 9.33%; and Boston
Safe Deposit & Trust Co. TTGE as Agent - Omnibus Account, Medford, Massachusetts
02155 - 5.64%.
MANAGEMENT ARRANGEMENTS
INVESTMENT ADVISER. The Manager is a wholly-owned subsidiary of Mellon
Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). 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.
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 14, 1998. 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:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment Officer
and a director; Thomas F. Eggers, Vice Chairman--Institutional; Lawrence S.
Kash, Vice Chairman and a director; J. David Officer, Vice Chairman and a
director; Ronald P. O'Hanley III, Vice Chairman; William T. Sandalls, Jr.,
Executive Vice President; Mark N. Jacobs, Vice President, General Counsel and
Secretary; Diane P. Durnin, Vice President--Product Development; Patrice M.
Kozlowski, Vice President--Corporate Communications; Mary Beth Leibig, Vice
President--Human Resources; Andrew S. Wasser, Vice President--Information
Systems; Theodore A. Schachar, Vice President; Wendy Strutt, Vice President;
Richard Terres, Vice President; William H. Maresca, Controller; James Bitetto,
Assistant Secretary; Steven F. Newman, Assistant Secretary; and Mandell L.
Berman, Burton C. Borgelt, Steven G. Elliott, Martin C. McGuinn, Richard W. Sabo
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 Michael Hoeh, Roger King, John Koerber, 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 pay the Distributor for shareholder
services from the Manager's own assets, including past profits but not including
the management fees paid by the Fund. The Distributor may use part or all of
such payments to pay securities dealers, banks or other financial institutions
in respect of these services. The Manager also may make such advertising and
promotional expenditures, using its own resources, as it from time to time deems
appropriate.
Under the Manager's personal securities trading policy (the "Policy"),
the Manager employees must preclear personal transactions in securities not
exempt under the Policy. In addition, the Manager's employees must report their
personal securities transactions and holdings, which are reviewed for compliance
with the Policy. In that regard, the Manager's portfolio managers and other
investment personnel also are subject to the oversight of Mellon's Investment
Ethics Committee. The Manager's portfolio managers and other investment
personnel who comply with the Policy's preclearance and disclosure procedures,
and the requirements of the Committee, may be permitted to purchase, sell or
hold securities which also may be or are held in fund(s) they manage or for
which they otherwise provide investment advice.
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 Board members 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 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, 1997, 1998 and 1999
amounted to $3,885,766, $3,914,925 and $3,967,610, 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 1997, 1998 and 1999.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of the Fund's net assets increases.
DISTRIBUTOR. The Distributor, located at 60 State Street, Boston,
Massachusetts 02109, serves as the Fund's distributor on a best efforts basis
pursuant to an agreement which is renewable annually.
The Distributor may pay dealers a fee based on 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 or Funds or
certain other products made available by the Distributor to such plan or
programs exceeds $1,000,000 ("Eligible Benefit Plans"). Generally, the fee paid
to dealers will not exceed 1% of the amount invested through such dealers. The
Distributor, however, may pay dealers a higher fee and 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.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN. Dreyfus
Transfer, Inc., (the "Transfer Agent"), 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.
Mellon Bank, N.A. (the "Custodian"), the Manager's parent, One Mellon
Bank Center, Pittsburgh, Pennsylvania 15258, is the Fund's custodian. 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.
HOW TO BUY SHARES
GENERAL. 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. Share 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.
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 is $750 for
Dreyfus-sponsored Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a
non-working spouse, Roth IRAs, IRAs set up under a Simplified Employee Pension
Plan ("SEP-IRAs"), and rollover IRAs) and 403(b)(7) Plans with only one
participant and $500 for Dreyfus-sponsored Education IRAs, with no minimum for
subsequent purchases. The initial investment must be accompanied by the Account
Application. For full-time or part-time employees of the Manager or any of its
affiliates or subsidiaries, directors of the Manager, Board members of a fund
advised by the Manager, 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 Manager or any of its affiliates or
subsidiaries who elect to have a portion of their pay directly deposited into
their Fund 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 further vary 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 you against loss in a declining market.
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 authorized entity. 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. For purposes of determining net asset value per share, options and
futures contracts will be valued 15 minutes after the close of trading on the
floor of the New York Stock Exchange. Net asset value per share is computed by
dividing the value of the Fund's net assets (i.e., the value of its assets less
liabilities) by the total number of shares outstanding. See "Determination of
Net Asset Value."
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.
DREYFUS TELETRANSFER PRIVILEGE. You may purchase shares 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 ("ACH") member may be so designated.
Dreyfus TELETRANSFER purchase orders may be made at any time. Purchase
orders received by 4:00 p.m., New York time, on any day 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 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 Fund 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 "How to Redeem 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. You 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 Fund has adopted a Shareholder Services Plan (the "Plan") pursuant
to which the Fund reimburses Dreyfus Service Corporation an amount not to exceed
an annual rate of .25% 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
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 September 14, 1998. 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, 1999, the Fund was charged
$831,198 pursuant to the Plan.
HOW TO REDEEM SHARES
CHECK REDEMPTION PRIVILEGE. The Fund provides Redemption Checks
("Checks") automatically upon opening an account, unless you specifically refuse
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 your 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
your agent, will cause the Fund to redeem a sufficient number of shares in your
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 you. You
generally will be subject to the same rules and regulations that apply to
checking accounts, although election of this Privilege creates only a
shareholder-transfer agent relationship with the Transfer Agent. If 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.
You should date your Checks with the current date when you write them.
Please do not postdate your Checks. If you do, the Transfer Agent will honor,
upon presentment, even if presented before the date of the Check, all postdated
Checks which are dated within six months of presentment for payment, if they are
otherwise in good order.
Checks are free, but the Transfer Agent will impose a fee for stopping
payment of a Check upon your request or if the Transfer Agent cannot honor a
Check due to insufficient funds or other valid reason. If the amount of the
Check is greater than the value of the shares in your account, the Check will be
returned marked insufficient funds. Checks should not be used to close an
account.
This Privilege will be terminated immediately, without notice, with
respect to any account which is, or becomes, subject to backup withholding on
redemptions. Any Check written on an account which has become subject to backup
withholding on redemptions will not be honored by the Transfer Agent.
WIRE REDEMPTION PRIVILEGE. By using this Privilege, you authorize the
Transfer Agent to act on wire, telephone or letter redemption instructions from
any person representing himself or herself to be you, 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 if the
Transfer Agent receives a 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 you on the Account Application or
Shareholder Services Form, or to a correspondent bank if your 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
your bank is necessary to avoid a delay in crediting the funds to your bank
account.
If you have access to telegraphic equipment, you may wire redemption
requests to the Transfer Agent by employing the following transmittal code which
may be used for domestic or overseas transmissions:
TRANSFER AGENT'S
TRANSMITTAL CODE ANSWER BACK SIGN
---------------- ----------------
144295 144295 TSSG PREP
If you do not have direct access to telegraphic equipment, you may
have the wire transmitted by contacting a TRT Cables operator at 1-800-654-7171,
toll free. You should advise the operator that the above transmittal code must
be used and should also inform the operator of the Transfer Agent's answer back
sign.
To change the commercial bank or account designated to receive wire
redemption proceeds, a written request must be sent to the Transfer Agent. This
request must be signed by each shareholder, with each signature guaranteed as
described below under "Stock Certificates; Signatures."
DREYFUS TELETRANSFER PRIVILEGE. You may request by telephone that
redemption proceeds be transferred between your Fund account and your bank
account. Only a bank account maintained in a domestic financial institution
which is an ACH member may be designated. Redemption proceeds will be on deposit
in your account at an ACH member bank ordinarily two business 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. You should be aware
that if you have selected the Dreyfus TELETRANSFER Privilege, any request for a
wire redemption will be effected as a Dreyfus TELETRANSFER transaction through
the ACH system unless more prompt transmittal specifically is requested. See
"How to Buy 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 holder of
a joint account, and each signature must be guaranteed. Signatures on endorsed
certificates submitted for redemption also must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations,
as well as from participants in the New York Stock Exchange Medallion Signature
Program, the Securities Transfer Agents Medallion Program ("STAMP") and the
Stock Exchanges Medallion Program. Guarantees must be signed by an authorized
signatory of the guarantor and "Signature-Guaranteed" must appear with the
signature. The Transfer Agent may request additional documentation from
corporations, executors, administrators, trustees or guardians, and may accept
other suitable verification arrangements from foreign investors, such as
consular verification. For more information with respect to
signature-guarantees, please call 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 and is a
fundamental policy of the Fund which may not be changed without shareholder
approval. 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 in 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 portfolio of the Fund is valued. If the recipient sells 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 period when the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (b) when
trading in the markets the Fund ordinarily utilizes is restricted, or when an
emergency exists as determined by the Securities and Exchange Commission so that
disposal of the Fund's investments or determination of its net asset value is
not reasonably practicable or (c) for such other periods as the Securities and
Exchange Commission by order may permit to protect the Fund's shareholders.
SHAREHOLDER SERVICES
FUND EXCHANGES. You may purchase, in exchange for shares of the Fund,
shares of certain other funds managed or administered by the Manager, to the
extent such shares are offered for sale in your state of residence. Shares of
other funds purchased by exchange will be purchased on the basis of relative net
asset value per share as follows:
A. Exchanges for shares of funds offered without a sales load will
be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a
sales load and additional shares acquired through reinvestment of
dividends or distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), but 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, you must notify the
Transfer Agent of your prior ownership of fund shares and your account number.
To request an exchange, you 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 you check the applicable "No" box on the Account Application, indicating
that you specifically refuse this privilege. By using the Telephone Exchange
Privilege, you authorize 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 you, 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. 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.
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.
DREYFUS AUTO-EXCHANGE PRIVILEGE. Dreyfus Auto-Exchange Privilege
permits you to purchase, in exchange for shares of the Fund, shares of another
fund in the Dreyfus Family of Funds of which you are a shareholder. This
Privilege is available only for existing accounts. Shares will be exchanged on
the basis of relative net asset value as described above under "Fund Exchanges."
Enrollment in or modification or cancellation of this Privilege is effective
three business days following notification by you. You will be notified if your
account falls below the amount designated to be exchanged under this Privilege.
In this case, your account will fall to zero unless additional investments are
made in excess of the designated amount prior to the next Auto-Exchange
transaction. Shares held under IRA and other retirement plans are eligible for
this Privilege. Exchanges of IRA shares may be made between IRA accounts and
from regular accounts to IRA accounts, but not from IRA accounts to regular
accounts. With respect to all other retirement accounts, exchanges may be made
only among those accounts.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available
to shareholders residing in any state in which shares of the fund being acquired
may legally be sold. Shares may be exchanged only between accounts having
identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject any
exchange request in whole or in part. The Fund Exchanges service or Dreyfus
Auto-Exchange Privilege may be modified or terminated at any time upon notice to
shareholders.
DREYFUS-AUTOMATIC ASSET BUILDER(R). Dreyfus-AUTOMATIC Asset Builder
permits you to purchase Fund 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.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund 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 U.S. Government
automatically deposited into your Fund account. You may deposit as much of such
payments as you elect.
DREYFUS PAYROLL SAVINGS PLAN. Dreyfus Payroll Savings Plan permits you
to purchase Fund 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 ACH 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. It is the sole responsibility of your employer to
arrange for transactions under the Dreyfus Payroll Savings Plan.
DREYFUS STEP PROGRAM. The 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, as provided under the terms of
such Privilege(s). 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." The Fund may modify
or terminate this Program at any time.
DREYFUS DIVIDEND OPTIONS. Dreyfus Dividend Sweep allows you to invest
automatically your 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 you are 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
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"), but 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.
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 ACH member may be so designated. Banks may charge a fee
for this service.
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. Withdrawal
payments are the proceeds from sales of Fund shares, not the yield on the
shares. If withdrawal payments exceed reinvested dividends and distributions,
your shares will be reduced and eventually may be depleted. The Automatic
Withdrawal Plan may be terminated at any time by you, the Fund or the Transfer
Agent. Shares for which share certificates have been issued may not be redeemed
through the Automatic Withdrawal Plan.
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 regular IRA, spousal IRAs for
a non-working spouse, Roth IRAs, SEP-IRAs, Education IRAs and 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.
You 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 1997, 1998
and 1999 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 and may be selected
based upon their sales of shares of the Fund or other funds advised by the
Manager or its affiliates.
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.
DETERMINATION OF NET ASSET VALUE
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, Martin
Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas.
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, 1999. 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. If the Fund did not qualify
as a regulated investment company, it would be treated for tax purposes as an
ordinary corporation subject to Federal income tax. The term "regulated
investment company" does not imply the supervision of management or investment
practices or policies by any government agency.
The Fund ordinarily declares and pays dividends from net investment
income monthly, and distributes 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 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.
If you elect to receive dividends and distributions in cash, and your
dividend and 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.
Any dividend or 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 the investment. Such a dividend or distribution would be a
return on investment in an economic sense, although taxable as stated in the
Prospectus. In addition, the Code provides that if a shareholder holds shares of
the Fund for six months or less 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 a 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 as 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 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 Fund's current yield for the 30-day period ended March 31, 1999
was 6.04%. 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, 1999 was 2.05%, 6.55% and 8.73%, 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 "nth 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, 1999
was 637.44%. 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.
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 Smith Barney High Grade Index,
Morningstar, Inc., IBC Bond Fund Report and other industry publications. From
time to time, advertising materials may refer to studies performed by the
Manager or its affiliates, such as "The Dreyfus Tax Informed Investing Study" or
"The Dreyfus Gender Investment Comparison Study (1996 and 1997)."
INFORMATION ABOUT THE FUND
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.
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, 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. Fund
shareholders may remove a Board member by the affirmative vote of a majority of
the Fund's outstanding voting shares. In addition, the 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 Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculating 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 following a market-timing strategy or is
otherwise engaging 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 or who makes exchanges
that appear to coincide with a 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 participants in 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.
The Fund sends annual and semi-annual financial statements to all its
shareholders.
COUNSEL AND INDEPENDENT AUDITORS
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 independent auditors.
<PAGE>
APPENDIX
Description of certain S&P and 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, B, CCC, CC, C
Debt rated BB, B, CCC, CC and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest degree
of speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB
Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal 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 rating.
C
The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC-debt rating.
D
Bonds rated D are in default, and payment of interest and/or repayment
of principal is in arrears.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by
the addition of a plus or minus sign to show relative standing within the major
ratings categories.
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.
FITCH
BOND RATINGS
The ratings represent Fitch's assessment of the issuer's ability to
meet the obligations of a specific debt issue or class of debt. The ratings take
into consideration special features of the issue, its relationship to other
obligations of the issuer, the current financial condition and operative
performance of the issuer and of any guarantor, as well as the political and
economic environment that might affect the issuer's future financial strength
and credit quality.
AAA
Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated F-1+.
A
Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB
Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have an adverse impact on these
bonds and, therefore, impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings.
BB
Bonds rated BB are considered speculative. The obligor's ability to
pay interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements.
B
Bonds rated B are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC
Bonds rated CCC have certain identifiable characteristics, which, if
not remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC
Bonds rated CC are minimally protected. Default in payment of interest
and/or principal seems probable over time.
C
Bonds rated C are in imminent default in payment of interest or
principal.
DDD, DD and D
Bonds rated DDD, DD and D are in actual default of interest and/or
principal payments. Such bonds are extremely speculative and should be valued on
the basis of their ultimate recovery value in liquidation or reorganization of
the obligor. DDD represents the highest potential for recovery on these bonds
and D represents the lowest potential for recovery.
Plus (+) and minus (-) signs are used with a rating symbol to indicate
the relative position of a credit within the rating category.
SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
Although the credit analysis is similar to Fitch's bond rating
analysis, the short-term rating places greater emphasis than bond ratings on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.
DUFF
BOND RATINGS
AAA
Bonds rated AAA are considered highest credit quality. The risk
factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
AA
Bonds rated AA are considered high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
A
Bonds rated A have protection factors which are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.
BBB
Bonds rated BBB are considered to have below average protection
factors but still considered sufficient for prudent investment. Considerable
variability in risk exists during economic cycles.
BB
Bonds rated BB are below investment grade but are deemed by Duff as
likely to meet obligations when due. Present or prospective financial protection
factors fluctuate according to industry conditions or company fortunes. Overall
quality may move up or down frequently within the category.
B
Bonds rated B are below investment grade and possess the risk that
obligations will not be met when due. Financial protection factors will
fluctuate widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in quality rating within
this category or into a higher or lower quality rating grade.
CCC
Bonds rated CCC are well below investment grade securities. Such bonds
may be in default or have considerable uncertainty as to timely payment of
interest, preferred dividends and/or principal. Protection factors are narrow
and risk can be substantial with unfavorable economic or industry conditions
and/or with unfavorable company developments.
DD
Defaulted debt obligations. Issuer has failed to meet scheduled
principal and/or interest payments.
Plus (+) and minus (-) signs are used with a rating symbol (except
AAA) to indicate the relative position of a credit within the rating category.
COMMERCIAL PAPER RATING
The rating Duff-1 is the highest commercial paper rating assigned by
Duff. Paper rated Duff-1 is regarded as having very high certainty of timely
payment with excellent liquidity factors which are supported by ample asset
protection. Risk factors are minor.
<PAGE>
Dreyfus
A Bonds Plus, Inc.
ANNUAL REPORT March 31, 2000
(reg.tm)
The views expressed herein are current to the date of this report. These views
and the composition of the fund's portfolio are subject to change at any time
based on market and other conditions.
* Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Contents
THE FUND
----------------------------------------------------
2 Letter from the President
3 Discussion of Fund Performance
6 Fund Performance
7 Statement of Investments
13 Statement of Financial Futures
13 Statement of Options Written
14 Statement of Assets and Liabilities
15 Statement of Operations
16 Statement of Changes in Net Assets
17 Financial Highlights
18 Notes to Financial Statements
25 Report of Independent Auditors
26 Important Tax Information
FOR MORE INFORMATION
----------------------------------------------------
Back Cover
The Fund
Dreyfus
A Bonds Plus, Inc.
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this annual report for Dreyfus A Bonds Plus, Inc.,
covering the 12-month period from April 1, 1999 through March 31, 2000. Inside,
you' ll find valuable information about how the fund was managed during the
reporting period, including a discussion with Gerald E. Thunelius, portfolio
manager and a member of the Dreyfus Taxable Fixed Income Team that manages the
fund.
Tighter monetary policy represented the most significant influence on the bond
market over the past year. This was primarily a result of efforts by the Federal
Reserve Board to forestall a potential re-emergence of inflationary pressures.
The Federal Reserve raised short-term interest rates five times during the
reporting period, for a total increase of 125 basis points.
Higher interest rates generally led to an erosion of bond prices, especially
during 1999. During the first quarter of 2000, however, some bonds began to
rally, led higher by long-term U.S. Treasury securities, which rose because of
reduced supply amid robust demand from domestic and foreign investors.
We appreciate your confidence over the past year, and we look forward to your
continued participation in Dreyfus A Bonds Plus, Inc.
Sincerely,
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
April 12, 2000
DISCUSSION OF FUND PERFORMANCE
Gerald E. Thunelius, Portfolio Manager Dreyfus Taxable Fixed Income Team
How did Dreyfus A Bonds Plus, Inc. perform relative to its benchmark?
For the 12-month period ended March 31, 2000, Dreyfus A Bonds Plus, Inc.,
produced a 3.85% total return.(1) This compares to a 1.87% total return for the
fund' s new benchmark, the Lehman Brothers Aggregate Bond Index, for the same
period. (2) Further discussion about this benchmark change follows in the
line-graph comparison contained in this annual report.
We attribute the fund' s positive relative performance to our sector rotation
strategy, which emphasized corporate bonds, the best-performing sector of the
investment-grade bond market over the past year. We avoided bonds from financial
services companies such as banks and brokerage firms, which performed relatively
poorly. At the same time, we emphasized bonds issued by telecommunications firms
and economically sensitive companies, such as chemical manufacturers, which
performed well.
What is the fund's investment approach?
The fund seeks to maximize current income as is consistent with preservation of
capital and maintenance of liquidity. The fund invests at least 80% of its
assets in fixed-income securities that, when purchased, are rated single-A or
better or, if unrated, deemed to be of comparable quality by Dreyfus. While the
fund may invest in a broad array of fixed-income securities, the portfolio has
recently concentrated primarily on corporate securities, and we currently expect
to maintain that focus for the near term. Of course, portfolio composition is
subject to change at any time.
The Fund
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
When selecting securities for the fund, we first examine U.S. and global
economic conditions and other market factors in an effort to determine what we
believe is the likely direction of long- and short-term interest rates. Using a
research-driven investment process, we then attempt to identify potentially
profitable sectors before they are widely perceived by the market. Finally, we
look for underpriced or mispriced securities within those sectors that, in our
opinion, appear likely to perform well over time.
What other factors influenced the fund's performance?
The fund' s performance was influenced by a difficult investment environment
during much of the past year. When the reporting period began on April 1, 1999,
investors had become concerned that strong economic growth in the U.S. and
overseas might rekindle long-dormant inflationary pressures. In an attempt to
forestall a reacceleration of inflation, the Federal Reserve Board raised
short-term interest rates five times during the 12-month reporting period, for a
total increase of 125 basis points since last summer, causing most bond prices
to fall.
Most sectors of the bond market were also affected by supply-and-demand
influences. During the second half of the reporting period, these influences
helped longer term U.S. Treasury securities outperform higher yielding
securities of comparable maturity, including corporate bonds and U.S. government
agency securities. That' s because the federal government announced that it
intended to begin buying back longer term, higher yielding bonds, effectively
reducing the supply of U.S. Treasury bonds amid robust demand from domestic and
foreign investors.
In addition, heightened volatility in the stock market during the first quarter
of 2000 boosted demand for high quality bonds, such as U.S. Treasury securities,
and reduced demand for lower rated bonds. This "flight to quality" adversely
affected prices of corporate securities, and caused the yield differences
between high quality and lower rated bonds to widen considerably.
What is the fund's current strategy?
We have continued to follow our long-term strategy of investing in those sectors
of the investment-grade bond market that we believe offer high current income
potential. To that end, we have continued to focus primarily on corporate bonds.
However, we recently reduced our exposure to the corporate sector from about 70%
of the portfolio at the start of the reporting period to about 52% as of March
31, 2000. We redeployed those assets primarily to mortgage-backed pass-through
securities that are issued by U.S. government agencies such as Government
National Mortgage Association (" Ginnie Mae" ) and Federal National Mortgage
Association (" Fannie Mae"). With yields about 1.20% higher than U.S. Treasury
securities, government agency bonds have recently offered attractive values.
We also allocated about 10% of the fund's assets to inflation-indexed U.S.
Treasury securities, known as TIPS. Because these securities' principal adjust
with the rate of inflation, they tend to perform particularly well in strong
economic environments such as the one that prevailed during the reporting
period. Although we tended to avoid "regular" U.S. Treasury securities during
most of the period because of low yields, we increased our holdings modestly
during the first quarter of 2000. We also focused on U.S. Treasury bonds in the
20-year maturity range.
April 12, 2000
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND
INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, FUND SHARES MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST.
(2) SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- REFLECTS THE REINVESTMENT OF
DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE LEHMAN BROTHERS
AGGREGATE BOND INDEX IS A WIDELY ACCEPTED, UNMANAGED TOTAL RETURN INDEX OF
CORPORATE, U.S. GOVERNMENT AND U.S. GOVERNMENT-AGENCY DEBT INSTRUMENTS,
MORTGAGE-BACKED SECURITIES AND ASSET-BACKED SECURITIES WITH AN AVERAGE MATURITY
OF 1-10 YEARS.
The Fund
FUND PERFORMANCE
Comparison of change in value of $10,000 investment in Dreyfus A Bonds Plus,
Inc. with the Merrill Lynch Domestic Master Index and the Lehman Brothers
Aggregate Bond Index
-------------------------------------------------------------------------------
Average Annual Total Returns AS OF 3/31/00
1 Year 5 Years 10 Years
-------------------------------------------------------------------------------
FUND 3.85% 6.73% 8.04%
(+) SOURCE: BLOOMBERG, L.P.
(+)(+) SOURCE: LIPPER ANALYTICAL SERVICES, INC.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN DREYFUS A BONDS PLUS, INC.
ON 3/31/90 TO A $10,000 INVESTMENT MADE IN THE LEHMAN BROTHERS AGGREGATE BOND
INDEX AND IN THE MERRILL LYNCH DOMESTIC MASTER INDEX ON THAT DATE. ALL DIVIDENDS
AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED.
THIS IS THE FIRST YEAR IN WHICH COMPARATIVE PERFORMANCE IS BEING SHOWN FOR THE
LEHMAN BROTHERS AGGREGATE BOND INDEX. THIS INDEX HAS BEEN SELECTED AS THE
PRIMARY INDEX FOR COMPARING THE FUND'S PERFORMANCE BECAUSE STATISTICAL
INFORMATION ON THE LEHMAN BROTHERS AGGREGATE BOND INDEX IS PROVIDED MORE
FREQUENTLY THAN THAT ON THE MERRILL LYNCH DOMESTIC MASTER INDEX, WHICH WAS USED
AS THE FUND'S BENCHMARK INDEX LAST YEAR. PERFORMANCE FOR THE MERRILL LYNCH
DOMESTIC MASTER INDEX WILL NOT BE PROVIDED WITH THE NEXT ANNUAL REPORT, BUT IS
PROVIDED HEREWITH PURSUANT TO APPLICABLE REGULATIONS.
THE FUND'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE
FEES AND EXPENSES. THE LEHMAN BROTHERS AGGREGATE BOND INDEX IS A WIDELY
ACCEPTED, UNMANAGED TOTAL RETURN INDEX OF CORPORATE, GOVERNMENT AND
GOVERNMENT-AGENCY DEBT INSTRUMENTS, MORTGAGE-BACKED SECURITIES AND ASSET-BACKED
SECURITIES WITH AN AVERAGE MATURITY OF 1-10 YEARS. THE MERRILL LYNCH DOMESTIC
MASTER INDEX IS AN UNMANAGED PERFORMANCE BENCHMARK COMPOSED OF U.S. TREASURY AND
AGENCY, AND MORTGAGE AND INVESTMENT-GRADE CORPORATE SECURITIES WITH MATURITIES
GREATER THAN OR EQUAL TO ONE YEAR.
NEITHER OF THE FOREGOING INDICES TAKE INTO ACCOUNT CHARGES, FEES AND OTHER
EXPENSES. FURTHER INFORMATION RELATING TO FUND PERFORMANCE, INCLUDING EXPENSE
REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION
OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT.
STATEMENT OF INVESTMENTS
March 31, 2000
Principal
BONDS AND NOTES--91.6% Amount(a) Value ($)
-------------------------------------------------------------------------------
AEROSPACE & DEFENSE--2.0%
Lockheed Martin,
Notes, 8.2%, 2009 9,000,000 9,004,923
AIRLINES--4.8%
Air 2 US, Ser. A,
Enhanced Equipment Notes, 8.027%, 2019 9,000,000(b) 9,011,115
Continental Airlines,
Pass-Through Ctfs.,
Ser. 1997-4A, 6.9%, 2018 13,321,607 12,663,054
21,674,169
ASSET-BACKED NOTES--2.3%
Bosque Asset,
7.66%, 2002 2,123,411(b) 2,102,176
Inner Harbor CBO,
Ser. 1999-1, Cl. B2, 13.667%, 2012 3,210,000(b) 3,137,775
Pegasus Aviation Lease Securitization,
Ser. 2000-1, Cl. A1, 6.7213%, 2015 5,000,000(b,c) 5,000,000
10,239,951
AUTOMOTIVE--2.1%
Daimler-Chrysler, Ser. B,
Deb., 7.45%, 2097 5,000,000 4,735,320
Lear,
Sr. Notes, 7.96%, 2005 5,000,000 4,642,515
9,377,835
BANKING--5.6%
Fleet Boston,
Sub. Notes, 7.375%, 2009 4,840,000 4,726,841
KBC Bank Funding Trust IV,
Floating Rate Gtd. Trust Preferred Securities,
8.22%, 2049 5,000,000(c) 4,894,002
National Westminster Bank, Ser. B,
Floating Rate Notes, 6.5625%, 2049 3,000,000(c) 2,454,942
Regional Diversified Funding,
Sr. Notes, 9.25%, 2030 5,000,000(b) 5,025,335
Royal Bank of Scotland Group, Ser. 1,
Bonds, 9.118%, 2049 7,926,000 8,174,274
25,275,394
BROADCASTING & MEDIA--1.2%
Grupo Televisa,
Deb., 0/13.25%, 2008 5,650,000(d) 5,579,375
CHEMICALS--2.5%
Air Products & Chemicals, Ser. E,
Medium-Term Notes, 7.8%, 2026 3,637,000 3,438,347
ICI Wilmington
(Gtd. by Imperial Chemical Industries),
Notes, 7.05%, 2007 8,105,000 7,859,297
11,297,644
COMMERCIAL MORTGAGE PASS-THROUGH CTFS.--2.9%
Nomura Depositor Trust ST 1,
Ser. 1998-ST1, Cl. A3, 6.584%, 2003 5,000,000(b,c) 4,914,844
Resolution Trust,
Ser. 1994-C2, Cl. D, 8%, 2025 8,217,917 8,199,057
13,113,901
COMPUTERS--1.0%
IBM,
Deb., 7.125%, 2096 5,000,000 4,615,430
CONSUMER--1.8%
Corning,
Deb., 6.85%, 2029 5,000,000 4,509,120
Grand Metropolitan Investment,
Discount Notes, 0%, 2004 5,000,000 3,809,120
8,318,240
FINANCE--3.5%
DLJ,
Medium-Term Notes, .4%, 2000 8,000,000(b) 8,192,600
Lehman Brothers Holdings,
Notes, 7.875%, 2009 7,750,000 7,730,385
15,922,985
FOREIGN/GOVERNMENTAL--.9%
Federative Republic of Brazil,
Bonds, 12.25%, 2030 3,500,000 3,382,750
Republic of Philippines,
Notes, 9.875%, 2010 800,000 771,000
4,153,750
INDUSTRIAL--1.8%
Alliant Energy Resources,
Notes, 7.375%, 2009 5,000,000(b) 4,932,640
Rockwell International,
Deb., 5.2%, 2098 5,000,000 3,196,960
8,129,600
INSURANCE--1.5%
Everest Reinsurance Holdings,
Sr. Notes, 8.75%, 2010 6,750,000 6,789,744
MUNICIPAL OBLIGATIONS--6.1%
Chicago, ILL, Board of Education
(Chicago School Reform), Ser. A,
General Obligation, 5.25%, 2022 5,000,000 4,610,850
City of Atlanta, GA, Water and Wastewater
Revenue, Ser. A, 5%, 2038 5,000,000 4,307,900
Jefferson County, ALA,
Sewer Revenue, Capital Improvement,
5%, 2033 5,500,000 4,767,125
Massachusetts State Water Pollution Abatement
Trust, Ser. A,
System Revenue, 5.75%, 2029 5,000,000 4,961,000
Massachusetts Turnpike Authority, Ser. A,
Metropolitan Highway System Revenue,
5%, 2039 5,000,000 4,300,200
Oklahoma State Health System,
System Revenue, 5.75%, 2029 5,000,000 4,858,200
27,805,275
OIL & GAS EXPLORATION--1.0%
Petroleos Mexicanos, Ser. P,
Sr. Notes, 9.5%, 2006 4,250,000(e) 4,388,125
REAL ESTATE INVESTMENT TRUST--.5%
Crescent Real Estate Equities,
Notes, 7%, 2002 2,500,000 2,286,985
RESIDENTIAL MORTGAGE PASS-THROUGH CFTS.--3.2%
Chase Mortgage Finance, REMIC:
Ser. 1998-S5, Cl. B3, 6.5%, 2013 588,566(b) 463,312
Ser. 1998-S5, Cl. B4, 6.5%, 2013 490,471(b) 328,156
GE Capital Mortgage Services,
REMIC, Ser. 1998-16, Cl. B3, 6.5%, 2013 1,052,683(b) 828,330
Norwest Asset Securities:
Ser. 1997-15, Cl. B1, 6.75%, 2012 989,832 933,377
Ser. 1997-16, Cl. B1, 6.75%, 2027 2,145,504 1,994,160
Ser. 1997-16, Cl. B2, 6.75%, 2027 683,015 605,772
Ser. 1998-11, Cl. B2, 6.5%, 2013 1,657,241 1,552,321
Ser. 1998-13, Cl. B1, 6.25%, 2028 2,942,724 2,649,474
Ser. 1998-13, Cl. B2, 6.25%, 2028 2,820,233 2,598,788
Ser. 1998-13, Cl. B6, 6.25%, 2028 368,806(b) 108,798
Residential Funding Mortgage Securities I:
Ser. 1998-S9, Cl. 1-B1, 6.5%, 2013 761,267(b) 611,023
Ser. 1998-S22, Cl. B1, 6.5%, 2013 480,661 378,295
Ser. 1998-S22, Cl. B3, 6.5%, 2013 360,588(b) 90,598
Ser. 1998-S22, Cl. M2, 6.5%, 2013 601,061 532,293
Ser. 1998-S22, Cl. M3, 6.5%, 2013 1,201,652 1,015,817
14,690,514
RESTAURANTS--1.9%
Tricon Global Restaurants,
Sr. Notes, 7.45%, 2005 8,900,000 8,417,887
TECHNOLOGY--1.6%
Clear Channel Communications,
Conv. Sub. Deb., 2.625%, 2003 3,323,000 4,095,597
Metromedia Fiber Network,
Sr. Notes, 10%, 2009 3,500,000 3,355,625
7,451,222
TELECOMMUNICATION--2.2%
TCI Communication Financial,
Capital Securities, 9.65%, 2027 7,000,000 7,956,746
Winstar Communications,
Sr. Notes, 12.75%, 2010 EU R 2,000,000(b) 1,901,047
9,857,793
TELECOMMUNICATION/CARRIERS--1.0%
Qwest Communications International, Ser. B,
Sr. Discount Notes, 0/8.29%, 2008 5,690,000(d) 4,409,545
U.S. GOVERNMENT AGENCY--2.7%
Tennessee Valley Authority,
Valley Indexed Principal Securities,
3.375%, 1/15/2007 12,500,000(f) 12,393,469
U.S. GOVERNMENT--7.3%
U.S. Treasury Bonds:
6.125%, 8/15/2029 3,960,000 4,033,102
6.25%, 5/15/2030 5,000,000 5,295,950
U.S. Treasury Inflation Protection Securities:
3.625%, 1/15/2008 11,750,000(f) 11,956,150
3.875%, 4/15/2029 9,125,000(f) 9,290,149
U.S. Treasury Notes,
6.5%, 5/15/2005 2,500,000 2,519,175
33,094,526
U.S. GOVERNMENT AGENCY/MORTGAGE-BACKED--25.0%
Federal Home Loan Mortgage:
7.5%, 4/15/2029 20,000,000(g) 19,687,400
REMIC, Multiclass Mortgage Participation Ctfs.,
(Interest Only Obligation):
Ser. 1978, Cl. PH, 7%, 1/15/2024 4,074,538(h) 552,609
Ser. 1995, Cl. PY, 7%, 10/15/2027 10,124,292(h) 3,967,013
Federal National Mortgage Association:
6.88%, 2/1/2028 4,212,788 4,044,792
REMIC Trust, Gtd. Pass-Through Ctfs.
(Interest Only Obligation),
Ser. 1996-64, Cl. PM, 7%, 1/18/2012 5,941,837(h) 1,242,215
Government National Mortgage Association I:
7%, 6/15/2008 77,231 76,531
8.5%, 4/15/2030 20,000,000(g) 20,500,000
9.5%, 11/15/2017 3,722,407 3,949,213
Construction Loan;
6.7%, 5/15/2039 1,792,208(g) 1,723,871
Project Loan:
6.475%, 9/1/2033 7,717,790 6,637,299
6.54%, 7/15/2033 4,401,955 4,228,606
6.55%, 6/15/2033 1,828,109 1,732,133
6.625%, 6/1/2033--9/15/2033 6,155,180 5,945,753
6.7%, 7/15/2001 13,883,038 13,353,678
6.75%, 10/15/2033 2,209,826 2,116,594
6.86%, 3/15/2038 12,527,978 12,535,745
7%, 8/15/2039 11,324,167 10,994,974
113,288,426
WIRELESS COMMUNICATIONS--1.8%
Centaur Funding, Ser. C,
Discount Notes, 0%, 2020 45,000,000(b) 8,226,585
YANKEE--3.4%
Bayer HypoVereinsbank,
Bonds, 8.741%, 2031 5,525,000(b) 5,472,336
Pemex Finance,
Notes, Ser. 2000-1, Cl. A2, 7.8%, 2013 10,000,000(b) 10,070,000
15,542,336
TOTAL BONDS AND NOTES
(cost $420,646,479) 415,345,629
PREFERRED STOCKS--2.5% Shares Value ($)
-------------------------------------------------------------------------------
WIRELESS COMMUNICATIONS;
Winstar Communications, Ser. C,
Cum., $142.50
(cost $7,258,874) 7,600 11,324,000
Principal
SHORT-TERM INVESTMENTS--9.2% Amount ($) Value ($)
--------------------------------------------------------------------------------
COMMERCIAL PAPER--8.6%
Dow Chemical,
6.3%, 4/3/2000 10,000,000 9,996,500
Textron,
6.23%, 4/3/2000 3,090,000 3,088,931
UBS Finance,
6.28%, 4/3/2000 11,655,000 11,650,934
Xerox Credit,
6.35%, 4/3/2000 14,005,000 14,000,059
38,736,424
U.S. TREASURY BILLS--.6%
5.35%, 4/20/2000 2,700,000(i) 2,692,413
TOTAL SHORT-TERM INVESTMENTS 41,428,837
(cost $41,428,796)
TOTAL INVESTMENTS (cost $469,334,149) 103.3% 468,098,466
LIABILITIES, LESS CASH AND RECEIVABLES (3.3%) (14,802,982)
NET ASSETS 100.0% 453,295,484
(A) PRINCIPAL AMOUNT STATED IS IN U.S. DOLLARS UNLESS OTHERWISE NOTED.
EUR--EUROS
(B) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF
1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION,
NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT MARCH 31, 2000, THESE SECURITIES
AMOUNTED TO $70,416,670 OR 15.5% OF NET ASSETS.
(C) VARIABLE RATE SECURITY--INTEREST RATE SUBJECT TO PERIODIC CHANGE.
(D) ZERO COUPON UNTIL A SPECIFIED DATE AT WHICH TIME THE STATED COUPON RATE
BECOMES EFFECTIVE UNTIL MATURITY.
(E) REFLECTS DATE SECURITY CAN BE REDEEMED AT HOLDER'S OPTION; THE STATED
MATURITY IS 9/15/2027.
(F) PRINCIPAL AMOUNT FOR ACCRUAL PURPOSES IS PERIODICALLY ADJUSTED BASED ON
CHANGES TO THE CONSUMER PRICE INDEX.
(G) PURCHASED ON A FORWARD COMMITMENT BASIS.
(H) NOTIONAL FACE AMOUNT SHOWN.
(I) HELD BY THE CUSTODIAN IN A SEGREGATED ACCOUNT AS COLLATERAL FOR OPEN
FINANCIAL FUTURES POSITIONS.
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF FINANCIAL FUTURES
March 31, 2000
<TABLE>
<CAPTION>
Unrealized
Market Value Appreciation
Covered (Depreciation)
Contracts by Contracts ($) Expiration at 3/31/00 ($)
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL FUTURES (LONG)
<S> <C> <C> <C> <C>
U.S. Government Agency
10 Year Notes 200 18,387,500 June 2000 65,156
U.S. Treasury 30 Year Bonds 393 38,391,188 June 2000 515,375
FINANCIAL FUTURES (SHORT)
U.S. Treasury 5 Year Notes 562 55,357,000 June 2000 (337,203)
U.S. Treasury 10 Year Notes 681 66,791,203 June 2000 (605,203)
(361,875)
</TABLE>
STATEMENT OF OPTIONS WRITTEN
March 31, 2000
ISSUER Contracts Value ($)
--------------------------------------------------------------------------------
Call Options
U.S. Treasury Bonds, 6.25%, 5/15/2030,
May 2000 @$107.1015625
(Premiums received $410,156) 500 655,000
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2000
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See
Statement of Investments 469,334,149 468,098,466
Cash 3,680,107
Cash denominated in foreign currencies 1,944,000 1,910,600
Receivable for investment securities sold 21,435,715
Interest receivable 5,036,807
Receivable for options sold 710,938
Paydown receivables 55,926
Receivable for shares of Common Stock subscribed 14,866
500,943,425
-------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 309,652
Payable for investment securities purchased 44,006,784
Payable for shares of Common Stock redeemed 2,417,623
Outstanding options written, at value
(premiums received $410,156)--see Statement
of Options Written 655,000
Payable for futures variation margin--Note 4(a) 24,745
Accrued expenses 234,137
47,647,941
NET ASSETS ($) 453,295,484
COMPOSITION OF NET ASSETS ($):
Paid-in capital 478,416,965
Accumulated undistributed investment income--net 4,705,375
Accumulated net realized gain (loss) on investments (27,944,076)
Accumulated net unrealized appreciation (depreciation)
on investments, options written and foreign currency
transactions [including ($361,875) net unrealized
(depreciation) on financial futures]--Note 4(b) (1,882,780)
NET ASSETS ($) 453,295,484
SHARES OUTSTANDING
(100 million shares of $.001 par value Common Stock authorized) 33,201,471
NET ASSET VALUE, offering and redemption price per share ($) 13.65
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS
Year Ended March 31, 2000
INVESTMENT INCOME ($):
Interest 35,041,424
Cash dividends 658,825
TOTAL INCOME 35,700,249
EXPENSES:
Management fee--Note 3(a) 3,225,750
Shareholder servicing costs--Note 3(b) 1,473,614
Custodian fees--Note 3(b) 68,172
Professional fees 52,170
Directors' fees and expenses--Note 3(c) 52,123
Prospectus and shareholders' reports 40,799
Registration fees 33,490
Miscellaneous 7,210
TOTAL EXPENSES 4,953,328
INVESTMENT INCOME--NET 30,746,921
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments, foreign
currency transactions and options transactions (19,035,673)
Net realized gain (loss) on forward currency exchange
contracts 3,837
Net realized gain (loss) on financial futures 5,875,842
NET REALIZED GAIN (LOSS) (13,155,994)
Net unrealized appreciation (depreciation) on investments
[including ($650,320) net unrealized (depreciation)
on financial futures] (868,507)
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (14,024,501)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 16,722,420
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------
2000 1999
----- -----
OPERATIONS ($):
<S> <C> <C>
Investment income--net 30,746,921 35,287,779
Net realized gain (loss) on investments (13,155,994) (14,456,795)
Net unrealized appreciation (depreciation)
on investments ( 868,507) (8,867,246)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 16,722,420 11,963,738
NET EQUALIZATION CREDITS (DEBITS)--NOTE 1(F) ($) (901,460) (551,071)
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net (31,048,735) (35,493,065)
Net realized gain on investments -- (8,881,327)
TOTAL DIVIDENDS (31,048,735) (44,374,392)
CAPITAL STOCK TRANSACTIONS ($):
Net proceeds from shares sold 111,669,920 240,655,499
Dividends reinvested 27,426,561 39,428,193
Cost of shares redeemed (247,072,000) (318,995,045)
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL STOCK TRANSACTIONS (107,975,519) (38,911,353)
TOTAL INCREASE (DECREASE) IN NET ASSETS (123,203,294) (71,873,078)
NET ASSETS ($):
Beginning of Period 576,498,778 648,371,856
END OF PERIOD 453,295,484 576,498,778
Undistributed investment income--net 4,705,375 5,908,649
CAPITAL SHARE TRANSACTIONS (SHARES):
Shares sold 8,284,790 16,733,399
Shares issued for dividends reinvested 2,034,453 2,761,789
Shares redeemed (18,331,864) (22,239,479)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (8,012,621) (2,744,291)
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the fund's financial
statements.
<TABLE>
<CAPTION>
Year Ended March 31,
-----------------------------------------------------
2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 13.99 14.75 14.13 14.47 13.75
Investment Operations:
Investment income--net .85 .83 .89 .88 .92
Net realized and unrealized
gain (loss) on investments (.34) (.54) .79 (.34) .73
Total from Investment Operations .51 .29 1.68 .54 1.65
Distributions:
Dividends from investment income--net (.85) (.84) (.89) (.88) (.93)
Dividends from net realized
gain on investments -- (.21) (.17) -- --
Total Distributions (.85) (1.05) (1.06) (.88) (.93)
Net asset value, end of period 13.65 13.99 14.75 14.13 14.47
TOTAL RETURN (%) 3.85 2.05 12.20 3.88 12.12
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average net assets 1.00 .96 .95 .96 .93
Ratio of net investment income
to average net assets 6.20 5.78 6.07 6.12 6.32
Portfolio Turnover Rate 557.83 255.27 374.30 415.69 165.50
Net Assets, end of period ($ x 1,000) 453,295 576,499 648,372 571,580 598,551
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The Fund
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
Dreyfus A Bonds Plus, Inc. (the "fund") is registered under the Investment
Company Act of 1940, as amended (the "Act" ), as a diversified open-end
management investment company. The fund's investment objective is to maximize
current income to the extent consistent with the preservation of capital and the
maintenance of liquidity. The Dreyfus Corporation (the "Manager") serves as the
fund' s investment adviser. The Manager is a direct subsidiary of Mellon Bank,
N.A. (" Mellon" ), which is a wholly-owned subsidiary of Mellon Financial
Corporation. Effective March 22, 2000, Dreyfus Service Corporation ("DSC"), a
wholly-owned subsidiary of the Manager, became the distributor of the fund's
shares, which are sold to the public without a sales charge. Prior to March 22,
2000, Premier Mutual Fund Services, Inc. was the distributor.
The fund' s financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(A) PORTFOLIO VALUATION: Investments in securities (excluding short-term
investments, other than U.S. Treasury Bills, options and financial futures) are
valued each business day by an independent pricing service ("Service") approved
by the Board of Directors. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the judgment
of the Service are valued at the mean between the quoted bid prices (as obtained
by the Service from dealers in such securities) and asked prices (as calculated
by the Service based upon its evaluation of the market for such securities).
Other investments (which constitute a majority of the portfolio securities) are
carried at fair value as determined by the Service, based on methods which
include consideration of: yields or prices of securities of comparable quality,
coupon, maturity and type; indications as to values from dealers; and general
market conditions. Securities for which there are no such valuations are valued
at fair value as determined in good faith under the direction of the Board of
Directors. Short-term investments, excluding
U.S. Treasury Bills, are carried at amortized cost, which approximates value.
Financial futures and options are valued at the last sales price on the
securities exchange on which such securities are primarily traded or at the last
sales price on the national securities market on each business day. Investments
denominated in foreign currencies are translated to U.S. dollars at the
prevailing rates of exchange.
(B) FOREIGN CURRENCY TRANSACTIONS: The fund does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Net realized foreign exchange gains or losses arise from sales and maturities of
short-term securities, sales of foreign currencies, currency gains or losses
realized on securities transactions and the difference between the amounts of
dividends, interest, and foreign withholding taxes recorded on the fund's books
and the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the value of
assets and liabilities other than investments in securities, resulting from
changes in exchange rates. Such gains and losses are included with net realized
and unrealized gain or loss on investments.
(C) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income, including, where
applicable, amortization of discount on investments, is recognized on the
accrual basis. Under the terms of the custody agreement, the fund receives net
earnings credits based on available cash balances left on deposit.
(D) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend date.
Dividends from investment income-net are declared and paid monthly. Dividends
from net realized capital gain, if any, are normally declared and paid annually,
but the fund may make distri The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
butions on a more frequent basis to comply with the distribution requirements of
the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that
net realized capital gain, can be offset by capital loss carryovers, it is the
policy of the fund not to distribute such gain.
On March 31, 2000, the Board of Directors declared a cash dividend of $.071 per
share from undistributed investment income-net, payable on April 3, 2000
(ex-dividend date) , to shareholders of record as of the close of business on
March 31, 2000.
(E) FEDERAL INCOME TAXES: It is the policy of the fund to continue to qualify as
a regulated investment company, if such qualification is in the best interests
of its shareholders, by complying with the applicable provisions of the Code and
to make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes.
The fund has an unused capital loss carrryover of approximately $21,185,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to March 31, 2000. This amount
is calculated based on Federal income tax regulations which may differ from
financial reporting in accordance with generally accepted accounting principles.
If not applied, $3,436,000 of the carryover expires in fiscal 2007 and
$17,749,000 expires in fiscal 2008.
(F) EQUALIZATION: The fund follows the accounting practice known as "
equalization" by which a portion of the amounts received on issuances and the
amounts paid on redemptions of fund shares (equivalent, on a per share basis, to
the amount of distributable investment income--net on the date of the
transaction) is allocated to undistributed investment income-net so that
undistributed investment income-net per share is unaffected by fund shares
issued or redeemed.
NOTE 2--Bank Line of Credit:
The fund may borrow up to $20 million for leveraging purposes under a short-term
unsecured line of credit and participates with other Dreyfus-managed funds in a
$100 million unsecured line of credit primarily to be utilized for temporary or
emergency purposes, including the financing of redemptions. Interest is charged
to the fund at rates which are related to the Federal Funds rate in effect at
the time of borrowings. During the period ended March 31, 2000, the fund did not
borrow under either line of credit.
NOTE 3--Management Fee and Other Transactions With Affiliates:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .65 of 1% of the value of the
fund' s average daily net assets and is payable monthly. The Agreement provides
that if in any full fiscal year the aggregate expenses of the fund, exclusive of
taxes, interest on borrowings, brokerage commissions and extraordinary expenses,
exceed 11_2% of the value of the fund's average net assets, the fund may deduct
from the payments to be made to the Manager, or the Manager will bear, the
amount of such excess expenses. During the period ended March 31, 2000, their
was no expense reimbursement pursuant to the Agreement.
(B) Under the Shareholder Services Plan, the fund reimburses DSC 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. During the period
ended March 31, 2000, the fund was charged $710,776 pursuant to the Shareholder
Services Plan.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the
Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the fund. During the period
ended March 31, 2000, the fund was charged $246,381 pursuant to the transfer
agency agreement.
The fund compensates Mellon under a custody agreement for provid The Fun
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
ing custodial services for the fund. During the period ended March 31, 2000, the
fund was charged $68,172 pursuant to the custody agreement.
(C) Each Director who is not an "affiliated person" as defined in the Act is a
Board member of one or more funds comprising a certain group of funds ("Fund
Group" ) within the Dreyfus complex. Effective January 1, 2000, for their
participation as a director in a Fund Group, the Directors receive an annual fee
of $40,000 each, $6,000 for each meeting attended in person and $500 for each
telephonic meeting in which they participate. These fees are allocated among the
funds in the Fund Group. The Chairman of the Board receives an additional 25% of
such compensation. Prior to January 1, 2000, each director who was not an "
affiliated person" as defined in the Act received from the fund an annual fee of
$2,500 and an attendance fee of $500 per meeting. The Chairman of the Board
received an additional 25% of such compensation.
NOTE 4--Securities Transactions:
(A) The aggregate amount of purchases and sales (including paydowns) of
investment securities, excluding short-term securities, financial futures,
forward currency exchange contracts and options transactions during the period
ended March 31, 2000, amounted to $2,788,068,890 and $2,934,242,263,
respectively.
The following summarizes the fund' s call/put options written for the period
ended March 31, 2000:
<TABLE>
<CAPTION>
OPTIONS TERMINATED
------------------------------------
NUMBER OF PREMIUMS NET REALIZED
OPTIONS WRITTEN: CONTRACTS RECEIVED ($) COST($) GAIN ($)
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Contracts outstanding
March 31, 1999 -- --
Contracts written 500 410,156
Contracts terminated:
Closed -- -- -- --
Contracts outstanding
March 31, 2000 500 410,156
</TABLE>
The fund may purchase and write (sell) put and call options in order to gain
exposure to or to protect against changes in the market.
As a writer of call options, the fund receives a premium at the outset and then
bears the market risk of unfavorable changes in the price of the financial
instrument underlying the option. Generally, the fund would incur a gain, to the
extent of the premium, if the price of the underlying financial instrument
decreases between the date the option is written and the date on which the
option is terminated. Generally, the fund would realize a loss, if the price of
the financial instrument increases between those dates.
As a writer of put options, the fund receives a premium at the outset and then
bears the market risk of unfavorable changes in the price of the financial
instrument underlying the option. Generally, the fund would incur a gain, to the
extent of the premium, if the price of the underlying financial instrument
increases between the date the option is written and the date on which the
option is terminated. Generally, the fund would realize a loss, if the price of
the financial instrument decreases between those dates.
The fund may invest in financial futures contracts in order to gain exposure to
or protect against changes in the market. The fund is exposed to market risk as
a result of changes in the value of the underlying financial instruments.
Investments in financial futures require the fund to "mark to market" on a daily
basis, which reflects the change in the market value of the contracts at the
close of each day's trading. Typically, variation margin payments are received
or made to reflect daily unrealized gains or losses. When the contracts are
closed, the fund recognizes a realized gain or loss. These investments require
initial margin deposits with a custodian, which consist of cash or cash
equivalents, up to approximately 10% of the contract amount. The amount of these
deposits is determined by the exchange or Board of Trade on which the contract
is traded and is subject to change. Contracts open at March 31, 2000, are set
forth in the Statement of Financial Futures.
The fund may purchase or sell financial futures contracts and options on such
futures contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities.
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(B) At March 31, 2000, accumulated net unrealized depreciation on investments,
financial futures and options was $1,842,402, consisting of $8,676,058 gross
unrealized appreciation and $10,518,460 gross unrealized depreciation.
At March 31, 2000, the cost of investments for Federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors Dreyfus A Bonds Plus, Inc.
We have audited the accompanying statement of assets and liabilities of Dreyfus
A Bonds Plus, Inc., including the statements of investments, financial futures
and options written, as of March 31, 2000, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and financial highlights for
each of the years indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
verification by examination of securities held by the custodian as of March 31,
2000 and confirmation of securities not held by the custodian by correspondence
with others. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Dreyfus A Bonds Plus, Inc. at March 31, 2000, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the indicated
years, in conformity with accounting principles generally accepted in the United
States.
New York, New York
May 10, 2000
The Fund
IMPORTANT TAX INFORMATION (Unaudited)
For Federal tax purposes, the fund hereby designates .70% of the ordinary
dividends paid during the fiscal year ended March 31, 2000 as qualifying for the
corporate dividends received deduction. Shareholders will receive notification
in January 2001 of the percentage applicable to the preparation of their 2000
income tax returns.
NOTES
For More Information
Dreyfus A Bonds Plus, Inc.
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
Transfer Agent & Dividend Disbursing Agent
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Distributor
Dreyfus Service Corporation
200 Park Avenue
New York, NY 10166
To obtain information:
BY TELEPHONE Call 1-800-645-6561
Y MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
Y E-MAIL Send your request to [email protected]
N THE INTERNET Information can be viewed online or downloaded from:
ttp://www.dreyfus.com
(c) 2000 Dreyfus Service Corporation 084AR003
<PAGE>
Dreyfus
Strategic Governments
Income, Inc.
ANNUAL REPORT November 30, 1999
(reg.tm)
The views expressed herein are current to the date of this report. These views
and the composition of the fund's portfolio are subject to change at any time
based on market and other conditions.
* Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Year 2000 Issues (Unaudited)
The fund could be adversely affected if the computer systems used by Dreyfus and
the fund's other service providers do not properly process and calculate
date-related information from and after January 1, 2000. Dreyfus has taken steps
designed to avoid year 2000-related problems in its systems and to monitor the
readiness of other service providers. In addition, issuers of securities in
which the fund invests may be adversely affected by year 2000-related problems.
This could have an impact on the value of the fund's investments and its share
price.
Contents
THE FUND
--------------------------------------------------
2 Letter from the President
3 Discussion of Fund Performance
6 Selected Information
7 Statement of Investments
11 Statement of Financial Futures
12 Statement of Options Written
13 Statement of Assets and Liabilities
14 Statement of Operations
15 Statement of Changes in Net Assets
16 Financial Highlights
17 Notes to Financial Statements
24 Report of Independent Auditors
25 Dividend Reinvestment and
Cash Purchase Plan
27 Proxy Results
29 Officers and Directors
FOR MORE INFORMATION
-------------------------------------------------------------------------------
Back Cover
The Fund
Dreyfus Strategic Governments Income, Inc.
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this annual report for Dreyfus Strategic Governments
Income, Inc., covering the 12-month period from December 1, 1998 through
November 30, 1999. Inside, you'll find valuable information about how the fund
was managed during the reporting period, including a discussion with the fund's
portfolio manager, Gerald Thunelius.
The past 12 months have been highly volatile for most bonds, including U.S.
government securities. When the reporting period began, U.S. Treasury securities
had already rallied strongly during a "flight to quality" caused by the global
financial crisis. However, other types of bonds -- including U.S. government
agency securities -- had declined sharply in the wake of massive selling by
troubled hedge funds. The Federal Reserve Board responded to these influences by
reducing short-term interest rates. Its strategy apparently was effective,
because the U.S. economy remained strong through the remainder of the reporting
period.
In fact, by the second quarter of 1999, stronger than expected economic growth
created concerns that inflationary pressures might re-emerge. To help forestall
a rise of inflation, the Federal Reserve Board increased short-term interest
rates three times during the summer and fall, leading to erosion of most bond
prices. In addition, supply-and-demand factors have recently pushed the yields
of U.S. government agency securities to levels that are quite attractive
compared to the yields of U.S. Treasury securities of comparable maturity.
We appreciate your confidence over the past year, and we look forward to your
continued participation in Dreyfus Strategic Governments Income, Inc.
Sincerely,
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
December 15, 1999
DISCUSSION OF FUND PERFORMANCE
Gerald Thunelius, Portfolio Manager
How did Dreyfus Strategic Governments Income, Inc. perform relative to its
benchmark?
For the 12-month period ended November 30, 1999, Dreyfus Strategic Governments
Income, Inc. produced a total return of 3.77%.(1) In contrast, the fund's
benchmark, the Salomon Smith Barney World Government Bond Index (currency
hedged) , produced a total return of 1.05% for the same period.(2)
We attribute our good relative performance primarily to our emphasis on
sovereign bonds, particularly those from issuers in emerging markets. In
addition, our allocation to U.S. government agency bonds boosted returns, while
our limited exposure to U.S. Treasury bonds helped us avoid the disappointing
returns those securities provided during much of the period.
What is the fund's investment approach?
The fund seeks to provide as high a level of current income as is consistent
with the preservation of capital. To pursue this goal, we invest primarily in
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities (" U.S. Government Securities" ), as well as in securities
issued by foreign governments and any of their political subdivisions, agencies
or instrumentalities (" Foreign Government Securities" ). Under normal
circumstances, the fund invests at least 65% of its total assets in the
securities of U.S. and foreign governments. The fund may also invest up to 35%
of its total assets in other debt securities, including those issued by
non-governmental issuers in the United States. The fund may invest up to 50% of
its total assets in Foreign Government Securities. The dollar-weighted average
maturity of the fund generally will not exceed 10 years.
When choosing securities, generally we first examine U.S. and global economic
conditions and other market factors to determine what we believe is the likely
direction of long- and short-term interest rates. The Fun
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
Using a research-driven investment process, we then attempt to identify
potentially profitable sectors before they are widely perceived by the market.
Finally, we look for what we believe are underpriced or mispriced securities
within those sectors that, in our opinion, potentially can perform well over
time.
What other factors influenced the fund's performance?
The global bond markets have been highly volatile over the past year. When 1999
began, many investors were concerned about the near collapse of a major U.S.
hedge fund, the rapid deterioration of Asian economies and markets, Russia's
debt default and low commodity prices. As a result of these negative economic
influences, investors seemed more comfortable holding U.S. Treasuries, which
many consider to be the most creditworthy investments in the world.
The environment that ultimately prevailed during most of 1999 presented quite a
different picture, however. As the year progressed, many global economies staged
impressive rebounds, and the U.S. economy continued to grow strongly. Commodity
prices also began to rise; this was especially true of oil prices, which more
than doubled over the course of the year.
As domestic and overseas economies continued to grow during the summer and fall,
the Federal Reserve Board raised short-term interest rates by a total of 75
basis points in an attempt to forestall an acceleration of inflation. At the
same time, strong economic growth reassured investors that recession was
unlikely, and they seemed to become more comfortable holding riskier assets such
as corporate and foreign government bonds.
As assets flowed into these higher yielding securities, they flowed out of U.S.
Treasury securities, putting downward pressure on prices. As a result, U.S.
Treasury securities underperformed most other sectors of the global bond market
in 1999. When prices of U.S. Treasury securities fell, the differences in yields
between U.S. Treasury securities and higher yielding bonds -- such as U.S.
government agency and corporate bonds -- widened dramatically during the summer
before moderating somewhat toward the end of the reporting period. We took
advantage of these market conditions by locking in the higher yields available
on U.S. corporate bonds and Foreign Government Securities during the summer.
What is the fund's current strategy?
We have recently taken several steps to add liquidity to the portfolio while
simultaneously attempting to reduce potential Y2K-related risks. Toward the end
of the year, we began to take profits in many of our emerging market
investments, where we realized significant gains. We have redeployed those
assets primarily to U.S. Treasury securities, which provide greater liquidity
and have recently appeared more attractively valued. In addition, we reduced our
exposure to government agency bonds, where the yield differences relative to
Treasuries have narrowed recently, making government agency bonds less
attractive.
By increasing the fund's liquidity, we believe we have positioned the fund to
avoid any Y2K-related problems that may arise temporarily at the start of the
new year. We also believe we are well positioned to take advantage of any new
bond issuance in the early part of 2000. As global economies continue to grow,
we believe they will need to raise capital. Accordingly, our current strategy is
designed to keep assets readily available to selectively purchase new bonds as
they come to market.
December 15, 1999
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID,
BASED UPON THE NET ASSET VALUE PER SHARE. PAST PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS.
(2) SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- THE SALOMON SMITH BARNEY WORLD
GOVERNMENT BOND INDEX (CURRENCY HEDGED) IS A MARKET CAPITALIZATION-WEIGHTED
BENCHMARK THAT TRACKS THE PERFORMANCE OF 18 GOVERNMENT BOND MARKETS.
The Fund
Selected Information
November 30, 1999 (Unaudited)
Market Price per share November 30, 1999 $ 814
Shares Outstanding November 30, 1999 14,640,617
New York Stock Exchange Ticker Symbol DSI
Market Price (New York Stock Exchange) FISCAL YEAR ENDED NOVEMBER 30, 1999 ($)
<TABLE>
<CAPTION>
Quarter Ended
February 28, 1999 May 31, 1999 August 31, 1999 November 30, 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
High 9(1)_4 9(1)_16 8(13)_16 8(7)_8
Low 8(7)_8 8(3)_4 8(1)_4 8(1)_16
Close 9(5)_8 8(7)_8 8(7)_16 8(1)_4
</TABLE>
Percentage Gain (Loss) BASED ON CHANGE IN MARKET PRICE(%)((+))
June 24, 1988 (commencement of operations) through November 30, 1999 100.50
December 1, 1989 through November 30, 1999 99.39
December 1, 1994 through November 30, 1999 43.42
December 1, 1998 through November 30, 1999 (2.21)
March 1, 1999 through November 30, 1999 (2.20)
June 1, 1999 through November 30, 1999 (2.86)
September 1, 1999 through November 30, 1999 (0.00)
Net Asset Value Per Share ($)
June 24, 1988 (commencement of operations) 11.11
November 30, 1998 10.20
February 28, 1999 10.02
May 31, 1999 9.97
August 31, 1999 9.74
November 30, 1999 9.73
Percentage Gain BASED ON CHANGE IN NET ASSET VALUE(%)((+))
June 24, 1988 (commencement of operations) through November 30, 1999 155.12
December 1, 1989 through November 30, 1999 122.82
December 1, 1994 through November 30, 1999 56.52
December 1, 1998 through November 30, 1999 3.77
March 1, 1999 through November 30, 1999 3.49
June 1, 1999 through November 30, 1999 1.87
September 1, 1999 through November 30, 1999 2.05
((+)) WITH DIVIDENDS REINVESTED.
STATEMENT OF INVESTMENTS
November 30, 1999
<TABLE>
<CAPTION>
Principal
BONDS AND NOTES--94.4% Amount (a) Value ($)
-----------------------------------------------------------------------------------------------------------------------------------
BANKING AND FINANCE--4.7%
Bangko Sentral Philipinas,
<S> <C> <C>
Bonds, 8.6%, 2027 2,500,000 2,109,258
Credit Local de France,
Bonds, 9.625%, 2000 CAD 1,000,000 696,960
DLJ,
Medium-Term Notes, .4%, 2000 2,500,000 (b) 2,519,850
Mannesmann Finance,
Bonds, 4.75%, 2009 EUR 1,500,000 1,353,522
6,679,590
FOREIGN/GOVERNMENTAL--37.2%
Belgium Kingdom Bonds,
9%, 2003 EUR 2,478,935 2,836,500
Canada Government Bonds:
9.75%, 2000 CAD 2,000,000 1,416,057
8.75%, 2005 CAD 2,000,000 1,533,899
Federative Republic of Brazil:
Bonds, 14.5%, 2009 1,000,000 1,042,500
Floating Rate Notes, 7%, 2009 1,000,000 (c) 757,500
France O.A.T., Deb.:
8.5%, 2003 EUR 781,837 882,733
8.5%, 2008 EUR 1,800,000 2,260,914
8.5%, 2023 EUR 1,143,367 1,549,772
Hellenic Republic of Greece:
Bonds, 8.6%, 2008 GRD 400,000,000 1,377,398
Bonds, 6.3%, 2009 GRD 310,000,000 938,271
Ivory Coast,
Floating Rate Notes, 2%, 2018 2,000,000 (c) 440,000
Kingdom of Denmark Bonds,
7%, 2007 DKK 9,000,000 1,344,165
Poland, Ser. PDI,
Floating Rate Bonds, 6%, 2014 2,500,000 (c) 2,209,375
Republic of Argentina:
Bonds, 11.75%, 2009 1,000,000 967,500
Ser. B, Discount Notes, 0%, 2001 3,000,000 2,658,900
Republic of Austria,
Deb., 6.25%, 2003 JPY 720,000,000 8,530,676
Republic of Italy Bonds,
5.125%, 2003 JPY 270,000,000 3,068,254
Republic of Turkey,
Notes, 11.875%, 2004 3,000,000 3,026,250
Republica Oriental del Uruguay,
Sr. Notes, 7.875%, 2027 2,645,000 2,453,238
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount (a) Value ($)
-----------------------------------------------------------------------------------------------------------------------------------
FOREIGN/GOVERNMENTAL (CONTINUED)
Spain Government,
Deb., 10%, 2005 EUR 3,504,554 4,344,418
Sweden Government,
Deb., 6%, 2005 SEK 13,000,000 1,572,137
United Kingdom Gilt Edged Securities:
9.5%, 2005 GBP 600,000 1,110,846
9%, 2011 GBP 250,000 529,641
United Mexican States:
Bonds, 11.375%, 2016 2,000,000 2,210,000
Ser. B, Secured Bonds, 6.25%, 2019 3,000,000 2,328,900
Ser. C, Collateralized Floating Rate Bonds,
6.836%, 2019 1,000,000 (c,d) 908,800
Ser. WA, Secured Bonds, 6.25%, 2019 1,000,000 (d) 776,300
53,074,944
FOREIGN/SUPRANATIONAL--4.9%
European Investment Bank,
Notes, 12.2%, 2003 ITL 7,000,000,000 4,440,959
International Bank for Reconstruction and Development,
Notes, 5.25%, 2002 JPY 230,000,000 (g) 2,513,960
6,954,919
U.S. GOVERNMENT AGENCY--16.5%
Federal Farm Credit, Real Yield Securities,
2.858%, 2/14/2002 1,000,000 (d) 972,520
Federal National Mortgage Association:
Medium-Term Notes, 5.75%, 2/15/2008 5,000,000 4,686,365
Medium-Term Notes, 5.25%, 1/15/2009 20,000,000 17,916,400
23,575,285
U.S. GOVERNMENT AGENCY/MORTGAGE-BACKED--14.7%
Federal Home Loan Mortgage Corp.:
Gtd. REMIC Pass-Through Ctfs.,
Ser. 51, Cl. E, 10%, 7/15/2020 4,005,010 4,279,554
REMIC Trust, Pass-Through Ctfs.
(Collateralized by FHLMC Pass-Through Ctfs.),
Ser. 2153, Cl. PI, 6.5%, 3/15/2016
(Interest Only Obligation) 7,000,000 (e) 1,585,938
Federal National Mortgage Association:
8%, 12/1/2025 726,456 739,845
Gtd. REMIC Pass-Through Ctfs.,
Ser. 1988-16, Cl. B, 9.5%, 6/25/2018 1,980,460 2,068,828
Principal
BONDS AND NOTES (CONTINUED) Amount (a) Value ($)
-----------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY/MORTGAGE-BACKED (CONTINUED)
U.S. Government Gtd. Development,
Participation Ctfs.
(Gtd. By U.S. Small Business Administration):
Ser. 1994-20K, 8.65%, 11/1/2014 3,816,889 3,995,199
Ser. 1994-20L, 8.4%, 12/1/2014 6,451,007 6,696,388
Ser. 1997-20J, 6.55%, 10/1/2017 1,576,901 1,519,471
20,885,223
U.S. GOVERNMENT--15.8%
U.S. Treasury Notes:
5.875%, 10/31/2001 20,000,000 19,957,600
6%, 8/15/2009 2,600,000 2,567,786
22,525,386
UTILITIES--.6%
Korea Electric Power,
Discount Notes, 0/7.95%, 2096 5,256,000 (f) 789,094
TOTAL BONDS AND NOTES
(cost $138,895,710) 134,484,441
-----------------------------------------------------------------------------------------------------------------------------------
OPTIONS--.0% Contracts Value ($)
-----------------------------------------------------------------------------------------------------------------------------------
Call Options;
U.S. Treasury Notes, 4.75%, 11/15/2008,
December '99 @$100.375
(cost $207,187) 85 1
-----------------------------------------------------------------------------------------------------------------------------------
Principal
SHORT-TERM INVESTMENTS--5.7% Amount ($) Value ($)
-----------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES--5.2%
Federal Home Loan Banks,
Discount Notes, 5.57%, 12/1/1999 7,355,000 7,355,000
U.S. TREASURY BILLS--.5%
4.5%, 12/9/1999 550,000 (g) 549,461
4.7%, 12/23/1999 150,000 (g) 149,625
699,086
TOTAL SHORT-TERM INVESTMENTS
(cost $8,054,019) 8,054,086
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $147,156,916) 100.1% 142,538,528
LIABILITIES, LESS CASH AND RECEIVABLES (.1%) (55,424)
NET ASSETS 100.0% 142,483,104
</TABLE>
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
A PRINCIPAL AMOUNT WILL BE IN U.S. DOLLARS UNLESS OTHERWISE NOTED.
CAD--CANADIAN DOLLARS DKK--DANISH KRONE EUR--EUROS GBP--BRITISH POUNDS
GRD--GREEK DRACHMAS ITL--ITALIAN LIRE JPY--JAPANESE YEN SEK--SWEDISH KRONA
B SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF
1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION,
NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT NOVEMBER 30, 1999, THESE
SECURITIES AMOUNTED TO $2,519,850 OR 1.8% OF NET ASSETS.
C VARIABLE RATE SECURITY--INTEREST RATE SUBJECT TO PERIODIC CHANGE.
D WITH VALUE RECOVERY RIGHTS ATTACHED.
E NOTIONAL FACE AMOUNT SHOWN.
F ZERO COUPON UNTIL A SPECIFIED DATE AT WHICH TIME THE STATED COUPON RATE
BECOMES EFFECTIVE UNTIL MATURITY.
G HELD BY THE CUSTODIAN IN A SEGREGATED ACCOUNT AS COLLATERAL FOR OPEN FINANCIAL
FUTURES POSITIONS.
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF FINANCIAL FUTURES
November 30, 1999
<TABLE>
<CAPTION>
Unrealized
Market Value Appreciation
Covered by (Depreciation)
Contracts Contracts ($) Expiration at 11/30/99 ($)
-----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL FUTURES LONG
<S> <C> <C> <C> <C>
U.S. Treasury 5 year Notes 68 7,300,437 December '99 (15,938)
U.S. Treasury 5 year Notes 43 4,256,328 March '00 (13,773)
U.S. Treasury 10 year Notes 26 2,534,594 March '00 (6,906)
U.S. Treasury 30 year Bonds 69 6,421,313 March '00 (129,859)
Australian Dollar 25 1,592,000 December '99 (53,000)
Euro Bond 15 1,892,813 December '99 (138,375)
Euro Bond 51 5,441,150 March '00 41,499
United Kingdom 15 year Gilt 15 2,730,318 March '00 (25,683)
FINANCIAL FUTURES SHORT
U.S. Treasury 20 year Bonds 90 10,071,563 December '99 177,063
(164,972)
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The Fund
STATEMENT OF OPTIONS WRITTEN
November 30, 1999
Call Options
ISSUER Contracts Value ($)
--------------------------------------------------------------------------------
U.S. Treasury Notes, 4.75%, 11/15/2008, 85 1
December '99 @$104.78125
Put Options
ISSUER
--------------------------------------------------------------------------------
U.S. Treasury Notes, 4.75%, 11/15/2008,
December '99 @ $95.125 85 443,955
(Premiums received $207,187) 443,956
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1999
Cost Value
-------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 147,156,916 142,538,528
Cash 4,000,189
Interest receivable 2,936,182
Receivable for investment securities sold 2,598,255
Net unrealized appreciation on forward
currency exchange contracts--Note 3(a) 61,012
Receivable for futures variation margin--Note 3(a) 19,178
Prepaid expenses and other assets 10,821
152,164,165
-------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 92,286
Payable for investment securities purchased 7,970,780
Dividend payable 915,039
Outstanding options written, at value
(premiums received $207,187)--see Statement of Options Written 443,956
Accrued expenses and other liabilities 259,000
9,681,061
-------------------------------------------------------------------------------
NET ASSETS ($) 142,483,104
-------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 160,194,917
Accumulated distributions in excess of investment income-net (2,183,543)
Accumulated net realized gain (loss) on investments, options
and foreign currency transactions (10,520,422)
Accumulated net unrealized appreciation (depreciation) on
investments, options written and foreign currency transactions
[including ($164,972) net unrealized depreciation on
financial futures] (5,007,848)
-------------------------------------------------------------------------------
NET ASSETS ($) 142,483,104
-------------------------------------------------------------------------------
SHARES OUTSTANDING
(100 million shares of $.001 par value Common Stock authorized) 14,640,617
NET ASSET VALUE, per share ($) 9.73
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF OPERATIONS
Year Ended November 30, 1999
-------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INTEREST INCOME 11,575,270
EXPENSES:
Management fee--Note 2(a) 1,022,275
Shareholder servicing costs 71,413
Custodian fees 67,993
Professional fees 62,600
Directors' fees and expenses--Note 2(b) 58,455
Shareholders' reports 54,576
Registration fees 24,260
Miscellaneous 32,639
TOTAL EXPENSES 1,394,211
INVESTMENT INCOME-NET 10,181,059
-------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 3 ($):
Net realized gain (loss) on investments and
foreign currency transactions (including options written) (3,366,332)
Net realized gain (loss) on financial futures (712,103)
Net realized gain (loss) on forward currency exchange contracts 1,642,855
NET REALIZED GAIN (LOSS) (2,435,580)
Net unrealized appreciation (depreciation) on investments, options
written and foreign currency transactions [including ($251,514)
net unrealized (depreciation) on financial futures] (3,685,483)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (6,121,063)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 4,059,996
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF CHANGES IN NET ASSETS
Year Ended November 30,
-----------------------------------
1999 1998
--------------------------------------------------------------------------------
OPERATIONS ($):
Investment income-net 10,181,059 10,142,388
Net realized gain (loss) on investments (2,435,580) (4,401,402)
Net unrealized appreciation (depreciation)
on investments (3,685,483) 2,720,455
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 4,059,996 8,461,441
--------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income-net (10,010,460) (16,664,869)
In excess of investment income-net -- (720,868)
Tax return of capital (970,003) --
TOTAL DIVIDENDS (10,980,463) (17,385,737)
TOTAL INCREASE (DECREASE) IN NET ASSETS (6,920,467) (8,924,296)
--------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 149,403,571 158,327,867
END OF PERIOD 142,483,104 149,403,571
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
FINANCIAL HIGHLIGHTS
The following tables describe the performance for the fiscal period indicated.
Total return shows how much your investment in the fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the fund's financial
statements and market price data for the fund's shares.
<TABLE>
<CAPTION>
Year Ended November 30,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 10.20 10.81 10.76 10.66 9.85
Investment Operations:
Investment income--net .70(a) .70(a) .69(a) .72(a) .71
Net realized and unrealized gain (loss)
on investments (.42) (.12) .18 .13 .82
Total from Investment Operations .28 .58 .87 .85 1.53
Distributions:
Dividends from investment income-net (.69) (1.14) (.67) (.74) (.71)
Dividends in excess of investment
income--net -- (.05) (.15) (.01) (.01)
Tax return of capital (.06) -- -- -- --
Total Distributions (.75) (1.19) (.82) (.75) (.72)
Net asset value, end of period 9.73 10.20 10.81 10.76 10.66
Market Value, end of period 8 1_4 9 3_16 9 9_16 9 3_8 9 1_8
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (B) (2.21) 8.75 11.32 11.37 8.80
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average net assets .95 .90 .92 .90 .94
Ratio of net investment income to
average net assets 6.97 6.65 6.48 6.91 7.56
Portfolio Turnover Rate 480.07 559.75 337.41 328.37 91.27
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period ($ X 1,000) 142,483 149,404 158,328 157,527 156,083
</TABLE>
A BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
B CALCULATED BASED ON MARKET VALUE.
SEE NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
Dreyfus Strategic Governments Income, Inc. (the "fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a non-diversified
closed-end management investment company. The fund's investment objective is to
maximize current income to the extent consistent with the preservation of
capital. The Dreyfus Corporation ("Investment Adviser") serves as the fund's
investment adviser. The Investment Adviser is a direct subsidiary of Mellon
Bank, N.A. (" Mellon"), which is a wholly-owned subsidiary of Mellon Financial
Corporation. Sinopia Asset Management serves as the fund's sub-investment
adviser.
The fund' s financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(a) Portfolio valuation: Investments in securities (excluding short-term
investments, other than U.S.Treasury Bills, options and financial futures) are
valued each business day by an independent pricing service ("Service") approved
by the Board of Directors. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the judgement
of the Service are valued at the mean between the quoted bid prices (as obtained
by the Service from dealers in such securities) and asked prices (as calculated
by the Service based upon its evaluation of the market for such securities).
Other investments (which constitute a majority of the portfolio securities) are
carried at fair value as determined by the Service, based on methods which
include consideration of: yields or prices of securities of comparable quality,
coupon, maturity and type; indications as to values from dealers; and general
market conditions. Securities for which there are no such valuations are valued
at fair value as determined in good faith under the direction of the Board of
Directors. Short-term investments, excluding U.S. Treasury Bills, are carried at
amortized cost, which approximates value. Financial futures and options are
valued at the last The Fund sales price on the securities exchange on which such
securities are primarily traded or at the last sales price on the national
securities market on each business day. Investments denominated in foreign
currencies are translated to U.S. dollars at the prevailing rates of exchange.
(b) Foreign currency transactions: The fund does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in the market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Net realized foreign exchange gains or losses arise from sales and maturities of
short-term securities, sales of foreign currencies, currency gains or losses
realized on securities transactions and the difference between the amount of
interest and foreign withholding taxes recorded on the fund's books and the U.S.
dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end, resulting
from changes in exchange rates. Such gains and losses are included with net
realized and unrealized gain or loss on investments.
(c) Securities transactions and investment income: Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
including, where applicable, amortization of discount on investments, is
recognized on the accrual basis. Under the terms of the custody agreement, the
fund received net earnings credits of $35,762 during the period ended November
30, 1999 based on available cash balances left on deposit. Income earned under
this arrangement is included in interest income.
(d) Dividends to shareholders: Dividends are recorded on the ex-dividend date.
Dividends from investment income-net are normally declared and paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the fund may make distributions on a more frequent basis to comply
with the distribution requirements of the Internal Revenue Code of 1986, as
amended (the "Code" ). This may result in distributions that are in excess of
investment income-net and net realized gain on a fiscal year basis. To the
extent that net realized capital gain can be offset by capital loss carryovers,
it is the policy of the fund not to distribute such gain.
For shareholders who elect to receive their distributions in additional shares
of the fund, in lieu of cash, such distributions will be reinvested at the lower
of the market price or net asset value per share (but not less than 95% of the
market price) as defined in the dividend reinvestment and cash purchase plan
On November 12, 1999, the Board of Directors declared a cash dividend of $.0625
per share from investment income-net, payable on December 1, 1999 to
shareholders of record as of the close of business on November 16, 1999.
(e) Federal income taxes: It is the policy of the fund to continue to qualify as
a regulated investment company, if such qualification is in the best interests
of its shareholders, by complying with the applicable provisions of the Code,
and to make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes.
The fund has an unused capital loss carryover of approximately $10,333,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to November 30, 1999. This
amount is calculated based on Federal income tax regulations which may differ
from financial reporting in accordance with generally accepted accounting
principles. If not applied, $4,384,000 of the carryover expires in fiscal 2002,
$18,000 expires in fiscal 2003, $831,000 expires in fiscal 2004, $811,000
expires in fiscal 2006 and $4,289,000 expires in fiscal 2007.
During the period ended November 30, 1999, the fund increased accumulated
undistributed investment income-net by $1,090,005 and decreased accumulated net
realized gain (loss) on iinvestments by $120,002 and paid-in capital by
$970,003. Net assets were not effected by this reclassification.
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--Management Fee and Other Transactions With Affiliates:
(a) Pursuant to a management agreement with the Investment Adviser, the
management fee is computed at the annual rate of .70 of 1% of the value of the
fund's average weekly net assets and is payable monthly.
Pursuant to a Sub-Investment Advisory Agreement between the Investment Adviser
and Sinopia Asset Management, the sub-advisory fee is computed at the annual
rate of .20 of 1% of the value of the fund's average weekly net assets and is
payable monthly by the Investment Adviser.
The fund compensates Mellon, an affiliate of the Investment Adviser, under a
transfer agency agreement for providing personnel and facilities to perform
transfer agency services for the fund. During the period ended November 30,
1999, the fund was charged $19,482 pursuant to the transfer agency agreement.
(b) Each director who is not an "affiliated person" as defined in the Act
receives from the fund an annual fee of $4,500 and an attendance fee of $500 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
(c) At November 30,1999, the fund held 320,000 shares of Common Stock in
Treasury, with a cost basis of $2,850,038.
NOTE 3--Securities Transactions:
(a) The aggregate amount of purchases and sales of investment securities
(including paydowns) , excluding short-term securities, financial futures,
forward currency exchange contracts and options transactions, during the period
ended November 30, 1999, amounted to $669,683,639 and $675,607,994,
respectively.
The following summarizes open forward currency exchange contracts at November
30, 1999:
<TABLE>
<CAPTION>
FOREIGN UNREALIZED
FORWARD CURRENCY CURRENCY APPRECIATION
EXCHANGE CONTRACTS AMOUNTS PROCEEDS ($) VALUE($) (DEPRECIATION)($)
------------------------------------------------------------------------------------------------------------------------------------
SALES:
British Pounds,
<S> <C> <C> <C> <C>
expiring 2/24/2000 1,075,000 1,741,640 1,719,211 22,429
Canadian Dollars,
expiring 2/24/2000 5,700,000 3,896,903 3,877,805 19,098
Danish Krone,
expiring 2/24/2000 10,237,000 1,430,768 1,394,759 36,009
Euro,
expiring 2/24/2000 17,525,000 18,195,331 17,784,289 411,042
Greek Drachmas,
expiring 1/20/2000 806,000,000 2,508,325 2,462,116 46,209
Japanese Yen,
expiring 2/24/2000 1,443,000,000 13,851,027 14,360,800 (509,773)
Swedish Krona,
expiring 2/24/2000 14,312,000 1,728,649 1,692,651 35,998
TOTAL 61,012
</TABLE>
The fund enters into forward currency exchange contracts in order to hedge its
exposure to changes in foreign currency exchange rates on its foreign portfolio
holdings. When executing forward currency exchange contracts, the fund is
obligated to buy or sell a foreign currency at a specified rate on a certain
date in the future. With respect to sales of forward currency exchange
contracts, the fund would incur a loss if the value of the contract increases
between the date the forward contract is opened and the date the forward
contract is closed. The fund realizes a gain if the value of the contract
decreases between those dates. With respect to purchases of forward currency
exchange contracts, the fund would incur a loss if the value of the contract
decreases between the date the forward contract is opened and the date the
forward contract is closed. The fund realizes a gain if the value The Fund of
the contract increases between those dates. The fund is also exposed to credit
risk associated with counter party nonperformance on these forward currency
exchange contracts which is typically limited to the unrealized gain on each
open contract.
The following summarizes the fund' s call/put options written for the period
ended November 30, 1999:
<TABLE>
<CAPTION>
OPTIONS TERMINATED
___________________
NET
NUMBER OF PREMIUMS REALIZED
CONTRACTS RECEIVED ($) COST ($) GAIN ($)
__________ ____________ _____________________
OPTIONS WRITTEN:
Contracts outstanding
<S> <C> <C> <C> <C>
November 30, 1998 -- --
Contracts written 1,157 1,267,658
Contracts terminated:
Closed 837 884,283 743,114 141,169
Exercised 150 176,187 176,187 --
Contracts outstanding
November 30, 1999 170 207,188
</TABLE>
The fund may purchase and write (sell) put and call options in order to gain
exposure to or to protect against changes in the market.
As a writer of call options, the fund receives a premium at the outset and then
bears the market risk of unfavorable changes in the price of the financial
instrument underlying the option. Generally, the fund would incur a gain, to the
extent of the premium, if the price of the underlying financial instrument
decreases between the date the option is written and the date on which the
option is terminated. Generally, the fund would realize a loss, if the price of
the financial instrument increases between those dates.
As a writer of put options, the fund receives a premium at the outset and then
bears the market risk of unfavorable changes in the price of the financial
instrument underlying the option. Generally, the fund would incur a gain, to the
extent of the premium, if the price of the underlying financial instrument
increases between the date the option is written and the date on which the
option is terminated. Generally, the fund would realize a loss, if the price of
the financial instrument decreases between those dates.
The fund may invest in financial futures contracts in order to gain exposure to
or protect against changes in the market. The fund is exposed to market risk as
a result of changes in the value of the underlying financial instruments.
Investments in financial futures require the fund to "mark to market" on a daily
basis, which reflects the change in the market value of the contracts at the
close of each day's trading. Typically, variation margin payments are received
or made to reflect daily unrealized gains or losses. When the contracts are
closed, the fund recognizes a realized gain or loss. These investments require
initial margin deposits with a custodian, which consist of cash or cash
equivalents, up to approximately 10% of the contract amount. The amount of these
deposits is determined by the exchange or Board of Trade on which the contract
is traded and is subject to change. Contracts open at November 30, 1999 are set
forth in the Statement of Financial Futures.
(b) At November 30, 1999, accumulated net unrealized depreciation on
investments, financial futures, options and forward currency exchange contracts
was $4,959,117, consisting of $2,410,584 gross unrealized appreciation and
$7,369,701 gross unrealized depreciation.
At November 30, 1999, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
The Fund
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Dreyfus Strategic Governments Income, Inc.
We have audited the accompanying statement of assets and liabilities of Dreyfus
Strategic Governments Income, Inc., including the statements of investments,
options written and financial futures, as of November 30, 1999, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and financial
highlights for each of the years indicated therein. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of November 30, 1999 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Dreyfus Strategic Governments Income, Inc. at November 30, 1999, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the indicated years, in conformity with generally accepted accounting
principles.
New York, New York
January 12, 2000
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (Unaudited)
The fund generally distributes net investment income and any net realized
short-term capital gains monthly, and net realized long-term capital gains at
least annually.
Under the fund' s Dividend Reinvestment and Cash Purchase Plan (the "Plan"), a
shareholder who has fund shares registered in his name will have all
distributions reinvested automatically by The Mellon, as Plan agent (the "
Agent" ), in additional shares of the fund's Common Stock at the lower of
prevailing market price or net asset value (but not less than 95% of market
value at the time of valuation) unless such shareholder elects to receive cash
as provided below. If market price is equal to or exceeds net asset value,
shares will be issued at net asset value. If net asset value exceeds market
price or if a dividend or other distribution payable only in cash is declared,
the Agent, as agent for the Plan participants, will buy fund shares of the fund'
s Common Stock in the open market. A Plan participant is not relieved of any
income tax that may be payable on such dividends or distributions.
A shareholder who owns fund shares registered in the name of his broker/dealer
or other nominee (i.e., in "street name") may not participate in the Plan, but
may elect to have cash dividend distributions reinvested by his broker/dealer or
other nominee in additional shares of the fund if such service is provided by
the broker/dealer or other nominee; otherwise such distributions will be treated
like any other cash dividend.
A shareholder who has fund shares registered in his name may elect to withdraw
from the Plan at any time for a $5.00 fee and thereby elect to receive cash in
lieu of shares of the fund. Changes in elections must be in writing, sent to
Mellon Bank N.A., c/o ChaseMellon Shareholder Services, P.O. Box 3338, South
Hackensack, NJ 07606-1938, should include the shareholder's name and address as
they appear on the Agent's records and will be effective only if received more
than fifteen days prior to the record date for any distribution.
A Plan participant who has fund shares registered in his name has the option of
making additional cash payments to the Agent, semi-annually, in any amount from
$100 to $500, for investment in the fund's shares in the open market on or
about January 15 and July 15. Any voluntary cash payments received more than 30
days prior to these dates will be returned by the Agent, and interest will not
be paid on any uninvested cash payments. A participant may withdraw a voluntary
cash payment by written notice, if the notice is received by the Agent not less
than 48 hours before the payment is to be invested. A shareholder who owns fund
shares registered in street name should consult his broker/dealer to determine
whether an additional cash purchase option is available through his
broker/dealer.
The Agent maintains all shareholder accounts in the Plan and furnishes written
confirmations of all transactions in the account. Shares in the account of each
Plan participant will be held by the Agent in non-certificated form in the name
of the participant, and each such participant's proxy will include those shares
purchased pursuant to the Plan.
Plan participants pay an Agent's fee of $.50 per reinvestment of dividends and
distributions, a pro rata share of brokerage commissions incurred with respect
to the Agent's open market purchases and purchases from voluntary cash payments,
and a $3.00 fee for each purchase made from a voluntary cash payment.
The fund reserves the right to amend or terminate the Plan as applied to any
voluntary cash payments made and any dividend or distribution paid subsequent to
notice of the change sent to Plan participants at least 90 days before the
record date for such dividend or distribution. The Plan also may be amended or
terminated by the Agent on at least 90 days' written notice to Plan
participants.
PROXY RESULTS (Unaudited)
Stockholders voted on the following proposals presented at the annual
stockholders' meeting held on June 11, 1999. The description of each proposal
and the number of shares voted are as follows:
<TABLE>
<CAPTION>
Shares
----------------------------------------------------------------------------
For Against Abstained
----------------------------------------------------------------------------
1. To consider a proposal
to convert the fund
to an open-end
<S> <C> <C> <C>
investment company 2,192,140 4,849,434 475,596
2. To ratify the selection
of Ernst & Young LLP
as independent auditors
of the fund 12,211,849 168,458 153,684
3. To consider a stockholder
proposal recommending that the
fund's board commit to a program
to repurchase fund shares. 2,035,814 4,910,267 583,388
Authority
For Withheld
-------------------------------------------------------
4. To elect three Class I Directors:((+))
Joseph S. DiMartino 11,954,162 579,829
Warren B. Rudman 11,951,448 582,543
Sander Vanocur 11,944,836 589,155
((+)) THE TERMS OF THESE CLASS I DIRECTORS EXPIRE IN 2002.
</TABLE>
The Fund
NOTES
OFFICERS AND DIRECTORS
Dreyfus Strategic Governments Income, Inc.
200 Park Avenue
New York, NY 10166
DIRECTORS
Joseph S. DiMartino, Chairman
David W. Burke
Diane Dunst
Rosalind Gersten Jacobs
Jay I. Meltzer
Daniel Rose
Warren B. Rudman
Sander Vanocur
OFFICERS
President and Treasurer
Marie E. Connolly
Vice President and Secretary
Margaret W. Chambers
Vice President and Assistant Treasurer
John P. Covino
Vice President and Assistant Treasurer
Mary A. Nelson
Vice President and Assistant Treasurer
George A. Rio
Vice President and Assistant Treasurer
Joseph F. Tower, III
Vice President, Assistant Treasurer and
Assistant Secretary
Frederick C. Dey
Vice President, Assistant Treasurer and
Assistant Secretary
Stephanie Pierce
Vice President and Assistant Secretary
Douglas C. Conroy
Vice President and Assistant Secretary
Karen Jacoppo-Wood
Vice President and Assistant Secretary
Christopher J. Kelley
Vice President and Assistant Secretary
Kathleen K. Morrisey
Vice President and Assistant Secretary
Elba Vasquez
PORTFOLIO MANAGERS
Gerald Thunelius
Jean Charles Bertrand
Michel-Andre Levy
Benedicte Maillant
Thierry Mirabe
Pierre Sequier
Jacques Sikarov
INVESTMENT ADVISER
The Dreyfus Corporation
SUB-INVESTMENT ADVISER
Sinopia Asset Management
CUSTODIAN
The Bank of New York
COUNSEL
Stroock & Stroock & Lavan LLP
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR
Mellon Bank, N.A.
STOCK EXCHANGE LISTING
NYSE Symbol: DSI
INITIAL SEC EFFECTIVE DATE
June 23, 1988
THE NET ASSET VALUE APPEARS IN THE FOLLOWING PUBLICATIONS: BARRON'S, CLOSED-END
BOND FUNDS SECTION UNDER THE HEADING "WORLD INCOME FUNDS" EVERY MONDAY; WALL
STREET JOURNAL, MUTUAL FUNDS SECTION UNDER THE HEADING "CLOSED-END FUNDS WORLD
INCOME FUNDS" EVERY MONDAY; NEW YORK TIMES, BUSINESS SECTION UNDER THE HEADING
"CLOSED-END FUNDS WORLD INCOME FUNDS" EVERY SUNDAY.
NOTICE IS HEREBY GIVEN IN ACCORDANCE WITH SECTION 23(C) OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED, THAT THE FUND MAY PURCHASE SHARES OF ITS COMMON
STOCK IN THE OPEN MARKET WHEN IT CAN DO SO AT PRICES BELOW THE THEN CURRENT NET
ASSET VALUE PER SHARE.
The Fund
For More Information
Dreyfus Strategic Governments
Income, Inc.
200 Park Avenue
New York, NY 10166
Investment Adviser
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Sub-Investment Adviser
Sinopia Asset Management
66 Rue de la Chaussee d'Antin
Paris, France 75009
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agent,
Dividend Disbursing Agent
& Registrar
Mellon Bank, N.A.
85 Challenger Road
Ridgefield Park, NJ 07660
(c) 2000 Dreyfus Service Corporation 429AR9911
<PAGE>
Dreyfus
Strategic Governments
Income, Inc.
SEMIANNUAL REPORT
May 31, 1999
<PAGE>
The views expressed herein are current to the date of this report. These views
and the composition of the fund's portfolio are subject to change at any time
based on market and other conditions.
* Not FDIC-Insured
* Not Bank-Guaranteed
* May Lose Value
Year 2000 Issues (Unaudited)
The fund could be adversely affected if the computer systems used by The Dreyfus
Corporation and the fund's other service providers do not properly process and
calculate date-related information from and after January 1, 2000. The Dreyfus
Corporation is working to avoid Year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by Year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
<PAGE>
Contents
THE FUND
-------------------------------------------
2 Letter from the President
3 Discussion of Fund Performance
6 Statement of Investments
10 Statement of Financial Futures
11 Statement of Options Written
12 Statement of Assets and Liabilities
13 Statement of Operations
14 Statement of Changes in Net Assets
15 Financial Highlights
16 Notes to Financial Statements
FOR MORE INFORMATION
--------------------------------------------------------
Back Cover
<PAGE>
Dreyfus
Strategic Governments Income, Inc. The Fund
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Strategic
Governments Income, Inc., covering the six-month period from December 1, 1998
through May 31, 1999. Inside, you'll find valuable information about how the
fund was managed during the reporting period, including a discussion with the
fund's portfolio manager, Gerald Thunelius.
Lower short-term interest rates adopted by the Federal Reserve Board and other
central banks in the fall of 1998 appear to have helped many developed nations
withstand the effects of economic weakness in Japan, Asia and Latin America. At
the same time, the U.S. economy entered its eighth year of expansion in an
environment characterized by low inflation and high levels of consumer spending.
Fixed-income securities provided mixed results in this economic climate. U.S.
Treasury securities gave back most of the gains they achieved last summer when
stocks and other types of bonds fell. Other types of bonds performed well,
however, as investors shifted assets back into bond market sectors they had
previously avoided. Accordingly, many corporate bonds, mortgage-backed
securities, asset-backed securities and U.S. dollar-denominated foreign bonds
provided relatively attractive returns over the reporting period.
We appreciate your confidence over the past six months, and we look forward to
your continued participation in Dreyfus Strategic Governments Income, Inc.
Sincerely,
/s/ Stephen E. Canter
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
June 14, 1999
<PAGE>
DISCUSSION OF FUND PERFORMANCE
Gerald Thunelius, Portfolio Manager
How did Dreyfus Strategic Governments Income, Inc. perform relative to its
benchmark?
For the six-month period ended May 31, 1999, Dreyfus Strategic Governments
Income, Inc. produced a total return of 1.86%.1 In comparison, the fund's
benchmark, the Salomon Smith Barney World Government Bond Index (currency
hedged), produced a total return of 1.16% for the same six-month period.2
What is the fund's investment approach?
The fund seeks to provide as high a level of current income as is consistent
with the preservation of capital. To pursue this goal, it invests primarily in
securities issued or guaranteed by the U.S. government or its agencies as well
as in securities issued by one or more foreign governments and any of their
political sub-divisions or agencies. The fund invests at least 65% of its total
assets in the securities of U.S. and foreign governments and may invest up to
50% of its total assets in foreign government securities.
When choosing securities, we first examine U.S. and global economic
conditions and other market factors to determine the likely direction of
long- and short-term interest rates. Using a research-driven investment
process, we then attempt to identify potentially profitable sectors before they
are widely perceived by the market. Finally, we look for underpriced or
mispriced securities within those sectors that, in our opinion, are likely to
perform well over time.
What other factors influenced the fund's performance?
Our U.S. bond holdings produced mixed results during the six-month reporting
period. Most significantly, U.S. Treasury securities suffered as investors who
had flocked to these direct obligations of the federal government during last
year's "flight to quality" shifted their assets to
The Fund 3
<PAGE>
DISCUSSION OF FUND PERFORMANCE (continued)
higher yielding segments of the marketplace. This was especially true in April
and May, when the international bond markets began to show improvement.
The portfolio's foreign bonds also produced mixed returns. On one hand, the fund
benefited from its holdings in Korea, Panama, Spain, Greece and Turkey. Our
Korean holdings produced the strongest returns over the past six months. That's
because even though Korea had already made dramatic progress toward financial
reform, their bond prices rose further when many other Asian economies began to
rebound in the early part of this year. Panama and Spain have both benefited
from strong exports as global growth has improved, while Greece and Turkey both
initiated aggressive reforms in the hope of becoming part of the European
Monetary Union (EMU). Unfortunately, neither Greece nor Turkey was able to meet
the deadline for this first round of EMU entries, but their efforts resulted in
stronger economies.
On the other hand, our investments in Poland and Uruguay provided lackluster
returns. Bonds in Poland have suffered because of the country's fiscal problems
and, most recently, as a result of the war in Kosovo. Investments in Uruguay,
often referred to as the "Switzerland of Latin America," provided disappointing
results during the period. As the region's emerging markets made quick
recoveries from January's Brazilian currency devaluation, the "flight to
quality" that might have otherwise used Uruguay as a safe haven never took
place.
4
<PAGE>
What is the fund's current strategy?
We have maintained a neutral average duration -- which is a measure of
sensitivity to changes in interest rates -- because we do not believe that
investors have been adequately compensated for taking on the risks of
longer-term securities. We also reduced the portfolio's exposure to non-dollar
investments by about 15%, based on evidence supporting a strong U.S. dollar
relative to major foreign currencies. At the same time, we slightly increased
our exposure to U.S Treasury securities, preferring to add more liquidity to the
portfolio while we wait to see how the global bond market conditions evolve.
June 14, 1999
1 Total return includes reinvestment of dividends and any capital gains paid.
2 SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- The Salomon Smith Barney World
Government Bond Index (currency hedged) is a market-capitalization-weighted
benchmark that tracks the performance of 18 government bond markets.
The Fund 5
<PAGE>
STATEMENT OF INVESTMENTS
May 31, 1999 (Unaudited)
--------------------------------------------------------------------------------
Principal
Bonds and Notes--93.8% Amount ($) Value ($)
--------------------------------------------------------------------------------
Banking and Finance--9.8%
Banco Comercial,
Bonds, 8.875%, 2009a 2,500,000 2,443,750
Banco Nacional de Mexico,
Bonds, 7.25%, 2004 5,000,000 4,431,250
Bangko Sentral Philipinas,
Bonds, 8.6%, 2027 2,500,000 2,031,250
Credit Local de France,
Bonds, 9.625%, 2000b 678,104 712,083
KfW International Finance,
Gtd. Bonds, 6%, 1999c 2,219,482 2,284,726
Korea Development Bank,
Notes, 7.125%, 2004 2,500,000 2,431,215
14,334,274
Foreign--5.1%
Korea Electric Power:
Deb., 7.75%, 2013 7,000,000 6,450,493
Discount Notes, 7.95%, 2096d 5,256,000 997,163
7,447,656
Foreign/Governmental--49.4%
Belgium Kingdom Bonds,
9%, 2003e 2,580,571 3,104,099
Canada Government Bonds:
9.75%, 2000b 1,356,208 1,448,336
8.75%, 2005b 1,356,208 1,601,465
Federative Republic of Brazil:
Floating Rate Notes, 5.938%, 2009f 5,000,000 3,218,750
Global Bonds, 10.125%, 2027 2,500,000 1,828,126
France O.A.T., Deb.:
8.5%, 2003e 2,063,092 2,455,701
8.5%, 2008e 1,873,800 2,496,779
8.5%, 2023e 1,190,245 1,757,632
Hellenic Republic of Greece:
Bonds, 6.3%, 2009g 3,201,537 3,308,715
Bonds, 8.6%, 2008g 1,280,615 1,503,606
Ivory Coast,
Floating Rate Notes, 2%, 2018f 2,000,000 520,000
Jordan,
Floating Rate Notes, 5.5%, 2023f 2,000,000 1,190,000
Kingdom of Denmark Bonds,
7%, 2007h 1,260,681 1,488,035
6
<PAGE>
--------------------------------------------------------------------------------
Principal
Bonds and Notes (continued) Amount ($) Value ($)
--------------------------------------------------------------------------------
Foreign/Governmental (continued)
Poland, Ser. PDI,
Floating Rate Bonds, 5%, 2014f 2,000,000 1,780,000
Republic of Austria,
Deb., 6.25%, 2003c 2,630,497 3,287,225
Republic of Colombia:
Notes, 8.66%, 2004i 4,000,000 3,600,008
Global Bonds, 9.75%, 2009 3,000,000 2,568,750
Republic of Costa Rica,
Notes, 9.335%, 2009a 9,000,000 8,662,500
Republic of Panama,
Global Bonds, 8.875%, 2027 2,000,000 1,735,000
Republic of Turkey,
Bonds, 12%, 2003j 2,000,000 1,990,000
Republic of Venezuela, Ser. C,
Floating Rate Deb., 6.375%, 2003f 2,500,000 1,750,000
Republica Oriental del Uruguay,
Bonds:
7.25%, 2009 2,500,000 2,350,000
Ser. B, 6.75%, 2021 (Units)k 3,000,000 2,580,000
Spain Government,
Deb., 10%, 2005e 2,815,441 3,746,648
Sweden Government,
Deb., 6%, 2005l 2,322,395 2,545,426
United Kingdom Gilt Edged Securities:
9.5%, 2005m 960,600 1,174,664
9%, 2011m 1,601,000 2,180,494
United Mexican States:
Global Bonds, 11.5%, 2026 2,000,000 2,202,500
Ser. XW, Global Bonds, 10.375%, 2009 4,000,000 3,980,000
72,054,459
Foreign/Supranational--4.8%
European Investment Bank,
Notes, 12.2%, 2003n 3,763,423 4,908,033
International Bank for Reconstruction
and Development,
Notes, 5.25%, 2002c 1,890,670 2,155,307
7,063,340
U.S. Government Agencies--18.4%
Federal Farm Credit,
Real Yield Securities,
2.169%, 2/14/2002o 1,000,000 973,410
The Fund 7
<PAGE>
STATEMENT OF INVESTMENTS (Unaudited) (continued)
--------------------------------------------------------------------------------
Principal
Bonds and Notes (continued) Amount ($) Value ($)
--------------------------------------------------------------------------------
U.S. Government Agencies (continued)
Federal Home Loan Mortgage Corp.:
Gtd. REMIC Pass-Through Ctfs.,
Ser. 51, Cl. E, 10%, 7/15/2020 5,071,136 5,476,624
REMIC Trust, Pass-Through Ctfs.
(Collateralized by FHLMC
Pass-Through Ctfs.):
Ser. 1611, Cl. L, 7%, 11/15/2023
(Interest Only Obligation)p 5,000,000 1,509,375
Ser. 1978, Cl. PJ, 7%, 3/15/2026
(Interest Only Obligation)p 5,130,500 1,537,303
Federal National Mortgage Association:
8%, 12/1/2025 861,205 897,532
Gtd. REMIC Pass-Through Ctfs.,
Ser. 1988-16, Cl. B., 9.5%,
6/25/2018 2,373,616 2,508,961
U.S. Government Gtd. Development,
Participation Ctfs.
(Gtd. by U.S. Small Business
Administration):
Ser 1994-20K, 8.65%, 11/1/2014 4,625,194 4,935,990
Ser 1994-20L, 8.4%, 12/1/2014 6,979,663 7,376,573
Ser 1997-20J, 6.55%, 10/1/2017 1,615,791 1,603,215
26,818,983
U.S. Government--6.3%
U.S. Treasury Notes:
5.25%, 5/15/2004 1,500,000 1,478,775
5.625%, 2/15/2006 300,000 297,579
5.5%, 5/15/2009 7,500,000 7,431,825
9,208,179
Total Bonds and Notes
(cost $143,402,211) 136,926,891
--------------------------------------------------------------------------------
Options--0.0% Contracts Value ($)
Call Options;
U.S. Treasury Notes, 4.75%, 11/15/2008,
December '99 @ $100.375
(cost $207,188) 85 13,430
8
<PAGE>
--------------------------------------------------------------------------------
Principal
Short-Term Investments--1.4% Amount ($) Value ($)
--------------------------------------------------------------------------------
U.S. Government Agencies--.6%
Federal Home Loan Banks,
Discount Notes, 4.68%, 6/1/1999 872,000 872,000
U.S. Treasury Bills-.8%
4.48%, 6/3/1999q 240,000 239,875
4.21%, 6/10/1999q 390,000 389,421
4.43%, 6/17/1999q 23,000 22,947
4.46%, 7/1/1999q 100,000 99,602
4.42%, 7/8/1999q 400,000 398,066
1,149,911
Total Short-Term Investments
(cost $2,022,296) 2,021,911
--------------------------------------------------------------------------------
Total Investments (cost $145,631,695) 95.2% 138,962,232
Cash and Receivables (Net) 4.8% 7,074,993
Net Assets 100.0% 146,037,225
a Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At May 31, 1999 these securities
amounted to $11,106,250 or 7.6% of net assets.
b Converted to U.S. Dollars from Canadian Dollars.
c Converted to U.S. Dollars from Japanese Yen.
d Zero coupon until a specified date at which time the stated coupon rate
becomes effective until maturity.
e Converted to U.S. Dollars from Euro.
f Variable rate security--interest rate subject to periodic change.
g Converted to U.S. Dollars from Greek Drachmas.
h Converted to U.S. Dollars from Danish Krone.
i Reflects date security can be redeemed at holder's option; the stated maturity
is 10/7/2016.
j Reflects date security can be redeemed at holder's option; the stated
maturity is 12/15/2008.
k With value recovery rights attached.
l Converted to U.S. Dollars from Swedish Krona.
m Converted to U.S. Dollars from British Pounds.
n Converted to U.S. Dollars from Italian Lire.
o Variable rate security-adjustment to interest rate linked to the Consumer
Price Index.
p Notional face amount shown.
q Held by the custodian in a segregated account as collateral for open
financial futures positions.
See notes to financial statements.
The Fund 9
<PAGE>
STATEMENT OF FINANCIAL FUTURES
May 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Unrealized
Market Value Appreciation
Covered by (Depreciation)
Contracts Contracts ($) Expiration at 5/31/99 ($)
-----------------------------------------------------------------------------------------
Financial Futures Long
<S> <C> <C> <C> <C>
U.S. Treasury 30 Year Bonds 227 26,665,406 September '99 (58,523)
Australian 10 Year Bonds 5 467,891 June '99 (11,934)
Euro Bond 41 5,115,727 June '99 (63,092)
United Kingdom 15 Year Gilt 5 921,378 June '99 (47,893)
Financial Futures Short
U.S. Treasury 2 Year Notes 50 10,403,125 September '99 (5,469)
U.S. Treasury 5 Year Notes 395 43,048,828 September '99 179,609
U.S. Treasury 10 Year Notes 7 780,719 September '99 5,961
(1,341)
</TABLE>
See notes to finanacial statements
10
<PAGE>
Statement of Options Written
May 31, 1999 (Unaudited)
--------------------------------------------------------------------------------
Call Options
Issuer Contracts Value ($)
--------------------------------------------------------------------------------
U.S. Treasury Notes, 4.75%, 11/15/2008,
December '99 @ $104.78125 85 2,040
Put Options
Issuer
--------------------------------------------------------------------------------
U.S. Treasury 30 Year Bonds, July '99 @ $118 150 189,844
U.S. Treasury Notes, 4.75%, 11/15/2008,
December '99 @ $95.125 85 336,855
(Premiums received $383,375) 528,739
See notes to financial statements.
The Fund 11
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1999 (Unaudited)
--------------------------------------------------------------------------------
Cost Value
--------------------------------------------------------------------------------
Assets ($):
Investments in securities--See Statement of
Investments 145,631,695 138,962,232
Receivable for investment securities sold 4,316,907
Interest receivable 3,446,763
Net unrealized appreciation on forward currency
exchange contracts--Note 3(a) 446,885
Prepaid expenses and other receivables 25,735
147,198,522
--------------------------------------------------------------------------------
Liabilities ($):
Due to The Dreyfus Corporation 93,180
Cash overdraft due to Custodian 24,219
Outstanding options written, at value (premiums
received $383,375)
--see Statement of Options Written 528,739
Payable for forward currency exchange contracts--Note 3(a) 323,209
Payable for futures variation margin--Note 3(a) 21,789
Accrued expenses and other liabilities 170,161
1,161,297
--------------------------------------------------------------------------------
Net Assets ($) 146,037,225
--------------------------------------------------------------------------------
Composition of Net Assets ($):
Paid-in capital 161,164,920
Accumulated distributions in excess of investment income--net (2,931,736)
Accumulated net realized gain (loss) on investments, options and
foreign currency transactions (5,804,127)
Accumulated net unrealized appreciation (depreciation) on
investments, options written and foreign currency transactions
[including ($1,341) net unrealized depreciation on financial
futures]--Note 3(b) (6,391,832)
--------------------------------------------------------------------------------
Net Assets ($) 146,037,225
--------------------------------------------------------------------------------
Shares Outstanding
(100 million shares of $.001 par value Common Stock authorized) 14,640,617
Net Asset Value, per share ($) 9.97
See notes to financial statements.
12
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended May 31, 1999 (Unaudited)
--------------------------------------------------------------------------------
Investment Income ($):
--------------------------------------------------------------------------------
Interest Income 5,739,600
Expenses:
Management fee--Note 2(a) 519,400
Shareholder servicing costs 42,928
Shareholders' reports 33,612
Directors' fees and expenses--Note 2(b) 30,809
Professional fees 29,946
Custodian fees 26,699
Registration fees 12,130
Miscellaneous 11,437
Total Expenses 706,961
Investment Income--Net 5,032,639
--------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments--Note 3 ($):
Net realized gain (loss) on investments and foreign currency
transactions (including options written) 380,271
Net realized gain (loss) on financial futures (547,757)
Net realized gain (loss) on forward currency exchange
contracts 2,328,199
Net Realized Gain (Loss) 2,160,713
Net unrealized appreciation (depreciation) on investments,
options written and foreign currency transactions
[including ($87,883) net unrealized (depreciation) on
financial futures] (5,069,467)
Net Realized and Unrealized Gain (Loss) on Investments (2,908,754)
Net Increase in Net Assets Resulting from Operations 2,123,885
See notes to financial statements.
The Fund 13
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
Six Months Ended
May 31, 1999 Year Ended
(Unaudited) November 30, 1998
--------------------------------------------------------------------------------
Operations ($):
Investment income--net 5,032,639 10,142,388
Net realized gain (loss) on investments 2,160,713 (4,401,402)
Net unrealized appreciation (depreciation)
on investments (5,069,467) 2,720,455
Net Increase (Decrease) in Net Assets
Resulting from Operations 2,123,885 8,461,441
--------------------------------------------------------------------------------
Dividends to Shareholders ($):
From Investment income--net (5,490,231) (16,664,869)
In excess of investment income--net -- (720,868)
Total Distributions (5,490,231) (17,385,737)
Total Increase (Decrease) in Net Assets (3,336,346) (8,924,296)
--------------------------------------------------------------------------------
Net Assets ($):
Beginning of Period 149,403,571 158,327,867
End of Period 146,037,225 149,403,571
See notes to financial statements.
14
<PAGE>
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal period indicated.
Total return shows how much your investment in the fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the fund's financial
statements.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Six Months
Ended Six Months Year
May 31, Ended Ended
1999 Year Ended November 30, November 30, May 31,
----------------------------
(Unaudited) 1998 1997 1996 1995 1994a 1994
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Data ($):
Net asset value, beginning
of period 10.20 10.81 10.76 10.66 9.85 10.30 11.03
Investment Operations:
Investment income--net .34b .70b .69b .72b .71 .42 .89
Net realized and unrealized
gain (loss) on investments (.19) (.12) .18 .13 .82 (.44) (.70)
Total from Investment
Operations .15 .58 .87 .85 1.53 (.02) .19
Distributions:
Dividends from investment
income--net (.38) (1.14) (.67) (.74) (.71) (.28) (.92)
Dividends in excess of
investment income--net -- (.05) (.15) (.01) (.01) -- --
Dividends from paid-in
capital -- -- -- -- -- (.15) --
Total Distributions (.38) (1.19) (.82) (.75) (.72) (.43) (.92)
Net asset value, end of period 9.97 10.20 10.81 10.76 10.66 9.85 10.30
Market Value, end of period 8 7/8 9 3/16 9 9/16 9 3/8 9 1/8 9 1/8 10
------------------------------------------------------------------------------------------------------
Total Return (%)c 1.34d 8.75 11.32 11.37 8.80 (8.98)d (5.23)
------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data (%):
Ratio of expenses to average
net assets .95d .90 .92 .90 .94 .92d .89
Ratio of net investment income
to average net assets 6.78d 6.65 6.48 6.91 7.56 8.28d 8.18
Portfolio Turnover Rate 211.53e 599.75 337.41 328.37 91.27 65.21e 22.76
------------------------------------------------------------------------------------------------------
Net Assets, end of period
($ x 1,000) 146,037 149,404 158,328 157,527 156,083 145,164 154,140
</TABLE>
a The fund changed its fiscal year end from May 31 to November 30.
b Based on average shares outstanding.
c Calculated based on market value.
d Annualized.
e Not annualized.
See notes to financial statements.
The Fund 15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus Strategic Governments Income, Inc. (the "fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a non-diversified
closed-end management investment company. The fund's investment objective is to
maximize current income to the extent consistent with the preservation of
capital. The Dreyfus Corporation ("Investment Adviser") serves as the fund's
investment adviser. The Investment Adviser is a direct subsidiary of Mellon
Bank, N.A. ("Mellon"). Sinopia Asset Management serves as the fund's
sub-investment adviser.
The fund's financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(a) Portfolio valuation: Investments in securities (excluding short-term
investments, other than U.S.Treasury Bills, options and financial futures) are
valued each business day by an independent pricing service ("Service") approved
by the Board of Trustees. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the judgement
of the Service are valued at the mean between the quoted bid prices (as obtained
by the Service from dealers in such securities) and asked prices (as calculated
by the Service based upon its evaluation of the market for such securities).
Other investments (which constitute a majority of the portfolio securities) are
carried at fair value as determined by the Service, based on methods which
include consideration of: yields or prices of securities of comparable quality,
coupon, maturity and type; indications as to values from dealers; and general
market conditions. Securities for which there are no such valuations are valued
at fair value as determined in good faith under the direction of the Board of
Trustees. Short-term investments, excluding U.S. Treasury Bills, are carried at
amortized cost, which approximates value. Financial futures and options are
valued at the last sales price on the securities exchange on which such
securities are primarily traded or at the last sales price on the national
16
<PAGE>
securities market on each business day. Investments denominated in foreign
currencies are translated to U.S. dollars at the prevailing rates of exchange.
(b) Foreign currency transactions: The fund does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in the market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Net realized foreign exchange gains or losses arise from sales and maturities of
short-term securities, sales of foreign currencies, currency gains or losses
realized on securities transactions and the difference between the amount of
interest and foreign withholding taxes recorded on the fund's books and the U.S.
dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end, resulting
from changes in exchange rates. Such gains and losses are included with net
realized and unrealized gain or loss on investments.
(c) Securities transactions and investment income: Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
including, where applicable, amortization of discount on investments, is
recognized on the accrual basis. Under the terms of the custody agreement, the
fund received net earnings credits of $15,145 during the period ended May 31,
1999 based on available cash balances left on deposit. Income earned under this
arrangement is included in interest income.
(d) Dividends to shareholders: Dividends are recorded on the ex-dividend date.
Dividends from investment income-net are normally declared and paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the fund may make distributions on a more frequent basis to comply
with the distribution
The Fund 17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
requirements of the Internal Revenue Code of 1986, as amended (the "Code").
This may result in distributions that are in excess of investment income-net
and net realized gain on a fiscal year basis. To the extent that net realized
capital gain can be offset by capital loss carryovers, it is the policy of the
fund not to distribute such gain.
For shareholders who elect to receive their distributions in additional shares
of the fund, in lieu of cash, such distributions will be reinvested at the lower
of the market price or net asset value per share (but not less than 95% of the
market price) based on the record date's respective prices. If the net asset
value per share on the record date is lower than the market price per share,
shares will be issued by the fund at the record date's net asset value on the
payable date of the distribution. If net asset value per share is less than 95%
of market value, shares will be issued by the fund at 95% of market value. If
the market price is lower than the net asset value per share on the record date,
Mellon will purchase fund shares in the open market commencing on the payable
date and reinvest those shares accordingly. As a result of purchasing fund
shares in the open market, fund shares outstanding will not be affected by this
form of reinvestment.
On May 28, 1999, the Board of Directors declared a cash dividend of $.0625 per
share from investment income-net, payable on June 28, 1999 to shareholders of
record as of the close of business on June 14, 1999.
(e) Federal income taxes: It is the policy of the fund to continue to qualify as
a regulated investment company, if such qualification is in the best interests
of its shareholders, by complying with the applicable provisions of the Code,
and to make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes.
The fund has an unused capital loss carryover of approximately $6,044,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to November 30, 1998. The
carryover does not include net realized secu-
18
<PAGE>
rities losses from November 1, 1998 through November 30, 1998 which are
treated, for federal income tax purposes, as arising in fiscal 1999.
If not applied, $4,384,000 of the carryover expires in fiscal 2002,
$18,000 expires in fiscal 2003, $831,000 expires in fiscal 2004 and
$811,000 expires in fiscal 2006.
NOTE 2--Management Fee and Other Transactions
With Affiliates:
(a) Pursuant to a management agreement with the Investment Adviser, the
management fee is computed at the annual rate of .70 of 1% of the value of the
fund's average weekly net assets and is payable monthly.
Pursuant to a Sub-Investment Advisory Agreement between the Investment Adviser
and Sinopia Asset Management, the sub-advisory fee is computed at the annual
rate of .20 of 1% of the value of the fund's average weekly net assets and is
payable monthly by the Investment Adviser.
The fund compensates Mellon, an affiliate of the Investment Adviser, under a
transfer agency agreement for providing personnel and facilities to perform
transfer agency services for the fund. During the period ended May 31, 1999, the
fund was charged $6,817 pursuant to the transfer agency agreement.
(b) Each director who is not an "affiliated person" as defined in the Act
receives from the fund an annual fee of $4,500 and an attendance fee of $500 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3--Securities Transactions:
(a) The aggregate amount of purchases and sales of investment securities
(including paydowns), excluding short-term securities, financial futures,
forward currency exchange contracts and options transactions, during the period
ended May 31, 1999, amounted to $299,602,369 and $304,413,359, respectively.
The Fund 19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The following summarizes open forward currency exchange contracts at May 31,
1999:
<TABLE>
<CAPTION>
Foreign Unrealized
Currency Appreciation
Forward Currency Exchange Contracts Amounts Proceeds ($) Value($) (Depreciation)($)
----------------------------------------------------------------------------------------------------
Sales:
British Pounds,
<S> <C> <C> <C> <C>
expiring 8/27/1999 2,185,000 3,536,095 3,496,389 39,706
Canadian Dollars,
expiring 8/27/1999 5,920,000 4,034,209 4,017,142 17,067
Danish Krone,
expiring 8/27/1999 11,160,000 1,605,294 1,570,754 34,540
Euro,
expiring 8/27/1999 17,940,000 19,227,195 18,787,539 439,656
Greek Drachmas,
expiring 7/30/1999 490,000,000 1,592,098 1,556,941 35,157
Japanese Yen,
expiring 8/27/1999 975,000,000 7,950,098 8,112,341 (162,243)
Swedish Krona,
expiring 8/27/1999 22,690,000 2,690,397 2,647,395 43,002
Total 446,885
</TABLE>
The fund enters into forward currency exchange contracts in order to hedge its
exposure to changes in foreign currency exchange rates on its foreign portfolio
holdings. When executing forward currency exchange contracts, the fund is
obligated to buy or sell a foreign currency at a specified rate on a certain
date in the future. With respect to sales of forward currency exchange
contracts, the fund would incur a loss if the value of the contract increases
between the date the forward contract is opened and the date the forward
contract is closed. The fund realizes a gain if the value of the contract
decreases between those dates. With respect to purchases of forward currency
exchange contracts, the fund would incur a loss if the value of the contract
decreases between the date the forward contract is opened and the date the
forward contract is closed. The fund realizes a gain if the value of the
contract increases between those dates. The fund is also exposed to credit risk
associated with counter party nonperformance on these forward currency exchange
contracts which is typically limited to the unrealized gain on each open
contract.
20
<PAGE>
The following summarizes the fund's call/put options written for the period
ended May 31, 1999:
Options Terminated
------------------
Net
Number of Premiums Realized
Contracts Received($) Cost($) Gain($)
--------- ---------- ------------------
OPTIONS WRITTEN:
Contracts outstanding
November 30, 1998 -- --
Contracts written 1,157 1,267,658
Contracts terminated:
Closed 837 884,283 743,114 141,169
Contracts outstanding
May 31, 1999 320 383,375
The fund may purchase and write (sell) put and call options in order to gain
exposure to or to protect against changes in the market.
As a writer of call options, the fund receives a premium at the outset and then
bears the market risk of unfavorable changes in the price of the financial
instrument underlying the option. Generally, the fund would incur a gain, to the
extent of the premium, if the price of the underlying financial instrument
decreases between the date the option is written and the date on which the
option is terminated. Generally, the fund would realize a loss, if the price of
the financial instrument increases between those dates.
As a writer of put options, the fund receives a premium at the outset and then
bears the market risk of unfavorable changes in the price of the financial
instrument underlying the option. Generally, the fund would incur a gain, to the
extent of the premium, if the price of the underlying financial instrument
increases between the date the option is written and the date on which the
option is terminated. Generally, the fund would realize a loss, if the price of
the financial instrument decreases between those dates.
The fund may invest in financial futures contracts in order to gain exposure to
or protect against changes in the market. The fund is exposed to market risk as
a result of changes in the value of the under-
The Fund 21
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
lying financial instruments. Investments in financial futures require the fund
to "mark to market" on a daily basis, which reflects the change in the market
value of the contracts at the close of each day's trading. Typically, variation
margin payments are received or made to reflect daily unrealized gains or
losses. When the contracts are closed, the fund recognizes a realized gain or
loss. These investments require initial margin deposits with a custodian, which
consist of cash or cash equivalents, up to approximately 10% of the contract
amount. The amount of these deposits is determined by the exchange or Board of
Trade on which the contract is traded and is subject to change. Contracts open
at May 31, 1999 are set forth in the Statement of Financial Futures.
(b) At May 31, 1999, accumulated net unrealized depreciation on investments,
financial futures, options and forward currency exchange contracts was
$6,391,831, consisting of $1,636,817 gross unrealized appreciation and
$8,028,648 gross unrealized depreciation.
At May 31, 1999, the cost of investments for Federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
22
<PAGE>
PROXY RESULTS (Unaudited)
Stockholders voted on the following proposals presented at the annual
stockholders' meeting held on June 11, 1999. The description of each proposal
and the number of shares voted are as follows:
--------------------------------------------------------------------------------
Shares
--------------------------------------------------------------------------------
For Against Abstained
--------------------------------------------------------------------------------
1. To consider a proposal
to convert the fund
to an open-end
investment company 2,192,140 4,849,434 475,596
2. To ratify the selection
of Ernst & Young LLP
as independent auditors
of the fund 12,211,849 168,458 153,684
3. To consider a stockholder
proposal recommending that the
fund's board commit to a program
to repurchase fund shares. 2,035,814 4,910,267 583,388
--------------------------------------------------------------------------------
Authority
For Withheld
--------------------------------------------------------------------------------
4. To elect three Class I Directors:*
Joseph S. DiMartino 11,954,162 579,829
Warren B. Rudman 11,951,448 582,543
Sander Vanocur 11,944,836 589,155
* The terms of these Class IDirectors expire in 2002.
The Fund 23
<PAGE>
OFFICERS AND DIRECTORS
Dreyfus Strategic Governments Income, Inc.
200 Park Avenue
New York, NY 10166
Directors
Joseph S. DiMartino, Chairman
David W. Burke
Diane Dunst
Rosalind Gersten Jacobs
Jay I. Meltzer
Daniel Rose
Warren B. Rudman
Sander Vanocur
Officers
President and Treasurer
Marie E. Connolly
Vice President and Secretary
Margaret W. Chambers
Vice President and Assistant Treasurer
John P. Covino
Vice President and Assistant Treasurer
Mary A. Nelson
Vice President and Assistant Treasurer
George A. Rio
Vice President and Assistant Treasurer
Joseph F. Tower, III
Vice President, Assistant Treasurer and
Assistant Secretary
Frederick C. Dey
Vice President, Assistant Treasurer and
Assistant Secretary
Stephanie Pierce
Vice President and Assistant Secretary
Douglas C. Conroy
Vice President and Assistant Secretary
Karen Jacoppo-Wood
Vice President and Assistant Secretary
Christopher J. Kelley
Officers (continued)
Vice President and Assistant Secretary
Kathleen K. Morrisey
Vice President and Assistant Secretary
Elba Vasquez
Portfolio Managers:
Kevin McClintock
Gerald Thunelius
Jean Charles Bertrand
Michel-Andre Levy
Benedicte Maillant
Thierry Mirabe
Pierre Sequier
Jacques Sikarov
Investment Adviser
The Dreyfus Corporation
Sub-Investment Adviser
Sinopia Asset Management
Custodian
The Bank of New York
Counsel
Stroock & Stroock & Lavan LLP
Transfer Agent,
Dividend Disbursing Agent
and Registrar
Mellon Bank, N.A.
Stock Exchange Listing
NYSE Symbol: DSI
Initial SEC Effective Date
June 23, 1988
The Net Asset Value appears in the following publications: Barron's, Closed-End
Bond Funds section under the heading "World Income Funds" every Monday; Wall
Street Journal, Mutual Funds section under the heading "Closed-End Funds World
Income Funds" every Monday; New York Times, Business Section under the heading
"Closed-End Funds World Income Funds" every Sunday.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that the fund may purchase shares of its common
stock in the open market when it can do so at prices below the then current net
asset value per share.
<PAGE>
For More Information
Dreyfus Strategic Governments
Income, Inc.
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Sub-Investment Advisorr
Sinopia Asset Management
66 Rue de la Chaussee d'Antin
Paris, France 75009
Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
Transfer Agent,
Dividend Disbursing Agent
& Registrar
Mellon Bank, N.A.
85 Challenger Road
Ridgefield Park, NJ 07660
(c) 1999 Dreyfus Service Corporation 854SA995
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA STATEMENT OF
ASSETS AND LIABILITIES
APRIL 30, 2000 (UNAUDITED)
DREYFUS
DREYFUS STRATEGIC PRO FORMA
A BONDS GOVERNMENTS COMBINED
PLUS, INC. INCOME, INC. ADJUSTMENTS (NOTE 1)
ASSETS: Investments in securities,
at value - See Statement
(including Repurchase
Agreements of $ 000,000,000)
<S> <C> <C> <C> <C>
of Investments * $452,093,243 $135,297,579 $(43,824,789)(a) $543,566,033
Cash 66,716 4,622,062 4,688,778
Cash denominated in foreign
currencies
Receivable for investment 12,441,045 45,013,509(a) 57,454,554
securities sold
Interest receivable 5,711,966 2,811,637 (1,188,720)(a) 7,334,883
Receivable for futures - 315,011 (206,837)(b) 108,174
variation margin
Net unrealized appreciation
on forward
currency exchange
contracts
Receivable for shares of 549,246 --- 549,246
Common Stock subscribed
Receivable for shares of
Capital Stock subscribed
Prepaid expenses and other --- 26,322 26,322
assets
Due from The Dreyfus
Corporation
TOTAL ASSETS 470,862,216 143,072,611 (206,837) 613,727,990
LIABILITIES: Due to The Dreyfus 239,184 86,214 325,398
Corporation and affiliates
Due to Distributor
Cash overdraft due to
Custodian
Securities sold short, at
value
(proceeds $
000,000,000)-see statement
Outstanding call options
written, at value
(premiums received $
000,000)-see statement
Net unrealized depreciation
on forward
currency exchange - 658,225 658,225
contracts
Payable for investment 32,983,055 3,901,252 36,884,307
securities purchased
Payable for shares of 1,781,185 - 1,781,185
Common Stock redeemed
Payable for futures 206,837 (206,837)(b) -
variation margin
Accrued expenses 341,623 104,389 446,012
Bank Loan payable-Note 3(a)
Directors' fees payable
Accrued expenses and other
liabilities
TOTAL LIABILITIES 35,551,884 4,750,080 (206,837) 40,095,127
NET ASSETS $435,310,332 $138,322,531 $- $573,632,863
REPRESENTED BY: Paid-in capital $470,312,441 $160,194,917 $630,507,358
Accumulated undistributed
(distributions in excess
of) investment 4,389,113 (3,160,389) 1,228,724
income-net
Accumulated net realized (29,461,368) (8,926,821) (5,599,264)(a) (43,987,453)
gain (loss) on investments
Accumulated net unrealized
appreciation (depreciation)
on investments (9,929,854) (9,785,176) 5,599,264 (a) (14,115,766)
NET ASSETS $435,310,332 $138,322,531 $- $573,632,863
Shares of Common Stock
outstanding (100 million
shares of $.001 par value
shares authorized):
DREYFUS A BONDS PLUS, INC. 32,595,469
Shares of Common Stock
outstanding (100 million
shares of $.001 par value
shares authorized):
DREYFUS STRATEGIC 14,640,617
GOVERNMENTS INCOME, INC.
NET ASSET VALUE PER
SHARE-NOTE 3:
Dreyfus A Bonds Plus, Inc.
($435,310,332 / $13.35
32,595,469 shares)
Dreyfus Strategic
Governments Income, Inc.
($138,322,531 / $9.45
14,640,617 shares)
Pro forma Combined
($573,632,863 / $13.35
42,959,052 shares)
* Investments in $462,135,675 $144,685,191 $557,396,813
securities, at cost
(a) Reflects reclassification and
netting of cash balances.
(b) Reflects the payment
of undistributed net
realized gain on
investments.
(a) Reflects anticipated
sale of certain portfolio
securities prior to the
merger of the Funds.
(b) To reclass and combine
variation margin accounts.
SEE NOTES TO PRO
FORMA FINANCIAL
STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA STATEMENT
OF OPERATIONS
FOR THE TWELVE MONTHS
ENDED APRIL 30, 2000
(UNAUDITED)
DREYFUS
DREYFUS STRATEGIC PRO FORMA
A BONDS GOVERNMENTS COMBINED
PLUS, INC. INCOME, INC. ADJUSTMENTS (1) (NOTE 1)
INVESTMENT INCOME:
<S> <C> <C> <C> <C>
INCOME: Interest Income $33,659,391 $10,939,944 $44,599,335
Dividends 658,825 - 658,825
TOTAL INCOME 34,318,216 10,939,944 45,258,160
--------------------------- ---------------------
EXPENSES: Management fee $3,082,297 $993,724 $(71,000) (a) $4,005,021
Distribution and service fees -
Interest -
Shareholder servicing costs 1,550,430 14,997 193,000 (a) 1,758,427
Custodian fees 63,995 57,277 (45,000) (a) 76,272
(a)
Prospectus and shareholders' reports 45,443 50,835 (41,000) (a) 55,278
Professional fees 41,208 50,149 (38,000) (a) 53,357
Legal fees (a) -
Audit fees (a) -
Registration fees 32,090 18,195 19,000 (a) 69,285
Distribution and service fees (a) -
Directors' fees and expenses 52,179 58,552 (59,000) (a) 51,731
Loan commitment fees (a) -
Dividends on securities sold short (a) -
Organization expenses (a) -
Miscellaneous 7,456 34,409 (31,000) (a) 10,865
TOTAL EXPENSES 4,875,098 1,278,138 (73,000) 6,080,236
Less- reduction in management fee due to
undertaking - -
NET EXPENSES 4,875,098 1,278,138 (73,000) 6,080,236
INVESTMENT INCOME-NET 29,443,118 9,661,806 73,000 39,177,924
REALIZED AND
UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments $(21,411,847) $(5,249,908) $5,599,264 (b) $(21,062,491)
Net realized gain (loss) on investments:
Long transactions
(including foreign currency transactions)
Short sale transactions
Net realized gain (loss) on forward currency
exchange contracts 3,837 3,267,146 3,270,983
Net realized gain (loss) on financial futures 3,134,555 (1,019,931) 2,114,624
Long transactions
Short transactions
NET REALIZED GAIN (LOSS) (18,273,455) (3,002,693) 5,599,264 (15,676,884)
Net unrealized appreciation (depreciation) on
investments 2,934,660 (3,393,344) (5,599,264) (b) (6,057,948)
foreign currency transactions and forward currency exchange
contracts [including ($159,377) and ($315,971), respectively,
net unrealized (depreciation) on financial futures]
NET REALIZED AND (15,338,795) (6,396,037) - (21,734,832)
UNREALIZED GAIN
(LOSS) ON INVESTMENTS
NET INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS $14,104,323 $3,265,769 $73,000 $17,443,092
(a) Reflects the
anticipated savings
of the Merger.
(b) Reflects
anticipated sale of
certain portfolio
securities prior to
the merger of the
Funds.
(a) Reflects the
higher management fee
charged by Dreyfus
Premier Limited Term
High Income Fund.
(b) To conform to
Dreyfus Premier
Limited Term High
Income Fund's
presentation of
shareholder servicing
costs.
SEE NOTES TO PRO
FORMA FINANCIAL
STATEMENTS.
</TABLE>
CHART GOES HERE
<TABLE>
<CAPTION>
PRO FORMA STATEMENT
OF INVESTMENTS DREYFUS
A BONDS PLUS, INC.
MAY 31, 2000
(UNAUDITED)
PRINCIPAL AMOUNT (A)
Pro Forma
Dreyfus Dreyfus Strategic Combined
BONDS 95.3% A BONDS PLUS, INC. GOVERNMENTS INCOME, INC. (Note 1)
------------------ ------------------------
AND
NOTES
AIRLINES .2%
Air 2
US,
Ser.
A,
<S> <C> <C> <C>
Enhanced 1,999,929 1,999,929
Equipment
Notes,
8.027%,
2019
Continental
Airlines,
Pass-Through
Ctfs.,
Ser. 13,321,607 13,321,607
1997-4A,
6.9%, 2018
ASSET-BACKED .1%
NOTES
Bosque
Asset,
7.66%, 2002 2,088,860 2,088,860
Inner
Harbor
CBO,
Ser. 3,210,000 3,210,000
1999-1,
Cl. B2,
13.667%,
2012
Pegasus
Aviation
Lease
Securitization,
Ser. 4,984,833 4,984,833 b,c
2000-1,
Cl. A1,
7.235%,
2015
AUTOMOTIVE-PARTS .4%
American
Axel
&
Manufacturing,
Sr. Sub. 2,500,000 2,500,000
Notes,
9.75%, 2009
BANKING .5%
AND
FINANCE
Bank
of
America,
Sub. 5,900,000 5,900,000
Notes,
7.8%, 2010
Bangko
Sentral
Philipinas,
Bonds, 2,500,000 2,500,000
8.6%, 2027
Credit
Local
de
France,
Bonds, CAD 1,000,000
9.625%,
2000
DLJ,
Medium-Term 8,000,000 2,500,000
Notes,
.4%, 2000
KBC
Bank
Funding
Trust
IV,
Floating
Rate Gtd.
Trust
Preferred
Securities,
8.22%, 2049 EUR 5,000,000
Mannesmann
Finance,
Bonds, EUR 1,500,000
4.75%, 2009
National
Westminster
Bank,
Ser.
B,
Floating 3,000,000
Rate
Notes,
6.5625%,
2049
Regional
Diversified
Funding,
Sr. Notes, 5,000,000
9.25%, 2030
CABLE .9%
TELEVISION
CSC
Holdings,
Deb., 5,000,000
8.125%,
2009
CHEMICALS .1%
Air
Products
&
Chemicals,
Ser.
E,
Medium-Term 3,637,000
Notes,
7.8%, 2026
ICI
Wilmington
(Gtd. by
Imperial
Chemical
Industries),
Notes, 4,500,000
7.05%, 2007
COMMERCIAL .2%
MORTGAGE
PASS-THROUGH
CTFS.
Nomura
Depositor
Trust
ST 1,
Ser. 5,000,000
1998-ST1,
Cl. A3,
7.103%,
2003
Resolution
Trust,
Ser. 7,368,508
1994-C2,
Cl. D,
7.235%,
2025
CONSUMER .1%
Corning,
Deb., 5,000,000
6.85%, 2029
Grand
Metropolitan
Investment,
Discount 5,000,000
Notes, 0%,
2004
8,201,060
FINANCE Moved to Banking and
DLJ, Finance
Medium-Term
Notes,
FOREIGN/GOVERNMENTAL .5%
Belgium
Kingdom
Bonds,
9%, 2003 EUR 2,545,585
Bulgaria
Government,
Ser. A, 1,132,500
Bonds,
7.063%,
2024
Canada
Government
Bonds:
9.75%, 2000 CAD
*
8.75%, 2005 CAD
*
Federative
Republic
of
Brazil:
Bonds, 8%, 1,713,659
2014
Bonds, 6,500,000 8,186,250
12.25%,
2030
France
O.A.T.,
Deb.:
8.5%, 2003 EUR
8.5%, 2008 EUR
8.5%, 2023 EUR
Government
of
New
Zealand
Bonds,
Ser. 1106, NZD
8%, 2006
Hellenic
Republic
of
Greece:
Bonds, GRD
8.6%, 2008
Bonds, GRD
6.3%, 2009
Kingdom
of
Denmark
Bonds:
4%, 2002 DKK
7%, 2007 DKK
Republic
of
Argentina:
Notes, 6,000,000
14.15%,
2002
Ser. B,
Discount
Notes, 0%,
2001
Republic
of
Austria,
Deb., JPY
6.25%, 2003
Republic
of
Italy
Bonds,
5.125%, JPY
2003
Spain
Government:
Deb., 10%, EUR
2005
Deb., EUR
10.15%,
2006
Deb., EUR
8.2%, 2009
Sweden
Government,
Ser. 1035, SEK
Bonds, 6%,
2005
United
Kingdom
Gilt
Edged
Securities:
9.5%, 2005 GBP
9%, 2011 GBP
United
Mexican
States,
Notes,
9.875%,
2010
FOREIGN/SUPRANATIONAL--5.7% .0%
European
Investment
Bank:
Notes, 3%, JPY
2006
Notes, ITL
12.2%, 2003
International
Bank
for
Reconstruction
and
Development,
Notes, JPY
5.25%, 2002
INDUSTRIAL .1%
Alliant
Energy
Resources,
Notes, 5,000,000
7.375%,
2009
Rockwell
International,
Deb., 5,000,000
5.2%, 2098
INSURANCE .1%
Everest
Reinsurance
Holdings,
Sr. Notes, 6,750,000
8.75%, 2010
MUNICIPAL .4%
OBLIGATIONS
Chicago,
ILL,
Board
of
Education
(Chicago
School
Reform),
Ser. A,
General 5,000,000
Obligation,
5.25%, 2022
City
of
Atlanta,
GA,
Water
and
Wastewater
Revenue,
Ser.
A,
5%, 2038 5,000,000
Jefferson
County,
ALA,
Sewer 5,500,000
Revenue,
Capital
Improvement,
5%, 2033
Massachusetts
State
Water
Pollution
Abatement
Trust,
Ser.
A,
System 5,000,000
Revenue,
5.75%,
2029
Massachusetts
Turnpike
Authority,
Ser.
A,
Metropolitan 5,000,000
Highway
System
Revenue,
5%, 2039
Oklahoma
State
Health
System,
System 5,000,000
Revenue,
5.75%, 2029
OIL & .7%
GAS
EXPLORATION
Petroleos
Mexicanos,
Ser.
P,
Sr. Notes, 4,250,000
9.5%, 2006
REAL .4%
ESTATE
INVESTMENT
TRUST
Crescent
Real
Estate
Equities,
Notes, 7%, 2,500,000
2002
RESIDENTIAL .2%
MORTGAGE
PASS-THROUGH
CTFS.
Chase
Mortgage
Finance,
REMIC:
Ser. 583,816
1998-S5,
Cl. B3,
6.5%, 2013
Ser. 486,514
1998-S5,
Cl. B4,
6.5%, 2013
GE
Capital
Mortgage
Services,
REMIC, 1,044,246
Ser.
1998-16,
Cl. B3,
6.5%, 2013
Norwest
Asset
Securities:
Ser. 980,758
1997-15,
Cl. B1,
6.75%, 2012
Ser. 2,141,191
1997-16,
Cl. B1,
6.75%, 2027
Ser. 681,641
1997-16,
Cl. B2,
6.75%, 2027
Ser. 1,643,280
1998-11,
Cl. B2,
6.5%, 2013
Ser. 2,936,707
1998-13,
Cl. B1,
6.25%, 2028
Ser. 2,814,466
1998-13,
Cl. B2,
6.25%, 2028
Ser. 368,051
1998-13,
Cl. B6,
6.25%, 2028
Residential
Funding
Mortgage
Securities
I:
Ser. 754,836
1998-S9,
Cl. 1-B1,
6.5%, 2013
Ser. 476,788
1998-S22,
Cl. B1,
6.5%, 2013
Ser. 357,682
1998-S22,
Cl. B3,
6.5%, 2013
Ser. 596,217
1998-S22,
Cl. M2,
6.5%, 2013
Ser. 1,191,970
1998-S22,
Cl. M3,
6.5%, 2013
TECHNOLOGY .1%
Clear
Channel
Communications,
Conv. Sub. 5,538,000
Deb.,
2.625%,
2003
TELECOMMUNICATIONS .1%
TCI
Communication
Financial,
Capital 7,000,000
Securities,
9.65%, 2027
Winstar
Communications,
Sr. Notes, EUR 2,000,000
12.75%,
2010
TELECOMMUNICATION/CARRIERS .2%
Qwest
Communications
International,
Ser.
B,
Sr. 5,690,000
Discount
Notes,
0/8.29%,
2008
WorldCom,
Notes, 7,861,000
8.25%, 2010
U.S. .2%
GOVERNMENT
U.S.
Treasury
Bonds:
10%,
5/15/2010
10.375%,
11/15/2009
6.125%, 2,700,000
8/15/2029
8.875%, 8,500,000
2/15/2019
U.S.
Treasury
Inflation
Protection
Securities:
3.625%,
7/15/2002
3.625%, 11,750,000
1/15/2008
3.875%, 19,825,000
4/15/2029
U.S.
Treasury
Notes,
6.375%, 9,000,000
4/30/2002
6.5%, 26,619,000
2/15/2010
7%, 12,000,000
7/15/2006
U.S.
Treasury
Principal
Strips,
0%, 25,000,000
11/15/2009
U.S. .4%
GOVERNMENT
AGENCIES
Federal
Farm
Credit,
Real
Yield
Securities,
2.775%,
2/14/2002
Federal
National
Mortgage
Association,
Notes,
7.25%,
1/15/2010
Tennessee
Valley
Authority,
Valley
Indexed
Principal
Securities,
3.375%, 12,500,000
1/15/2007
U.S. .2%
GOVERNMENT
AGENCIES/MORTGAGE-
BACKED
Federal
Home
Loan
Mortgage:
7.5% 10,000,000
Gtd. REMIC
Pass-Through
Ctfs.,
Ser. 51,
Cl. E,
10%,
7/15/2020
REMIC,
Mutliclass
Mortgage
Participation
Ctfs.
(Interest
Only
Obligation):
Ser. 1978, Cl. PH, 7%, 3,861,135
1/15/2024
Ser. 1995, Cl. PY, 7%, 10,124,292
10/15/2027
REMIC
Trust,
Pass-Through
Ctfs.
(Collateralized
by FHLMC
Pass-Through
Ctfs.),
Ser. 2153,
Cl. Pl,
6.5%,
3/15/2016
(Interest
Only
Obligation)
Federal
National
Mortgage
Association:
7.5% 11,900,000
8%,
12/1/2025
6.88%, 4,205,212
2/1/2028
Gtd. REMIC
Pass-Through
Ctfs.,
Ser.
1988-16,
Cl. B,
9.5%,
6/25/2018
REMIC
Trust,
Gtd.
Pass-Through
Ctfs.
(Interest
Only
Obligation):
Ser. 5,848,038
1996-64,
Cl. PM,
7%,
1/18/2012
Government
National
Mortgage
Association
I:
7%, 74,324
6/15/2008
9.5%, 3,587,485
11/15/2017
Construction
Loan;
6.7%, 1,631,227
5/15/2039
Project
Loan:
6.475%, 7,707,594
9/1/2033
6.54%, 4,396,224
7/15/2033
6.55%, 1,825,740
6/15/2033
6.625%, 6,143,592
6/1/2033 -
9/15/2033
6.7%, 14,044,019
7/15/2001
6.75%, 2,207,107
10/15/2033
6.86%, 12,527,978
3/15/2038
7%, 11,315,732
8/15/2039
U.S.
Government
Gtd.
Development,
Participation
Ctfs.
(Gtd. By
Small
Business
Administration):
Ser.
1994-20K,
8.65%,
11/1/2014
Ser.
1994-20L,
8.4%,
12/1/2014
Ser.
1997-20J,
6.55%,
10/1/2017
UTILITIES-TELEPHONE .9%
Bellsouth
Capital
Funding,
Notes, 5,000,000
7.75%, 2010
WIRELESS .8%
COMMUNICATIONS
Centaur
Funding,
Ser.
C,
Discount 30,000,000
Notes, 0%,
2020
YANKEE .4%
Pemex
Finance,
Ser. 10,000,000
2000-1,
Cl. A2,
7.8%, 2013
Telefonos
Mexico,
Conv. Sr. 950,000
Notes,
4.25%, 2004
YPF,
Bonds, 10,443,000
9.125%,
2009
TOTAL
BONDS
AND
NOTES
(cost
$441,348,748,
$139,759,080
and
$531,683,775,
respectively)
SHORT-TERM .4%
INVESTMENTS
COMMERCIAL .3%
PAPER
Equilon
Enterprises,
6.79%, 9,245,000
6/1/2000
UBS
Finance,
6.77%, 9,500,000
6/1/2000
U.S. .8%
GOVERNMENT
AGENCIES--3.3%
Federal
Home
Loan
Banks,
Discount
Notes,
6.27%,
6/1/2000
U.S. .5%
TREASURY
BILLS--.3%
5.65%,
7/20/2000
5.64%, 2,060,000
7/27/2000
5.51%,
8/17/2000
TOTAL
SHORT-TERM
INVESTMENTS
(cost
$20,786,927,
$4,926,111,
and
$25,713,038,
respectively)
TOTAL (cost $462,135,675, .1%
INVESTMENTS $144,685,191and $557,396,813,
respectively)
*
The
Manager
anticipates
the
liquiation
of
these
securities
prior
to
the
merger.
(a)
Principal
amount
will
be in
U.S.
Dollars
unless
otherwise
noted.
CAD--CANADIAN
DOLLARS
DKK--DANISH
KRONE
EUR--EUROS
GBP--BRITISH
POUNDS
GRD--GREEK
DRACHMAS
ITL--ITALIAN
LIRE
JPY--JAPANESE
YEN
NZD--NEW
ZEALAND
DOLLARS
SEK--SWEDISH
KRONA
(b) Securities exempt from registration under Rule 144A of the Securities Act of
1933.
These
securities
may
be
resold
in
transactions
exempt
from
registration,
normally
to
qualified
institutional
buyers.
At
May
31,
2000,
these
securities
amounted
to
$53,055,196
or
9.2%
of
pro
forma
combined
net
assets.
(c)
Variable
rate
security---interest
rate
subject
to
periodic
change.
(d)
Reflects
date
security
can
be
redeemed
at
holder's
option;
the
stated
maturity
is
9/15/2027.
(e)
Zero
coupon
until
a
specified date at which time the stated coupon rate becomes effective until
maturity.
(f)
Principal
amount
for
accrual
purposes
is
periodically
adjusted
based
on
changes
to
the
Consumer
Price
Index.
(g)
Purchased
on a
forward
commitment
basis.
(h)
Notional
face
amount
shown.
(i)
Held
by
the
custodian
in a
segregated
account
as
collateral
for
open
Financial
Futures
positions.
(J)
WITH
VALUE
RECOVERY
RIGHTS
ATTACHED.
SEE
NOTES
TO
PRO
FORMA
FINANCIAL
STATEMENTS.
VALUE ($)
Pro Forma
Dreyfus Dreyfus Strategic Combined
A BONDS PLUS, INC. GOVERNMENTS INCOME, INC. (Note 1)
------------------ ------------------------
b 1,956,301 1,956,301
12,191,336 12,191,336
14,147,637 14,147,637
b 2,026,194 2,026,194
b 3,061,538 3,061,538
,c 4,981,718 4,981,718
10,069,450 10,069,450
2,325,000 2,325,000
5,753,025 5,753,025
1,656,250 1,656,250
672,993
* *
10,500,000 b 8,117,976 2,536,868 10,654,844
5,000,000 c 4,769,330 4,769,330
1,500,000 1,243,884 1,243,884
3,000,000 c 2,409,300 2,409,300
5,000,000 b 4,936,875 4,936,875
25,986,506 6,109,995 31,423,508
5,000,000 4,704,275 4,704,275
3,637,000 3,282,796 3,282,796
4,500,000 4,265,199 4,265,199
7,547,995 7,547,995
5,000,000 b,c 4,919,531 4,919,531
7,368,508 7,343,492 7,343,492
12,263,024 12,263,024
5,000,000 4,377,095 4,377,095
5,000,000 3,823,965 3,823,965
8,201,060 8,201,060
2,478,935 2,478,935 2,545,585 2,545,585
1,500,000 1,500,000 c 1,132,500 1,132,500
2,000,000 1,365,314
* *
2,000,000 1,494,645
* *
2,426,420 2,426,420 1,713,659 1,713,659
2,750,000 9,250,000 5,752,500 2,433,750 8,186,250
781,837 798,428
* *
1,800,000 2,052,029
* *
1,143,368 1,459,965
* *
1,500,000 722,403
* *
400,000,000 1,278,708
* *
310,000,000 872,620
* *
7,000,000 853,272
* *
9,000,000 1,214,282
* *
4,000,000 10,000,000 c 5,835,000 3,890,000 9,725,000
3,000,000 3,000,000 2,775,000 2,775,000
720,000,000 7,920,782
* *
270,000,000 2,857,399
* *
3,504,554 3,899,418
* *
3,000,000 3,445,263
* *
2,500,000 2,779,343
* *
6,000,000 689,954
* *
600,000 1,038,417
* *
250,000 493,613
* *
5,000,000 5,000,000 4,975,000 4,975,000
11,587,500 54,701,349 31,052,994
160,000,000 1,645,966
* *
7,000,000,000 3,940,349
* *
230,000,000 2,329,626
* *
7,915,941
5,000,000 b 4,799,460 4,799,460
5,000,000 3,086,765 3,086,765
7,886,225 7,886,225
6,750,000 6,663,472 6,663,472
5,000,000 4,447,200 4,447,200
5,000,000 4,159,150 4,159,150
5,500,000 4,583,205 4,583,205
5,000,000 4,791,900 4,791,900
5,000,000 4,139,350 4,139,350
5,000,000 4,720,050 4,720,050
26,840,855 26,840,855
4,250,000 d 4,048,125 4,048,125
2,500,000 2,297,323 2,297,323
583,816 b 475,135 475,135
486,514 b 352,357 352,357
1,044,246 b 806,354 806,354
980,758 914,130 914,130
2,141,191 1,903,091 1,903,091
681,641 580,077 580,077
1,643,280 1,504,457 1,504,457
2,936,707 2,581,256 2,581,256
2,814,466 2,426,380 2,426,380
368,051 b 108,575 108,575
754,836 b 589,173 589,173
476,788 368,244 368,244
357,682 b 80,479 80,479
596,217 537,401 537,401
1,191,970 1,038,742 1,038,742
14,265,851 14,265,851
5,538,000 7,317,083 7,317,083
7,000,000 7,515,711 7,515,711
2,000,000 b 1,770,930 1,770,930
9,286,641 9,286,641
5,690,000 e 4,344,827 4,344,827
7,861,000 7,883,286 7,883,286
12,228,113 12,228,113
2,500,000 2,500,000 2,832,675 2,832,675
6,000,000 6,000,000 6,807,120 6,807,120
2,700,000 2,690,577 2,690,577
8,500,000 10,730,400 10,730,400
2,000,000 2,000,000 f 2,119,319 2,119,319
11,750,000 f 11,985,311 11,985,311
3,500,000 23,325,000 f 20,275,991 3,579,620 23,855,611
9,000,000 8,942,850 8,942,850
26,619,000 27,017,220 27,017,220
15,000,000 27,000,000 12,249,240 15,311,550 27,560,790
25,000,000 13,432,500 13,432,500
107,324,090 30,650,284 137,974,374
1,000,000 1,000,000 c,j 977,300 977,300
8,000,000 8,000,000 7,878,176 7,878,176
2,655,650 15,155,650 f 12,433,960 2,438,763 14,872,723
12,433,960 11,294,239 23,728,199
10,000,000 g 9,737,500 9,737,500
3,553,000 3,553,000 3,708,231 3,708,231
3,861,135 h 503,154 503,154
10,124,292 h 4,126,674 4,126,674
7,000,000 7,000,000 h 1,452,193 1,452,193
11,900,000 g 11,557,875 11,557,875
672,330 672,330 670,857 670,857
4,205,212 3,884,239 3,884,239
1,778,715 1,778,715 1,852,301 1,852,301
5,848,038 h 1,222,606 1,222,606
74,324 72,791 72,791
3,587,485 3,780,313 3,780,313
1,631,227 g 1,550,677 1,550,677
7,707,594 7,013,911 7,013,911
4,396,224 4,187,404 4,187,404
1,825,740 1,715,611 1,715,611
6,143,592 5,882,691 5,882,691
14,044,019 13,350,525 13,350,525
2,207,107 2,094,677 2,094,677
12,527,978 12,022,944 12,022,944
11,315,732 10,877,248 10,877,248
3,534,537 3,534,537 3,642,702 3,642,702
6,123,529 6,123,529 6,252,267 6,252,267
1,483,393 1,483,393 1,390,267 1,390,267
93,580,841 18,968,818 112,549,659
5,000,000 4,905,080 4,905,080
30,000,000 b 4,332,600 4,332,600
750,000 10,750,000 b 9,740,000 730,500 10,470,500
950,000 1,126,937 1,126,937
10,443,000 10,194,979 10,194,979
21,061,916 730,500 21,792,416
431,304,620 130,371,126 517,850,957
9,245,000 9,245,000 9,245,000
9,500,000 9,500,000 9,500,000
18,745,000 18,745,000
4,470,000 4,470,000 4,470,000 4,470,000
220,000 220,000 i 218,489 218,489
205,000 2,265,000 i 2,043,623 203,370 2,246,993
35,000 35,000 I 34,594 34,594
2,043,623 456,453 2,500,076
20,788,623 4,926,453 25,715,076
452,093,243 135,297,579 543,566,033
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF FINANCIAL FUTURES
MAY 31, 2000 (UNAUDITED)
CONTRACTS MARKET VALUE
COVERED BY
CONTRACTS ($)
Drefus Drefus
Dreyfus Strategic Strategic
A Bonds Government Dreyfus Government
Expiration Plus Income Fund Total A Bonds Plus Income Fund Total
--------------------------------------------------------------------------------------------------------------------
FINANCIAL FUTURES (LONG)
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury 5 year Notes September 2000 803 148 951 78,367,781 14,443,875 92,811,656
U.S. Treasury 10 year Notes September 2000 185 185 17,904,531 17,904,531
U.S. Treasury 30 year Bonds September 2000 25 13 38 2,390,625 1,243,125 3,633,750
Euro Bond September 2000 49 49 4,886,994 4,886,994
United Kingdom 15 year Gilt September 2000 15 15 2,520,793 2,520,793
FINANCIAL FUTURES (SHORT)
U.S. Treasury 10 year Notes September 2000 285 285 27,582,656 27,582,656
Unrealized
Appreciation
(DEPRECIATION)
AT 5/31/00 ($)
Drefus
Strategic
Dreyfus Government
A Bonds Plus Income Fund Total
---------------------------------------------------------------------
FINANCIAL FUTURES (LONG)
U.S. Treasury 5 year Notes 181,929 33,531 215,460
U.S. Treasury 10 year Notes 81,766 81,766
U.S. Treasury 30 year Bonds (3,906) (2,031) (5,937)
Euro Bond 118,461 118,461
United Kingdom 15 year Gilt 50,574 50,574
178,023 282,301 460,324
FINANCIAL FUTURES (SHORT)
U.S. Treasury 10 year Notes (56,736) (56,736)
403,588
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
DREYFUS A BONDS PLUS, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Basis of Combination:
At a special meeting of the Board of Directors of Dreyfus A Bonds
Plus, Inc. (the "Fund") held on June 27, 2000 and at special meetings of the
Board of Dreyfus Strategic Governments Income, Inc. held on June 22, 2000 and
July __, 2000, the Boards of Directors each approved an Agreement and Plan of
Reorganization pursuant to which, subject to approval by the shareholders of
Dreyfus Strategic Governments Income, Inc., Dreyfus Strategic Governments
Income, Inc. will transfer all of its assets, subject to its liabilities, to the
Fund, in exchange for a number of shares of the Fund equal in value to the
assets of the Dreyfus Strategic Governments Income, Inc. (the "Exchange").
Shares of the Fund then will be distributed to Dreyfus Strategic Governments
Income, Inc. shareholders on a pro rata basis in liquidation of the Dreyfus
Strategic Governments Income, Inc.
The Exchange will be accounted for as a tax free merger of investment
companies. The unaudited pro forma statement of investments and statement of
assets and liabilities reflect the financial position of the Fund and Dreyfus
Strategic Governments Income, Inc. at May 31, 2000. The unaudited pro forma
statement of operations reflects the results of operations of the Fund and
Dreyfus Strategic Governments Income, Inc for the twelve months ended May 31,
2000. These statements have been derived from the Funds' respective books and
records utilized in calculating daily net asset value at the dates indicated
above under generally accepted accounting principles. The historical cost of
investment securities will be carried forward to the surviving entity and
results of operations of the Fund for pre-combination periods will not be
restated. The fiscal year ends are March 31 for the Fund and November 30 for
Dreyfus Strategic Governments Income, Inc.
The pro forma statements of investments, assets and liabilities and
operations should be read in conjunction with the historical financial
statements of the Funds included or incorporated by reference in the respective
Statements of Additional Information. The pro forma combined financial
statements are presented for information only and may not necessarily be
representative of what the actual combined financial statements would have been
had the reorganization occurred at May 31, 2000.
NOTE 2--Portfolio Valuation:
Investments in securities (excluding short-term investments other than
U.S. Treasury Bills, options and financial futures) are valued each business day
by an independent pricing service ("Service") approved by the Board of
Directors. Investments for which quoted bid prices are readily available and are
representative of the bid side of the market and in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of securities of comparable quality, coupon, maturity and
type; indications as to values from dealers; and general market conditions.
Securities for which there are no such valuations are valued at fair value as
determined in good faith under the direction of the respective Board of
Directors. Short-term investments, excluding U.S. Treasury Bills, are carried at
amortized cost, which approximates value. Financial futures and options are
valued at the last sales price on the securities exchange on which such
securities are primarily traded or at the last sales price on the national
securities market on each business day. Investments denominated in foreign
currencies are translated to U.S. dollars at the prevailing rates of exchange.
NOTE 3--Capital Shares:
The pro forma net asset value per share assumes 10,363,583 additional
shares of Common Stock of the Fund were issued in connection with the proposed
acquisition by the Fund of Dreyfus Strategic Governments Income, Inc. as of May
31, 2000. The pro forma number of shares that would be issuable was calculated
by dividing the net assets of Dreyfus Strategic Governments Income, Inc. at May
31, 2000 by the net asset value per share of the Fund shares at May 31, 2000 of
$13.35. The pro forma combined number of shares outstanding of 42,959,052
consists of the 10,363,583 shares issuable to Dreyfus Strategic Governments
Income, Inc. as a result of the merger and the 32,595,469 shares of the Fund
outstanding at May 31, 2000.
NOTE 4--Pro Forma Operating Expenses:
The accompanying pro forma financial statements reflect changes in
fund expenses as if the merger had taken place on May 31, 2000. Although it is
anticipated that there will be an elimination of certain duplicative expenses as
a result of the Exchange, the actual amount of such expenses cannot be
determined because it is not possible to predict the cost of future operations.
NOTE 5--Merger Cost:
Merger costs are estimated at approximately $00,000 and are not
included in the pro forma statement of operations since these costs are not
recurring. These costs represent the estimated expenses of the Funds carrying
out their obligations under the Plan and consist of management's estimate of
legal fees, accounting fees, printing costs and mailing charges related to the
Merger.
NOTE 6--Federal Income Taxes:
Each fund has elected to be taxed as a "regulated investment company"
under the Internal Revenue Code. After the Exchange, the Fund intends to
continue to qualify as a regulated investment company, if such qualification is
in the best interests of its shareholders, by complying with the provisions
available to certain investment companies, as defined in applicable sections of
the Internal Revenue Code, and to make distributions of taxable income
sufficient to relieve it from all, or substantially all, Federal income taxes.
The identified cost of investments for the Funds is substantially the
same for both financial accounting and Federal income tax purposes. The tax cost
of investments will remain unchanged for the combined entity.
<PAGE>
DREYFUS A BONDS PLUS, INC.
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION.
------- ---------------
The response to this item is incorporated by reference to Item 25 of
Part C of Post-Effective Amendment No. 37 to the Registrant's Registration
Statement on Form N-1A, filed on July 21, 1999.
ITEM 16. Exhibits - All references are to Post-Effective Amendments
to the Registrant's Registration Statement on Form N-1A (File
No. 2-55614) (the "Registration Statement") unless otherwise
noted.
(1) Registrant's Certificate of Incorporation is incorporated by reference
to Exhibit (1)(a) of Post-Effective Amendment No. 32 filed on July 24,
1996.
(2) Registrant's Bylaws are incorporated by reference to Exhibit (2) of
Post-Effective Amendment No. 32 filed on July 24, 1996.
(3) Not Applicable.
(4) Agreement and Plan of Reorganization.*
(5) Not Applicable.
(6) Management Agreement is incorporated by reference to Exhibit (5) of
Post-Effective Amendment No. 30 filed on July 27, 1995.
(7) Distribution Agreement is incorporated by reference to Exhibit (6) of
Post-Effective Amendment No. 30 filed on July 27, 1995.
(8) Not Applicable.
(9) Custody Agreement is incorporated by reference to Exhibit (8) of
Post-Effective Amendment No. 32 filed on July 24, 1996.
(10) Not Applicable.
(11)(a) Opinion of Registrant's counsel is incorporated by reference to
Exhibit (10) of Post-Effective Amendment No. 32 filed on July 24,
1996.
(11)(b) Consent of Stroock & Stroock & Lavan LLP.
(12) Form of opinion and consent of Stroock & Stroock & Lavan LLP regarding
tax matters.**
(13) Not Applicable.
(14) Consent of Independent Auditors.
(15) Not Applicable.
(16) Powers of Attorney are incorporated by reference to Other Exhibits of
Post-Effective Amendment No. 37 filed July 21, 1999 and to the
Signature Page hereof.
(17)(a) Form of Proxy.*
(17)(b) Registrant's Prospectus dated August 1, 1999, as revised August 2,
1999.
----------------
* Filed herewith as part of the Prospectus/Proxy Statement.
** To be filed by Post-Effective Amendment.
ITEM 17. UNDERTAKINGS.
------- ------------
(1) The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is
a part of this registration statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act of 1933, as amended, the reoffering prospectus will
contain the information called for by the applicable registration form
for reofferings by persons who may be deemed underwriters, in addition
to the information called for by the other items of the applicable
form.
(2) The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to
the registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities
Act of 1933, as amended, each post-effective amendment shall be deemed
to be a new registration statement for the securities offered therein,
and the offering of the securities at that time shall be deemed to be
the initial bona fide offering of them.
(3) The undersigned registrant agrees to file by post-effective amendment
the final opinion of counsel regarding tax matters within a reasonable
period of time after receiving such opinion.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement
has been signed on behalf of the Registrant, in the City of New York, State of
New York, on the 28th day of June, 2000.
DREYFUS A BONDS PLUS, INC.
(Registrant)
By:/S/STEPHEN E. CANTER
------------------------------
Stephen E. Canter, President
POWER OF ATTORNEY
Each person whose signature appears below on this Registration
Statement hereby constitutes and appoints Mark N. Jacobs, Joseph Connolly,
Michael A. Rosenberg, Steven F. Newman, Robert R. Mullery and William McDowell,
and each of them, with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities (until
revoked in writing) to sign any and all amendments to this Registration
Statement (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 substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
/s/ Stephen E. Canter President (Principal June 28, 2000
Stephen E. Canter Executive Officer)
/s/ Joseph Connolly Vice President and Treasurer June 28, 2000
Joseph Connolly (Principal Accounting and
Financial Officer)
/s/ Joseph S. DiMartino Chairman of the Board June 28, 2000
Joseph S. DiMartino
/s/ David P. Feldman Board Member June 28, 2000
David F. Feldman
/s/ Robert R. Glauber Board Member June 28, 2000
Robert R. Glauber
/s/ James F. Henry Board Member June 28, 2000
James F. Henry
/s/ Rosalind Gersten Jacobs Board Member June 28, 2000
Rosalind Gersten Jacobs
/s/ Dr. Paul A. Marks Board Member June 28, 2000
Dr. Paul A. Marks
/s/ Dr. Martin Peretz Board Member June 28, 2000
Dr. Martin Peretz
/s/ Bert W. Wasserman Board Member June 28, 2000
Bert W. Wasserman
<PAGE>
EXHIBIT INDEX
Exhibit 11(b) Consent of Counsel
Exhibit 14 Consent of Independent Auditors
Exhibit 17(b) Registrant's Prospectus dated August 1, 1999, as revised
August 2, 1999.
