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DREYFUS INSTITUTIONAL MONEY MARKET FUND
GOVERNMENT SECURITIES SERIES
MONEY MARKET SERIES
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
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This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of the
Government Securities Series and Money Market Series (each, a "series") of
Dreyfus Institutional Money Market Fund (the "Fund"), dated May 1, 2000, as it
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 1-718-895-1396
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 and Series....................................B-2
Management of the Fund................................................B-8
Management Arrangements..............................................B-12
How to Buy Shares....................................................B-15
Shareholder Services Plan............................................B-17
How to Redeem Shares.................................................B-17
Shareholder Services.................................................B-19
Portfolio Transactions...............................................B-22
Determination of Net Asset Value.....................................B-23
Dividends, Distributions and Taxes...................................B-24
Yield Information....................................................B-24
Information About the Fund and Series................................B-25
Counsel and Independent Auditors.....................................B-27
Year 2000 Issues.....................................................B-27
Appendix.............................................................B-28
DESCRIPTION OF THE FUND AND SERIES
The Fund was incorporated under Maryland law on March 19, 1980. The Fund
began offering shares of the Government Securities Series on April 1, 1982, and
shares of the Money Market Series on May 4, 1982. On April 27, 1987, the Fund
was reorganized as a Massachusetts business trust. The Fund is an open-end
management investment company, known as a money market mutual fund. Each series
is a diversified fund, which means that, with respect to 75% of its total
assets, the series 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.
Dreyfus Service Corporation ("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.
U.S. Government Securities. Each series may invest in securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, which
include U.S. Treasury securities that differ in their interest rates, maturities
and times of issuance. The series may invest in Treasury Bills, Treasury Notes
and Treasury Bonds. In addition, the Money Market Series may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities. Some obligations issued or guaranteed by U.S. Government
agencies and instrumentalities are supported by the full faith and credit of the
U.S. Treasury; others by the right of the issuer to borrow from the Treasury;
others by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others only by the credit of
the agency or instrumentality. These securities bear fixed, floating or variable
rates of interest. While the U.S. Government currently provides financial
support to such U.S. Government-sponsored agencies or instrumentalities, no
assurance can be given that it will always do so, since it is not so obligated
by law.
Bank Obligations. (Money Market Series only) The Money Market Series may
purchase certificates of deposit, time deposits, bankers' acceptances and other
short-term obligations issued by domestic banks, London branches of domestic
banks, and loan associations and other banking institutions.
Certificates of deposit ("CDs") are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period of
time.
Time deposits ("TDs") are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven days)
at a stated interest rate.
Investments in TDs and CDs are limited to domestic banks having total
assets in excess of $1 billion and London branches of such domestic banks.
Bankers' acceptances are credit instruments evidencing the obligation of a
bank to pay a draft drawn on it by a customer. These instruments reflect the
obligation both of the bank and the drawer to pay the face amount of the
instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
Both domestic banks and London branches of domestic banks are subject to
extensive but different governmental regulations which may limit both the amount
and types of loans which may be made and interest rates which may be charged. In
addition, the profitability of the banking industry is dependent largely upon
the availability and cost of funds for the purpose of financing lending
operations under prevailing money market conditions. General economic conditions
as well as exposure to credit losses arising from possible financial
difficulties of borrowers play an important part in the operations of the
banking industry.
Domestic commercial banks organized under Federal law are supervised and
examined by the Comptroller of the Currency and are required to be members of
the Federal Reserve System and to have their deposits insured by the Federal
Deposit Insurance Corporation. Domestic banks organized under state law are
supervised and examined by state banking authorities but are members of the
Federal Reserve System only if they elect to join. As a result of Federal and
state laws and regulations, domestic banks are, among other things, generally
required to maintain specified levels of reserves and are subject to other
regulations designed to promote financial soundness. However, not all of such
laws and regulations apply to the London branches of domestic banks.
Foreign Government Obligations; Securities of Supranational Entities.
(Money Market Series only) The Money Market Series may invest in obligations
issued or guaranteed by one or more foreign governments or any of their
political subdivisions, agencies or instrumentalities that are determined by the
Manager to be of comparable quality to the other obligations in which the Money
Market Series 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.
Repurchase Agreements. Each series may enter into repurchase agreements.
In a repurchase agreement, the series buys, and the seller agrees to repurchase,
a security at a mutually agreed upon time and price (usually within seven days).
The repurchase agreement thereby determines the yield during the purchaser's
holding period, while the seller's obligation to repurchase is secured by the
value of the underlying security. The Fund's custodian or sub-custodian will
have custody of, and will hold in a segregated account, securities acquired by
the series under a repurchase agreement. Repurchase agreements are considered by
the staff of the Securities and Exchange Commission to be loans by the series
which enters into them. Repurchase agreements could involve risks in the event
of a default or insolvency of the other party to the agreement, including
possible delays or restrictions upon the series' ability to dispose of the
underlying securities. In an attempt to reduce the risk of incurring a loss on a
repurchase agreement, the series will enter into repurchase agreements only with
domestic banks with total assets in excess of $1 billion, or primary government
securities dealers reporting to the Federal Reserve Bank of New York, with
respect to securities of the type in which the series may invest or government
securities regardless of their remaining maturities, and will require that
additional securities be deposited with it if the value of the securities
purchased should decrease below resale price. The series may enter into
repurchase agreements with certain banks or non-bank dealers.
Commercial Paper. (Money Market Series only) The Money Market Series may
purchase commercial paper consisting of short-term, unsecured promissory notes
issued to finance short-term credit needs. The commercial paper purchased by the
Money Market Series will consist only of direct obligations issued by domestic
entities. The other corporate obligations in which the Money Market Series may
invest consist of high quality, U.S. dollar denominated short-term bonds and
notes (including variable amount master demand notes) issued by domestic
corporations, including banks.
Floating and Variable Rate Obligations. (Money Market Series only) The
Money Market Series may purchase floating and variable rate demand notes and
bonds, which are obligations ordinarily having stated maturities in excess of 13
months, but which permit the holder to demand payment of principal at any time,
or at specified intervals not exceeding 13 months, in each case upon not more
than 30 days' notice. Variable rate demand notes include master demand notes
which are obligations that permit the Money Market Series to invest fluctuating
amounts, at varying rates of interest, pursuant to direct arrangements between
the Money Market Series, as lender, and the borrower. These obligations permit
daily changes in the amounts borrowed. Because these obligations are direct
lending arrangements between the lender and borrower, it is not contemplated
that such instruments generally will be traded, and there generally is no
established secondary market for these obligations, although they are redeemable
at face value, plus accrued interest. Accordingly, where these obligations are
not secured by letters of credit or other credit support arrangements, the Money
Market Series' right to redeem is dependent on the ability of the borrower to
pay principal and interest on demand.
Asset-Backed Securities. (Money Market Series only) The Money Market
Series may purchase asset-backed securities, which are securities issued by
special purpose entities whose primary assets consist of a pool of mortgages,
loans, receivables or other assets. Payment of principal and interest may depend
largely on the cash flows generated by the assets backing the securities and, in
certain cases, supported by letters of credit, surety bonds or other forms of
credit or liquidity enhancements. The value of these asset-backed securities
also may be affected by the creditworthiness of the servicing agent for the pool
of assets, the originator of the loans or receivables or the financial
institution providing the credit support.
Illiquid Securities. Each series may invest up to 10% of the value of its
net assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the series' investment objective.
Such securities may include securities that are not readily marketable, such as
securities that are subject to legal or contractual restrictions on resale, and
repurchase agreements providing for settlement in more than seven days after
notice. As to these securities, the series is subject to a risk that should the
series desire to sell them when a ready buyer is not available at a price the
series deems representative of their value, the value of the series' net assets
could be adversely affected.
Investment Techniques
The following information supplements and should be read in conjunction
with the Fund's Prospectus.
Borrowing Money. Each series may borrow money from banks for temporary or
emergency (not leveraging) purposes, in an amount up to 15% of the value of its
total assets (including the amount borrowed) valued at the lesser of cost or
market, less liabilities (not including the amount borrowed) at the time the
borrowing is made. While borrowings exceed 5% of the series' total assets, the
series will not make any additional investments.
Lending Portfolio Securities. (Government Securities Series only) The
Government Securities Series may lend securities from its portfolio to brokers,
dealers and other financial institutions needing to borrow securities to
complete certain transactions. The Government Securities Series continues to be
entitled to payments in amounts equal to the interest or other distributions
payable on the loaned securities which affords the series an opportunity to earn
interest on the amount of the loan and on the loaned securities' collateral.
Loans of portfolio securities may not exceed 20% of the value of the Government
Securities Series' total assets, and the series will receive collateral
consisting of cash or U.S. Treasury securities which will be maintained at all
times in an amount equal to at least 100% of the current market value of the
loaned securities. Such loans are terminable by the Fund at any time upon
specified notice. The Government Securities Series 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 Government Securities Series 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.
Investment Considerations and Risks
Foreign Securities. Since the Money Market Series' portfolio may contain
securities issued by London branches of domestic banks, this series may be
subject to additional investment risks with respect to such securities that are
different in some respects from those incurred by a fund which invests only in
debt obligations of U.S. domestic issuers. Such risks 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 these securities.
Bank Securities. To the extent the Money Market Series' investments are
concentrated in the banking industry, the series will have correspondingly
greater exposure to the risk factors which are characteristic of such
investments. Sustained increases in interest rates can adversely affect the
availability or liquidity and cost of capital funds for a bank's lending
activities, and a deterioration in general economic conditions could increase
the exposure the credit losses. In addition, the value of and the investment
return on the Money Market Series' shares could be affected by economic or
regulatory developments in or related to the banking industry, which industry
also is subject to the effects of competition within the banking industry as
well as with other types of financial institutions. The Money Market Series,
however, will seek to minimize its exposure to such risks by investing only in
debt securities which are determined to be of high quality.
Simultaneous Investments. Investment decisions for the Fund are made
independently from those of 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, as to a series, without approval by the holders of a majority (as
defined in the Investment Company Act of 1940, as amended (the "1940 Act")) of
the outstanding voting shares of such series. In addition, the Fund has adopted
investment restrictions numbered 1 through 10, with respect to each series, and
investment restrictions numbered 12 and 13, with respect to the Money Market
Series only, as fundamental policies. Investment restriction number 11 is not a
fundamental policy and may be changed, as to a series, by a vote of a majority
of the Fund's Board members at any time. Neither series may:
1. Purchase common stocks, preferred stocks, warrants, other equity
securities, corporate bonds or debentures, state bonds, municipal bonds or
industrial revenue bonds.
2. Borrow money, except from banks for temporary or emergency (not
leveraging) purposes, in an amount up to 15% of the value of a series' total
assets (including the amount borrowed) based on the lesser of cost or market,
less liabilities (not including the amount borrowed) at the time the borrowing
is made. While borrowings exceed 5% of the value of the series' total assets,
the series will not make any additional investments.
3. Pledge, hypothecate, mortgage or otherwise encumber its assets except
in an amount up to 15% of the value of its total assets but only to secure
borrowings for temporary or emergency purposes.
4. Sell securities short or purchase securities on margin.
5. Write or purchase put or call options.
6. Underwrite the securities of other issuers.
7. Purchase or sell real estate, real estate investment trust
securities, commodities, or oil and gas interests.
8. Make loans to others, except through the purchase of debt obligations
and through repurchase agreements referred to in the Prospectus. However, the
Government Securities Series may lend securities to brokers, dealers and other
institutional investors, but only when the borrower deposits collateral
consisting of cash or U.S. Treasury securities with the Government Securities
Series and agrees to maintain such collateral so that it amounts at all times to
at least 100% of the value of the securities loaned. Such loans will not be made
if, as a result, the aggregate value of the securities loaned exceeds 20% of the
value of the Government Securities Series' total assets.
9. Invest in companies for the purpose of exercising control.
10. Invest in securities of other investment companies, except as they may
be acquired as part of a merger, consolidation or acquisition of assets.
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 10% of the value of the series' net assets would be so
invested.
The following investment restrictions numbered 12 and 13, which are
fundamental policies, apply only to the Money Market Series. The Money Market
Series may not:
12. Invest more than 15% of its assets in the obligations of any one bank,
or invest more than 5% of its assets in the commercial paper of any one issuer.
Notwithstanding the foregoing, to the extent required by the rules of the
Securities and Exchange Commission, the Money Market Series will not invest more
than 5% of its assets in the obligations of any one bank.
13. Invest less than 25% of its assets in obligations issued by banks or
invest more than 25% of its assets in the securities of issuers in any other
industry, provided that there shall be no limitation on the purchase of
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Notwithstanding the foregoing, if at some future date
available yields on bank securities are significantly lower than yields on other
securities in which the Money Market Series may invest, the Money Market Series
may invest less than 25% of its assets in bank obligations.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values or
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
Dreyfus Service Corporation...............Distributor
Dreyfus Transfer, Inc.....................Transfer Agent
The Bank of New York......................Custodian
Board members and officers of the Fund, together with information as to
their principal business occupations during at least the last five years, are
shown below.
Board Members of the Fund
JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman of the
Board of various funds in the Dreyfus Family of Funds. He is also a
director of The Muscular Dystrophy Association, HealthPlan Services
Corporation, a provider of marketing, administrative and risk management
services to health and other benefit programs, Carlyle Industries, Inc.
(formerly, Belding Heminway Company, Inc.), a button packager and
distributor, Century Business Services Inc., (formerly, International
Alliance Services, Inc.), a provider of various outsourcing functions for
small and medium sized companies, and QuikCAT.com, Inc., a private company
engaged in the development of high speed movement, routing, storage and
encryption of data across cable, wireless and all other modes of data
transport. 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 the
Distributor. From August 1994 to December 31, 1994, he was a director of
Mellon Financial Corporation. He is 56 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 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 60
years old and his address is 466 Lexington Avenue, New York, New York
10017.
JOHN M. FRASER, JR., Board Member Retired. Retired President of Fraser
Associates, a service company. 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. Adjunct Lecturer, 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 Advanced Management
Program. He is Chairman of Measurisk.com, an Internet provider of risk
management to institutional investors, and a director of The Dun &
Bradstreet Corp., XL Capital, Ltd., a Bermuda-based insurance company,
National Association of Securities Dealers, Inc., 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 a director of the Edna McConnell Clark Foundation, a
philanthropic organization from September 1971 to December 1976. He is 69
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 1977 to 1998, she was director of Merchandise and Marketing for
Corporate Property Investors, a real estate investment company. From 1974
to 1976, she was owner and manager of a merchandise and marketing
consulting firm. Prior to 1974, she was a Vice President of Macy's, New
York. She is 74 years old and her address is c/o Corporate Property
Investors, 305 East 47th Street, New York, New York 10017.
DR. PAUL A. MARKS, Board Member. President-Emeritus of Memorial
Sloan-Kettering Cancer Center. From 1980 to 1999, he was 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 director from 1978 to 1996; and a director of Tularik, Inc.,
a biotechnology 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, and a
director of Genos, Inc., a genomics company from 1996 to 1999. He is 73
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
Academy for Liberal Education, an accrediting agency for colleges and
universities certified by the U.S. Department of Education. Dr. Peretz
is also Co-Chairman of TheStreet.com, a financial daily on the Web. He
is a director of The Electronic Newsstand, a distributor of magazines
on the Web, and Digital Learning Group, LLC, an on-line publisher of
college textbooks. He was a director of Bank Leumi Trust Company of
New York and Carmel Container Corporation from 1988 to 1991, and
Leukosite Inc., a biopharmaceutical company, from 1993 to 1999. He 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, Winstar Communications, Inc. and PSC Inc., a
leading manufacturer and marketer of bar code scanners. From January
1990 to March 1995, he was 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 68 years old and
his address is 126 East 56th Street, Suite 12 North, New York, New York
10022-3613.
The Fund has a standing nominating committee comprised of its Board
members who are not "interested persons" of the Fund, as defined in the 1940
Act. The function of the nominating committee is to select and nominate all
candidates who are not "interested persons" of the Fund for election to the
Fund's Board.
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 and by all funds in the Dreyfus Family of Funds
for which such person was a Board member (the number of which is set forth in
parenthesis next to each Board member's total compensation)* during the year
ended December 31, 1999, were as follows:
Total
Compensation from
Aggregate Fund and Fund
Name of Board Compensation from Complex Paid to
Member Fund** Board Members
Joseph S. DiMartino $8,750 $642,177 (189)
David P. Feldman $7,000 $188,875 (56)
John M. Fraser, Jr. $7,000 $ 78,000 (41)
Robert R. Glauber $6,500 $ 94,250 (40)
James F. Henry $7,000 $ 53,750 (28)
Rosalind Gersten Jacobs $7,000 $ 92,250 (44)
Irving Kristol+ $6,500 $ 50,250 (28)
Dr. Paul A. Marks $7,000 $ 53,750 (28)
Dr. Martin Peretz $7,000 $ 54,500 (28)
Bert W. Wasserman $7,000 $ 53,750 (28)
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* Represents the number of separate portfolios comprising the investment
companies in the Fund Complex, including the series, for which the Board
member serves.
** Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $2,848 for all Board members as a group.
+ Board member Emeritus since January 22, 2000.
Officers of the Fund
STEPHEN E. CANTER, President. President, Chief Operating Officer, Chief
Investment Officer and a director of the Manager, and an officer of
other investment companies advised and administered by the Manager.
Mr. Canter also is a Director or an Executive Committee Member of the
other investment management subsidiaries of Mellon Financial
Corporation, each of which is an affiliate of the Manager. He is 54
years old.
JOSEPHCONNOLLY, Vice President and Treasurer. Director - Mutual Fund Accounting
of the Manager, and an officer of other investment companies advised and
administered by the Manager. He is 42 years old.
MARK N. JACOBS, Vice President. Vice President, Secretary and General
Counsel of the Manager, and an officer of other investment companies
advised and administered by the Manager. He is 53 years old.
MICHAEL A. ROSENBERG, Secretary. Associate General Counsel of the Manager,
and an officer of other investment companies advised and administered
by the Manager. He is 40 years old.
STEVEN F. NEWMAN, Assistant Secretary. Associate General Counsel of the
Manager, and an officer of other investment companies advised and
administered by the Manager. He is 50 years old.
ROBERT R. MULLERY, Assistant Secretary. Assistant General Counsel of the
Manager, and an officer of other investment companies advised and
administered by the Manager. He is 48 years old.
MICHAEL CONDON, Assistant Treasurer. Senior Treasury Manager of the Manager, and
an officer of other investment companies advised and administered by the
Manager. He is 38 years old.
The Fund's Board members and officers, as a group, owned less than 1% of
the Fund's shares of outstanding on April 17, 2000.
The following are known by the Fund to own of record 5% or more of the
outstanding voting securities of the indicated series as of April 17, 2000.
[Money Market Series: Bruce W. Dunlevie and Elizabeth Dunlevie Ten Com, 80
Santiago Avenue, Atherton CA 94027-5413 - 10.68%.] The following are known
by the Fund to own of record 5% or more of the outstanding voting securities
of the indicated series as of April 17, 2000. [Government Securities
Series: Fiduciary Trust Co. International Customers Account, Attn: Felyce
Porr, P.O. Box 3199, New York NY 10008-3199 - 25.88%; Chase Manhattan Bank,
Client Services Department, Attn: Sevan Marinos, 1 Chase Manhattan Plaza,
Floor 16, New York, NY 10005-1401 - 24.39%; Fiduciary Trust Co., INTL,
Customer Accounts, Attn: Felyce Porr, P.O. Box 3199, New York, NY 10008-3199
- - 9.17%.] A shareholder who beneficially owns, directly or indirectly, more
than 25% of a series' voting securities may be deemed a "Control Person" (as
defined in the 1940 Act) of that series.
MANAGEMENT ARRANGEMENTS
Investment Adviser. The Manager is a wholly-owned subsidiary of Mellon
Bank, N.A., which is a wholly-owned subsidiary of Mellon Financial 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 a Management
Agreement (the "Agreement") between the Manager and the Fund. As to each series,
the Agreement 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 such series, provided that in either event the continuance also is approved
by a majority of the Board members who are not "interested persons" (as defined
in the 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. As to each series, the
Agreement is terminable without penalty on 60 days' notice by the Fund's Board
or by vote of a majority of the outstanding voting securities of such series or,
on 90 days' notice, by the Manager. The Agreement will terminate automatically,
as to the relevant series, 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 and a
director; Lawrence S. Kash, Vice Chairman; J. David Officer, Vice Chairman
and a director; Ronald P. O'Hanley III, Vice Chairman; William T. Sandalls,
Jr., Executive Vice President; Stephen R. Byers, Senior 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; Ray Van Cott, Vice President-Information Systems; Theodore A.
Schachar Vice President-Tax; 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 are Bernard W. Kiernan, Jr.,
Patricia A. Larkin, James C. O'Connor and Thomas Riordan. The Manager also
maintains a research department with a professional staff of portfolio managers
and securities analysts who provide research services for the Fund as well as
for other funds advised by the Manager.
The Manager's Code of Ethics (the "Code") subjects its employees' personal
securities transactions to various restrictions to ensure that such trading does
not disadvantage any fund advised by the Manager. In that regard, portfolio
managers and other investment personnel of the Manager must preclear and report
their personal securities transactions and holdings, which are reviewed for
compliance with the Code, and are also subject to the oversight of Mellon's
Investment Ethics Committee. Portfolio managers and other investment personnel
who comply with the Code'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 funds(s) they manage or for which
they otherwise provide investment advice.
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 services, 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 fee 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.
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 registrars and custodians, transfer and dividend disbursing agents'
fees, outside auditing and legal expenses, costs of independent pricing
services, costs of maintaining the Fund's existence, all costs of insurance
obtained other than under a blanket policy covering one or more other investment
companies managed by the Manager, costs attributable to investor services
(including, allocable telephone and personnel expenses), costs of shareholders'
reports and meetings, costs of preparing and printing prospectuses for
regulatory purposes and for distribution to existing shareholders and any
extraordinary expenses. Expenses attributable to a particular series are charged
against the assets of that series; other expenses of the Fund are allocated
between the series on the basis determined by the Board members, including, but
not limited to, proportionately in relation to the net assets of each series.
As compensation for the Manager's services, the Fund has agreed to pay the
Manager a monthly management fee at the annual rate of 0.50% of the value of
each series' average daily net assets. All expenses are accrued daily and
deducted before declaration of dividends to investors. The management fees paid
by the Money Market Series to the Manager for the fiscal years ended December
31, 1997, 1998 and 1999 amounted to $2,597,609, $2,701,351 and $2,817,113,
respectively. The management fees paid by the Government Securities Series to
the Manager for the fiscal years ended December 31, 1997, 1998 and 1999 amounted
to $754,470, $418,907 and $396,676, respectively.
The Manager has agreed that if in any fiscal year the aggregate expenses
of the Fund, exclusive of taxes, brokerage commissions, interest and (with the
prior written consent of the necessary state securities commissions)
extraordinary expenses, but including the management fee, exceed 1% of the value
of the average net assets of either series for the year, the Fund may deduct
from the management fees charged to the series or the Manager will bear such
excess amount.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of a series' net assets increases.
Distributor. The Distributor, a wholly-owned subsidiary of the Manager
located at 200 Park Avenue, New York, New York 10166, serves as the Fund's
distributor on a best efforts basis pursuant to an agreement with the Fund which
is renewable annually.
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.
The Bank of New York (the "Custodian"), 100 Church Street, New York, New
York 10286, is the Fund's custodian. The Custodian has no part in determining
the investment policies of the series or which securities are to be purchased or
sold by the series.
HOW TO BUY SHARES
General. Shares of each series are sold without a sales charge. You may be
charged a fee if you effect transactions in shares of either series 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 in each series is $50,000, unless 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 $50,000. Subsequent investments in either
series must be at least $100. The initial investment must be accompanied by the
Account Application. Shares also may be purchased through Dreyfus-Automatic
Asset Builder(R), Dreyfus Government Direct Deposit Privilege and Dreyfus
Payroll Savings Plan described under "Shareholder Services." These services
enable you to make regularly scheduled investments and may provide you with a
convenient way to invest for long-term financial goals. You should be aware,
however, that periodic investment plans do not guarantee a profit and will not
protect an investor against loss in a declining market.
Each series' shares are sold on a continuous basis at the net asset value
per share next determined after an order and Federal Funds (monies of member
banks within the Federal Reserve system which are held on deposit at a Federal
Reserve Bank) are received by the Transfer Agent or other entity authorized to
receive orders on behalf of the Fund. If you do not remit Federal Funds, your
payment must be converted into Federal Funds. This usually occurs within one day
of receipt of a bank wire and within two business days of receipt of a check
drawn on a member bank of the Federal Reserve System. Checks drawn on banks
which are not members of the Federal Reserve System may take considerably longer
to convert into Federal Funds. Prior to receipt of Federal Funds, your money
will not be invested.
The net asset value per share of each series is determined twice each
business day at 12:00 Noon, New York time, and 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 or, with respect to the Money Market
Series, the Transfer Agent is open for business. Net asset value per share is
computed by dividing the value of the net assets of each series (i.e., the value
of its assets less liabilities) by the total number of shares of such series
outstanding. See "Determination of Net Asset Value." If your payments are
received in or converted into Federal Funds by 12:00 Noon, New York time, by the
Transfer Agent, you will receive the dividend declared on that day. If your
payments are received in or converted into Federal Funds after 12:00 Noon, New
York time, by the Transfer Agent, your shares will begin to accrue dividends on
the following business day. Qualified institutions may telephone orders for
purchase of either series' shares. A telephone order placed with the Distributor
or its designee in New York will become effective at the price determined at
12:00 Noon, New York time, and the shares purchased will receive the dividend on
such series' shares declared on that day if such order is placed by 12:00 Noon,
New York time, and Federal Funds are received by the Transfer Agent by 4:00
p.m., New York time.
Using Federal Funds. The Transfer Agent or the Fund may attempt to notify
you upon receipt of checks drawn on banks that are not members of the Federal
Reserve System as to the possible delay in conversion into Federal Funds and may
attempt to arrange for a better means of transmitting the money. If you are a
customer of a securities dealer, bank or other financial institution and your
order to purchase Fund shares is paid for other than in Federal Funds, the
securities dealer, bank or other financial institution, acting on your behalf,
will complete the conversion into, or itself advance, Federal Funds generally on
the business day following receipt of your order. The order is effective only
when so converted and received by the Transfer Agent. If you have a sufficient
Federal Funds or cash balance in your brokerage account with a securities
dealer, bank or other financial institution, your order to purchase Fund shares
will become effective on the day that the order, including Federal Funds, is
received by the Transfer Agent.
Procedures for Multiple Accounts. Special procedures have been designed
for banks and other institutions that wish to open multiple accounts. The
institution may open a single master account by filing one application with the
Transfer Agent and may open individual sub-accounts at the same time or at some
later date. The Transfer Agent will provide each institution with a written
confirmation for each transaction in a sub-account. Duplicate confirmations may
be transmitted to the beneficial owner of the sub-account at no additional
charge. Upon receipt of funds for investment by interbank wire, the Transfer
Agent or First Interstate Bank of California will promptly confirm the receipt
of the investment by telephone or return wire to the transmitting bank, if the
investor so requests.
The Transfer Agent also will provide each institution with a monthly
statement setting forth, for each sub-account, the share balance, income earned
for the month, income earned for the year to date and the total current value of
the account.
Transactions Through Securities Dealers. Fund shares may be purchased and
redeemed through securities dealers who may charge a transaction fee for such
services. Some dealers will place the Fund's shares in an account with their
firm. Dealers also may require that the customer not take physical delivery of
share 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 the Distributor an amount not to exceed the annual
rate of 0.25% of the value of each series' average daily net assets. 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.
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 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.
The fees paid by the Money Market Series and the Government Securities
Series pursuant to the Plan for the fiscal year ended December 31, 1999 amounted
to $52,801 and $37,040, respectively.
HOW TO REDEEM SHARES
Checkwriting Privilege. The Fund provides Redemption Checks ("Checks")
automatically upon opening an account, unless you specifically refuse the
Checkwriting 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 Checkwriting 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 the election of this Privilege creates only a shareholder-transfer
agent relationship with the Transfer Agent.
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.
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 of payment, if they are
otherwise in good order. If you hold shares in a Dreyfus sponsored IRA account,
you may be permitted to make withdrawals from your IRA account using checks
furnished to you by The Dreyfus Trust Company.
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 same business day if the
redemption request is received by the Transfer Agent in proper form prior to
12:00 Noon, New York time, on such day; otherwise, the Fund will initiate
payment on the next business day. 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 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 "Share Certificates; Signatures."
Share Certificates; Signatures. Any certificate 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 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 relevant
series' net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the Securities and Exchange
Commission. In the case of requests for redemption in excess of such amount, the
Fund's Board reserves the right to make payments in whole or part in securities
or other assets of the relevant series in case of an emergency or any time a
cash distribution would impair the liquidity of such series to the detriment of
the existing shareholders. In such event, the securities would be valued in the
same manner as the series' portfolio is valued. If the recipient sold such
securities, brokerage charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or the
date of payment postponed (a) during any periods when the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (b) when
trading in the markets the Fund ordinarily utilizes is restricted, or when an
emergency exists as determined by the Securities and Exchange Commission so that
disposal of the Fund's investments or determination of its net asset value is
not reasonably practicable, or (c) for such other periods as the Securities and
Exchange 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 the Fund's other series or 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 exchanges.
Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege permits
you to purchase, in exchange for shares of the Fund, shares of certain other
funds 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 set forth 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.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. Shares may be exchanged only between
accounts having identical names and other identifying designations. 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 Automated Clearing House system at each pay period.
To establish a Dreyfus Payroll Savings Plan account, you must file an
authorization form with your employer's payroll department. It is the sole
responsibility of your employer to arrange for transactions under the Dreyfus
Payroll Savings Plan.
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 Automated Clearing House 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. Automatic Withdrawal
may be terminated at any time by you, the Fund or the Transfer Agent. Shares for
which stock certificates have been issued may not be redeemed through the
Automatic Withdrawal Plan.
Quarterly Distribution Plans. The Quarterly Distribution Plan permits you
to receive quarterly payments from the Fund consisting of proceeds from the
redemption of shares purchased for your account through the automatic
reinvestment of dividends declared on your account during the preceding calendar
quarter. You may open a Quarterly Distribution Plan by submitting a request to
the Transfer Agent. The Quarterly Distribution Plan may be ended at any time by
you, the Fund or the Transfer Agent. Shares for which certificates have been
issued must be presented before redemption under the Quarterly Distribution
Plan.
PORTFOLIO TRANSACTIONS
Portfolio securities ordinarily are purchased 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 from underwriters
of portfolio securities include a 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
have been paid by the Fund to date.
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
Amortized Cost Pricing. The valuation of the Fund's portfolio securities
is based upon their amortized cost which does not take into account unrealized
gains or losses. This involves valuing an instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Fund would receive if it sold the instrument.
The Fund's Board has established, as a particular responsibility within
the overall duty of care owed to the Fund's investors, procedures reasonably
designed to stabilize the Fund's price per share as computed for the purpose of
purchases and redemptions at $1.00. Such procedures include review of the Fund's
portfolio holdings by the Board, at such intervals as it may deem appropriate,
to determine whether the Fund's net asset value calculated by using available
market quotations or market equivalents deviates from $1.00 per share based on
amortized cost. In such review, investments for which market quotations are
readily available will be valued at the most recent bid price or yield
equivalent for such securities or for securities of comparable maturity, quality
and type, as obtained from one or more of the major market makers for the
securities to be valued. Other investments and assets will be valued at fair
value as determined in good faith by the Board.
The extent of any deviation between the Fund's net asset value based upon
available market quotations or market equivalents and $1.00 per share based on
amortized cost will be examined by the Fund's Board. If such deviation exceeds
1/2 of 1%, the Board will consider promptly what action, if any, will be
initiated. In the event the Board determines that a deviation exists which may
result in material dilution or other unfair results to investors or existing
shareholders, it has agreed to take such corrective action as it regards as
necessary and appropriate, including: selling portfolio instruments prior to
maturity to realize capital gains or losses or to shorten average portfolio
maturity; withholding dividends or paying distributions from capital or capital
gains; redeeming shares in kind; or establishing a net asset value per share by
using available market quotations.
New York Stock Exchange and Transfer Agent Closings. The holidays (as
observed) on which the New York Stock Exchange and the Transfer Agent are
closed currently are: New Year's Day, Martin Luther King Jr. Day,
Presidents' Day, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas. In addition, the New York Stock Exchange is closed on Good Friday.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Management believes that each series has qualified for the fiscal year
ended December 31, 1999 as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended (the "Code"). Each series intends to continue
to so qualify if such qualification is in the best interests of its
shareholders. Such qualification relieves the series of any liability for
Federal income tax to the extent its earnings are distributed in accordance with
applicable provisions of the Code. If the series 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 Fund ordinarily declares dividends from each series' net investment
income on each day the New York Stock Exchange or, with respect to the Money
Market Series, the Transfer Agent is open for business. Each series' earnings
for Saturdays, Sundays and holidays are declared as dividends on the preceding
business day. Dividends usually are paid on the last business day of each month
and automatically are reinvested in additional shares of the series from which
they were paid at net asset value or, at your option, paid in cash. If you
redeem all shares in your account at any time during the month, all dividends to
which you are entitled will be paid to you along with the proceeds of the
redemption. If you are an omnibus accountholder and indicate in a partial
redemption request that a portion of any accrued dividends to which such account
is entitled belongs to an underlying accountholder who has redeemed all shares
in his or her account, such portion of the accrued dividends will be paid to you
along with the proceeds of the redemption.
If you elect to receive dividends and distributions in cash, and your
dividend or distribution check is returned to the Fund as undeliverable or
remains uncashed for six months, the Fund reserves the right to reinvest such
dividends or distributions 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.
Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gain or loss. However, all or a portion of any gain realized
from the sale or other disposition of certain market discount bonds will be
treated as ordinary income under Section 1276 of the Code.
YIELD INFORMATION
For the seven-day period ended December 31, 1999, the Money Market Series'
yield was 5.08% and its effective yield was 5.21%. For the seven-day period
ended December 31, 1999, the Government Securities Series' yield was 4.25% and
its effective yield was 4.34%. Yield is computed in accordance with a
standardized method which involves determining the net change in the value of a
hypothetical pre-existing Fund account having a balance of one share at the
beginning of a seven calendar day period for which yield is to be quoted,
dividing the net change by the value of the account at the beginning of the
period to obtain the base period return, and annualizing the results (i.e.,
multiplying the base period return by 365/7). The net change in the value of the
account reflects the value of additional shares purchased with dividends
declared on the original share and any such additional shares and fees that may
be charged to shareholder accounts, in proportion to the length of the base
period and the Fund's average account size, but does not include realized gains
and losses or unrealized appreciation and depreciation. Effective yield is
computed by adding 1 to the base period return (calculated as described above),
raising that sum to a power equal to 365 divided by 7, and subtracting 1 from
the result.
Yields will fluctuate and are not necessarily representative of future
results. You should remember that yield is a function of the type and quality of
the instruments in the portfolio, portfolio maturity and operating expenses.
Your principal in the Fund is not guaranteed. See "Determination of Net Asset
Value" for a discussion of the manner in which the Fund's price per share is
determined.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., IBC's Money Fund Report(TM), Bank Rate Monitor(TM),
N. Palm Beach, Fla. 33408, Morningstar, Inc. and other industry publications.
From time to time, the Fund in its advertising and sales literature may refer to
the growth of assets managed or administered by the Manager over certain time
periods.
INFORMATION ABOUT THE FUND AND SERIES
Each share has one vote and, when issued and paid for in accordance with
the terms of the offering, is fully paid and non-assessable. 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,
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.
Shareholders may remove a Board member by the affirmative vote of two-thirds 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 a "series fund," which is a mutual fund divided into separate
portfolios, each of which is treated as a separate entity for certain matters
under the 1940 Act and for other purposes. A shareholders of one portfolio is
not deemed to be a shareholder of any other portfolio. For certain matters
shareholders vote together as a group; as to others they vote separately by
portfolio.
To date, the Board has authorized the creation of two series of shares.
All consideration received by the Fund for shares of one of the series and all
assets in which such consideration is invested will belong to that series
(subject only to the rights of creditors of the Fund) and will be subject to the
liabilities related thereto. The income attributable to, and the expenses of,
one series are treated separately from those of the other series. The Fund has
the ability to create, from time to time, new series without shareholder
approval.
Under Massachusetts law, shareholders, under certain circumstances, could
be held personally liable for the obligations of the Fund. However, the Fund's
Agreement and Declaration of Trust (the "Trust Agreement") disclaims shareholder
liability for acts or obligations of the Fund and requires that notice of such
disclaimer be given in each agreement, obligation or instrument entered into or
executed by the Fund or a Board member. The Trust Agreement provides for
indemnification from the Fund's property for all losses and expenses of any
shareholder held personally liable for the obligations of the Fund. Thus, the
risk of a shareholder's incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund itself would be unable
to meet its obligations, a possibility which management believes is remote. Upon
payment of any liability incurred by the Fund, the shareholder paying such
liability will be entitled to reimbursement from the general assets of the Fund.
The Fund intends to conduct its operations in such a way so as to avoid, as far
as possible, ultimate liability of the shareholders for liabilities of the Fund.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise, to the holders of the outstanding voting securities of an investment
company, such as the Fund, will not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each series affected by such matter. Rule 18f-2 further provides that a series
shall be deemed to be affected by a matter unless it is clear that the interests
of each series in the matter are identical or that the matter does not affect
any interest of such series. However, the Rule exempts the selection of
independent accountants and the election of Board members from the separate
voting requirements of the Rule.
To offset the relatively higher costs of servicing smaller accounts, the
Fund will charge regular accounts with balances below $2,000 an annual fee of
$12. The valuation of accounts and the deductions are expected to take place
during the last four months of each year. The fee will be waived for any
investor whose aggregate Dreyfus mutual fund investments total at least $25,000
and will apply to IRA accounts or to accounts participating in automatic
investment programs or opened through a securities dealer, bank or other
financial institution, or to other fiduciary accounts.
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, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as independent auditors of the Fund.
YEAR 2000 ISSUES
The Fund could be adversely affected if the computer systems used by the
Manager and the Fund's other service providers do not properly process and
calculate date-related information from and after January 1, 2000.
The Manager 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.
APPENDIX
Description of the two highest commercial paper, bond and other short-
and long-term rating categories assigned by Standard & Poor's Ratings Group
("S&P"), Moody's Investors Service, Inc. ("Moody's"), Fitch IBCA, Inc.
("Fitch"), Duff & Phelps Credit Rating Co. ("Duff") and Thomson BankWatch,
Inc. ("BankWatch"):
Commercial Paper and Short-Term Ratings
The designation A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Capacity for timely
payment on issues with an A-2 designation is strong. However, the relative
degree of safety is not as high as for issues designated A-1. Those issues
determined to possess overwhelming safety characteristics are denoted with a
plus sign (+) designation.
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.
Issues rated Prime-2 (P-2) have a strong capacity for repayment of short-term
promissory obligations. This ordinarily will 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.
The rating Fitch-1 (Highest Grade) is the highest commercial paper rating
assigned by Fitch. Paper rated Fitch-1 is regarded as having the strongest
degree of assurance for timely payment. The rating Fitch-2 (Very Good Grade) is
the second highest commercial paper rating assigned by Fitch which reflects an
assurance of timely payment only slightly less in degree than the strongest
issues.
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. Paper rated Duff-2 is regarded as having good certainty
of timely payment, good access to capital markets and sound liquidity factors
and company fundamentals. Risk factors are small.
The rating TBW-1 is the highest short-term obligation rating assigned by
BankWatch. Obligations rated TBW-1 are regarded as having the strongest capacity
for timely repayment. Obligations rated TBW-2 are supported by a strong capacity
for timely repayment, although the degree of safety is not as high as for issues
rated TBW-1.
Bond and Long-Term Ratings
Bonds rated AAA are considered by S&P to be the highest grade obligations
and possess an extremely strong capacity to pay principal and interest. Bonds
rated AA by S&P are judged by S&P to have a very strong capacity to pay
principal and interest, and in the majority of instances, differ only in small
degree from issues rated AAA. The rating AA may be modified by the addition of a
plus or minus sign to show relative standing within the rating category.
Bonds rated Aaa are judged by Moody's to be of the best quality. Bonds
rated Aa by Moody's are judged by Moody's to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high-grade bonds. Bonds rated Aa are rated lower than Aaa bonds because
margins of protection may not be as large or fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger. Moody's applies the numerical
modifiers 1, 2 and 3 in the Aa rating category. The modifier 1 indicates a
ranking for the security in the higher end of this rating category, the modifier
2 indicates a mid-range ranking and the modifier 3 indicates a ranking in the
lower end of the rating category.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high-grade,
broadly marketable and suitable for investment by trustees and fiduciary
institutions and liable to but slight market fluctuation other than through
changes in the money rate. The prime feature of an AAA bond is a showing of
earnings several times or many times interest requirements, with such stability
of applicable earnings that safety is beyond reasonable question whatever
changes occur in conditions. Bonds rated AA by Fitch are judged by Fitch to be
of safety virtually beyond question and are readily salable, whose merits are
not unlike those of the AAA class, but whose margin of safety is less strikingly
broad. The issue may be the obligation of a small company, strongly secured but
influenced as to rating by the lesser financial power of the enterprise and more
local type of market.
Bonds rated AAA by Duff are considered to be of the highest credit
quality. The risk factors are negligible, being only slightly more than U.S.
Treasury debt. Bonds rated AA are considered to be of high credit quality with
strong protection factors. Risk is modest but may vary slightly from time to
time because of economic conditions.
Fitch also assigns a rating to certain international and U.S. banks. A
Fitch bank rating represents Fitch's current assessment of the strength of the
bank and whether such bank would receive support should it experience
difficulties. In its assessment of a bank, Fitch uses a dual rating system
comprised of Legal Ratings and Individual Ratings. In addition, Fitch assigns
banks long- and short-term ratings as used in the corporate ratings discussed
above. Legal Ratings, which range in gradations from 1 through 5, address the
question of whether the bank would receive support provided by central banks or
shareholders if it experienced difficulties, and such ratings are considered by
Fitch to be a prime factor in its assessment of credit risk. Individual Ratings,
which range in gradations from A through E, represent Fitch's assessment of a
bank's economic merits and address the question of how the bank would be viewed
if it were entirely independent and could not rely on support from state
authorities or its owners.
In addition to ratings of short-term obligations, BankWatch assigns a
rating to each issuer it rates, in gradations of A through E. BankWatch examines
all segments of the organization including, were applicable, the holding
company, member banks or associations, and other subsidiaries. In those
instances where financial disclosure is incomplete or untimely, a qualified
rating (QR) is assigned to the institution. BankWatch also assigns, in the case
of foreign banks, a country rating which represents a assessment of the overall
political and economic stability of the country in which the bank is domiciled.
