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PROSPECTUS MAY 1, 1996
DREYFUS APPRECIATION FUND, INC.
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DREYFUS APPRECIATION FUND, INC. (THE "FUND") IS AN OPEN-END,
DIVERSIFIED, MANAGEMENT INVESTMENT COMPANY, KNOWN AS A MUTUAL FUND. THE
FUND'S PRIMARY INVESTMENT OBJECTIVE IS TO PROVIDE YOU WITH LONG-TERM CAPITAL
GROWTH CONSISTENT WITH THE PRESERVATION OF CAPITAL. THE FUND INVESTS
PRIMARILY IN THE COMMON STOCKS OF DOMESTIC AND FOREIGN ISSUERS. CURRENT
INCOME IS A SECONDARY INVESTMENT OBJECTIVE.
YOU CAN INVEST, REINVEST OR REDEEM SHARES AT ANY TIME WITHOUT CHARGE
OR PENALTY. YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING DREYFUS
TELETRANSFER.
THE DREYFUS CORPORATION ("DREYFUS") SERVES AS THE FUND'S INVESTMENT
ADVISER. FAYEZ SAROFIM & CO. ("SAROFIM") SERVES AS THE FUND'S SUB-INVESTMENT
ADVISER AND PROVIDES DAY-TO-DAY MANAGEMENT OF THE FUND'S PORTFOLIO.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED MAY 1, 1996, WHICH MAY
BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF CERTAIN AREAS
IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST TO SOME
INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND
IS INCORPORATED HEREIN BY REFERENCE. FOR A FREE COPY, WRITE TO THE FUND AT
144 GLENN CURTISS BOULEVARD, UNIONDALE, NEW YORK 11556-0144, OR CALL
1-800-645-6561. WHEN TELEPHONING, ASK FOR OPERATOR 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM TIME TO TIME.
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TABLE OF CONTENTS
Page
Annual Fund Operating Expenses.................... 3
Condensed Financial Information................... 3
Description of the Fund........................... 4
Management of the Fund............................ 5
How to Buy Shares................................. 7
Shareholder Services.............................. 9
How to Redeem Shares.............................. 12
Shareholder Services Plan......................... 14
Dividends, Distributions and Taxes................ 14
Performance Information........................... 16
General Information............................... 16
Appendix.......................................... 17
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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This Page Intentionally Left Blank
Page 2
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
<S> <C> <C> <C> <C> <C>
Management Fees........................................................................... .55%
Other Expenses............................................................................ .37%
Total Fund Operating Expenses............................................................. .92%
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
You would pay the following
expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at
the end of each time period: $9 $29 $51 $113
</TABLE>
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THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL
RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL
RETURN GREATER OR LESS THAN 5%.
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The purpose of the foregoing table is to assist you in understanding
the costs and expenses borne by the Fund, the payment of which will reduce
investors' annual return. Certain Service Agents (as defined below) may
charge their clients direct fees for effecting transactions in Fund shares;
such fees are not reflected in the foregoing table. See "Management of the
Fund," "How to Buy Shares" and "Shareholder Services Plan."
CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited by Ernst &
Young LLP, the Fund's independent auditors, whose report thereon appears in
the Statement of Additional Information. Further financial data and related
notes are included in the Statement of Additional Information, available upon
request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share
of Common Stock outstanding, total investment return, ratios to average net
assets and other supplemental data for each year indicated. This information
has been derived from the Fund's financial statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PERSHAREDATA:(1)
Net asset value,
beginning of year.... $8.51 $9.67 $ 9.03 $10.28 $12.20 $10.95 $14.67 $15.15 $14.92 $15.17
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net.... .07(2) .08(2) .15 .18 .23 .21 .17 .24 .28 .33
Net realized and unrealized
gain (loss) on investments... 1.21 .38 1.35 2.60 (.46) 3.96 .52 (.14) .26 5.42
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 1.28 .46 1.50 2.78 (.23) 4.17 .69 .10 .54 5.75
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income-net.... (.02) (.14) (.17) (.17) (.24) (.20) (.13) (.24) (.28) (.34)
Dividends in excess of investment
income-net............... -- -- -- -- -- -- -- (.03) -- --
Dividends from net realized gain
on investments........... (.10) (.96) (.08) (.69) (.78) (.25) (.08) (.03) (.01) (.03)
Dividends in excess of net realized
gain on investments...... -- -- -- -- -- -- -- (.03) -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS...... (.12) (1.10) (.25) (.86) (1.02) (.45) (.21) (.33) (.29) (.37)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year $9.67 $9.03 $10.28 $12.20 $10.95 $14.67 $15.15 $14.92 $15.17 $20.55
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN.... 15.03% 4.59% 16.61% 27.20% (1.83%) 38.43% 4.62% .71% 3.62% 37.89%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets... 1.50%(3) 1.63%(3) 1.74%(3) 1.18% 1.24% 1.30% 1.14% 1.07% .96% .92%
Ratio of net investment income
to average net assets.... .65% .65% 1.41% 1.38% 2.21% 1.69% 1.46% 1.66% 1.86% 2.28%
Portfolio Turnover Rate.... 183.27% 178.79% 136.56% 130.36% 179.03% 12.89% 2.84% 9.65% 6.58% 4.51%
Net Assets, end of year
(000's omitted).. $27,378 $39,479 $40,836 $45,672 $40,398 $80,947 $207,627 $237,018 $233,459 $457,267
(1) Per share data for the fiscal years from 1986 to 1991 has been restated to reflect a 100%
stock dividend at the close of business on March 9, 1992.
(2) Based on average number of shares outstanding at each month end.
(3) Net of expenses reimbursed.
</TABLE>
Page 3
Further information about the Fund's performance is contained in the
Fund's annual report, which may be obtained without charge by writing to the
address or calling the number set forth on the cover page of this Prospectus.
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVES
The Fund's primary investment objective is to provide you with
long-term capital growth consistent with the preservation of capital. Current
income is a secondary investment objective. The Fund's investment objectives
cannot be changed without approval by the holders of a majority (as defined
in the Investment Company Act of 1940, as amended (the "1940 Act")), of the
Fund's outstanding voting shares. There can be no assurance that the Fund's
investment objectives will be achieved.
MANAGEMENT POLICIES
During periods which the Fund's management judges to be of market
strength, the Fund acts aggressively to increase shareholders' capital by
investing principally in common stocks of domestic and foreign issuers,
common stocks with warrants attached and debt securities of foreign
governments. The Fund will seek investment opportunities in generally larger
capitalization companies (those with market capitalizations exceeding $500
million) which Sarofim believes have the potential to experience above average
and predictable earnings growth. The Fund also will be alert to those
foreign and domestic issuers which it considers undervalued by the stock
market in terms of current earnings, assets or growth prospects. These
companies will include those that management believes have new or innovative
products, services or processes which can enhance prospects for growth in
future earnings. The Fund may invest up to 10% of the value of its assets in
securities of foreign governments and foreign companies which are not
publicly traded in the United States. Other than in periods of anticipated
market weakness, the Fund will invest at least 80% of its net assets in
common stocks.
While seeking desirable investments, the Fund may invest in money
market instruments consisting of U.S. Government securities, certificates of
deposit, time deposits, bankers' acceptances, short-term investment grade
corporate bonds and other short-term debt instruments, and repurchase
agreements, as set forth under "Appendix -- Certain Portfolio Securities --
Money Market Instruments." Under normal market conditions, the Fund does not
expect to have a substantial portion of its assets invested in money market
instruments. However, when Sarofim determines that adverse market conditions
exist, the Fund may adopt a temporary defensive posture and invest all of its
assets in money market instruments.
The Fund's annual portfolio turnover rate is not expected to exceed
100%. The Fund currently intends to engage in foreign currency transactions,
lending portfolio securities and, to a limited extent, options transactions.
See also "Investment Considerations and Risks" and "Appendix_Investment
Techniques" below and "Investment Objectives and Management
Policies_Management Policies" in the Statement of Additional Information.
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL -- The Fund's net asset value per share should be expected to
fluctuate. Investors should consider the Fund as a supplement to an overall
investment program and should invest only if they are willing to undertake
the risks involved. See "Investment Objectives and Management
Policies_Management Policies" in the Statement of Additional Information for
a further discussion of certain risks.
EQUITY SECURITIES -- Equity securities fluctuate in value, often based on
factors unrelated to the value of the issuer of the securities, and such
fluctuations can be pronounced. Changes in the value of the Fund's
investments will result in changes in the value of its shares and thus the
Fund's total return to investors.
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
Page 4
comparable U.S. issuers. Similarly, volume and liquidity in most foreign
securities markets are less than in the United States and, at times,
volatility of price can be greater than in the United States.
Because evidences of ownership of such securities usually are held
outside the United States, the Fund will be subject to additional risks which
include possible: adverse political and economic developments, seizure or
nationalization of foreign deposits and adoption of governmental restrictions
which might adversely affect the payment of principal and interest on the
foreign securities or restrict the payment of principal and interest to
investors located outside the country of the issuer, whether from currency
blockage or otherwise.
Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in
U.S. dollars may be affected favorably or unfavorably by changes in currency
rates and exchange control regulations.
FOREIGN CURRENCY TRANSACTIONS -- 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 U.S. or abroad. See "Appendix -- Investment Techniques -- Foreign
Currency Transactions."
USE OF DERIVATIVES -- The Fund may invest, to a limited extent, in
derivatives ("Derivatives"). These are financial instruments which derive
their performance, at least in part, from the performance of an underlying
asset, index or interest rate. The Derivatives the Fund may use include
options. While Derivatives can be used effectively in furtherance of the
Fund's investment objectives, under certain market conditions, they can
increase the volatility of the Fund's net asset value, can decrease the
liquidity of the Fund's portfolio and make more difficult the accurate
pricing of the Fund's portfolio. See "Appendix -- Investment Techniques --
Use of Derivatives" below and "Investment Objectives and Management Policies
- -- Management Policies -- Derivatives" in the Statement of Additional
Information.
SIMULTANEOUS INVESTMENTS -- Investment decisions for the Fund are made
independently from those of other investment companies or accounts advised by
Dreyfus or Sarofim. If, however, such other investment companies or accounts
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. In some cases, this procedure may adversely affect the size of the
position obtained for or disposed of by the Fund or the price paid or
received by the Fund.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- Dreyfus, located at 200 Park Avenue, New York, New York
10166, was formed in 1947 and serves as the Fund's investment adviser.
Dreyfus is a wholly-owned subsidiary of Mellon Bank, N.A., which is a
wholly-owned subsidiary of Mellon Bank Corporation ("Mellon"). As of March
29, 1996, Dreyfus managed or administered approximately $82 billion in assets
for more than 1.7 million investor accounts nationwide.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international
markets. Mellon is among the twenty-five largest bank holding companies in
the United States based on total assets. Mellon's principal wholly-owned
subsidiaries are Mellon Bank, N.A., Mellon Bank (DE) National Association,
Mellon Bank (MD), The Boston Company, Inc., AFCO Credit Corporation and a
number of companies known as Mellon Financial Services Corporations. Through
its subsidiaries, including Dreyfus, Mellon managed more than $233 billion in
assets as of December 31, 1995, includ-
Page 5
ing approximately $81 billion in proprietary mutual fund assets. As of
December 31, 1995, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services, for
more than $786 billion in assets, including approximately $60 billion in
mutual fund assets.
Dreyfus supervises and assists in the overall management of the
Fund's affairs under an Investment Advisory Agreement with the Fund, subject
to the authority of the Fund's Board in accordance with Maryland law.
Under the Investment Advisory Agreement, the Fund has agreed to pay
Dreyfus an annual fee, payable monthly, as set forth below:
<TABLE>
<CAPTION>
ANNUAL FEE AS A PERCENTAGE OF
TOTAL ASSETS AVERAGE DAILY NET ASSETS
---------------- --------------------------------------
<S> <C> <C>
0 to $25 million.................................... .44 of 1%
$25 million to $75 million.......................... .37 of 1%
$75 million to $200 million......................... .33 of 1%
$200 million to $300 million........................ .29 of 1%
$300 million or more................................ .275 of 1%
</TABLE>
For the year ended December 31, 1995, the Fund paid Dreyfus a monthly
advisory fee at the effective annual rate of .33 of 1% of the value of the
Fund's average daily net assets.
SUB-INVESTMENT ADVISER -- Sarofim, a registered investment adviser located at
Two Houston Center, Suite 2907, Houston, Texas 77010, was formed in 1958 and
serves as the Fund's sub-investment adviser. As of March 29, 1996, Sarofim
managed approximately $29.8 billion in assets for three other registered
investment companies and numerous separate discretionary accounts, each over
$5 million.
Sarofim, subject to the supervision and approval of Dreyfus, provides
investment advisory assistance and the day-to-day management of the Fund's
portfolio, as well as investment research and statistical information, under
a Sub-Investment Advisory Agreement with the Fund, subject to the overall
authority of the Fund's Board in accordance with Maryland law.
Under the Sub-Investment Advisory Agreement, the Fund has agreed to
pay Sarofim an annual fee, payable monthly, as set forth below:
<TABLE>
<CAPTION>
ANNUAL FEE AS A PERCENTAGE OF
TOTAL ASSETS AVERAGE DAILY NET ASSETS
---------------- --------------------------------------
<S> <C> <C>
0 to $25 million.................................... .11 of 1%
$25 million to $75 million.......................... .18 of 1%
$75 million to $200 million......................... .22 of 1%
$200 million to $300 million........................ .26 of 1%
$300 million or more................................ .275 of 1%
</TABLE>
For the year ended December 31, 1995, the Fund paid Sarofim a monthly
sub-advisory fee at the effective annual rate of .22 of 1% of the Fund's
average daily net assets.
The Fund's primary portfolio manager is Fayez Sarofim. He has held
that position since December 27, 1990. Mr. Sarofim founded Fayez Sarofim &
Co. in 1958. The Fund's other portfolio managers are identified in the
Statement of Additional Information. Dreyfus and Sarofim also provide
research services for the Fund and other funds advised by Dreyfus or Sarofim,
respectively, through a professional staff of portfolio managers and
securities analysts.
From time to time, Dreyfus and/or Sarofim may waive receipt of their
fees and/or voluntarily assume certain expenses of the Fund, which would have
the effect of lowering the overall expense ratio of the Fund and increasing
yield to investors. The Fund will not pay Dreyfus and/or Sarofim at a later
time for any amounts which may be waived, nor will the Fund reimburse Dreyfus
and/or Sarofim for any amounts which may be assumed.
In allocating brokerage transactions for the Fund, Dreyfus and
Sarofim seek to obtain the best execution of orders at the most favorable net
price. Subject to this determination, Dreyfus and Sarofim may
Page 6
consider, among other things, the receipt of research services and/or the
sale of shares of the Fund or other funds managed, advised or administered
by Dreyfus as factors in the selection of broker/dealers to execute portfolio
transactions for the Fund. See "Portfolio Transactions" in the Statement of
Additional Information.
Dreyfus may pay the Fund's distributor for shareholder services from
Dreyfus' own assets, including past profits but not including the investment
advisory fee paid by the Fund. The Fund's distributor may use part or all of
such payments to pay Service Agents in respect of these services.
DISTRIBUTOR -- The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at One Exchange Place, Boston, Massachusetts
02109. The Distributor's ultimate parent is Boston Institutional Group, Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN -- Dreyfus Transfer,
Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box 9671, Providence, Rhode
Island 02940-9671, is the Fund's Transfer and Dividend Disbursing Agent (the
"Transfer Agent"). Mellon Bank, N.A., One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258, is the Fund's Custodian.
HOW TO BUY SHARES
Fund shares are sold without a sales charge. You may be charged a
nominal fee if you effect transactions in Fund shares through certain
financial institutions (which may include banks), securities dealers
("Selected Dealers") and other industry professionals, such as investment
advisers, accountants and estate planning firms (collectively, "Service
Agents") that have entered into service agreements with the Distributor.
Stock certificates are issued only upon your written request. No certificates
are issued for fractional shares. The Fund reserves the right to reject any
purchase order.
The minimum initial investment is $2,500, or $1,000 if you are a
client of a Service Agent which has made an aggregate minimum initial
purchase for its customers of $2,500. Subsequent investments must be at least
$100. However, the minimum initial investment for Dreyfus-sponsored Keogh
Plans, IRAs, SEP-IRAs and 403(b)(7) Plans with only one participant is $750,
with no minimum for subsequent purchases. Individuals who open an IRA also
may open a non-working spousal IRA with a minimum initial investment of $250.
Subsequent investments in a spousal IRA must be at least $250. The initial
investment must be accompanied by the Account Application. For full-time or
part-time employees of Dreyfus or any of its affiliates or subsidiaries,
directors of Dreyfus, Board members of a fund advised by Dreyfus, 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 Dreyfus or any of its affiliates or subsidiaries who
elect to have a portion of their pay directly deposited into their Fund
account, the minimum initial investment is $50. The Fund reserves the right
to offer Fund shares without regard to minimum purchase requirements to
employees participating in certain qualified or non-qualified employee
benefit plans or other programs where contributions or account information
can be transmitted in a manner and form acceptable to the Fund. The Fund
reserves the right to vary further the initial and subsequent investment
minimum requirements at any time. Fund shares also are offered without regard
to the minimum initial investment requirements through Dreyfus-AUTOMATIC
Asset BuilderRegistration Mark, Dreyfus Government Direct Deposit Privilege
or Dreyfus Payroll Savings Plan pursuant to the Dreyfus Step Program
described under "Shareholder Services." These services enable you to make
regularly scheduled investments and may provide you with a convenient way to
invest for long-term financial goals. You should be aware, however, that
periodic investment plans do not guarantee a profit and will not protect an
investor against loss in a declining market.
You may purchase Fund shares by check or wire, or through the Dreyfus
TELETRANSFER Privilege, described below. Checks should be made payable to
"The Dreyfus Family of Funds," or, if for Dreyfus retirement plan accounts,
to "The Dreyfus Trust Company, Custodian." Payments to open new
Page 7
accounts which are mailed should be sent to The Dreyfus Family of Funds, P.O.
Box 9387, Providence, Rhode Island 02940-9387, together with your Account
Application. For subsequent investments, your Fund account number should
appear on the check and an investment slip should be enclosed and sent to The
Dreyfus Family of Funds, P.O. Box 105, Newark, New Jersey 07101-0105. For
Dreyfus retirement plan accounts, both initial and subsequent investments
should be sent to The Dreyfus Trust Company, Custodian, P.O. Box 6427,
Providence, Rhode Island 02940-6427. Neither initial nor subsequent
investments should be made by third party check. Purchase orders may be
delivered in person only to a Dreyfus Financial Center. THESE ORDERS WILL BE
FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For
the location of the nearest Dreyfus Financial Center, please call one of the
telephone numbers listed under "General Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, DDA #8900051906/Dreyfus
Appreciation Fund, Inc., for purchase of Fund shares in your name. The wire
must include your Fund account number (for new accounts, your Taxpayer
Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable. If your initial purchase of
Fund shares is by wire, please call 1-800-645-6561 after completing your wire
payment to obtain your Fund account number. Please include your Fund account
number on the Account Application and promptly mail the Account Application to
the Fund, as no redemptions will be permitted until the Account Application is
received. You may obtain further information about remitting funds in this
manner from your bank. All payments should be made in U.S. dollars and, to
avoid fees and delays, should be drawn only on U.S. banks. A charge will be
imposed if any check used for investment in your account does not clear. The
Fund makes available to certain large institutions the ability to issue
purchase instructions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member. You must direct the
institution to transmit immediately available funds through the Automated
Clearing House to The Bank of New York with instructions to credit your Fund
account. The instructions must specify your Fund account registration and
your Fund account number PRECEDED BY THE DIGITS "1111."
Fund shares are sold on a continuous basis at the net asset value per
share next determined after an order in proper form is received by the
Transfer Agent or other agent. Net asset value per share is determined as of
the close of trading on the floor of the New York Stock Exchange (currently
4:00 p.m., New York time), on each day the New York Stock Exchange is open
for business. For purposes of determining net asset value per share, options
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. The Fund's
investments 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
Fund's Board. For further information regarding the methods employed in
valuing the Fund's investments, see "Determination of Net Asset Value" in the
Statement of Additional Information.
For certain institutions that have entered into agreements with the
Distributor, payment for the purchase of Fund shares may be transmitted, and
must be received by the Transfer Agent, within three business days after the
order is placed. If such payment is not received within three business days
after the order is placed, the order may be canceled and the institution
could be held liable for resulting fees and/or losses.
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have
a mini-
Page 8
mum of 250 employees eligible for participation in such plans or
programs, or (ii) such plan's or program's aggregate investment in the
Dreyfus Family of Funds or certain other products made available by the
Distributor to such plans or programs exceeds $1,000,000 ("Eligible Benefit
Plan"). Shares of funds in the Dreyfus Family of Funds then held by Eligible
Benefit Plans will be aggregated to determine the fee payable. The
Distributor reserves the right to cease paying these fees at any time. The
Distributor will pay such fees from its own funds, other than amounts
received from the Fund, including past profits or any other source available
to it.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
the Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service (the "IRS").
DREYFUS TELETRANSFER PRIVILEGE -- You may purchase Fund shares (minimum $500,
maximum $150,000 per day) by telephone if you have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds will
be transferred between the bank account designated in one of these documents
and your Fund account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be so designated.
The Fund may modify or terminate this Privilege at any time or charge a
service fee upon notice to shareholders. No such fee currently is
contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of shares by telephoning
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES
FUND EXCHANGES -- You may purchase, in exchange for shares of the Fund,
shares of certain other funds managed or administered by Dreyfus, to the
extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
If you desire to use this service, you should consult your Service Agent or
call 1-800-645-6561 to determine if it is available and whether any
conditions are imposed on its use.
To request an exchange, you must give exchange instructions to the
Transfer Agent in writing or by telephone. Before any exchange, you must
obtain and should review a copy of the current prospectus of the fund into
which the exchange is being made. Prospectuses may be obtained by calling
1-800-645-6561. Except in the case of personal retirement plans, the shares
being exchanged must have a current value of at least $500; furthermore, when
establishing a new account by exchange, the shares being exchanged must have
a value of at least the minimum initial investment required for the fund into
which the exchange is being made. The ability to issue exchange instructions
by telephone is given to all Fund shareholders automatically, unless you
check the applicable "No" box on the Account Application, indicating that you
specifically refuse this Privilege. The Telephone Exchange Privilege may be
established for an existing account by written request, signed by all
shareholders on the account, or by a separate signed Shareholder Services
Form, also available by calling 1-800-645-6561. If you have established the
Telephone Exchange Privilege, you may telephone exchange instructions by
calling 1-800-645-6561 or, if you are calling from overseas, call
516-794-5452. See "How to Redeem Shares _ Procedures." Upon an exchange into
a new account, the following shareholder services and privileges, as
applicable and where available, will be automatically carried over to the
fund into which the exchange is made: Telephone Exchange Privilege, Wire
Redemption Privilege, Telephone Redemption Privilege, Dreyfus TELETRANSFER
Privilege, and the dividend/capital gain distribution option (except for
Dreyfus Dividend Sweep) selected by the investor.
Shares will be exchanged at the next determined net asset value;
however, a sales load may be charged with respect to exchanges into funds
sold with a sales load. If you are exchanging into a fund
Page 9
that charges a sales load, you may qualify for share prices which do not
include the sales load or which reflect a reduced sales load, if the shares
you are exchanging were: (a) purchased with a sales load, (b) acquired by a
previous exchange from shares purchased with a sales load, or (c) acquired
through reinvestment of dividends or distributions paid with respect to the
foregoing categories of shares. To qualify, at the time of the exchange you
must notify the Transfer Agent or your Service Agent must notify the
Distributor. Any such qualification is subject to confirmation of your
Page 10
holdings through a check of appropriate records. See "Shareholder Services" in
the Statement of Additional Information. No fees currently are charged
shareholders directly in connection with exchanges, although the Fund reserves
the right, upon not less than 60 days' written notice, to charge shareholders
a nominal fee in accordance with rules promulgated by the Securities and
Exchange Commission. The Fund reserves the right to reject any exchange
request in whole or in part. The availability of Fund Exchanges may be
modified or terminated at any time upon notice to shareholders. See
"Dividends, Distributions and Taxes."
DREYFUS AUTO-EXCHANGE PRIVILEGE -- Dreyfus Auto-Exchange Privilege enables
you to invest regularly (on a semi-monthly, monthly, quarterly or annual
basis), in exchange for shares of the Fund, in shares of other funds in the
Dreyfus Family of Funds of which you are a shareholder. The amount you
designate, which can be expressed either in terms of a specific dollar or
share amount ($100 minimum), will be exchanged automatically on the first
and/or fifteenth day of the month according to the schedule you have
selected. Shares will be exchanged at the then-current net asset value;
however, a sales load may be charged with respect to exchanges into funds
sold with a sales load. See "Shareholder Services" in the Statement of
Additional Information. The right to exercise this Privilege may be modified
or canceled by the Fund or the Transfer Agent. You may modify or cancel your
exercise of this Privilege at any time by mailing written notification to The
Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671.
The Fund may charge a service fee for the use of this Privilege. No such fee
currently is contemplated. For more information concerning this Privilege and
the funds in the Dreyfus Family of Funds eligible to participate in this
Privilege, or to obtain a Dreyfus Auto-Exchange Authorization Form, please
call toll free 1-800-645-6561. See "Dividends, Distributions and Taxes."
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark -- 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.
At your option, the bank account designated by you will be debited in the
specified amount, and Fund shares will be purchased, once a month, on either
the first or fifteenth day, or twice a month, on both days. Only an account
maintained at a domestic financial institution which is an Automated Clearing
House member may be so designated. To establish a Dreyfus-Automatic Asset
Builder account, you must file an authorization form with the Transfer Agent.
You may obtain the necessary authorization form by calling 1-800-645-6561.
You may cancel your participation in this Privilege or change the amount of
purchase at any time by mailing written notification to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus
retirement plan accounts, to The Dreyfus Trust Company, Custodian, P.O. Box
6427, Providence, Rhode Island 02940-6427, and the notification will be
effective three business days following receipt. The Fund may modify or
terminate this Privilege at any time or charge a service fee. No such fee
currently is contemplated.
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 Federal
government automatically deposited into your Fund account. You may deposit as
much of such payments as you elect. To enroll in Dreyfus Government Direct
Deposit, you must file with the Transfer Agent a completed Direct Deposit
Sign-Up Form for each type of payment that you desire to include in this
Privilege. The appropriate form may be obtained by calling 1-800-654-6561.
Death or legal incapacity will
Page 10
terminate your participation in this Privilege. You may elect at any time to
terminate your participation by notifying in writing the appropriate Federal
agency. Further, the Fund may terminate your participation upon 30 days'
notice to you.
DREYFUS PAYROLL SAVINGS PLAN -- Dreyfus Payroll Savings Plan permits you to
purchase 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. Your
employer must complete the reverse side of the form and return it to The
Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671.
You may obtain the necessary authorization form by calling 1-800-645-6561.
You may change the amount of purchase or cancel the authorization only by
written notification to your employer. It is the sole responsibility of your
employer, not the Distributor, Dreyfus, the Fund, the Transfer Agent or any
other person, to arrange for transactions under the Dreyfus Payroll Savings
Plan. The Fund may modify or terminate this Privilege at any time or charge a
service fee. No such fee currently is contemplated.
DREYFUS STEP PROGRAM -- Dreyfus Step Program enables you to purchase Fund
shares without regard to the Fund's minimum initial investment requirements
through Dreyfus-AUTOMATIC Asset Builder, 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). The Fund may modify or
terminate this Program at any time. Investors who wish to purchase Fund
shares through Dreyfus Step Program in conjunction with a Dreyfus-sponsored
retirement plan may do so only for IRAs, SEP-IRAs and IRA "Rollover
Accounts."
DREYFUS DIVIDEND OPTIONS -- Dreyfus Dividend Sweep enables you to invest
automatically dividends or dividends and capital gain distributions, if any,
paid by the Fund in shares of another fund in the Dreyfus Family of Funds of
which you are a shareholder. Shares of the other fund will be purchased at
the then-current net asset value; however, a sales load may be charged with
respect to investments in shares of a fund sold with a sales load. If you are
investing in a fund that charges a sales load, you may qualify for share price
s which do not include the sales load or which reflect a reduced sales load.
If you are investing in a fund that charges a contingent deferred sales
charge, the shares purchased will be subject on redemption to the contingent
deferred sales charge, if any, applicable to the purchased shares. See
"Shareholder Services" in the Statement of Additional Information. Dreyfus
Dividend ACHpermits 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 financial institution which is an
Automated Clearing House member may be so designated. Banks may charge a fee
for this service.
For more information concerning these privileges or to request a
Dividend Options Form, please call toll free 1-800-645-6561. You may cancel
these privileges by mailing written notification to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. Enrollment in or
cancellation of these privileges is effective three business days following
receipt. These privileges are available only for existing accounts and may
not be used to open new accounts. Minimum subsequent investments do not apply
for Dreyfus Dividend Sweep. The Fund may modify or terminate these privileges
at any time or charge a service fee. No such fee currently is contemplated.
Shares held under Keogh Plans, IRAs or other retirement plans are not
eligible for Dreyfus Dividend Sweep.
Page 11
AUTOMATIC WITHDRAWAL PLAN -- The Automatic Withdrawal Plan permits you to
request withdrawal of a specified dollar amount (minimum $50) on either a
monthly or quarterly basis if you have a $5,000 minimum account. An
application for the Automatic Withdrawal Plan can be obtained by calling
1-800-645-6561. The Automatic Withdrawal Plan may be ended at any time by
you, the Fund or the Transfer Agent. Shares for which certificates have been
issued may not be redeemed through the Automatic Withdrawal Plan.
RETIREMENT PLANS -- The Fund offers a variety of pension and profit-sharing
plans, including Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover Accounts,"
401(k) Salary Reduction Plans and 403(b)(7) Plans. Plan support services also
are available. You can obtain details on the various plans by calling the
following numbers toll free: for Keogh Plans, please call 1-800-358-5566; for
IRAs and IRA "Rollover Accounts," please call 1-800-645-6561; or for
SEP-IRAs, 401(k) Salary Reduction Plans and 403(b)(7) Plans, please call
1-800-322-7880.
HOW TO REDEEM SHARES
GENERAL
You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined net asset value.
The Fund imposes no charges when shares are redeemed. Service Agents
may charge their clients a nominal fee for effecting redemptions of Fund
shares. Any certificates representing Fund shares being redeemed must be
submitted with the redemption request. The value of the shares redeemed may
be more or less than their original cost, depending upon the Fund's
then-current net asset value.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission. HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY DREYFUS
TELETRANSFER PRIVILEGE OR THROUGH DREYFUS-AUTOMATIC ASSET BUILDERRegistration
Mark AND SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER
AGENT, THE REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK
CLEARANCE OF YOUR PURCHASE CHECK, DREYFUS TELETRANSFER PURCHASE OR
DREYFUS-AUTOMATIC ASSET BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS
DAYS OR MORE. IN ADDITION, THE FUND WILL REJECT REQUESTS TO REDEEM SHARES BY
WIRE OR TELEPHONE OR PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE FOR A
PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE
DREYFUS TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER
AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT APPLY
IF YOUR SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A
SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE REDEMPTION REQUEST.
PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL
ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS
OF BENEFICIAL OWNERSHIP. Fund shares will not be redeemed until the Transfer
Agent has received your Account Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if your account's net asset value is
$500 or less and remains so during the notice period.
PROCEDURES
You may redeem shares by using the regular redemption procedure
through the Transfer Agent, or, 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, through the Wire
Redemption Privilege, the Telephone Redemption Privilege or the Dreyfus TELETR
ANSFER Privilege. If you are a client of a Selected Dealer, you may redeem
shares through the Selected Dealer. Other redemption procedures may be in
effect for clients of certain Service Agents. The Fund makes available to
certain
Page 12
large institutions the ability to issue redemption instructions
through compatible computer facilities. The Fund reserves the right to refuse
any request made by wire or telephone, including requests made shortly after
a change of address, and may limit the amount involved or the number of such
requests. The Fund may modify or terminate any redemption Privilege at any
time or charge a service fee upon notice to shareholders. No such fee
currently is contemplated. Shares held under Keogh Plans, IRAs or other
retirement plans, and shares for which certificates have been issued, are not
eligible for the Wire Redemption, Telephone Redemption or Dreyfus TELETRANSFER
Privilege.
You may redeem shares by telephone if you have checked the
appropriate box on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select a telephone redemption
privilege or telephone exchange privilege (which is granted automatically
unless you refuse it), you authorize the Transfer Agent to act on telephone
instructions from any person representing himself or herself to be you, or a
representative of your Service Agent, and reasonably believed by the Transfer
Agent to be genuine. The Fund will require the Transfer Agent to employ
reasonable procedures, such as requiring a form of personal identification,
to confirm that instructions are genuine and, if it does not follow such
procedures, the Fund or the Transfer Agent may be liable for any losses due
to unauthorized or fraudulent instructions. Neither the Fund nor the Transfer
Agent will be liable for following telephone instructions reasonably believed
to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used. During the delay, the Fund's net asset value may fluctuate.
REGULAR REDEMPTION -- Under the regular redemption procedure, you may redeem
shares by written request mailed to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus retirement plan
accounts, to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427. Redemption requests may be delivered in person only
to a Dreyfus Financial Center. THESE REQUESTS WILL BE FORWARDED TO THE FUND
AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For the location of the
nearest Dreyfus Financial Center, please call one of the telephone numbers
listed under "General Information." Redemption requests must be signed by
each shareholder, including each owner of a joint account, and each signature
must be guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP") and the Stock Exchanges Medallion Program. If you
have a question with respect to signature-guarantees, please call one of the
telephone numbers listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
WIRE REDEMPTION PRIVILEGE -- You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. You also may direct that redemption proceeds be paid by
check (maximum $150,000 per day)made out to the owners of record and mailed
to your address. Redemption proceeds of less than $1,000 will be paid
automatically by check. Holders of jointly registered Fund or bank accounts
may have redemption proceeds of not more than $250,000 wired within any
30-day period. You may telephone redemption requests by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452. The
Statement of Additional Information sets forth instructions for transmitting
redemption requests by wire.
Page 13
TELEPHONE REDEMPTION PRIVILEGE -- You may request by telephone that
redemption proceeds (maximum $150,000 per day) be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452.
DREYFUS TELETRANSFER PRIVILEGE -- You may request by telephone that
redemption proceeds (minimum $500 per day) be transferred between your Fund
account and your bank account. Only a bank account maintained in a domestic
financial institution which is an Automated Clearing House member may be
designated. Redemption proceeds will be on deposit in your account at an
Automated Clearing House member bank ordinarily two days after receipt of the
redemption request or, at your request, paid by check (maximum $150,000 per
day) and mailed to your address. Holders of jointly registered Fund or bank
accounts may redeem through the Dreyfus TELETRANSFER Privilege for transfer
to their bank account not more than $250,000 within any 30-day period.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of shares by telephoning
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452.
REDEMPTION THROUGH A SELECTED DEALER -- If you are a customer of a Selected
Dealer, you may make redemption requests to your Selected Dealer. If the
Selected Dealer transmits the redemption request so that it is received by
the Transfer Agent by the close of trading on the floor of the New York Stock
Exchange on a business day, the redemption request will be effective on that
day. If a redemption request is received by the Transfer Agent after the
close of trading on the floor of the New York Stock Exchange, the redemption
request will be effective on the next business day. It is the responsibility
of the Selected Dealer to transmit a request so that it is received in a
timely manner. The proceeds of the redemption are credited to your account
with the Selected Dealer.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan, pursuant to which
the Fund reimburses (a) the Distributor for payments made for servicing
shareholder accounts ("Servicing") and (b) Dreyfus, Dreyfus Service
Corporation, a wholly-owned subsidiary of Dreyfus, and any affiliate of
either of them for payments made for Servicing, at an aggregate annual rate
of up to .20 of 1% of the value of the Fund's average daily net assets. Each
of the Distributor and Dreyfus or its affiliates may pay one or more Service
Agents a fee in respect of the Fund's shares owned by shareholders with whom
the Service Agent has a Servicing relationship or for whom the Service Agent
is the dealer or holder of record. The schedule of such fees and the basis
upon which such fees will be paid shall be determined from time to time by
the Fund's Board. If a Fund shareholder ceases to be a client of a Service
Agent, but continues to hold Fund shares, Dreyfus or its affiliates will be
permitted to act as a Service Agent in respect of such Fund shareholder and
receive payments under the Service Plan for Servicing.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily pays dividends from its net investment income 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 Internal Revenue Code of 1986, as amended (the "Code"),
in all events in a manner consistent with the provisions of the 1940 Act. The
Fund will not make distributions from net realized securities gains unless
capital loss carryovers, if any, have been utilized or have expired. You may
choose whether to receive dividends and distributions in cash or to reinvest
in additional shares at net asset value. All expenses are accrued daily and
deducted before declaration of dividends to investors.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of cer-
Page 14
tain market discount bonds, paid by the Fund will be taxable to U.S.
shareholders as ordinary income whether received in cash or reinvested in
additional shares. Depending upon the composition of the Fund's income, all
or a portion of the dividends derived from net investment income may qualify
for the dividends received deduction allowable to qualifying U.S. corporate
shareholders. Distributions from net realized long-term securities gains of
the Fund will be taxable to U.S. shareholders as long-term capital gains for
Federal income tax purposes, regardless of how long shareholders have held
their Fund shares and whether such distributions are received in cash or
reinvested in Fund shares. The Code provides that the net capital gain of an
individual generally will not be subject to Federal income tax at a rate in
excess of 28%. Dividends and distributions may be subject to state and local
taxes.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by the Fund to a foreign investor generally are
subject to U.S. nonresident withholding taxes at the rate of 30%, unless the
foreign investor claims the benefit of a lower rate specified in a tax
treaty. Distributions from net realized long-term securities gains paid by
the Fund to a foreign investor as well as the proceeds of any redemptions
from a foreign investor's account, regardless of the extent to which gain or
loss may be realized, generally will not be subject to U.S. nonresident
withholding tax. However, such distributions and redemption proceeds may be
subject to backup withholding, as described below, unless the foreign
investor certifies his non-U.S. residency status.
Notice as to the tax status of your dividends and distributions will
be mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions from
securities gains, if any, paid during the year.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends, distributions
from net realized securities gains and the proceeds of any redemption,
regardless of the extent to which gain or loss may be realized, paid to a
shareholder if such shareholder fails to certify either that the TIN
furnished in connection with opening an account is correct, or that such
shareholder has not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report taxable dividend or
interest income on a Federal income tax return. Furthermore, the IRS may
notify the Fund to institute backup withholding if the IRS determines a
shareholder's TIN is incorrect or if a shareholder has failed to properly
report taxable dividend and interest income on a Federal income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the
record owner of the account, and may be claimed as a credit on the record
owner's Federal income tax return.
Management of the Fund believes that the Fund has qualified for the
fiscal year ended December 31, 1995 as a "regulated investment company" under
the Code. The Fund intends to continue to so qualify if such qualification is
in the best interests of its shareholders. Such qualification relieves the
Fund of any liability for Federal income tax to the extent its earnings are
distributed in accordance with applicable provisions of the Code. The Fund is
subject to a non-deductible 4% excise tax, measured with respect to certain
undistributed amounts of taxable investment income and capital gains.
You should consult your tax adviser regarding specific questions as
to Federal, state or local taxes.
Page 15
PERFORMANCE INFORMATION
For purposes of advertising, performance may be calculated on the
basis of average annual total return and/or total return.
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment in the Fund was purchased with an
initial payment of $1,000 and that the investment was redeemed at the end of
a stated period of time, after giving effect to the reinvestment of dividends
and distributions during the period. The return is expressed as a percentage
rate which, if applied on a compounded annual basis, would result in the
redeemable value of the investment at the end of the period. Advertisements
of the Fund's performance will include the Fund's average annual total return
for one, five and ten year periods.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the net asset
value per share at the beginning of the period. Advertisements may include
the percentage rate of total return or may include the value of a
hypothetical investment at the end of the period which assumes the
application of the percentage rate of total return.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., the Dow Jones Industrial Average, Standard &
Poor's 500 Composite Stock Price Index, Morningstar, Inc. and other industry
publications.
GENERAL INFORMATION
The Fund was incorporated under Maryland law on July 30, 1980, and
commenced operations on January 18, 1984. Prior to March 1, 1993, the Fund's
name was General Aggressive Growth Fund, Inc. The Fund is authorized to issue
100 million shares of Common Stock, par value $.01 per share. Each share has
one vote.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may no longer consider each year the election of Board
members or the appointment of auditors. However, pursuant to the Fund's
By-Laws, the holders of at least 10% of the shares outstanding and entitled
to vote may require the Fund to hold a special meeting of shareholders for
purposes of removing a Board member from office and the holders of at least
25% of such shares may require the Fund to hold a special meeting of
shareholders for any other purpose. Fund shareholders may remove a Board
member by the affirmative vote of a majority of the Fund's outstanding voting
shares. In addition, the Fund's Board will call a meeting of shareholders for
the purpose of electing Board members if, at any time, less than a majority
of the Board members then holding office have been elected by shareholders.
The Transfer Agent maintains a record of your ownership and sends you
confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free,
1-800-645-6561. In New York City, call 1-718-895-1206; outside the U.S. and
Canada, call 516-794-5452.
Page 16
APPENDIX
INVESTMENT TECHNIQUES
FOREIGN CURRENCY TRANSACTIONS -- Foreign currency transactions may be entered
into 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; or 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
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
Sarofim's ability to predict accurately the future exchange rates between
foreign currencies and the U.S. dollar.
LENDING PORTFOLIO SECURITIES -- The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. The Fund continues to be
entitled to payments in amounts equal to the interest or other distributions
payable on the loaned securities which affords the Fund an opportunity to
earn interest on the amount of the loan and at the same time to earn income
on the loaned securities' collateral. Loans of portfolio securities may not
exceed 331/3% of the value of the Fund's total assets, and the Fund will
receive collateral consisting of cash, 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. TheFund might experience risk of loss if the institution with which
it has engaged in a portfolio loan transaction breaches its agreement with
the Fund.
BORROWING MONEY -- The Fund is permitted to borrow to the extent permitted
under the 1940 Act, which permits an investment company to borrow in an
amount up to 331/3% of the value of the value of its total assets. The Fund
currently intends to borrow money only for temporary or emergency (not
leveraging) purposes, in an amount up to 15% of the value of its total assets
(including the amount borrowed) valued at the lesser of cost or market, less
liabilities (not including the amount borrowed) at the time the borrowing is
made. While borrowings exceed 5% of the Fund's total assets, the Fund will
not make any additional investments.
USE OF DERIVATIVES -- The Fund may invest in the types of Derivatives
enumerated under "Description of the Fund--Investment Considerations and
Risks--Use of Derivatives." These instruments and certain related risks are
described more specifically under "Investment Objective and Management
Policies_Management Policies_Derivatives" in the Statement of Additional
Information.
Derivatives 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 inappropriate 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 it 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.
The Fund may write (i.e, sell) covered call option contracts to the
extent of 20% of the value of its net assets at the time such option
contracts are written. A call option gives the purchaser of the option the
right to buy, and obligates the writer to sell, the underlying security at
the exercise price at any time during the option period. A covered call
option sold by the Fund, which is a call option with respect to which the
Fund owns the underlying security, exposes the Fund during the term of the
option to possi-
Page 17
ble loss of opportunity to realize appreciation in the market
price of the underlying security or to possible continued holding of a
security which might otherwise have been sold to protect against depreciation
in the market price of the security.
CERTAIN PORTFOLIO SECURITIES
WARRANTS -- A warrant is an instrument issued by a corporation which gives
the holder the right to subscribe to a specified amount of the corporation's
capital stock at a set price for a specified period of time. The Fund may
invest up to 2% of its net assets in warrants, except that this limitation
does not apply to warrants purchased by the Fund that are sold in units with,
or attached to, other securities.
MONEY MARKET INSTRUMENTS -- The Fund may invest in the following types of
money market
instruments.
U.S. GOVERNMENT SECURITIES. Securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities include U.S. Treasury
securities that differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government agencies
and instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others by the right of the issuer to borrow from the Treasury;
others by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others only by the credit
of the agency or instrumentality. These securities bear fixed, floating or
variable rates of interest. While the U.S. Government provides financial
support to such U.S. Government-sponsored agencies and instrumentalities, no
assurance can be given that it will always do so since it is not so obligated
by law.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Fund buys, and
the seller agrees to repurchase, a security at a mutually agreed upon time
and price (usually within seven days). The repurchase agreement thereby
determines the yield during the purchaser's holding period, while the
seller's obligation to repurchase is secured by the value of the underlying
security. Repurchase agreements could involve risks in the event of a default
or insolvency of the other party to the agreement, including possible delays
or restrictions upon the Fund's ability to dispose of the underlying
securities. The Fund may enter into repurchase agreements with certain banks
or non-bank dealers.
BANK OBLIGATIONS. The Fund may purchase certificates of deposit, time
deposits, bankers' acceptances and other short-term obligations issued by
domestic banks, foreign subsidiaries or foreign branches of domestic banks,
domestic and foreign branches of foreign banks, domestic savings and loan
associations and other banking institutions. With respect to such securities
issued by foreign subsidiaries or foreign branches of domestic banks, and
domestic and foreign branches of foreign banks, the Fund may be subject to
additional investment risks that are different in some respects from those
incurred by a fund which invests only in debt obligations of U.S. domestic
issuers. See "Description of the Fund--Investment Considerations and
Risks--Foreign Securities."
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period
of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven
days) at a stated interest rate.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments reflect
the obligation both of the bank and the drawer to pay the face amount of the
instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
COMMERCIAL PAPER. Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs. The commercial
paper purchased by the Fund will consist only of direct obligations which, at
the time of their purchase, are (a) rated not lower than Prime-1 by Moody's
Investors Service, Inc. ("Moody's"), A-1 by Standard &Poor's Rating Group
("S&P"), F-1 by Fitch Investors Service, L.P. ("Fitch") or Duff-1 by Duff &
Phelps Credit Rating Co. ("Duff"), (b)
Page 18
issued by companies having an outstanding unsecured debt issue currently
rated at least A3 by Moody's or A- by S&P, Fitch or Duff, or (c) if unrated,
determined by Dreyfus and Sarofim to be of comparable quality to those rated
obligations which may be purchased by the Fund.
ILLIQUID SECURITIES -- The Fund may invest up to 15% of the value of its net
assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Fund's investment
objective. Such securities may include securities that are not readily
marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, repurchase agreements providing for
settlement in more than seven days after notice, and certain 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.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 19
DREYFUS
Appreciation
Fund, Inc.
Prospectus
(LION LOGO)
Registration Mark
Copy Rights 1996 Dreyfus Service Corporation
141p050196
DREYFUS APPRECIATION FUND, INC.
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MAY 1, 1996
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus
of Dreyfus Appreciation Fund, Inc. (the "Fund"), dated May 1, 1996, 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 the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. and Canada -- Call 516-794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
adviser. Fayez Sarofim & Co. ("Sarofim") serves as the Fund's
sub-investment adviser. Sarofim provides day-to-day management of the
Fund's portfolio, subject to the supervision of Dreyfus. Dreyfus and
Sarofim are referred to collectively as the "Advisers."
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objectives and Management Policies . . . . . . . .B-2
Management of the Fund. . . . . . . . . . . . . . . . . . . .B-6
Investment Advisory Agreements. . . . . . . . . . . . . . . .B-10
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . .B-13
Shareholder Services Plan . . . . . . . . . . . . . . . . . .B-13
Redemption of Shares. . . . . . . . . . . . . . . . . . . . .B-14
Shareholder Services. . . . . . . . . . . . . . . . . . . . .B-16
Determination of Net Asset Value. . . . . . . . . . . . . . .B-19
Dividends, Distributions and Taxes. . . . . . . . . . . . . .B-20
Portfolio Transactions. . . . . . . . . . . . . . . . . . . .B-21
Performance Information . . . . . . . . . . . . . . . . . . .B-22
Information About the Fund. . . . . . . . . . . . . . . . . .B-23
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors . . . . . . . . . . . .B-23
Financial Statements. . . . . . . . . . . . . . . . . . . . .B-25
Report of Independent Auditors. . . . . . . . . . . . . . . .B-35
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the sections in the Fund's Prospectus entitled
"Description of the Fund" and "Appendix."
Portfolio Securities
Repurchase Agreements. The Fund's custodian or subcustodian will have
custody of, and will hold in a segregated account, securities acquired by
the Fund under a repurchase agreement. Repurchase agreements are
considered by the staff of the Securities and Exchange Commission to be
loans by the Fund. In an attempt to reduce the risk of incurring a loss on
a repurchase agreement, the Fund will enter into repurchase agreements only
with domestic banks with total assets in excess of $1 billion, or primary
government securities dealers reporting to the Federal Reserve Bank of New
York, with respect to securities of the type in which the Fund may invest,
and will require that additional securities be deposited with it if the
value of the securities purchased should decrease below resale price.
Commercial Paper and Other Short-Term Corporate Obligations. These
instruments include variable amount master demand notes, which are
obligations that permit the Fund to invest fluctuating amounts at varying
rates of interest pursuant to direct arrangements between the Fund, as
lender, and the borrower. These notes permit daily changes in the amounts
borrowed. Because these obligations are direct lending arrangements
between the lender and borrower, it is not contemplated that such
instruments generally will be traded, and there generally is no established
secondary market for these obligations, although they are redeemable at
face value, plus accrued interest, at any time. Accordingly, where these
obligations are not secured by letters of credit or other credit support
arrangements, the Fund's right to redeem is dependent on the ability of the
borrower to pay principal and interest on demand. Such obligations
frequently are not rated by credit rating agencies, and the Fund may invest
in them only if at the time of an investment the borrower meets the
criteria set forth in the Fund's Prospectus for other commercial paper
issuers.
Illiquid Securities. When purchasing securities that have not been
registered under the Securities Act of 1933, as amended, and are not
readily marketable, the Fund will endeavor to obtain the right to
registration at the expense of the issuer. Generally, there will a lapse
of time between the Fund's decision to sell any such security and the
registration of the security permitting sale. During any such period, the
price of the securities will be subject to market fluctuations. However,
where a substantial market of qualified institutional buyers has developed
for certain of these securities purchased by the Fund pursuant to Rule 144A
under the Securities Act of 1933, as amended, the Fund intends to treat
such securities as liquid securities in accordance with procedures approved
by the Fund's Board. Because it is not possible to predict with assurance
how the market for restricted securities pursuant to Rule 144A will
develop, the Fund's Board has directed the Advisers to monitor carefully
the Fund's investments in such securities with particular regard to trading
activity, availability of reliable price information and other relevant
information. To the extent that, for a period of time, qualified
institutional buyers cease purchasing restricted securities pursuant to
Rule 144A, the Fund's investing in such securities may have the effect of
increasing the level of illiquidity in the Fund's investments during such
period.
Management Policies
The Fund may engage in the following investment practices in
furtherance of its objectives.
Lending Portfolio Securities. In connection with its securities
lending transactions, the Fund may return to the borrower or a third party
which is unaffiliated with the Fund, and which is acting as a "placing
broker," a part of the interest earned from the investment of collateral
received for securities loaned.
The Securities and Exchange Commission currently requires that the
following conditions be met whenever portfolio securities are loaned: (1)
the Fund must receive at least 100% cash collateral from the borrower; (2)
the borrower must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (3) the Fund must be
able to terminate the loan at any time; (4) the Fund must receive
reasonable interest on the loan, as well as any dividends, interest or
other distributions payable on the loaned securities, and any increase in
market value; (5) the Fund may pay only reasonable custodian fees in
connection with the loan; and (6) while voting rights on the loaned
securities may pass to the borrower, the Fund's Board must terminate the
loan and regain the right to vote the securities if a material event
adversely affecting the investment occurs.
Derivatives. The Fund may invest in Derivatives (as defined in the
Fund's Prospectus) for a variety of reasons, including to hedge certain
market risks, to provide a substitute for purchasing or selling particular
securities or to increase potential income gain. Derivatives may provide a
cheaper, quicker or more specifically focused way for the Fund to invest
than "traditional" securities would.
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.
When required by the Securities and Exchange Commission, the Fund will
set aside permissible liquid assets in a segregated account to cover its
obligations relating to its transactions in Derivatives. To maintain this
required cover, the Fund may have to sell portfolio securities at
disadvantageous prices or times since it may not be possible to liquidate a
Derivative position at a reasonable price. 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 Advisers
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.
Options--In General. The Fund may write (i.e., sell) call options with
respect to specific securities. A call option gives the purchaser of the
option the right to buy, and obligates the writer to sell, the underlying
security or securities at the exercise price at any time during the option
period, or at a specific date.
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. The principal
reason for writing covered call 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
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 order 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.
Successful use by the Fund of options will be subject to the Advisers'
ability to predict correctly movements in the prices of individual stocks
or the stock market generally. To the extent the Advisers' predictions are
incorrect, the Fund may incur losses.
Investment Restrictions
The Fund has adopted investment restrictions numbered 1 through 10 as
fundamental policies, which cannot be changed without approval by the
holders of a majority (as defined in the Investment Company Act of 1940, as
amended (the "1940 Act")) of the Fund's outstanding voting shares.
Investment restrictions numbered 11 through 17 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. Invest more than 5% of its assets in the obligations of any single
issuer, except that up to 25% of the value of the Fund's total assets may
be invested, and securities issued or guaranteed by the U.S. Government, or
its agencies or instrumentalities may be purchased, without regard to any
such limitation.
2. Hold more than 10% of the outstanding voting securities of any
single issuer. This Investment Restriction applies only with respect to
75% of the Fund's total assets.
3. Concentrate its investments in any particular industry or
industries, except that the Fund may invest up to 25% of the value of its
total assets in a single industry, provided that, when the Fund has adopted
a defensive posture, there shall be no limitation on the purchase of
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, time deposits and certificates of deposit (including
those issued by foreign branches of domestic banks), and bankers'
acceptances.
4. Invest in commodities, except that the Fund may purchase and sell
options, forward contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices.
5. Purchase, hold or deal in real estate, or oil, gas or other
mineral leases or exploration or development programs, but the Fund may
purchase and sell securities that are secured by real estate or issued by
companies that invest or deal in real estate.
6. 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.
7. Make loans to others, except through the purchase of debt
obligations and the entry into repurchase agreements. However, the Fund
may lend its portfolio securities in an amount not to exceed 33-1/3% of the
value of its total assets. Any loans of portfolio securities will be made
according to guidelines established by the Securities and Exchange
Commission and the Fund's Board.
8. Act as an underwriter of securities of other issuers, except to
the extent the Fund may be deemed an underwriter under the Securities Act
of 1933, as amended, by virtue of disposing of portfolio securities.
9. Issue any senior security (as such term is defined in Section
18(f) of the 1940 Act), except to the extent the activities permitted in
Investment Restriction Nos. 5, 6 and 13 may be deemed to give rise to a
senior security.
10. Purchase securities on margin, but the Fund may make margin
deposits in connection with transactions in options, forward contracts,
futures contracts, including those relating to indices, and options on
futures contracts or indices.
11. Purchase securities of any company having less than three years'
continuous operations (including operations of any predecessor) if such
purchase would cause the value of the Fund's investments in all such
companies to exceed 5% of the value of its total assets.
12. Invest in the securities of a company for the purpose of
exercising management or control, but the Fund will vote the securities it
owns in its portfolio as a shareholder in accordance with its views.
13. Pledge, mortgage or hypothecate 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 writing covered put and call
options and the purchase of securities on a when-issued or forward
commitment basis and collateral and initial or variation margin
arrangements with respect to options, forward contracts, futures contracts,
including those relating to indices, and options on futures contracts or
indices.
14. Purchase, sell or write puts, calls or combinations thereof,
except as described in the Fund's Prospectus and Statement of Additional
Information.
15. 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.
16. Invest in securities of other investment companies, except to the
extent permitted under the 1940 Act.
17. Purchase or retain the securities of any issuer if the officers
or Board members of the Fund or the Advisers who own beneficially more than
1/2 of 1% of the securities of such issuer together own beneficially more
than 5% of the securities of such issuers.
As a fundamental policy, the Fund may invest, notwithstanding any
other investment restriction (whether or not fundamental), all of the
Fund's assets in the securities of a single open-end management investment
company with substantially the same investment objectives, fundamental
policies and restrictions as the Fund.
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from a change in values or assets will
not constitute a violation of such restriction.
The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Fund shares in certain states.
Should the Fund determine that a commitment is no longer in the best
interest of the Fund and its shareholders, the Fund reserves the right to
revoke the commitment by terminating the sale of Fund shares in the state
involved.
MANAGEMENT OF THE FUND
Board members and officers of the Fund, together with information as
to their principal business occupations during at least the last five
years, are shown below. Each Board member who is deemed to be an
"interested person" of the Fund, as defined in the 1940 Act, is indicated
by an asterisk.
Board Members of the Fund
CLIFFORD L. ALEXANDER, JR., Board Member. President of Alexander &
Associates, Inc., a management consulting firm. From 1977 to 1981, Mr.
Alexander served as Secretary of the Army and Chairman of the Board of
the Panama Canal Company, and from 1975 to 1977, he was a member of
the Washington, D.C. law firm of Verner, Liipfert, Bernhard, McPherson
and Alexander. He is a director of American Home Products
Corporation, The Dun & Bradstreet Corporation, MCI Communications
Corporation and Mutual of America Life Insurance Company. He is 62
years old and his address is 400 C Street, N.E., Washington, D.C.
20002.
PEGGY C. DAVIS, Board Member. Shad Professor of Law, New York
University School of Law. Professor Davis has been a member of the New
York University law faculty since 1983. Prior to that time, she served for
three years as a judge in the courts of New York State; was engaged for
eight years in the practice of law, working in both corporate and non-
profit sectors; and served for two years as a criminal justice
administrator in the government of the City of New York. She writes and
teaches in the fields of evidence, constitutional theory, family law,
social sciences and the law, legal process and professional methodology and
training. She is 53 years old and her address is c/o New York University
School of Law, 249 Sullivan Street, New York, New York 10012.
*JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman
of the Board of various funds in the Dreyfus Family of Funds. For
more than five years prior thereto, he was President, a director and,
until August 1994, Chief Operating Officer of Dreyfus and Executive
Vice President and a director of Dreyfus Service Corporation, a
wholly-owned subsidiary of Dreyfus and, until August 24, 1994, the
Fund's distributor. From August 1994 to December 31, 1994, he was a
director of Mellon Bank Corporation. He is also Chairman of the Board
of Directors of Noel Group, Inc., a venture capital company; a trustee
of Bucknell University; and a director of the Muscular Dystrophy
Association, HealthPlan Services Corporation, Belding Heminway, Inc.,
a manufacturer of industrial threads, specialty yarns, home
furnishings and fabrics, Curtis Industries, Inc., a national
distributor of securities products, chemicals, and automotive and
other hardware, and Staffing Resources, Inc. He is 52 years old and
his address is 200 Park Avenue, New York, New York 10166.
ERNEST KAFKA, Board Member. A physician engaged in private practice
specializing in the psychoanalysis of adults and adolescents. Since
1981, he has served as an Instructor at the New York Psychoanalytic
Institute and, prior thereto, held other teaching positions. He is
Associate Clinical Professor of Psychiatry at Cornell Medical School.
For more than the past five years, Dr. Kafka has held numerous
administrative positions and has published many articles on subjects
in the field of psychoanalysis. He is 63 years old and his address is
23 East 92nd Street, New York, New York 10128.
SAUL B. KLAMAN, Board Member. Chairman and Chief Executive Officer of SBK
Associates, which provides research and consulting services to
financial institutions. Dr. Klaman was President of the National
Association of Mutual Savings Banks until November 1983, President of
the National Council of Savings Institutions until June 1985, Vice
Chairman of Golembe Associates and BEI Golembe, Inc. until 1989 and
Chairman Emeritus of BEI Golembe, Inc. until November 1992. He also
served as an Economist to the Board of Governors of the Federal
Reserve System and on several Presidential Commissions, and has held
numerous consulting and advisory positions in the fields of economics
and housing finance. He is 76 years old and his address is 431-B
Dedham Street, The Gables, Newton Center, Massachusetts 02159.
NATHAN LEVENTHAL, Board Member. President of Lincoln Center for the
Performing Arts, Inc. Mr. Leventhal was Deputy Mayor for Operations
of New York City from September 1979 until March 1984 and Commissioner
of the Department of Housing Preservation and Development of New York
City from February 1978 to September 1979. Mr. Leventhal was an
associate and then a member of the New York law firm of Poletti
Freidin Prashker Feldman and Gartner from 1974 to 1978. He was
Commissioner of Rent and Housing Maintenance for New York City from
1972 to 1973. Mr. Leventhal serves as Chairman of Citizens Union, an
organization which strives to reform and modernize city and state
government. He is 53 years old and his address is 70 Lincoln Center
Plaza, New York, New York 10023-6583.
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 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 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 fiscal year ended December 31, 1995, was as
follows:
Total Compensation
Aggregate From Fund and
Name of Board Compensation from Fund Complex Paid
Member Fund* to Board Member
Clifford L. Alexander,Jr. $5,500 $ 94,386 (17)
Peggy C. Davis $5,500 $ 81,636 (15)
Joseph S. DiMartino $6,790 $448,618 (94)
Ernest Kafka $5,500 $ 81,136 (15)
Saul B. Klaman $5,500 $ 81,886 (15)
Nathan Leventhal $5,500 $ 81,636 (15)
________________________
* Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $248 for all Board members group.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President and Chief Executive
Officer of the Distributor and an officer of other investment
companies advised or administered by Dreyfus. From December 1991 to
July 1994, she was President and Chief Compliance Officer of Funds
Distributor, Inc., the ultimate parent of which is Boston
Institutional Group, Inc. Prior to December 1991, she served as Vice
President and Controller, and later as Senior Vice President, of The
Boston Company Advisors, Inc. She is 38 years old.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President and
General Counsel of the Distributor and an officer of other investment
companies advised or administered by Dreyfus. From February 1992 to
July 1994, he served as Counsel for The Boston Company Advisors, Inc.
From August 1990 to February 1992, he was employed as an Associate at
Ropes & Gray. He is 31 years old.
ERIC B. FISCHMAN, Vice President and Assistant Secretary. Associate
General Counsel of the Distributor and an officer of other investment
companies advised or administered by Dreyfus. From September 1992 to
August 1994, he was an attorney with the Board of Governors of the
Federal Reserve System. He is 30 years old.
ELIZABETH A. BACHMAN, Vice President and Assistant Secretary. Assistant
Vice President of the Distributor and an officer of other investment
companies advised or administered by Dreyfus. She is 26 years old.
FREDERICK C. DEY, Vice President and Assistant Treasurer. Senior Vice
President of the Distributor and an officer of other investment
companies advised or administered by Dreyfus. From 1988 to
August 1994, he was manager of the High Performance Fabric Division of
Springs Industries Inc. He is 34 years old.
JOSEPH S. TOWER, III, Assistant Treasurer. Senior Vice President,
Treasurer and Chief Financial Officer of the Distributor and an
officer of other investment companies advised or administered by
Dreyfus. 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 33 years old.
JOHN J. PYBURN, Assistant Treasurer. Assistant Treasurer of the
Distributor and an officer of other investment companies advised or
administered by Dreyfus. From 1984 to July 1994, he was Assistant
Vice President in the Mutual Fund Accounting Department of Dreyfus.
He is 60 years old.
MARGARET M. PARDO, Assistant Secretary. Legal Assistant with the
Distributor and an officer of other investment companies advised or
administered by Dreyfus. From June 1992 to April 1995, she was a
Medical Coordination Officer at ORBIS International. Prior to June
1992, she worked as Program Coordinator at Physicians World
Communications Group. She is 27 years old.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
Board members and officers of the Fund, as a group, owned less than 1%
of the Fund's shares outstanding on April 5, 1996.
The following shareholder owned of record 5% or more of the Fund's
shares outstanding as of April 8, 1996: Charles Schwab & Co., Inc.,
Reinvest Account, Attn: Mutual Funds Account, 101 Montgomery Street, San
Francisco, California 94104-4122 -- (10.25%).
INVESTMENT ADVISORY AGREEMENTS
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Management
of the Fund."
Investment Advisory Agreement. Dreyfus supervises investment
management of the Fund's portfolio pursuant to the Investment Advisory
Agreement (the "Advisory Agreement") dated August 24, 1994 between Dreyfus
and the Fund. Prior to December 27, 1990, Dreyfus provided management
services pursuant to a Management Agreement dated November 2, 1981 between
Dreyfus and the Fund. The Advisory 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 Fund's outstanding voting securities, provided that in either
event its continuance also is approved by a majority of the Fund's Board
members who are not "interested persons" (as defined in the 1940 Act) of
the Fund or Dreyfus, by vote cast in person at a meeting called for the
purpose of voting on such approval. The Fund's Board, including a majority
of the Board members who are not "interested persons" of any party to the
Advisory Agreement, last approved the Advisory Agreement at a meeting held
on September 27, 1995. Shareholders approved the Advisory Agreement on
August 3, 1994. The Advisory Agreement is terminable without penalty, on
60 days' notice, by the Fund's Board or by vote of the holders of a
majority of the Fund's shares, or, on not less than 90 days' notice, by
Dreyfus. The Advisory 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 Dreyfus: Howard
Stein, Chairman of the Board and Chief Executive Officer; W. Keith Smith,
Vice Chairman of the Board; Christopher M. Condron, President, Chief
Operating Officer and a director; Stephen E. Canter, Vice Chairman, Chief
Investment Officer and a director; Lawrence S. Kash, Vice Chairman-
Distribution and a director; Philip L. Toia, Vice Chairman-Operations and
Administration and a director; William T. Sandalls, Jr., Senior Vice
President and Chief Financial Officer; Barbara E. Casey, Vice President-
Dreyfus Retirement Services; Patrice M. Kozlowski, Vice President-Corporate
Communications; Elie M. Genadry, Vice President-Institutional Sales;
William F. Glavin, Jr., Vice President-Corporate Development; Mark N.
Jacobs, Vice President, General Counsel and Secretary; Mary Beth Leibig,
Vice President-Human Resources; Jeffrey N. Nachman, Vice President-Mutual
Fund Accounting; Andrew S. Wasser, Vice President-Information Systems;
Maurice Bendrihem, Controller; Elvira Oslapas, Assistant Secretary; and
Mandell L. Berman, Frank V. Cahouet, Alvin E. Friedman, Lawrence M. Greene
and Julian M. Smerling, directors.
Dreyfus maintains office facilities on behalf of the Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. Dreyfus also may make such advertising and
promotional expenditures using its own resources, as it from time to time
deems appropriate.
Under the Advisory Agreement, the Fund has agreed to pay Dreyfus a
monthly fee at the annual rate set forth in the Fund's Prospectus. The
investment advisory fees paid by the Fund pursuant to the Advisory
Agreement for the fiscal years ended December 31, 1993, 1994 and 1995 were
$804,828, $779,597 and $1,039,869, respectively.
Sub-Investment Advisory Agreement. Sarofim provides investment
advisory assistance and day-to-day management of the Fund's portfolio
pursuant to the Sub-Investment Advisory Agreement (the "Sub-Advisory
Agreement") dated December 27, 1990 between Sarofim and the Fund. The
Sub-Advisory 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 Fund's
outstanding voting securities, provided that in either event the
continuance also is approved by a majority of the Fund's Board members who
are not "interested persons" (as defined in the 1940 Act) of the Fund or
Sarofim, by vote cast in person at a meeting called for the purpose of
voting on such approval. The Fund's Board, including a majority of the
Board members who are not "interested persons" of any party to the
Sub-Advisory Agreement, last approved the Sub-Advisory Agreement at a
meeting held on September 27, 1995. Shareholders approved the Sub-Advisory
Agreement on December 27, 1990. The Sub-Advisory Agreement is terminable
without penalty, on 60 days' notice, by the Fund's Board or by vote of the
holders of a majority of the Fund's shares, or, on not less than 90 days'
notice, by Sarofim. The Sub-Advisory Agreement will terminate
automatically in the event of its assignment (as defined in the 1940 Act).
Under the Sub-Advisory Agreement, the Fund has agreed to pay Sarofim a
monthly fee at the annual rate set forth in the Fund's Prospectus. The
sub-advisory fees paid by the Fund pursuant to the Sub-Advisory Agreement
for the fiscal years ended December 31, 1993, 1994 and 1995 were $479,759,
$457,139 and $700,539, respectively.
The following persons are officers and/or directors of Sarofim: Fayez
S. Sarofim, Chairman of the Board, President and a director; Raye G. White,
Executive Vice President, Secretary, Treasurer and a director; Russell M.
Frankel, Russell B. Hawkins, William K. McGee, Jr., Charles E. Sheedy and
Ralph B. Thomas, Senior Vice Presidents; and Nancy V. Daniel and James A.
Reynolds, III, Vice Presidents.
Sarofim provides day-to-day management of the Fund's portfolio of
investments in accordance with the stated policies of the Fund, subject to
the supervision of Dreyfus and the approval of the Fund's Board. Dreyfus
and Sarofim provide the Fund with portfolio managers who are authorized by
the Board to execute purchases and sales of securities. The Fund's
portfolio managers are Thomas A. Frank, Russell B. Hawkins, Elaine Rees,
Fayez S. Sarofim and Howard Stein. Dreyfus also maintains a research
department with a professional staff of portfolio managers and securities
analysts who provide research services for the Fund as well as other funds
advised by Dreyfus. All purchases and sales are reported for the Board's
review at the meeting subsequent to such transactions.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Advisers. The
expenses borne by the Fund include: taxes, interest, loan commitment fees,
interest and distributions paid on securities sold short, brokerage fees
and commissions, if any, fees of Board members who are not officers,
directors, employees or holders of 5% or more of the outstanding voting
securities of Dreyfus or Sarofim or their affiliates, 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 preparing
and printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders, costs of
shareholders' reports, and any extraordinary expenses.
Dreyfus has agreed that if in any fiscal year the aggregate expenses
of the Fund, exclusive of interest, taxes, brokerage and (with the prior
written consent of the necessary state securities commissions)
extraordinary expenses, but including the advisory fees, exceed the expense
limitation of any state having jurisdiction over the Fund, the Fund may
deduct from the payment to be made to Dreyfus under the Advisory Agreement,
or Dreyfus will bear, such excess expense to the extent required by state
law. Such deduction or payment, if any, will be estimated daily, and
reconciled and effected or paid, as the case may be, on a monthly basis.
PURCHASE OF SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Shares."
The Distributor. The Distributor serves as the Fund's distributor on
a best efforts basis pursuant to an agreement which is renewable annually.
The Distributor also acts as distributor for the other funds in the Dreyfus
Family of Funds and for certain other investment companies. In some
states, banks and other financial institutions effecting transactions in
Fund shares may be required to register as dealers pursuant to state law.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 p.m., New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York
Stock Exchange are open for business will be credited to the shareholder's
Fund account on the next bank business day following such purchase order.
Purchase orders made after 4:00 p.m., New York time, on any business day
the Transfer Agent and the New York Stock Exchange are open for business,
or orders made on Saturday, Sunday or any Fund holiday (e.g., when the New
York Stock Exchange is not open for business), will be credited to the
shareholder's Fund account on the second bank business day following such
purchase order. To qualify to use the Dreyfus TeleTransfer Privilege, the
initial payment for purchase of 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
"Redemption of Shares--Dreyfus TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account with a
minimum investment of $100 without filing a new Account Application during
the calendar year the account is closed or during the following calendar
year, provided the information on the old Account Application is still
applicable.
SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Shareholder
Services Plan."
Shareholder Services Plan. The Fund has adopted a Shareholder
Services Plan (the "Plan"), pursuant to which the Fund reimburses (a) the
Distributor for payments to certain securities dealers, financial
institutions (which may include banks), or other financial industry
professionals, such as investment advisers, accountants and estate planning
firms (collectively, "Service Agents"), for servicing shareholder accounts
("Servicing") and (b) Dreyfus, Dreyfus Service Corporation and any
affiliate of either of them for Servicing.
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 Fund's Board, and by the
Board members who are not "interested persons" (as defined in the 1940 Act)
of the Fund or the Advisers and have no direct or indirect financial
interest in the operation of the Plan or in the related service agreements,
by vote cast in person at a meeting called for the purpose of considering
such amendments. The Plan and the related service agreements are 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 adopted
at a meeting held on July 19, 1995. 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 or in any of the related service agreements entered into in connection
with the Plan.
From August 1, 1995 (effective date of the Plan) through the fiscal
year ended December 31, 1995, $319,704 was charged to the Fund under the
Plan.
Prior Service Plan. As of July 31, 1995, the Fund terminated its
then-existing Service Plan that had been in effect from August 24, 1994.
That Service Plan, adopted pursuant to Rule 12b-1 under the 1940 Act,
provided that the Fund reimburse (a) the Distributor for payments to
Service Agents for distributing the Fund's shares and Servicing and (b)
Dreyfus, Dreyfus Service Corporation and any affiliate of either of them
for servicing at an aggregate annual rate of .20 of 1% of the value of the
Fund's total assets. Under such Plan, for the period January 1, 1995
through July 31, 1995, the Fund paid $338,750, of which $213,832 was
payable to Dreyfus as reimbursement for advertising and marketing and for
Servicing, $99,340 was payable to the Distributor as reimbursement for
payments made to Service Agents and $25,578 was paid for preparing,
printing and distributing prospectuses and statements of additional
information and for costs associated with implementing and operating such
plan.
REDEMPTION OF SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to
Redeem Shares."
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's Service Agent, and
reasonably believed by the Transfer Agent to be genuine. Ordinarily, the
Fund will initiate payment for shares redeemed pursuant to this Privilege
on the next business day after receipt if the Transfer Agent receives the
redemption request in proper form. Redemption proceeds ($1,000 minimum)
will be transferred by Federal Reserve wire only to the commercial bank
account specified by the investor on the Account Application or Shareholder
Services Form, or to a correspondent bank if the investor's bank is not a
member of the Federal Reserve System. Fees ordinarily are imposed by such
bank and usually are borne by the investor. Immediate notification by the
correspondent bank to the investor's bank is necessary to avoid a delay in
crediting the funds to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at 1-800-654-
7171, toll free. Investors should advise the operator that the above
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. Investors should be aware that if
they have also selected the Dreyfus TeleTransfer Privilege, any request for
a wire redemption will be effected as a Dreyfus TeleTransfer transaction
through the Automated Clearing House ("ACH") system unless more prompt
transmittal specifically is requested. Redemption proceeds will be on
deposit in the investor's account at an ACH member bank ordinarily two
business days after receipt of the redemption request. See "Purchase of
Shares--Dreyfus TeleTransfer Privilege."
Stock Certificates; Signatures. Any 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 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 made 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 (including non-marketable
securities) or other assets of the Fund in case of an emergency or any time
a cash distribution would impair the liquidity of the Fund to the detriment
of the existing shareholders. In such event, the securities would be
valued in the same manner as the Fund's portfolio is valued. If the
recipient sold such securities, brokerage charges would 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
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Shareholder
Services."
Fund Exchanges. Shares of other funds purchased by exchange will be
purchased on the basis of relative net asset value per share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load,
and the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of any other funds sold
without a sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a
sales load, and additional shares acquired through
reinvestment of dividends or distributions of any such funds
(collectively referred to herein as "Purchased Shares") may
be exchanged for shares of other funds sold with a sales load
(referred to herein as "Offered Shares"), provided that, if
the sales load applicable to the Offered Shares exceeds the
maximum sales load that could have been imposed in connection
with the Purchased Shares (at the time the Purchased Shares
were acquired), without giving effect to any reduced sales
loads, the difference will be deducted.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their
account number.
To request an exchange, an investor must give exchange instructions to
the Transfer Agent in writing or by telephone. The ability to issue
exchange instructions by telephone is given to all Fund shareholders
automatically, unless the investor checks the applicable "No" box on the
Account Application, indicating that the investor specifically refuses this
Privilege. By using the Telephone Exchange Privilege, the investor
authorizes the Transfer Agent to act on telephonic instructions from any
person representing himself or herself to be the investor, or a
representative of the investor's Service Agent, and reasonably believed by
the Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for
telephone exchange.
To establish a personal retirement plan by exchange, shares of the
fund being exchanged must have a value of at least the minimum initial
investment required for the fund into which the exchange is being made.
For Dreyfus-sponsored Keogh Plans, IRAs and IRAs set up under a Simplified
Employee Pension Plan ("SEP-IRAs") with only one participant, the minimum
initial investment is $750. To exchange shares held in corporate plans,
403(b)(7) Plans and SEP-IRAs with more than one participant, the minimum
initial investment is $100 if the plan has at least $2,500 invested among
the funds in the Dreyfus Family of Funds. To exchange shares held in
personal retirement plans, the shares exchanged must have a current value
of at least $100.
Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of the Fund, shares
of another fund in the Dreyfus Family of Funds. This Privilege is
available only for existing accounts. Shares will be exchanged on the
basis of relative net asset value as described above under "Fund
Exchanges." Enrollment in or modification or cancellation of this
Privilege is effective three business days following notification by the
investor. An investor will be notified if his account falls below the
amount designated to be exchanged under this Privilege. In this case, an
investor's account will fall to zero unless additional investments are made
in excess of the designated amount prior to the next Auto-Exchange
transaction. Shares held under IRA and other retirement plans are eligible
for this Privilege. Exchanges of IRA shares may be made between IRA
accounts and from regular accounts to IRA accounts, but not from IRA
accounts to regular accounts. With respect to all other retirement
accounts, exchanges may be made only among those accounts.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available
to shareholders resident in any state in which shares of the Fund being
acquired 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
the Dreyfus Auto-Exchange Privilege may be modified or terminated at any
time upon notice to shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends
and distributions, the investor's shares will be reduced and eventually may
be depleted. Automatic Withdrawal may be terminated at any time by the
investor, the Fund or the Transfer Agent. Shares for which certificates
have been issued may not be redeemed through the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest on the payment date their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of another fund in the
Dreyfus Family of Funds of which the investor is a shareholder. Shares of
other funds purchased pursuant to this privilege will be purchased on the
basis of relative net asset value per share as follows:
A. Dividends and distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds
that are offered without a sales load.
B. Dividends and distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds
sold with a sales load, and the applicable sales load will be
deducted.
C. Dividends and distributions paid by a fund which charges a
sales load may be invested in shares of other funds sold with
a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered
Shares exceeds the maximum sales load charged by the fund
from which dividends or distributions are being swept,
without giving effect to any reduced loads the difference
will be deducted.
D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be
imposed upon redemption of such shares.
Corporate Pension/Profit-Sharing and Personal Retirement Plans. The
Fund makes available to corporations a variety of prototype pension and
profit-sharing plans including a 401(k) Salary Reduction Plan. In
addition, the Fund makes available Keogh Plans, IRAs, including IRAs set up
under a Simplified Employee Pension Plan ("SEP-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 from the
Distributor forms for adopting such plans.
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 forms.
Shares may be purchased in connection with these plans only by direct
remittance to the entity which acts as custodian. Purchases for these
plans may not be made in advance of receipt of funds.
The minimum initial investment for corporate plans, salary reduction
plans, 403(b)(7) Plans and SEP-IRAs, with more than one participant, is
$2,500, with no minimum on subsequent purchases. The minimum initial
investment for Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs and 403(b)(7)
Plans, with only one participant, is normally $750, with no minimum on
subsequent purchases. Individuals who open an IRA may also open a
non-working spousal IRA with a minimum investment of $250.
The investor should read the prototype retirement plans and the
appropriate form of custodial agreement for further details as to
eligibility, service fees and tax implications, and should consult a tax
adviser.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Shares."
Valuation of Portfolio Securities. Portfolio securities, including
covered call options written, are valued at the last sale price on the
securities exchange or national securities market on which such securities
are primarily traded. Securities not listed on an exchange or national
securities market, or securities in which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price
is used when no asked price is available. Market quotations for foreign
securities in foreign currencies are translated into U.S. dollars at the
prevailing rates of exchange. Any securities or other assets for which
recent market quotations are not readily available are valued at fair value
as determined in good faith by the Fund's Board. Expenses and fees,
including the advisory fees, are accrued daily and taken into account for
the purpose of determining the net asset value of Fund shares.
New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Dividends,
Distributions and Taxes."
Management believes that the Fund qualified as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code"),
for the fiscal year ended December 31, 1995. The Fund intends to continue
to so qualify if such qualification is in the best interests of its
shareholders. Such qualification relieves the Fund of any liability for
Federal income taxes to the extent its net investment income and net
realized capital gains are distributed in accordance with applicable
provisions of the Code. The term "regulated investment company" does not
imply the supervision of management or investment practices or policies by
any government agency.
Any dividend or distribution paid shortly after an investor's purchase
may have the effect of reducing the net asset value of the shares below the
cost of the investment. Such a dividend or distribution would be a return
of 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 long-term capital loss to the extent of the
capital gain distribution received.
Depending upon the composition of the Fund's income, all or a portion
of the dividends from net investment income may qualify for the dividends
received deduction allowable to qualifying U.S. corporate shareholders
("dividends received deduction"). In general, dividend income of the Fund
distributed to qualifying corporate shareholders will be eligible for the
dividends received deduction only to the extent that the Fund's income
consists of dividends paid by U.S. corporations. However, Section 246(c)
of the Code provides that if a qualifying corporate shareholder has
disposed of Fund shares not held for 46 days or more and has received a
dividend from net investment income with respect to such shares, the
portion designated by the Fund as qualifying for the dividends received
deduction will not be eligible for such shareholder's dividends received
deduction. In addition, the Code provides other limitations with respect
to the ability of a qualifying corporate shareholder to claim the dividends
received deduction in connection with holding Fund shares.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gains or losses. However, a portion of any gain or
loss realized from the disposition of certain non-U.S. dollar denominated
securities (including debt instruments, certain forward contracts and
option transactions 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 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. Finally, all or a portion of any 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, other than those
subject to Section 988 of the Code, will be treated as 60% long-term
capital gain or loss and 40% short-term capital gain or loss. Gain or loss
will arise upon exercise or lapse of such contracts and options as well as
from closing transactions. In addition, any such contracts or options
remaining unexercised at the end of the Fund's taxable year will be treated
as sold for their then fair market value, resulting in additional gain or
loss to the Fund characterized in the manner described above.
Offsetting positions held by the Fund involving certain foreign
currency forward contracts or options may be considered, for tax purposes,
to 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, overrides or modifies the provisions of Sections
1256 and 988 of the Code. As such, all or a portion of any short- or long-
term capital gain from certain "straddle" and/or conversion transactions
may be recharacterized to ordinary income.
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" and conversion transaction 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" and conversion transaction rules,
short-term capital loss on "straddle" positions may be recharacterized as
long-term capital loss, and long-term capital gain may be treated as
short-term capital gain or ordinary income.
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
obligation could under special tax rules affect the amount, timing and
character of distributions to shareholders by causing the Fund to recognize
income prior to the receipt of cash payments. For example, the Fund could
be required to accrue as income each year a portion of the discount (or
deemed discount) at which such securities were issued and to distribute
such income in order to maintain its qualification as a regulated
investment company and to avoid Federal income and excise taxes. In such
case, the Fund may have to dispose of securities which it might otherwise
have continued to hold in order to generate cash to satisfy these
distribution requirements.
PORTFOLIO TRANSACTIONS
Dreyfus assumes general supervision over placing orders on behalf of
the Fund for the purchase or sale of portfolio securities. Allocation of
brokerage transactions, including their frequency, is made in Dreyfus' best
judgment and in a manner deemed fair and reasonable to shareholders. The
primary consideration is prompt execution of orders at the most favorable
net price. Subject to this consideration, the brokers selected will
include those that supplement the Advisers' research facilities with
statistical data, investment information, economic facts and opinions.
Information so received is in addition to and not in lieu of services
required to be performed by the Advisers and the Advisers' fees are not
reduced as a consequence of the receipt of such supplemental information.
Such information may be useful to Dreyfus in serving both the Fund and
other funds which it advises and to Sarofim in serving both the Fund and
the other funds or accounts it advises, and, conversely, supplemental
information obtained by the placement of business of other clients may be
useful to the Advisers in carrying out their obligations to the Fund.
Sales of Fund shares by a broker may be taken into consideration, and
brokers also will be selected because of their ability to handle special
executions such as are involved in large block trades or broad
distributions, provided the primary consideration is met. Large block
trades may, in certain cases, result from two or more funds advised or
administered by Dreyfus being engaged simultaneously in the purchase or
sale of the same security. Certain of the Fund's transactions in
securities of foreign issuers may not benefit from the negotiated
commission rates available to the Fund for transactions in securities of
domestic issuers. When transactions are executed in the over-the-counter
market, the Fund will deal with the primary market makers unless a more
favorable price or execution otherwise is obtainable.
Portfolio turnover may vary from year to year as well as within a
year. The Fund's portfolio turnover rate for the fiscal years ended
December 31, 1994 and 1995 was 6.58% and 4.51%, respectively. In periods
in which extraordinary market conditions prevail, the Advisers will not be
deterred from changing investment strategy as rapidly as needed, in which
case higher turnover rates can be anticipated which would result in greater
brokerage expenses. The overall reasonableness of brokerage commissions
paid is evaluated by Dreyfus based upon its knowledge of available
information as to the general level of commissions paid by other
institutional investors for comparable services.
In connection with its portfolio securities transactions for the
fiscal years ended December 31, 1993, 1994 and 1995, the Fund paid
brokerage commissions of $85,640, $54,450 and $163,070, respectively, none
of which was paid to the Distributor. The above figures for brokerage
commissions paid do not include gross spreads and concessions on principal
transactions, which, where determinable, amounted to $14,800, $ 0 and
$51,480 in fiscal 1993, 1994 and 1995, respectively, none of which was paid
to the Distributor.
PERFORMANCE INFORMATION
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Performance
Information."
The Fund's average annual total return for the 1, 5 and 10 year
periods ended December 31, 1995 was 37.89%, 15.79% and 13.81%,
respectively. Average annual total return is calculated by determining the
ending redeemable value of an investment purchased with a hypothetical
$1,000 payment made at the beginning of the period (assuming the
reinvestment of dividends and distributions), dividing by the amount of the
initial investment, taking the "n"th root of the quotient (where "n" is the
number of years in the period) and subtracting 1 from the result.
The Fund's total return for the period January 18, 1984 to December
31, 1995 was
461.86%. 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.
From time to time, advertising materials for the Fund may refer to the
fact that the Fund currently looks for successful companies with
established brands that are expanding into the world marketplace. From
time to time, advertising materials for the Fund may also refer to the
clients of Fayez Sarofim & Co., such as large corporations, states,
universities and other institutions and organizations. From time to time,
advertising materials for the Fund also may refer to Morningstar ratings
and related analyses supporting such ratings.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "General
Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and
non-assessable. Fund shares are of one class and have equal rights as to
dividends and in liquidation. Shares have no preemptive, subscription or
conversion rights and are freely transferable.
The Fund sends annual and semi-annual financial statements to all its
shareholders.
On March 1, 1993, the Fund changed its name from General Aggressive
Growth Fund, Inc. to Dreyfus Appreciation Fund, Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN,
COUNSEL AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, 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., Dreyfus' parent, One
Mellon Bank Center, Pittsburgh, Pennsylvania 15258, acts as custodian of
the Fund's investments. Under a custody agreement with the Fund, Mellon
Bank, N.A. holds the Fund's securities and keeps all necessary accounts and
records. For its custody services, Mellon Bank, N.A. receives a monthly
fee based on the market value of the Fund's domestic assets held in custody
and receives certain securities transactions charges. Neither the Transfer
Agent nor Mellon Bank, N.A. has any part in determining the investment
policies of the Fund or which securities are to be purchased or sold by the
Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York
10004-2696, 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 auditors of the Fund.
<TABLE>
<CAPTION>
DREYFUS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS DECEMBER 31, 1995
COMMON STOCKS-94.0% SHARES VALUE
_______ _______
<S> <C> <C> <C>
AEROSPACE &
ELECTRONICS-8.5% Emerson Electric....................... 55,000 $ 4,496,250
General Electric....................... 250,000 18,000,000
Intel.................................. 115,000 6,526,250
Motorola............................... 80,000 4,560,000
Rockwell International................. 100,000 5,287,500
__________
38,870,000
__________
APPAREL & TEXTILES-1.6% NIKE, Cl. B............................ 60,000 4,177,500
Warnaco Group, Cl. A................... 130,000 3,250,000
__________
7,427,500
__________
AUTO RELATED-2.4% Chrysler............................... 70,000 3,876,250
Ford Motor............................. 244,905 7,102,245
__________
10,978,495
__________
BANKING-6.5% Banc One............................... 30,000 1,132,500
Chemical Banking....................... 150,000 8,812,500
Citicorp............................... 200,000 13,450,000
HSBC Holdings, A.D.R................... 35,000 5,285,000
PNC Bank............................... 30,000 967,500
__________
29,647,500
__________
CAPITAL GOODS-1.1% Allied Signal......................... 110,000 5,225,000
__________
CHEMICALS-4.5% Dow Chemical........................... 100,000 7,037,500
duPont (E.I.) de Nemours............... 125,000 8,734,375
Rohm & Haas............................ 75,000 4,828,125
__________
20,600,000
_________
ENERGY-8.0% Chevron................................ 120,000 6,300,000
Exxon.................................. 110,000 8,813,750
Mobil.................................. 75,000 8,400,000
Pennzoil............................... 10,000 422,500
Royal Dutch Petroleum (New York Shares) 90,000 12,701,250
__________
36,637,500
__________
FINANCIAL-3.4% American General....................... 200,000 6,975,000
Federal National Mortgage Association.. 60,000 7,447,500
MBNA................................... 30,000 1,106,250
__________
15,528,750
FOOD, BEVERAGE & __________
TOBACCO-17.7% Anheuser-Busch.......................... 70,000 4,681,250
Coca-Cola.............................. 300,000 22,275,000
General Mills.......................... 60,000 3,465,000
Kellogg................................ 100,000 7,725,000
Nestle, A.D.R.......................... 125,000 7,015,625
DREYFUS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1995
COMMON STOCKS (CONTINUED) SHARES VALUE
_______ _______
FOOD, BEVERAGE &
TOBACCO (CONTINUED) PepsiCo.................................... 220,000 $ 12,292,500
Philip Morris.......................... 240,000 21,720,000
Sara Lee............................... 50,000 1,593,750
__________
80,768,125
___________
HEALTH CARE &
RELATED PRODUCTS-15.8% Abbott Laboratories.................... 175,000 7,306,250
American Home Products................. 90,000 8,730,000
Amgen................................(a) 120,000 7,125,000
Johnson & Johnson...................... 145,000 12,415,625
Merck & Co............................. 250,000 16,437,500
Pfizer................................. 170,000 10,710,000
Roche Holdings, A.D.R.................. 100,000 7,925,000
Schering-Plough........................ 28,000 1,533,000
__________
72,182,375
_______
INDUSTRIAL SERVICES-.4% WMX Technologies....................... 55,000 1,643,125
__________
LEISURE TIME-4.2% Disney (Walt).......................... 95,000 5,605,000
Eastman Kodak.......................... 90,000 6,030,000
McDonald's............................. 172,000 7,761,500
__________
19,396,500
___________
MEDIA-2.3% McGraw-Hill............................ 50,000 4,356,250
News, A.D.R. .......................... 120,000 2,565,000
Readers Digest Association, Cl. A
(non-voting)......................... 70,000 3,587,500
__________
10,508,750
__________
MULTI-INDUSTRY-1.8% Minnesota Mining & Manufacturing...... 125,000 8,281,250
___________
OFFICE &
BUSINESS EQUIPMENT-2.0% AT&T................................... 80,000 5,180,000
General Motors, Cl. E.................. 75,000 3,900,000
__________
9,080,000
___________
PAPER &
FOREST PRODUCTS-.9% International Paper..................... 110,000 4,166,250
_______
PERSONAL CARE-8.5% Estee Lauder, Cl. A..................... 97,000 3,382,875
Gillette............................... 240,000 12,510,000
International Flavors & Fragrances..... 125,000 6,000,000
Procter & Gamble....................... 160,000 13,280,000
Unilever, N.V. (New York Shares)....... 25,000 3,518,750
___________
38,691,625
___________
DREYFUS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1995
COMMON STOCKS (CONTINUED) SHARES VALUE
_______ _______
RETAIL-3.1% American Stores........................ 80,000 $ 2,140,000
May Department Stores.................. 50,000 2,112,500
Wal-Mart Stores........................ 190,000 4,251,250
Walgreen............................... 190,000 5,676,250
__________
14,180,000
__________
TRANSPORTATION-1.3% Norfolk Southern....................... 75,000 5,953,125
__________
TOTAL COMMON STOCKS
(cost $307,152,995).................. $429,765,870
============
PREFERRED STOCKS-.5%
MEDIA; News, A.D.R. ..........................
(cost $1,916,832).................... 125,000 $ 2,406,250
============
PRINCIPAL
SHORT-TERM INVESTMENTS-6.7% AMOUNT
_______
U.S. TREASURY BILLS: 5.32%, 1/11/96......................... $ 1,564,000 $ 1,561,545
5.33%, 1/25/96......................... 4,791,000 4,775,573
5.25%, 2/29/96......................... 1,440,000 1,428,566
5.07%, 3/7/96.......................... 22,272,000 22,067,098
4.80%, 3/14/96......................... 928,000 918,488
___________
TOTAL SHORT-TERM INVESTMENTS
(cost $30,747,197)................... $ 30,751,270
============
TOTAL INVESTMENTS (cost $339,817,024) ................................ 101.2% $462,923,390
===== ============
LIABILITIES, LESS CASH AND RECEIVABLES...................................... (1.2%) $(5,656,322)
===== ============
NET ASSETS.................................................................. 100.0% $457,267,068
===== ============
NOTE TO STATEMENT OF INVESTMENTS;
(a) Non-income producing.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS APPRECIATION FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1995
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $339,817,024)-see statement..................................... $462,923,390
Cash.................................................................... 1,308,143
Dividends and interest receivable....................................... 774,505
Receivable for subscriptions to Common Stock............................ 136,271
Prepaid expenses........................................................ 17,583
_______
465,159,892
LIABILITIES:
Due to The Dreyfus Corporation and subsidiaries......................... $ 157,404
Due to Fayez Sarofim & Co............................................... 90,315
Due to Distributor...................................................... 38,550
Payable for Common Stock redeemed....................................... 5,343,067
Payable for investment securities purchased............................. 2,029,050
Accrued expenses........................................................ 234,438 7,892,824
_________ ___________
NET ASSETS ................................................................ $457,267,068
===========
REPRESENTED BY:
Paid-in capital......................................................... $337,562,876
Accumulated undistriduted investment income-net......................... 71
Accumulated net realized (loss) on investments.......................... (3,402,245)
Accumulated net unrealized appreciation on investments-Note 3........... 123,106,366
_____
- -NET ASSETS at value applicable to 22,256,561 shares outstanding
(100 million shares of $.01 par value Common Stock authorized).......... $457,267,068
============
NET ASSET VALUE, offering and redemption price per share
($457,267,068 / 22,256,561 shares)...................................... $20.55
============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS APPRECIATION FUND, INC.
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1995
INVESTMENT INCOME:
<S> <C> <C>
INCOME:
Cash dividends (net of $124,178 foreign taxes withheld at source)..... $ 9,508,460
Interest.............................................................. 612,231
________
TOTAL INCOME...................................................... $ 10,120,691
EXPENSES:
Investment advisory fee-Note 2(a)..................................... 1,039,869
Sub-investment advisory fee-Note 2(a)................................. 700,539
Shareholder servicing costs-Note 2(b)................................. 906,232
Registration fees..................................................... 71,019
Professional fees..................................................... 64,830
Prospectus and shareholders' reports-Note 2(b)........................ 51,651
Custodian fees........................................................ 39,023
Directors' fees and expenses-Note 2(c)................................ 35,995
Miscellaneous......................................................... 6,131
______
TOTAL EXPENSES.................................................... 2,915,289
_________
INVESTMENT INCOME-NET............................................. 7,205,402
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized (loss) on investments-Note 3............................... $ (3,334,873)
Net unrealized appreciation on investments.............................. 96,268,609
______
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 92,933,736
__________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $100,139,138
============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS APPRECIATION FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
_________________________________
1994 1995
---- -----
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 4,172,214 $ 7,205,402
Net realized gain (loss) on investments................................. 1,003,334 (3,334,873)
Net unrealized appreciation on investments for the year................. 2,231,801 96,268,609
_________ ___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. 7,407,349 100,139,138
__________ ___________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net................................................... (4,152,619) (7,254,131)
Net realized gain on investments........................................ (141,615) (450,655)
__________ ____________
TOTAL DIVIDENDS....................................................... (4,294,234) (7,704,786)
___________ ____________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold........................................... 94,909,133 316,317,434
Dividends reinvested.................................................... 3,933,592 7,319,942
Cost of shares redeemed................................................. (105,515,580) (192,263,401)
_____________ _____________
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS..... (6,672,855) 131,373,975
______________ ____________
TOTAL INCREASE (DECREASE) IN NET ASSETS........................... (3,559,740) 223,808,327
NET ASSETS:
Beginning of year....................................................... 237,018,481 233,458,741
___________ ____________
End of year (including undistributed investment income-net:
$48,800 in 1994 and $71 in 1995)...................................... $233,458,741 $457,267,068
============ ============
SHARES SHARES
_______ ______
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................. 6,370,453 17,110,923
Shares issued for dividends reinvested.................................. 263,004 362,104
Shares redeemed......................................................... (7,125,102) (10,606,835)
__________ ___________
NET INCREASE (DECREASE) IN SHARES OUTSTANDING......................... (491,645) 6,866,192
============ ===========
See notes to financial statements.
</TABLE>
DREYFUS APPRECIATION FUND, INC.
FINANCIAL HIGHLIGHTS
Reference is made to page 3 of the Fund's Prospectus, dated May 1, 1996.
DREYFUS APPRECIATION FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940 ("Act")
as a diversified open-end management investment company. Premier Mutual Fund
Services, Inc. (the "Distributor") acts as the distributor of the Fund's
shares, which are sold to the public without a sales load. The Distributor,
located at One Exchange Place, Boston, Massachusetts 02109, is a wholly-owned
subsidiary of FDI Distribution Services, Inc., a provider of mutual fund
administration services, which in turn is a wholly-owned subsidiary of FDI
Holdings, Inc., the parent company of which is Boston Institutional Group,
Inc. The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. Fayez Sarofim &
Co. ("Sarofim") serves as the Fund's sub-investment adviser.
(A) PORTFOLIO VALUATION: Investments in securities 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.
Securities not listed on an exchange or the national securities market, or
securities for which there were no transactions, are valued at the average of
the most recent bid and asked prices. Bid price is used when no asked price
is available. Investments denominated in foreign currencies are translated to
U.S. dollars at the prevailing rates of exchange.
(B) 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 discounts on investments, is recognized on
the accrual basis.
(C) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend
date. Dividends from investment income-net and 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. 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.
(D) 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 Internal Revenue 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 $3,314,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to December 31, 1995. The
carryover does not include net realized securities losses from November 1,
1995 through December 31, 1995 which are treated, for Federal income tax
purposes, as arising in fiscal 1996. If not applied, the carryover expires in
fiscal 2003.
NOTE 2-INVESTMENT ADVISORY FEE, SUB-INVESTMENT ADVISORY FEE AND OTHER TRANSACT
IONS WITH AFFILIATES:
(A) Fees payable by the Fund pursuant to the provisions of an Investment
Advisory Agreement with Dreyfus and a Sub-Investment Advisory Agreement with
Sarofim (together "Agreements") are payable monthly, computed on the average
daily value of the Fund's net assets at the following annual rates:
<TABLE>
<CAPTION>
DREYFUS APPRECIATION FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AVERAGE NET ASSETS DREYFUS SAROFIM
____________ _______ ______
<S> <C> <C>
0 to $25 million............................................ .44 of 1% .11 of 1%
$25 up to $75 million....................................... .37 of 1% .18 of 1%
$75 up to $200 million...................................... .33 of 1% .22 of 1%
$200 up to $300 million..................................... .29 of 1% .26 of 1%
In excess of $300 million................................... .275 of 1% .275 of 1%
</TABLE>
The Investment Advisory Agreement further provides that if in any full year
the aggregate expenses of the Fund exclusive of taxes, interest, brokerage
commissions and extraordinary expenses, exceed the expense limitation of any
state having jurisdiction over the Fund, the Fund may deduct from the fee to
be paid to Dreyfus, or Dreyfus will bear, such excess expense to the extent
required by state law. The most stringent state expense limitation applicable
to the Fund presently requires reimbursement of expenses in any full year that
such expenses (exclusive of distribution expenses and certain expenses as
described above) exceed 21/2% of the first $30 million, 2% of the next $70
million and 11/2% of the excess over $100 million of the average value of the
Fund's net assets in accordance with California "blue sky" regulations. There
was no expense reimbursement for the year ended December 31, 1995.
Effective December 1, 1995, the Fund compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for
providing personnel and facilities to perform transfer agency services for
the Fund. Such compensation amounted to $17,130 for the period from December
1, 1995 through December 31, 1995.
(B) Effective August 1, 1995, the Fund adopted a Shareholder Services
Plan, pursuant to which it reimburses (a) the Distributor for payments made
for servicing shareholder accounts ("Servicing") and (b) Dreyfus, Dreyfus
Service Corporation, a wholly-owned subsidiary of Dreyfus, and any affiliate
of either of them for payments made for Servicing, at an aggregate annual
rate of up to .20 of 1% of the value of the Fund's average daily net assets.
Each of the Distributor and Dreyfus or its affiliates may pay one or more
Service Agents a fee in respect of the Fund's shares owned by shareholders
with whom the Service Agent has a Servicing relationship or for whom the
Service Agent is the dealer or holder of record. During the period August 1,
1995 through December 31, 1995, the Fund was charged $319,704 pursuant to the
Shareholder Services Plan.
Prior to August 1, 1995, the Service Plan (the "Plan") pursuant to Rule
12b-1 under the Act, provided for the Fund to (a) reimburse the Distributor
for payments to third parties for distributing the Fund's shares and
servicing shareholder accounts ("Servicing") and (b) pay Dreyfus, Dreyfus
Service Corporation, or any affiliate for Servicing, at an annual rate of
.20 of 1% of the value of the Fund's average daily net assets. Each of the
Distributor and Dreyfus may have paid Service Agents (a securities dealer,
financial institution or other industry professional) a fee in respect of the
Fund's shares owned by shareholders with whom the Service Agent had a
Servicing relationship or for whom the Service Agent was the dealer or holder
of record. Each of the Distributor and Dreyfus determined the amounts to be
paid to Service Agents to which it made payments and the basis on which such
payments were made. The Plan also separately provided for the Fund to bear
the costs of preparing, printing and distributing certain of the Fund's
prospectuses and statements of additional information and costs associated
with implementing and
DREYFUS APPRECIATION FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
operating the Plan. During the period January 1, 1995 through July 31, 1995,
the Fund was charged $338,750 pursuant to the Plan. Effective August 1, 1995
the Plan was terminated.
(C) Each director who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $500
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended December 31, 1995,
amounted to $125,680,703 and $13,877,981, respectively.
At December 31, 1995, accumulated net unrealized appreciation on
investments was $123,106,366, consisting of $125,810,620 gross unrealized
appreciation and $2,704,254 gross unrealized depreciation.
At December 31, 1995, 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).
DREYFUS APPRECIATION FUND, INC.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS APPRECIATION FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Dreyfus Appreciation Fund, Inc., including the statement of investments, as
of December 31, 1995, 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. Our procedures included confirmation of
securities owned as of December 31, 1995 by correspondence with the custodian
and brokers. 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 Appreciation Fund, Inc. at December 31, 1995, 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.
[Ernst and Young LLP signature logo]
New York, New York
February 6, 1996
