Registration No. 333-____
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
/_/ Pre-Effective Amendment No. /_/ Post-Effective Amendment No. __
(Check appropriate box or boxes)
THE DREYFUS/LAUREL FUNDS TRUST
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(Exact Name of Registrant as Specified in Charter)
(212) 922-6000
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(Area Code and Telephone Number)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
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(Address of Principal Executive Offices: Number,
Street, City, State, Zip Code)
(Name and Address of Agent for Service)
Mark N. Jacobs, Esq.
c/o The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
copy to:
Thomas M. Leahey, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
Approximate Date of Proposed Public Offering: As soon as practicable after
this Registration Statement is declared effective.
It is proposed that this filing will become effective on July 20, 2000
pursuant to Rule 488.
An indefinite number of Registrant's shares of beneficial interest, par
value $0.001 per share, has been registered pursuant to Rule 24f-2 under the
Investment Company Act of 1940. Accordingly, no filing fee is being paid at this
time.
<PAGE>
THE DREYFUS/LAUREL FUNDS TRUST
Form N-14
Cross Reference Sheet
Pursuant to Rule 481(a) Under the Securities Act of 1933
<TABLE>
<CAPTION>
FORM N-14 PROSPECTUS / PROXY
ITEM NO. STATEMENT CAPTION
PART A
<S> <C> <C>
Item 1. Beginning of Registration Statement and Outside Cover Page
Front Cover Page of Prospectus
Item 2. Beginning and Outside Back Cover Page of Cover Page
Prospectus
Item 3. Synopsis Information and Risk Factors Summary
Item 4. Information About the Transaction Letter to Shareholders; Summary; Reasons
for the Exchange; Information About the
Exchange
Item 5. Information About the Registrant Letter to Shareholders; Summary; Reasons
for the Exchange; Information About the
Exchange; Additional Information About the
Acquiring Fund and Fund
Item 6. Information About the Company Being Acquired Letter to Shareholders; Reasons for the
Exchange; Information About the Exchange;
Additional Information About the Acquiring
Fund and Fund
Item 7. Voting Information Letter to Shareholders; Cover Page; Voting
Information
Item 8. Interest of Certain Persons and Experts Not Applicable
Item 9. Additional Information Required for Reoffering by Not Applicable
Persons Deemed to be Underwriters
STATEMENT OF ADDITIONAL
PART B INFORMATION CAPTION
Item 10. Cover Page Cover Page
Item 11. Table of Contents Not Applicable
Item 12. Additional Information About the Registrant Statement of Additional Information of
Dreyfus Premier Limited Term High Income
Fund dated May 1, 2000(1)
Item 13. Additional Information About the Company Being Statement of Additional Information of
Acquired Dreyfus Debt and Equity Funds dated March
1, 2000(2)
Item 14. Financial Statements Annual Report of Dreyfus Premier Limited
Term High Income Fund dated December 31,
1999; Annual Report and Semi-Annual Report
of Dreyfus Short Term High Yield Fund dated
October 31, 1999 and April 30, 2000,
respectively.
</TABLE>
PART C
Item 15. Indemnification
Item 16. Exhibits
Item 17. Undertakings
-----------------------
(1) Incorporated herein by reference to the Registration Statement of the
Registrant on Form N-1A (File No. 33-43846).
(2) Incorporated herein by reference to the Registration Statement of Dreyfus
Debt and Equity Funds on Form N-1A (File No. 33-7172).
<PAGE>
DREYFUS SHORT TERM HIGH YIELD FUND
c/o The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Dear Shareholder:
As a shareholder of Dreyfus Short Term High Yield Fund (the "Fund), a
series of Dreyfus Debt and Equity Funds (the "Trust"), you are entitled to vote
on the proposal described below and in the enclosed materials.
Management of the Trust has determined that it would be in the best
interest of the Fund and its shareholders if the Fund were to exchange its
assets (subject to liabilities) for shares of a larger fund advised by The
Dreyfus Corporation that has the same investment objective and substantially
similar management policies as the Fund. A larger fund should enhance the
ability of the portfolio managers to select a larger number of portfolio
securities on more favorable terms and thereby diversify investments through a
larger number of portfolio issues. It is proposed that this exchange take place
with Dreyfus Premier Limited Term High Income Fund (the "Acquiring Fund"), a
series of The Dreyfus/Laurel Funds Trust.
The proposal provides that the Fund exchange all of its assets,
subject to liabilities, for Class A shares of the Acquiring Fund (the
"Exchange"). Promptly thereafter, the Fund will distribute pro rata the
Acquiring Fund shares received in the Exchange to its shareholders in complete
liquidation of the Fund. Thus, each shareholder will receive for his or her Fund
shares a number of corresponding Class A shares of the Acquiring Fund equal to
the value of the Fund shares as of the date of the Exchange. No sales charge
will be imposed at the time of the Exchange, nor will you be subject to a sales
charge on any additional investments you make in Class A shares of the Acquiring
Fund. The Exchange will not result in the imposition of Federal income tax on
you. Shareholders who do not wish to participate in the Exchange may redeem
their shares prior to the Exchange.
Further information about the transaction is contained in the enclosed
materials, which you should review carefully.
Please take the time to consider the enclosed materials and then vote
by completing, dating and signing the enclosed proxy card. A self-addressed,
postage-paid envelope has been enclosed for your convenience.
THE TRUST'S BOARD MEMBERS UNANIMOUSLY RECOMMEND THAT THE FUND'S
SHAREHOLDERS VOTE IN FAVOR OF THE PROPOSED TRANSACTION.
If you have any questions after considering the enclosed materials,
please call 1-800-645-6561.
Sincerely,
Stephen E. Canter,
President
July __, 2000
<PAGE>
Preliminary Copy
DREYFUS SHORT TERM HIGH YIELD FUND
--------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
---------------------------
To the Shareholders:
A Special Meeting of Shareholders of Dreyfus Short Term High Yield
Fund (the "Fund"), a series of Dreyfus Debt and Equity Funds (the "Trust"), will
be held at the offices of The Dreyfus Corporation, 200 Park Avenue, 7th Floor,
Room 7G, New York, New York 10166, on Friday, September 8, 2000, at 10:00 a.m.,
for the following purposes:
1. To consider an Agreement and Plan of Reorganization providing for
the transfer of all of the assets, subject to liabilities, of the
Fund to Dreyfus Premier Limited Term High Income Fund (the
"Acquiring Fund") in exchange for the Acquiring Fund's Class A
shares and the assumption by the Acquiring Fund of the Fund's
stated liabilities (the "Exchange"). Class A shares of the
Acquiring Fund received in the Exchange will be distributed by
the Fund to its shareholders in liquidation of the Fund, after
which the Fund will be terminated as a series of the Trust; and
2. To transact such other business as may properly come before
the meeting, or any adjournment or adjournments thereof.
Shareholders of record at the close of business on July 21, 2000, will
be entitled to receive notice of and to vote at the meeting.
By Order of the Board of Trustees
John B. Hammalian,
Secretary
New York, New York
July __, 2000
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WE NEED YOUR PROXY VOTE IMMEDIATELY
A SHAREHOLDER MAY THINK HIS OR HER VOTE IS NOT IMPORTANT, BUT IT IS
VITAL. BY LAW, THE MEETING OF SHAREHOLDERS OF THE FUND WILL HAVE TO BE ADJOURNED
WITHOUT CONDUCTING ANY BUSINESS IF LESS THAN A QUORUM OF ITS SHARES ELIGIBLE TO
VOTE IS REPRESENTED. IN THAT EVENT, THE FUND, AT ITS SHAREHOLDERS' EXPENSE,
WOULD CONTINUE TO SOLICIT VOTES IN AN ATTEMPT TO ACHIEVE A QUORUM. CLEARLY, YOUR
VOTE COULD BE CRITICAL TO ENABLE THE FUND TO HOLD THE MEETING AS SCHEDULED, SO
PLEASE RETURN YOUR PROXY CARD IMMEDIATELY. YOU AND ALL OTHER SHAREHOLDERS WILL
BENEFIT FROM YOUR COOPERATION.
================================================================================
<PAGE>
______________, 2000
ACQUISITION OF THE ASSETS OF
DREYFUS SHORT TERM HIGH YIELD FUND
BY AND IN EXCHANGE FOR CLASS A SHARES OF
DREYFUS PREMIER LIMITED TERM HIGH INCOME FUND
PROSPECTUS/PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FRIDAY, SEPTEMBER 8, 2000
This Prospectus/Proxy Statement is furnished in connection with a
solicitation of proxies by the Board of Dreyfus Debt and Equity Funds (the
"Trust") on behalf of its series Dreyfus Short Term High Yield Fund (the
"Fund"), to be used at the Special Meeting of Shareholders (the "Meeting") of
the Fund to be held on Friday, September 8, 2000, at 10:00 a.m., at the offices
of The Dreyfus Corporation, 200 Park Avenue, 7th Floor, Room 7G, New York, New
York 10166, for the purposes set forth in the accompanying Notice of Special
Meeting of Shareholders. Shareholders of record at the close of business on July
21, 2000, are entitled to receive notice of and to vote at the Meeting.
It is proposed that the Fund transfer all of its assets, subject to
liabilities, to Dreyfus Premier Limited Term High Income Fund (the "Acquiring
Fund") in exchange for Class A shares of the Acquiring Fund, all as more fully
described herein (the "Exchange"). Upon consummation of the Exchange, the
Acquiring Fund shares received by the Fund will be distributed to Fund
shareholders, with each shareholder receiving a pro rata distribution of
Acquiring Fund shares (or fractions thereof) for Fund shares held prior to the
Exchange. Thus, it is contemplated that each shareholder will receive for his or
her Fund shares a number of Class A shares (or fractions thereof) of the
Acquiring Fund equal in value to the aggregate net asset value of the
shareholder's Fund shares as of the date of the Exchange.
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely information about the Acquiring Fund that Fund
shareholders should know before voting on the proposal or investing in the
Acquiring Fund.
A Statement of Additional Information ("SAI") dated _______, 2000,
relating to this Prospectus/Proxy Statement, has been filed with the Securities
and Exchange Commission (the "Commission") and is incorporated by reference in
its entirety. The Commission maintains a Web site (HTTP://WWW.SEC.GOV) that
contains the SAI, material incorporated in this Prospectus/Proxy Statement by
reference, and other information regarding the Acquiring Fund and Fund. A copy
of the SAI is available without charge by calling 1-800-645-6561 or writing to
the Acquiring Fund at its offices at 144 Glenn Curtiss Boulevard, Uniondale, New
York 11556-0144.
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MUTUAL FUND SHARES ARE NOT BANK DEPOSITS AND ARE NOT INSURED OR GUARANTEED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. MUTUAL
FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
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<PAGE>
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS
PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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The Fund and the Acquiring Fund are open-end, management investment
companies advised by The Dreyfus Corporation ("Dreyfus"). They also have the
same primary portfolio manager and investment objective and substantially
similar management policies. The Acquiring Fund is a separate series of The
Dreyfus/Laurel Funds Trust. The substantive differences between the Fund and the
Acquiring Fund are set forth herein.
The Acquiring Fund's Prospectus dated May 1, 2000, and the Acquiring
Fund's Annual Report for the fiscal year ended December 31, 1999, including its
audited financial statements for the fiscal year, each accompany this
Prospectus/Proxy Statement. Such Prospectus and financial statements are
incorporated herein by reference. FOR A FREE COPY OF THE FUND'S PROSPECTUS DATED
MARCH 1, 2000, THE FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED OCTOBER 31,
1999, AND THE FUND'S SEMI-ANNUAL REPORT FOR THE SIX MONTHS ENDED APRIL 30, 2000,
WRITE TO THE FUND AT ITS OFFICES LOCATED AT 144 GLENN CURTISS BOULEVARD,
UNIONDALE, NEW YORK 11556-0144, OR CALL 1-800-645-6561.
Shareholders are entitled to one vote for each share of beneficial
interest of the Fund, par value $.001 per share, held and fractional votes for
each fractional Fund share held. Fund shares represented by executed and
unrevoked proxies will be voted in accordance with the specifications made
thereon. If the enclosed form of proxy is executed and returned, it nevertheless
may be revoked by giving another proxy or by letter or telegram directed to the
Fund, which must indicate the shareholder's name and account number. To be
effective, such revocation must be received before the Meeting. Also, any
shareholder who attends the Meeting in person may vote by ballot at the Meeting,
thereby canceling any proxy previously given. As of ______________, 2000, there
were ____ Fund shares issued and outstanding.
Proxy materials will be mailed to shareholders of record on or about
July 28, 2000.
<PAGE>
TABLE OF CONTENTS
Summary
Reasons for the Exchange...................................................
Information about the Exchange.............................................
Additional Information about the Acquiring Fund and Fund...................
Voting Information.........................................................
Financial Statements and Experts...........................................
Other Matters..............................................................
Notice to Banks, Broker/Dealers and Voting Trustees and Their Nominees.....
Exhibit A..................................................................
<PAGE>
APPROVAL OF AN AGREEMENT AND PLAN OF REORGANIZATION PROVIDING FOR THE
TRANSFER OF ALL OF THE ASSETS OF THE FUND TO THE ACQUIRING FUND
SUMMARY
This Summary is qualified by reference to the more complete
information contained elsewhere in this Prospectus/Proxy Statement, the
Acquiring Fund Prospectus, the Fund Prospectus and the form of Agreement and
Plan of Reorganization attached to this Prospectus/Proxy Statement as Exhibit A.
PROPOSED TRANSACTION. The Trust's Board, including the Board members
who are not "interested persons" (as defined in the Investment Company Act of
1940, as amended (the "1940 Act")), has unanimously approved an Agreement and
Plan of Reorganization (the "Plan"). The Plan provides that, subject to the
requisite approval of the Fund's shareholders, on the date of the Exchange the
Fund assign, transfer and convey to the Acquiring Fund all of the assets
(subject to liabilities) of the Fund, including all securities and cash, in
exchange for Class A shares of the Acquiring Fund having an aggregate net asset
value equal to the value of the Fund's net assets. The Fund will distribute all
Acquiring Fund shares received by it among its shareholders so that each Fund
shareholder will receive a pro rata distribution of Class A shares (or fractions
thereof) of the Acquiring Fund having an aggregate net asset value equal to the
aggregate net asset value of the shareholder's Fund shares as of the date of the
Exchange. Thereafter, the Fund will be terminated as a series of the Trust.
As a result of the Exchange, each Fund shareholder will cease to be a
shareholder of the Fund and will become a shareholder of the Acquiring Fund as
of the close of business on the date of the Exchange.
The Trust's Board has concluded unanimously that the Exchange would be
in the best interests of shareholders of the Fund and the interests of existing
shareholders of the Fund would not be diluted as a result of the transactions
contemplated thereby. See "Reasons for the Exchanges."
TAX CONSEQUENCES. As a condition to the closing of the Exchange, the
Fund and the Acquiring Fund will receive an opinion of counsel to the effect
that, for Federal income tax purposes, (a) no gain or loss will be recognized by
the Fund's shareholders as a result of the Exchange, (b) the holding period and
aggregate tax basis of Acquiring Fund shares received by a Fund shareholder will
be the same as the holding period and aggregate tax basis of the shareholder's
Fund shares, and (c) the holding period and tax basis of the Fund's assets
transferred to the Acquiring Fund as a result of the Exchange will be the same
as the holding period and tax basis of such assets held by the Fund immediately
prior to the Exchange. See "Information about the Exchanges--Federal Income
Tax Consequences."
COMPARISON OF THE FUND AND ACQUIRING FUND. The following discussion is
primarily a summary of certain parts of the Fund Prospectus and the Acquiring
Fund Prospectus. Information contained in this Prospectus/Proxy Statement is
qualified by the more complete information set forth in the Fund Prospectus and
Acquiring Fund Prospectus, which are incorporated herein by reference.
GOAL/APPROACH. The Fund and the Acquiring Fund have the same
investment goals. Each seeks high current income. To pursue their respective
goals, the Fund and the Acquiring Fund each normally invests at least 65% of its
net assets in "high yield" bonds ("junk" bonds). High yield bonds are
fixed-income securities rated at the time of purchase below BBB or Baa by credit
rating agencies such as Standard & Poor's Ratings Group or Moody's Investors
Service, Inc., or the unrated equivalent as determined by Dreyfus. Because their
issuers may be at an early stage of development or may have been unable to repay
past debts, these bonds typically must offer higher yields than investment grade
bonds to compensate investors for greater credit risk. The respective portfolios
of the Fund and the Acquiring Fund may include various types of high yield
fixed-income securities, including corporate bonds and notes, mortgage-related
securities, asset-backed securities, zero coupon securities, convertible
securities, preferred stock and other debt instruments of U.S. and foreign
issuers.
In choosing securities for the Fund and Acquiring Fund, the portfolio
manager seeks to capture the higher yields offered by junk bonds. The investment
process is based on fundamental credit research, at times focusing on companies
that are currently out-of-favor. Each of the Fund and Acquiring Fund looks at a
variety of factors when assessing a potential investment, including the
company's financial strength, the state of the industry or sector it belongs to,
the long-term fundamentals of that industry or sector, the company's management,
and whether there is sufficient equity value in the company. Under certain
circumstances, the Fund and Acquiring Fund also may invest in investment grade
bonds.
The Fund and Acquiring Fund each attempt to manage credit risk and the
volatility caused by interest rate movements by limiting average effective
portfolio maturity and duration. The Fund maintains an average effective
portfolio maturity and duration of 3 years or less, whereas the Acquiring Fund
maintains an average effective portfolio maturity of 4 years or less and an
average effective portfolio duration of 3.5 years or less. In calculating
average effective maturity, each fund may treat a security that can be
repurchased by its issuer on an earlier date (known as a "call date") as
maturing on the call date rather than on its stated maturity date. Duration is
an indication of an investment's "interest rate risk," or how sensitive a bond
or mutual fund portfolio may be to changes in interest rates. Generally, the
longer a fund's duration, the more it will react to interest rate fluctuations.
There are some differences in the policies that the Fund and the
Acquiring Fund have regarding the use of derivative instruments, and in
effecting transactions with borrowed money (which is a form of leveraging). For
example, the Acquiring Fund's policy is to use futures and options only to hedge
its portfolio. The Fund's policy is to use them to hedge its portfolio or to
increase returns. Also, the Acquiring Fund will borrow money only for certain
purposes, such as temporary or emergency purposes, in anticipation of share
redemptions, or to facilitate portfolio securities trades. The Fund may borrow
for any purpose, including for investment purposes.
In all other material respects, the management policies of the Fund
and the Acquiring Fund are the same. For a more complete discussion of the
Fund's or Acquiring Fund's management policies, see "Goal/Approach" in the Fund
Prospectus or the Acquiring Fund Prospectus, respectively.
The Fund and Acquiring Fund are separate diversified portfolios of the
Trust and The Dreyfus/Laurel Funds Trust, respectively, which are unincorporated
business trusts organized under the laws of The Commonwealth of Massachusetts.
MAIN RISKS. The risks associated with an investment in the Fund and
Acquiring Fund are substantially similar and include interest rate, credit,
market, liquidity, and call risks. As a result, the value of your investment in
the Acquiring Fund, as in the Fund, will fluctuate, which means that you could
lose money.
High yield bonds involve greater credit risk than investment grade
bonds. They tend to be more volatile in price and less liquid and are considered
speculative. As with stocks, the prices of high yield bonds can fall in response
to bad news about the issuer, the issuer's industry or the economy in general.
The Acquiring Fund's or Fund's share price also could be hurt if it holds bonds
of issuers that default on payments of principal or interest, or if there is a
decline in the credit quality of a bond it holds, or the perception of a
decline.
Other risk factors could have an adverse effect on the Acquiring
Fund's or Fund's performance:
o if the high yield market becomes "illiquid," typically when there
are many more sellers than buyers for the securities, the value
of such securities, and the fund's share price, may fall
dramatically;
o under certain market conditions, usually during periods of market
illiquidity or rising interest rates, prices of the fund's
"callable" issues are subject to increased fluctuation because
they can be expected to perform more like longer term securities
than shorter term securities;
o price and yield of any foreign debt security the fund may own may
be affected by factors such as political/economic instability,
changes in currency exchange rates and less liquid markets.
o prices of the fund's mortgage-related securities may be impacted
if the loans underlying the securities are prepaid, and the value
of the fund's stripped mortgage-backed securities may move in the
same direction as interest rates.
Under adverse market conditions, the Fund or Acquiring Fund could
invest some or all of its assets in money market instruments. Although the Fund
or Acquiring Fund would do this to avoid losses, it could have the effect of
reducing the benefit from any upswing in the market. During such periods, the
Fund or Acquiring Fund may not achieve its investment objective.
The Acquiring Fund and the Fund, at times, may invest in certain
derivatives, such as futures and options. Derivatives can be illiquid and highly
volatile. To the extent the Fund uses derivatives for speculative purposes or
engages in leverage, its gains or losses, as compared to those of the Acquiring
Fund, potentially could be magnified.
The Acquiring Fund and the Fund also may borrow money, which is a form
of leverage. The Acquiring Fund is permitted to leverage to the extent necessary
to facilitate portfolio trades or for emergency purposes. The Fund is permitted
to borrow for these same reasons, but also may borrow to increase returns, which
if used could make the Fund's portfolio more volatile.
The Acquiring Fund is permitted to maintain a longer average effective
maturity and duration (4 and 3.5 years, respectively) than the Fund (3 years).
To the extent the Acquiring Fund maintains an average effective maturity or
duration longer than 3 years, the Acquiring Fund's share price may be more
volatile than the Fund's share price when interest rates change. Since its
inception, the Acquiring Fund has maintained an average effective maturity and
duration of less than 3 years; however, there can be no assurance that, in the
future, it will maintain an average effective maturity and duration of less than
3 years.
See "Main Risks" in the relevant Prospectus for a more complete
description of investment risks.
SALES CHARGES. The Fund's shares are sold at net asset value per share
("NAV") without a sales charge (load). Class A shares of the Acquiring Fund are
subject to a maximum front-end sales charge of 4.5% of the offering price. In
addition, Class A shares of the Acquiring Fund purchased without an initial
sales charge as part of an investment of at least $1,000,000 and redeemed within
one year after purchase are subject to a 1% contingent deferred sales charge
("CDSC"). However, Class A shares of the Acquiring Fund received by Fund
shareholders in the Exchange will NOT be subject to a front-end sales charge or
CDSC. In addition, each Fund shareholder who participates in the Exchange will
be able to purchase at NAV (without the imposition of any front-end
sales charge or CDSC) additional Class A shares of the Acquiring Fund for such
shareholder's account opened at the time of the Exchange. See in the Acquiring
Fund Prospectus "Account Policies-Share Class Charges" for a discussion of the
initial sales charge and CDSC imposed on Class A shares of the Acquiring Fund.
FEES AND EXPENSES. The management fee structure of the Fund and
Acquiring Fund differ. Unlike the arrangements between most investment advisers
and the funds they manage, the Acquiring Fund pays Dreyfus a "unitary" fee at
the annual rate of .70% of the value of the Acquiring Fund's average daily net
assets. Under the unitary fee structure, Dreyfus pays ALL of the Acquiring
Fund's expenses, except: brokerage commissions, taxes, interest, fees and
expenses of the non-interested Trustees (including counsel expenses), the Rule
12b-1 fees described below, and extraordinary expenses. Although Dreyfus does
not pay for the fees and expenses of the non-interested Trustees (including
counsel fees), Dreyfus is contractually required to reduce its investment
management fee by an amount equal to the Acquiring Fund's allocable share of
such fees and expenses. The Fund pays Dreyfus a separate management fee at the
annual rate of .65% of the value of the Fund's average daily net assets, pays
other service providers directly, and bears other Fund expenses directly.
The following information concerning fees and expenses of the Fund and
Acquiring Fund is derived from information set forth under the caption
"Expenses" in the relevant Prospectus. The fees and expenses of the Fund and
Acquiring Fund set forth below are for the fiscal year ended October 31, 1999
for the Fund, and December 31, 1999 for the Acquiring Fund. The "Pro Forma After
Exchange" information is based on net assets and fund accruals of the Fund and
Acquiring Fund as of May 19, 2000. Annual fund operating expenses are paid out
of fund assets, so their effect is reflected in the respective share price.
ANNUAL FUND
OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)
(percentage of average daily net assets):
Pro Forma
After
Acquiring Exchange
Fund Fund Acquiring Fund
SHARES CLASS A CLASS A
Management fees .65% .70% .70%
Rule 12b-1 fee None .25% .25%
Shareholder services fee .25% None None
Other expenses .28% .00% .00%
Total 1.18% .95% .95%
EXAMPLE
This example shows what you could pay in expenses over time. It uses
the same hypothetical conditions other funds use in their prospectuses: $10,000
initial investment, 5% total return each year and no changes in expenses.
BECAUSE EACH FUND SHAREHOLDER WHO PARTICIPATES IN THE EXCHANGE WILL BE ABLE TO
PURCHASE ADDITIONAL CLASS A SHARES IN SUCH ACCOUNTS AT NAV WITHOUT
THE IMPOSITION OF ANY FRONT-END SALES CHARGE OR CDSC, THE EXAMPLE DOES NOT
REFLECT THE SALES CHARGES OTHERWISE APPLICABLE TO CLASS A SHAREHOLDERS (IF THE
SALES CHARGE WAS REFLECTED, THE FIGURES WOULD BE HIGHER). The figures shown
would be the same whether you sold your shares at the end of a period or kept
them. Because actual return and expenses will be different, the example is for
comparison only.
ACQUIRING FUND
CLASS A SHARES
ACQUIRING FUND PRO FORMA
FUND SHARES CLASS A SHARES AFTER EXCHANGE
----------- -------------- ---------------
1 Year $120 $97 $97
3 Years $375 $303 $303
5 Years $649 $525 $525
10 Years $1,432 $1,166 $1,166
PAST PERFORMANCE. The bar chart and table below show some of the risks
of investing in the Acquiring Fund. The bar chart shows the changes in the
Acquiring Fund's Class A share performance from year to year. Sales loads are
not reflected in the chart; if they were, the returns shown would have been
lower. The table compares the Acquiring Fund's Class A share average annual
total return to that of the Merrill Lynch High Yield Master II Index, an
unmanaged index of high yield bond performance. The chart and table assume
reinvestment of dividends and distributions. For performance information of the
Fund, see the Fund Prospectus under the caption "Past Performance." Of course,
past performance is no guarantee of future results.
YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)
CLASS A SHARES OF THE ACQUIRING FUND
<TABLE>
<CAPTION>
-0.10% 1.99%
--------- -------- -------- -------- -------- -------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99
Best Quarter: Q-1 '98 3.84%
Worst Quarter: Q-3 '98 -5.15%
</TABLE>
<PAGE>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99
Since Inception
1 YEAR (6/2/97)
------ --------
Class A Shares (with sales charge) -2.56% 0.97%
Class A Shares (without sales charge) 1.99% 2.79%
Merrill Lynch High Yield Master II Index 2.51% 5.40%*
Dreyfus Customized Limited Term High 5.23% 6.30%*
Yield Index**
--------------------
* For comparative purposes, the value of the index on 5/31/97 is used as the
beginning value on 6/2/97.
** This is a blended and market weighted index constructed by Dreyfus that is
comprised of the four shorter-term sub-indexes of the Merrill Lynch High
Yield Master II Index. The four sub-indexes are (i) BB-rated 1-3 years;
(ii) B-rated 1-3 years; (iii) BB-rated 3-5 years; and (iv) B-rated 3-5
years.
INVESTMENT ADVISER. The investment adviser for the Fund and Acquiring
Fund is Dreyfus, 200 Park Avenue, New York, New York 10166. Founded in 1947,
Dreyfus manages approximately $130 billion in over 160 mutual fund portfolios.
Dreyfus is the primary mutual fund business of Mellon Financial Corporation
("Mellon"), a global financial services company with approximately $2.5 trillion
of assets under management, administration or custody, including over $500
billion under management. Mellon provides wealth management, global investment
services and a comprehensive array of banking services for individuals,
businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
PRIMARY PORTFOLIO MANAGER. The primary portfolio manager for the Fund
and Acquiring Fund is Roger King. He has managed the Fund and Acquiring Fund
since their respective inception. Mr. King is Senior Portfolio Manager and Head
of Taxable High Yield Investments at Dreyfus where he has been employed since
February 1996. Prior thereto, he was Vice President and Director of High Yield
Research at Citibank Securities, Inc.
BOARD MEMBERS. The Trust and The Dreyfus/Laurel Funds Trust have
different Board members. For a description of the Board members, see the
Acquiring Fund Statement of Additional Information under the caption "Management
of the Trust" and the Fund Statement of Additional Information under the caption
"Management of the Company."
CAPITALIZATION. Fund shares are of one class. The Acquiring Fund has
classified its shares into four classes--Class A, Class B, Class C and Class R.
The following table sets forth, as of May 19, 2000, (1) the capitalization of
the Fund, (2) the capitalization of Class A shares of the Acquiring Fund and (3)
the pro forma capitalization of Class A shares of the Acquiring Fund, as
adjusted showing the effect of the Exchange had it occurred on such date.
<TABLE>
<CAPTION>
Pro Forma After
Exchange Acquiring FUND
FUND ACQUIRING FUND CLASS A CLASS A
----------- ---------------------- -------
<S> <C> <C> <C>
Total net assets $ 88,047,750 $ 87,881,878 $ 175,929,628
Net asset value
per share $ 9.72 $ 10.01 $ 10.01
Shares outstanding 9,055,477 8,782,374 17,578,353
</TABLE>
Total net assets of the Acquiring Fund (Classes A, B, C and R), as of
May 19, 2000, were approximately $758 million.
PURCHASE PROCEDURES. The purchase procedures of the Fund and Acquiring
Fund are substantially similar, but differ in that the Acquiring Fund is
designed primarily for people who are investing through a third party, such as a
bank, broker-dealer or financial adviser, or in a 401(k) or other retirement
plan. For Fund shareholders participating in the Exchange, Dreyfus Service
Corporation (each fund's distributor) will act as broker-dealer. The automatic
investment services are the same, except that the Acquiring Fund does not offer
the Dreyfus Payroll Savings Plan (and would not for Fund shareholders holding
Class A shares). See "Account Policies - Buying Shares" in the relevant
Prospectus for a discussion of purchase procedures.
DISTRIBUTION PLAN. Acquiring Fund Class A shares are subject to a Rule
12b-1 Distribution Plan ("Rule 12b-1 Plan"). Under the Rule 12b-1 Plan, the
Acquiring Fund pays the distributor an annual fee of .25% of the average daily
net assets of Class A shares to finance the sale of Class A shares and for
shareholder servicing. Because this fee is paid out of the assets attributable
to Class A shares on an ongoing basis, over time it will increase the cost of
your investment in Class A shares of the Acquiring Fund and may cost you more
than paying other types of sales charges. The Fund has not adopted a
distribution plan under Rule 12b-1, but has adopted a Shareholder Services Plan
described below. See "Distribution and Service Plans" in the Acquiring Fund
Statement of Additional Information for a discussion of the Rule 12b-1 Plan.
SHAREHOLDER SERVICES PLAN. Fund shares are subject to a Shareholder
Services Plan pursuant to which the Fund pays the distributor an annual fee of
.25% of the Fund's average daily net assets for shareholder account service and
maintenance. The Acquiring Fund has no Shareholder Services Plan with respect to
its Class A shares, but has adopted a Rule 12b-1 Plan described above. See
"Distribution Plan and Shareholder Services Plan--Shareholder Services Plan" in
the Fund's Statement of Additional Information for a discussion of the
Shareholder Services Plan.
REDEMPTION PROCEDURES. The redemption procedures of the Fund and
Acquiring Fund are substantially similar, but differ in that the Acquiring Fund
does not offer the Wire Redemption Privilege but does offer a Checkwriting
Privilege. See "Account Policies - Selling Shares" in the relevant Prospectus
for a discussion of redemption procedures.
DISTRIBUTIONS. The dividend and distributions policies of the Fund and
Acquiring Fund are identical. See "Distributions and Taxes" in the relevant
Prospectus for a discussion of such policies.
The actual amount of dividends paid per share by the Fund and
Acquiring Fund is different. The following table sets forth, as of April 28,
2000, the approximate daily dividend rate per share, monthly dividend rate per
share, and monthly dividend payment for the Fund and on a pro forma basis as
adjusted showing the effect of the Exchange had it occurred on such date. The
data in the table has been prepared assuming a 30-day period for monthly
dividend payment and that the Fund shareholder owned 1,000 shares of the Fund
which, based on the NAV of the Fund and Acquiring Fund on April 28, 2000, would
be exchanged for approximately 974.2 shares of the Acquiring Fund.
Pro Forma After
Exchange Acquiring
AS OF APRIL 28, 2000 FUND SHARES FUND CLASS A SHARES
Net asset value $9.81 $10.07
per share
Daily dividend rate $0.0030739 $0.0031313
per share
Monthly dividend $0.09222 $0.09394
paid per share
Number of shares held 1,000.00 974.20
Monthly dividend payment $92.22 $91.52
on number of shares held
SHAREHOLDER SERVICES. The shareholder services offered by the Fund and
Acquiring Fund are substantially similar, except that the Acquiring Fund does
not offer the Dreyfus Payroll Savings Plan or the Wire Redemption Privilege.
However, the Acquiring Fund offers the Checkwriting Privilege which the Fund
does not offer. See "Services for Fund Investors" in the relevant Prospectus for
a description of shareholder services.
REASONS FOR THE EXCHANGE
The Boards of Trustees of The Dreyfus/Laurel Funds Trust and the Trust
have concluded that the Exchange is in the best interests of their respective
shareholders. Each Board believes that the Exchange will permit shareholders to
pursue identical investment goals in a larger fund without diluting
shareholders' interests. A larger fund should enhance the portfolio manager's
ability to select a larger number of portfolio securities on more favorable
terms and give the portfolio managers greater investment flexibility. As of May
19, 2000, the Fund was approximately $88 million in asset size, and the
Acquiring Fund was approximately $758 million in asset size. Also, the expense
ratio of the Fund is higher than that of the Acquiring Fund. See "Annual Fund
Operating Expenses" above for a discussion of the Acquiring Fund's unitary fee
structure.
In determining whether to recommend approval of the Exchange, each
Board considered the following factors, among others: (1) the compatibility of
the Fund's and the Acquiring Fund's investment objective, management policies
and investment restrictions, as well as shareholder services offered by the Fund
and Acquiring Fund; (2) the terms and conditions of the Exchange and whether the
Exchange would result in dilution of the interests of the respective
shareholders; (3) expense ratios and information regarding the fees
and expenses of the Fund and Acquiring Fund, as well as the estimated expense
ratio of the combined Acquiring Fund; (4) the tax consequences of the Exchange;
and (5) the fact that the costs to be incurred by the Fund and the Acquiring
Fund in connection with the Exchange are to be borne entirely by Dreyfus. In
addition, the Trust's Board considered the Fund's inability to attract and
retain sufficient assets to operate efficiently.
INFORMATION ABOUT THE EXCHANGE
PLAN OF EXCHANGE. The following summary of the Plan is qualified in
its entirety by reference to the form of Plan attached hereto as Exhibit A. The
Plan provides that the Acquiring Fund will acquire all of the assets of the Fund
in exchange for Class A shares of the Acquiring Fund and the assumption by the
Acquiring Fund of the Fund's stated liabilities on the date which is five
business days following the date on which Fund shareholders vote to approve the
Plan, or such other date as may be agreed upon by the duly authorized officers
of the parties (the "Closing Date"). The number of Acquiring Fund shares to be
issued to the Fund will be determined on the basis of the relative NAV and
aggregate net assets of the Fund and Class A shares of the Acquiring Fund,
generally computed on the Closing Date as of the close of trading on the floor
of the New York Stock Exchange (currently at 4:00 p.m., New York time), except
for options and futures contracts, if any, which will be valued 15 minutes after
the close of trading. Portfolio securities of the Fund and the Acquiring Fund
will be valued in accordance with the valuation practices of the Fund and the
Acquiring Fund, which are described under the caption "Account Policies-Buying
Shares" in the relevant Prospectus and under the caption "Determination of Net
Asset Value" in the relevant Statement of Additional Information.
Prior to the Closing Date, the Fund will declare a dividend or
dividends which, together with all dividends that have been declared previously,
will have the effect of distributing to Fund shareholders all of the Fund's
previously undistributed investment company taxable income, if any, for the tax
period ending on or prior to the Closing Date (computed without regard to any
deduction for dividends paid), its net exempt interest income for the tax period
ending on or prior to the Closing Date, and all of its previously undistributed
net capital gain realized in the tax period ending on or prior to the Closing
Date (after reduction for any capital loss carry forward).
As conveniently as practicable after the Closing Date, the Fund will
liquidate and distribute pro rata to its shareholders of record as of the close
of business on the Closing Date Class A shares of the Acquiring Fund received by
it in the Exchange. Such liquidation and distribution will be accomplished by
establishing accounts on the share records of the Acquiring Fund in the name of
each Fund shareholder, each account representing the respective pro rata number
of Acquiring Fund shares due to the shareholder. After such distribution and the
winding up of its affairs, the Fund will be terminated as a series of the Trust.
After the Closing Date, any outstanding certificates representing Fund shares
will represent Acquiring Fund Class A shares distributed to the record holders
of the Fund. Upon presentation to the transfer agent of the Acquiring Fund, Fund
share certificates will be exchanged for Acquiring Fund share certificates, at
the applicable exchange rate. Certificates for Acquiring Fund shares will be
issued only upon the investor's written request.
The Plan may be amended at any time prior to the relevant Exchange.
The Trust will provide Fund shareholders with information describing any
material amendment to the Plan prior to shareholder consideration. The
obligations of the Fund and Acquiring Fund under the Plan are subject to various
conditions, including approval by Fund shareholders holding the requisite number
of Fund shares and the continuing accuracy of various representations and
warranties of the Fund and the Acquiring Fund being confirmed by the respective
parties.
The total expenses of the Exchange will be borne entirely by Dreyfus.
If the Exchange is not approved by the Fund's shareholders, the
Trust's Board will consider other appropriate courses of action, including
liquidating the Fund.
TEMPORARY SUSPENSION OF CERTAIN OF THE FUND'S INVESTMENT RESTRICTIONS.
Since certain of the Fund's existing investment restrictions could preclude the
Fund from consummating the Exchange in the manner contemplated in the Plan, Fund
shareholders are requested to authorize the temporary suspension of certain
investment restrictions which restrict the Fund's ability to (i) invest more
than 5% of its assets in the obligations of any single issuer and (ii) invest
more than 25% of its total assets in the securities of issuers in any single
industry, as set forth in the Fund Statement of Additional Information, as well
as the temporary suspension of any other investment restriction of the Fund to
the extent necessary to permit the consummation of the Exchange. The temporary
suspension of the Fund's investment restrictions will not affect the investment
restrictions of the Acquiring Fund. A vote in favor of the Proposal is deemed to
be a vote in favor of the temporary suspensions.
FEDERAL INCOME TAX CONSEQUENCES. The exchange of the Fund's assets for
Acquiring Fund shares is intended to qualify for Federal income tax purposes as
a tax-free reorganization under Section 368(a) of the United States Internal
Revenue Code of 1986, as amended (the "Code"). As a condition to the closing of
the Exchange, the Acquiring Fund and Fund will receive the opinion of Stroock &
Stroock & Lavan, LLP, counsel to the Fund, to the effect that, on the basis of
the existing provisions of the Code, Treasury regulations issued thereunder,
current administrative regulations and pronouncements and court decisions, and
certain facts, assumptions and representations, for Federal income tax purposes:
(1) the transfer of all of the Fund's assets in exchange for Acquiring Fund
shares and the assumption by the Acquiring Fund of the Fund's liabilities will
constitute a "reorganization" within the meaning of Section 368(a)(1)(C) with
respect to the Fund; (2) no gain or loss will be recognized by the Acquiring
Fund upon the receipt of the Fund's assets solely in exchange for Acquiring Fund
shares and the assumption by the Acquiring Fund of liabilities of the Fund; (3)
no gain or loss will be recognized by the Fund upon the transfer of its assets
to the Acquiring Fund in exchange for Acquiring Fund shares and the assumption
by the Acquiring Fund of the Fund's liabilities or upon the distribution
(whether actual or constructive) of Acquiring Fund shares to Fund shareholders
in exchange for their Fund shares; (4) no gain or loss will be recognized by the
Fund shareholders upon the exchange of Fund shares for Acquiring Fund shares;
(5) the aggregate tax basis for Acquiring Fund shares received by each Fund
shareholder pursuant to the Exchange will be the same as the aggregate tax basis
for Fund shares held by such shareholder immediately prior to the Exchange, and
the holding period of Acquiring Fund shares to be received by the Fund
shareholder will include the period during which Fund shares surrendered in
exchange therefor were held by such shareholder (provided Fund shares were held
as capital assets on the date of the Exchange); and (6) the tax basis of Fund
assets acquired by the Acquiring Fund will be the same as the tax basis of such
assets to the Fund immediately prior to the Exchange, and the holding period of
Fund assets in the hands of the Acquiring Fund will include the period during
which those assets were held by the Fund.
NEITHER THE FUND NOR THE ACQUIRING FUND HAS SOUGHT A TAX RULING FROM
THE INTERNAL REVENUE SERVICE ("IRS"). THE OPINION OF COUNSEL IS NOT BINDING ON
THE IRS NOR DOES IT PRECLUDE THE IRS FROM ADOPTING A CONTRARY POSITION. Fund
shareholders should consult their tax advisers regarding the effect, if any, of
the proposed Exchange in light of their individual circumstances. Since the
foregoing discussion relates only to the Federal income tax consequences of the
Exchange, Fund shareholders also should consult their tax advisers as to state
and local tax consequences, if any, of the Exchange. REQUIRED VOTE AND BOARD'S
RECOMMENDATION
The Trust's Board has approved the Plan and the Exchange and has
determined that (i) participation in the Exchange is in the Fund's best
interests and (ii) the interests of shareholders of the Fund will not be diluted
as a result of the Exchange. Pursuant to the Trust's charter documents, an
affirmative vote of a majority of the Fund's shares outstanding and entitled to
vote is required to approve the Plan and the Exchange.
THE TRUST'S BOARD, INCLUDING THE "NON-INTERESTED" BOARD
MEMBERS, UNANIMOUSLY RECOMMENDS THAT THE FUND'S
SHAREHOLDERS VOTE "FOR" APPROVAL OF THE PLAN AND THE
EXCHANGE.
ADDITIONAL INFORMATION ABOUT THE ACQUIRING FUND AND FUND
Information about the Acquiring Fund is incorporated by reference into
this Prospectus/Proxy Statement from the Acquiring Fund Prospectus forming a
part of the Registration Statement on Form N-1A (File No. 33-43846). Information
about the Fund is incorporated by reference into this Prospectus/Proxy Statement
from the Fund Prospectus forming a part of the Trust's Registration Statement on
Form N-1A (File No. 33-7172).
The Fund and Acquiring Fund are subject to the requirements of the
1940 Act, and file reports, proxy statements and other information with the
Commission. Reports, proxy statements and other information filed by the Fund or
Acquiring Fund may be inspected and copied at the Public Reference Facilities of
the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and
at the Northeast regional office of the Commission at 7 World Trade Center,
Suite 1300, New York, New York 10048. Text-only versions of fund documents can
be viewed on-line or downloaded from www.sec.gov. Copies of such material also
can be obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services, Securities and Exchange Commission, Washington, D.C.
20549, at prescribed rates.
VOTING INFORMATION
In addition to the use of the mails, proxies may be solicited
personally or by telephone, and persons holding Fund shares in their names or in
nominee name may be paid for their expenses in sending soliciting materials to
their principals. Authorizations to execute proxies may be obtained by
telephonic or electronically transmitted instructions in accordance with
procedures designed to authenticate the shareholder's identity. In all cases
where a telephonic proxy is solicited, the shareholder will be asked to provide
his or her address, social security number (in the case of an individual) or
taxpayer identification number (in the case of a non-individual) and the number
of shares owned and to confirm that the shareholder has received the Fund's
proxy statement and proxy card in the mail. Within 72 hours of receiving a
shareholder's telephonic or electronically transmitted voting instructions, a
confirmation will be sent to the shareholder to ensure that the vote has been
taken in accordance with the shareholder's instructions and to provide a
telephone number to call immediately if the shareholder's instructions are not
correctly reflected in the confirmation. Any shareholder giving a proxy may
revoke it at any time before it is exercised by submitting to the Fund a written
notice of revocation or a subsequently executed proxy or by attending the
Meeting and voting in person.
If a proxy is properly executed and returned accompanied by
instructions to withhold authority to vote, represents a broker "non-vote" (that
is, a proxy from a broker or nominee indicating that such person has not
received instructions from the beneficial owner or other person entitled to vote
Fund shares on a particular matter with respect to which the broker or nominee
does not have discretionary power) or is marked with an abstention
(collectively, "abstentions"), the Fund shares represented thereby will be
considered to be present at a Meeting for purposes of determining the existence
of a quorum for the transaction of business. Abstentions will not constitute a
vote "for" or "against" a matter and will be disregarded in determining the
"votes cast" on an issue. For this reason, abstentions will have the effect of a
"no" vote for the purpose of obtaining requisite approval for the Proposal.
In the event that a quorum is not present at the Meeting, or if a
quorum is present but sufficient votes to approve the Proposal are not received,
the persons named as proxies may propose one or more adjournments of the Meeting
to permit further solicitation of proxies. In determining whether to adjourn the
Meeting, the following factors may be considered: the nature of the Proposal,
the percentage of votes actually cast, the percentage of negative votes actually
cast, the nature of any further solicitation and the information to be provided
to Fund shareholders with respect to the reasons for the solicitation. Any
adjournment will require the affirmative vote of a majority of those shares
affected by the adjournment that are represented at the Meeting in person or by
proxy. If a quorum is present, the persons named as proxies will vote those
proxies which they are entitled to vote "FOR" the Proposal in favor of such
adjournment, and will vote those proxies required to be voted "AGAINST" the
Proposal against any adjournment. A quorum is constituted with respect to the
Fund by the presence in person or by proxy of the holders of more than 30% of
the outstanding Fund shares entitled to vote at the Meeting.
The votes of the Acquiring Fund's shareholders are not being solicited
since their approval or consent is not necessary for the Exchange.
As of June 1, 2000, the following were known by the Fund to own of
record 5% or more of the outstanding voting shares of the Fund:
NAME AND ADDRESS PERCENTAGE OUTSTANDING
Charles Schwab & Co. Inc. BEFORE EXCHANGE AFTER EXCHANGE
Reinvest Account
101 Montgomery Street 11.28% _________%
San Francisco, CA 94101 (Class A)
As of May 31, 2000, the following were known by the Acquiring Fund to
own of record 5% or more of the outstanding voting shares of Class A:
NAME AND ADDRESS PERCENTAGE OUTSTANDING
BEFORE EXCHANGE AFTER EXCHANGE
Merrill Lynch Pierce Fenner & Smith
For the Sole Benefit of its Customers 19.62% _________%
Attn: Fund Administration (Class A) (Class A)
4800 Deer Lake Drive East
Jacksonville, FL 32246
First Union Securities, Inc.
Tifkat L.P. 10.98% _________%
111 East Kilbourn Avenue (Class A) (Class A)
Milwaukee, WI 53202
Merrill Lynch Pierce Fenner & Smith
For the Sole Benefit of its Customers 36.78% 36.78%
Attn: Fund Administration (Class B) (Class B)
4800 Deer Lake Drive East
Jacksonville, FL 32246
Merrill Lynch Pierce Fenner & Smith
For the Sole Benefit of its Customers 46.27% 46.27%
Attn: Fund Administration (Class C) (Class C)
4800 Deer Lake Drive East
Jacksonville, FL 32246
MBCIC
c/o Mellon Bank, N.A. 51.60% 51.60%
919 North Market Street (Class R) (Class R)
Wilmington, DE 19801
Boston & Co.
P.O. Box 534005 39.22% 39.22%
Pittsburgh, PA 15253 (Class R) (Class R)
As of May 31, 2000, Trustees and officers of The Dreyfus/Laurel Funds
Trust, as a group, owned less than 1% of the Acquiring Fund's outstanding
shares. As of June 1, 2000, Trustees and officers of the Trust, as a group,
owned less than 1% of the Fund's outstanding shares.
FINANCIAL STATEMENTS AND EXPERTS
The audited financial statements of the Fund for the fiscal year ended
October 31, 1999, and the audited financial statements of the Acquiring Fund for
the fiscal year ended December 31, 1999, have been incorporated herein by
reference in reliance upon the authority of the reports given, respectively, by
Ernst & Young LLP, the Fund's independent auditors, and KPMG LLP, the Acquiring
Fund's independent auditors, as experts in accounting and auditing. In addition,
the unaudited financial statements of the Fund for the six months ended April
30, 2000, also have been incorporated herein by reference.
OTHER MATTERS
The Trust's Trustees are not aware of any other matters which may come
before the Meeting. However, should any such matters properly come before the
Meeting, it is the intention of the persons named in the accompanying form of
proxy to vote the proxy in accordance with their judgment on such matters.
NOTICE TO BANKS, BROKER/DEALERS AND VOTING TRUSTEES
AND THEIR NOMINEES
Please advise the Trust, in care of Dreyfus Transfer, Inc., Attention:
Dreyfus Debt and Equity Funds--Dreyfus Short Term High Yield Fund, P.O. Box
9671, Providence, Rhode Island 02940-9671 whether other persons are the
beneficial owners of Fund shares for which proxies are being solicited from you,
and, if so, the number of copies of the Prospectus/Proxy Statement and other
soliciting material you wish to receive in order to supply copies to the
beneficial owners of Fund shares.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE,
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND IN PERSON ARE URGED TO COMPLETE, DATE,
SIGN AND RETURN THE PROXY CARD IN THE ENCLOSED STAMPED ENVELOPE.
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated June 7, 2000 (the
"Agreement"), between DREYFUS DEBT AND EQUITY FUNDS, a Massachusetts business
trust (the "Trust"), on behalf of DREYFUS SHORT TERM HIGH YIELD FUND (the
"Fund") and THE DREYFUS/LAUREL FUNDS TRUST, a Massachusetts business trust (the
"Dreyfus/Laurel Trust"), on behalf of DREYFUS PREMIER LIMITED TERM HIGH INCOME
FUND (the "Acquiring Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all of the
assets of the Fund, in exchange solely for Class A shares (the "Acquiring Fund
Shares") of beneficial interest, par value $.001 per share, of the Acquiring
Fund and the assumption by the Acquiring Fund of certain liabilities of the Fund
and the distribution, after the Closing Date hereinafter referred to, of the
Acquiring Fund Shares to the shareholders of the Fund in liquidation of the Fund
as provided herein, all upon the terms and conditions hereinafter set forth in
this Agreement.
WHEREAS, the Fund is a diversified series of the Trust, a registered
open-end management investment company, and the Acquiring Fund is a diversified
series of The Dreyfus/Laurel Trust, a registered, open-end management investment
company, and the Fund owns securities which are assets of the character in which
the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquiring Fund and the Fund are authorized to issue
their shares of beneficial interest;
WHEREAS, the Board of the Dreyfus/Laurel Trust has determined that the
exchange of all of the assets of the Fund and certain liabilities of the Fund
for Acquiring Fund Shares, and the assumption of such liabilities is in the best
interests of the Acquiring Fund's shareholders and that the interests of the
Acquiring Fund's existing shareholders would not be diluted as a result of this
transaction; and
WHEREAS, the Board of the Trust has determined that the exchange of
all of the assets and certain of the liabilities of the Fund for Acquiring Fund
Shares and the assumption of such liabilities is in the best interests of the
Fund's shareholders and that the interests of the Fund's existing shareholders
would not be diluted as a result of this transaction:
NOW THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties agree as follows:
1. TRANSFER OF ASSETS OF THE FUND IN EXCHANGE FOR THE ACQUIRING FUND SHARES AND
ASSUMPTION OF FUND LIABILITIES AND LIQUIDATION OF THE FUND.
1.1 Subject to the terms and conditions contained herein, the Fund
agrees to assign, transfer and convey to the Acquiring Fund all of the assets of
the Fund, including all securities and cash (subject to liabilities), and the
Acquiring Fund agrees in exchange therefor (i) to deliver to the Fund the number
of Acquiring Fund Shares, including fractional Acquiring Fund Shares, determined
as set forth in paragraph 2.3; and (ii) to assume certain liabilities of the
Fund, as set forth in paragraph 1.2. Such transactions shall take place at the
closing (the "Closing") on the closing date (the "Closing Date") provided for in
paragraph 3.1. In lieu of delivering certificates for the Acquiring Fund Shares,
the Acquiring Fund shall credit the Acquiring Fund Shares to the Fund's account
on the books of the Acquiring Fund and shall deliver a confirmation thereof to
the Fund.
1.2 The Fund will endeavor to discharge all of its known liabilities
and obligations prior to the Closing Date. The Acquiring Fund shall assume all
liabilities, expenses, costs, charges and reserves reflected on an unaudited
statement of assets and liabilities of the Fund prepared by The Dreyfus
Corporation ("Dreyfus"), as of the Valuation Date (as defined in paragraph 2.1),
in accordance with generally accepted accounting principles consistently applied
from the prior audited period. The Acquiring Fund shall assume only those
liabilities of the Fund reflected in that unaudited statement of assets and
liabilities and shall not assume any other liabilities, whether absolute or
contingent.
1.3 Delivery of the assets of the Fund to be transferred shall be made
on the Closing Date and shall be delivered to Mellon Bank, N.A., the Acquiring
Fund's custodian (the "Custodian"), for the account of the Acquiring Fund, with
all securities not in bearer or book-entry form duly endorsed, or accompanied by
duly executed separate assignments or stock powers, in proper form for transfer,
with signatures guaranteed, and with all necessary stock transfer stamps,
sufficient to transfer good and marketable title thereto (including all accrued
interest and dividends and rights pertaining thereto) to the Custodian for the
account of the Acquiring Fund free and clear of all liens, encumbrances, rights,
restrictions and claims. All cash delivered shall be in the form of immediately
available funds payable to the order of the Custodian for the account of the
Acquiring Fund.
1.4 The Fund will pay or cause to be paid to the Acquiring Fund any
interest received on or after the Closing Date with respect to assets
transferred to the Acquiring Fund hereunder. The Fund will transfer to the
Acquiring Fund any distributions, rights or other assets received by the Fund
after the Closing Date as distributions on or with respect to the securities
transferred. Such assets shall be deemed included in assets transferred to the
Acquiring Fund on the Closing Date and shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable (the
"Liquidation Date"), the Fund will liquidate and distribute pro rata to the
Fund's shareholders of record, determined as of the close of business on the
Closing Date (the "Fund Shareholders"), Acquiring Fund Shares received by the
Fund pursuant to paragraph 1.1. Such liquidation and distribution will be
accomplished by the transfer of the applicable Acquiring Fund Shares then
credited to the account of the Fund on the books of the Acquiring Fund to open
accounts on the share records of the Acquiring Fund in the names of the Fund
Shareholders and representing the respective pro rata number of the applicable
Acquiring Fund Shares due such shareholders. All issued and outstanding shares
of the Fund simultaneously will be canceled on the books of the Fund.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be issued
in the manner described in the Acquiring Fund's current prospectus and statement
of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquiring Fund shares
on the books of the Fund as of that time shall, as a condition of such issuance
and transfer, be paid by the person to whom such Acquiring Fund Shares are to be
issued and transferred.
1.8 Any reporting responsibility of the Fund is and shall remain the
responsibility of the Fund up to and including the Closing Date and such later
date on which the Fund's existence is terminated.
2. VALUATION.
2.1 The value of the Fund's assets to be acquired by the Acquiring
Fund hereunder shall be the value of such assets computed as of the close of
trading on the floor of the New York Stock Exchange (currently, 4:00 p.m., New
York time), except that options and futures contracts will be valued 15 minutes
after the close of trading on the floor of the New York Stock Exchange, on the
Closing Date (such time and date being hereinafter called the "Valuation Date"),
using the valuation procedures set forth in the Dreyfus/Laurel Trust's Trust
Agreement and the Acquiring Fund's then-current prospectus or statement of
additional information.
2.2 The net asset value of an Acquiring Fund Share shall be the net
asset value per share computed as of the Valuation Date, using the valuation
procedures set forth in the Dreyfus/Laurel Trust's Trust Agreement and the
Acquiring Fund's then-current prospectus or statement of additional information.
2.3 The number of Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Fund's net assets shall be
determined by dividing the value of the net assets of the Fund determined using
the same valuation procedures referred to in paragraph 2.1 by the net asset
value of one Acquiring Fund Share, determined in accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund.
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be five (5) business days following the
date shareholders of the Fund approve this Agreement, or such other date as the
parties, through its duly authorized officers, may mutually agree. All acts
taking place at the Closing shall be deemed to take place simultaneously as of
the close of business on the Closing Date unless otherwise provided. The Closing
shall be held at 10:00 a.m., New York time, at the offices of The Dreyfus
Corporation, 200 Park Avenue, New York, New York, or such other time and/or
place as the parties may mutually agree.
3.2 The Custodian shall deliver at the Closing a certificate of an
authorized officer stating that: (a) the Fund's portfolio securities, cash and
any other assets have been delivered in proper form to the Acquiring Fund within
two business days prior to or on the Closing Date; and (b) all necessary taxes
including all applicable stock transfer stamps have been paid, or provision for
payment shall have been made, in conjunction with the delivery of portfolio
securities.
3.3 If on the Valuation Date (a) the New York Stock Exchange or
another primary trading market for portfolio securities of the Acquiring Fund or
the Fund shall be closed to trading or trading thereon shall be restricted; or
(b) trading or the reporting of trading on said Exchange or elsewhere shall be
disrupted so that accurate appraisal of the value of the net assets of the
Acquiring Fund or the Fund is impracticable, the Closing Date shall be postponed
until the first business day after the day when trading shall have been fully
resumed and reporting shall have been restored.
3.4 The transfer agent for the Fund shall deliver at the Closing a
certificate of an authorized officer stating that its records contain the names
and addresses of the Fund Shareholders and the number and percentage ownership
of outstanding Fund shares owned by each such shareholder immediately prior to
the Closing. The Acquiring Fund shall issue and deliver a confirmation
evidencing the Acquiring Fund Shares to be credited on the Closing Date to the
Secretary of the Trust, or provide evidence satisfactory to the Fund that such
Acquiring Fund Shares have been credited to the Fund's account on the books of
the Acquiring Fund. At the Closing, each party shall deliver to the other such
bills of sale, checks, assignments, receipts or other documents as such other
party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES.
4.1 The Trust represents and warrants to the Acquiring Fund as
follows:
(a) The Fund is a series of the Trust, a business trust duly
organized and validly existing and in good standing under the laws of The
Commonwealth of Massachusetts and has power to own all of its properties and
assets and to carry out this Agreement.
(b) The Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, management investment
company, of which the Fund is a duly established and designated separate,
diversified series, and such registration has not been revoked or rescinded and
is in full force and effect.
(c) The current prospectus and statement of additional
information of the Fund conform in all material respects to the applicable
requirements of the Securities Act of 1933, as amended (the "1933 Act"), and the
1940 Act and the rules and regulations of the Securities and Exchange Commission
(the "SEC") thereunder and do not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(d) The Fund is not, and the execution, delivery and performance
of this Agreement will not result, in material violation of the Trust's
Agreement and Declaration of Trust dated March 12, 1992, as the same may have
been amended (the "Charter"), or its Bylaws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Fund is a party or
by which it is bound.
(e) The Fund has no material contracts or other commitments
outstanding (other than this Agreement) which will be terminated with liability
to it on or prior to the Closing Date.
(f) No litigation or administrative proceeding or investigation
of or before any court or governmental body is currently pending or to its
knowledge threatened against the Fund or any of its properties or assets which,
if adversely determined, would materially and adversely affect its financial
condition or the conduct of its business. The Fund knows of no facts which might
form the basis for the institution of such proceedings, and is not a party to or
subject to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or its
ability to consummate the transactions herein contemplated.
(g) The Statements of Assets and Liabilities of the Fund for the
four fiscal years ended October 31, 1999, have been audited by Ernst & Young
LLP, independent auditors, and are in accordance with generally accepted
accounting principles, consistently applied, and such statements (copies of
which have been furnished to the Acquiring Fund) fairly reflect the financial
condition of the Fund as of such dates, and there are no known contingent
liabilities of the Fund as of such dates not disclosed therein.
(h) Since October 31, 1999, there has not been any material
adverse change in the Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or any
incurrence by the Fund of indebtedness maturing more than one year from the date
such indebtedness was incurred, except as disclosed on the statement of assets
and liabilities referred to in Section 1.2 hereof.
(i) At the Closing Date, all Federal and other tax returns and
reports of the Fund required by law to have been filed by such dates shall have
been filed, and all Federal and other taxes shall have been paid so far as due,
or provision shall have been made for the payment thereof, and to the best of
the Trust's knowledge no such return is currently under audit and no assessment
has been asserted with respect to such returns.
(j) For each fiscal year of its operation, the Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company.
(k) All issued and outstanding shares of the Fund are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable by the Fund. All of the issued and outstanding shares of the Fund
will, at the time of Closing, be held by the persons and in the amounts set
forth in the records of the transfer agent as provided in paragraph 3.4. The
Fund does not have outstanding any options, warrants or other rights to
subscribe for or purchase any of the Fund's shares, nor is there outstanding any
security convertible into any of the Fund's shares.
(l) On the Closing Date, the Fund will have full right, power and
authority to sell, assign, transfer and deliver the assets to be transferred by
it hereunder.
(m) The execution, delivery and performance of this Agreement
will have been duly authorized prior to the Closing Date by all necessary action
on the part of the Trust's Board and, subject to the approval of the Fund
Shareholders, this Agreement will constitute the valid and legally binding
obligation of the Fund, enforceable in accordance with its terms, subject to the
effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar laws relating to or affecting creditors' rights
generally and court decisions with respect thereto, and to general principles of
equity and the discretion of the court (regardless of whether the enforceability
is considered in a proceeding in equity or at law).
(n) The proxy statement of the Fund (the "Proxy Statement"),
included in the Registration Statement referred to in paragraph 5.5 (other than
information therein that has been furnished by the Acquiring Fund) will, on the
effective date of the Registration Statement and on the Closing Date, not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not materially
misleading.
4.2 The Dreyfus/Laurel Trust represents and warrants as follows:
(a) The Acquiring Fund is a series of the Dreyfus/Laurel Trust, a
business trust duly organized, validly existing and in good standing under the
laws of The Commonwealth of Massachusetts and has power to carry on its business
as it is now being conducted and to carry out this Agreement.
(b) The Dreyfus/Laurel Trust is registered under the 1940 Act as
an open-end, diversified management investment company, of which the Acquiring
Fund is a duly established and designated, separate, diversified series, and
such registration has not been revoked or rescinded and is in full force and
effect.
(c) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act, and the rules and
regulations of the SEC thereunder, and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not materially misleading.
(d) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of the
Dreyfus/Laurel Trust's Second Amended and Restated Agreement and Declaration of
Trust, as amended (the "Trust Agreement"), or its Bylaws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquiring Fund is a party or by which it is bound.
(e) No litigation or administrative proceeding or investigation
of or before any court or governmental body is currently pending or to its
knowledge threatened against the Acquiring Fund or any of its properties or
assets which, if adversely determined, would materially and adversely affect its
financial condition or the conduct of its business. The Acquiring Fund knows of
no facts which might form the basis for the institution of such proceedings, and
is not a party to or subject to the provisions of any order, decree or judgment
of any court or governmental body which materially and adversely affects its
business or its ability to consummate the transactions contemplated herein.
(f) The Statements of Assets and Liabilities of the Acquiring
Fund for the three fiscal years ended December 31, 1999, have been audited by
KPMG LLP, independent auditors, and are in accordance with generally accepted
accounting principles, consistently applied, and such statements (copies of
which have been furnished to the Fund) fairly reflect the financial condition of
the Acquiring Fund as of such dates.
(g) Since December 31, 1999, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as disclosed on the
statement of assets and liabilities referred to in Section 4.2(f) hereof.
(h) At the Closing Date, all Federal and other tax returns and
reports of the Acquiring Fund required by law then to be filed shall have been
filed, and all Federal and other taxes shown as due on said returns and reports
shall have been paid or provision shall have been made for the payment thereof.
(i) For each fiscal year of its operation, the Acquiring Fund has
met the requirements of Subchapter M of the Code for qualification and treatment
as a regulated investment company.
(j) All issued and outstanding shares of the Acquiring Fund are,
and at the Closing Date will be, duly and validly issued and outstanding, fully
paid and non-assessable by the Acquiring Fund. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any of the Acquiring Fund Shares, nor is there outstanding any security
convertible into any Acquiring Fund Shares.
(k) The execution, delivery and performance of this Agreement
will have been duly authorized prior to the Closing Date by all necessary
action, if any, on the part of the Dreyfus/Laurel Trust's Trustees and Acquiring
Fund shareholders, and this Agreement will constitute the valid and legally
binding obligation of the Acquiring Fund enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws relating to or
affecting creditors' rights generally and court decisions with respect thereto,
and to general principles of equity and the discretion of the court (regardless
of whether the enforceability is considered in a proceeding in equity or at
law).
(l) The Proxy Statement included in the Registration Statement
(only insofar as it relates to the Acquiring Fund and is based on information
furnished by the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which such statements were made, not materially misleading.
5. COVENANTS OF THE ACQUIRING FUND AND THE FUND.
5.1 The Acquiring Fund and the Fund each will operate its business in
the ordinary course between the date hereof and the Closing Date, it being
understood that such ordinary course of business will include payment of
customary dividends and distributions.
5.2 The Trust will call a meeting of the Fund Shareholders to consider
and act upon this Agreement and to take all other action necessary to obtain
approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund
and the Fund will each take, or cause to be taken, all action, and do or cause
to be done, all things reasonably necessary, proper or advisable to consummate
and make effective the transactions contemplated by this Agreement.
5.4 As promptly as practicable, but in any case within sixty days
after the Closing Date, the Fund shall furnish the Acquiring Fund, in such form
as is reasonably satisfactory to the Acquiring Fund, a statement of the earnings
and profits of the Fund for Federal income tax purposes which will be carried
over to the Acquiring Fund as a result of Section 381 of the Code and which will
be certified by the Trust's President or its Vice President and Treasurer.
5.5 The Trust will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement, referred to in paragraph 4.1(n), all to
be included in a Registration Statement on Form N-14 of the Acquiring Fund (the
"Registration Statement"), in compliance with the 1933 Act, the Securities
Exchange Act of 1934, as amended, and the 1940 Act in connection with the
meeting of the Fund Shareholders to consider approval of this Agreement and the
transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and such
of the state Blue Sky or securities laws as it may deem appropriate in order to
continue its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by the
Fund of all the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of the Trust on behalf of the
Fund contained in this Agreement shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing Date with the
same force and effect as if made on and as of the Closing Date.
6.2 The Fund shall have delivered to the Acquiring Fund a statement of
the Fund's assets and liabilities, together with a list of the Fund's portfolio
securities showing the tax basis of such securities by lot and the holding
periods of such securities, as of the Closing Date, certified by the Treasurer
of the Trust.
6.3 The Trust shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by the Trust's President or Vice
President and its Treasurer, in form and substance satisfactory to the Acquiring
Fund, to the effect that the representations and warranties of the Trust made in
this Agreement on behalf of the Fund are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated by
this Agreement, and as to such other matters as the Acquiring Fund shall
reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE FUND.
The obligations of the Fund to consummate the transactions provided
for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Dreyfus/Laurel Trust on
behalf of the Acquiring Fund contained in this Agreement shall be true and
correct in all material respects as of the date hereof and, except as they may
be affected by the transactions contemplated by this Agreement, as of the
Closing Date with the same force and effect as if made on and as of the Closing
Date.
7.2 The Acquiring Fund shall have delivered to the Fund on the Closing
Date a certificate executed in its name by the Dreyfus/Laurel Trust's President
or Vice President and its Treasurer, in form and substance reasonably
satisfactory to the Fund, to the effect that the representations and warranties
of the Dreyfus/Laurel Trust made in this Agreement on behalf of the Acquiring
Fund are true and correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement, and as to such
other matters as the Fund shall reasonably request.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE
FUND.
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Fund or the Acquiring Fund, the other party to
this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement.
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Fund in accordance with the provisions of the Trust's Charter.
8.2 On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those of
the SEC and of state Blue Sky and securities authorities) deemed necessary by
the Acquiring Fund or the Fund to permit consummation, in all material respects,
of the transactions contemplated hereby shall have been obtained, except where
failure to obtain any such consent, order or permit would not involve a risk of
a material adverse effect on the assets or properties of the Acquiring Fund or
the Fund, provided that either party hereto may for itself waive any of such
conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act.
8.5 The Fund shall have declared a dividend or dividends which,
together with all previous such dividends, shall have the effect of distributing
to the Fund Shareholders all of the Fund's investment company taxable income for
all taxable years or periods ending on or prior to the Closing Date (computed
without regard to any deduction for dividends paid); the excess of its interest
income excludable from gross income under Section 103(a) of the Code over its
disallowed deductions under Sections 265 and 171(a)(2) of the Code, for all
taxable years or periods ending on or prior to the Closing Date; and all of its
net capital gain realized in all taxable years ending on or prior to the Closing
Date (after reduction for any capital loss carry forward).
8.6 The parties shall have received an opinion of Stroock & Stroock &
Lavan LLP substantially to the effect that for Federal income tax purposes:
(a) The transfer of all or substantially all of the Fund's assets
in exchange for the Acquiring Fund Shares and the assumption by the Acquiring
Fund of certain identified liabilities of the Fund will constitute a
"reorganization" within the meaning of Section 368(a)(1)(C) of the Code; (b) No
gain or loss will be recognized by the Acquiring Fund upon the receipt of the
assets of the Fund solely in exchange for the Acquiring Fund Shares and the
assumption by the Acquiring Fund of certain identified liabilities of the Fund;
(c) No gain or loss will be recognized by the Fund upon the transfer of the
Fund's assets to the Acquiring Fund in exchange for the Acquiring Fund Shares
and the assumption by the Acquiring Fund of certain identified liabilities of
the Fund or upon the distribution (whether actual or constructive) of the Fund
Shares to Fund Shareholders in exchange for their shares of the Fund; (d) No
gain or loss will be recognized by the Fund Shareholders upon the exchange of
their Fund shares for the Acquiring Fund Shares; (e) The aggregate tax basis for
the Acquiring Fund Shares received by each of the Fund Shareholders pursuant to
the Reorganization will be the same as the aggregate tax basis of the Fund
shares held by such shareholder immediately prior to the Reorganization, and the
holding period of the Acquiring Fund Shares to be received by each Fund
Shareholder will include the period during which the Fund shares exchanged
therefor were held by such shareholder (provided the Fund shares were held as
capital assets on the date of the Reorganization); and (f) The tax basis of the
Fund assets acquired by the Acquiring Fund will be the same as the tax basis of
such assets to the Fund immediately prior to the Reorganization, and the holding
period of the assets of the Fund in the hands of the Acquiring Fund will include
the period during which those assets were held by the Funds.
No opinion will be expressed as to the effect of the
reorganization on (i) the Fund or the Acquiring Fund with respect to any asset
as to which any unrealized gain or loss is required to be recognized for Federal
income tax purposes at the end of a taxable year (or on the termination or
transfer thereof) under a mark-to-market system of accounting, and (ii) any
shareholder of the Fund that is required to recognize unrealized gains and
losses for Federal income tax purposes under a mark-to-market system of
accounting.
9. TERMINATION OF AGREEMENT.
9.1 This Agreement and the transaction contemplated hereby may be
terminated and abandoned by resolution of the Board of the Trust or of the
Dreyfus/Laurel Trust, as the case may be, at any time prior to the Closing Date
(and notwithstanding any vote of the Fund Shareholders) if circumstances should
develop that, in the opinion of either of the parties' Board, make proceeding
with the Agreement inadvisable.
9.2 If this Agreement is terminated and the transaction contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this Agreement
shall become void and have no effect, without any liability on the part of any
party hereto or the trustees, officers or shareholders of the Dreyfus/Laurel
Trust or of the Trust, as the case may be, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing conditions
may be waived by the Board of the Dreyfus/Laurel Trust or of the Trust if, in
the judgment of either, such waiver will not have a material adverse effect on
the benefits intended under this Agreement to the shareholders of the Acquiring
Fund or of the Fund, as the case may be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided
for herein shall survive consummation of the transactions contemplated hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and merges
and supersedes all prior discussions, agreements and understandings of every
kind and nature between them relating to the subject matter hereof. Neither
party shall be bound by any condition, definition, warranty or representation,
other than as set forth or provided in this Agreement or as may be, on or
subsequent to the date hereof, set forth in a writing signed by the party to be
bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the State of New York, without giving effect to principles
of conflict of laws; provided, however, that the due authorization, execution
and delivery of this Agreement by the Acquiring Fund and the Fund shall be
governed and construed in accordance with the internal laws of The Commonwealth
of Massachusetts without giving effect to principles of conflict of laws.
11.4 This Agreement may be amended only by a signed writing between
the parties.
11.5 This Agreement may be executed in counterparts, each of which,
when executed and delivered, shall be deemed to be an original.
11.6 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
11.7 (a) The names "The Dreyfus/Laurel Funds Trust" and "Trustees of
The Dreyfus/Laurel Fund Trust" refer respectively to the Dreyfus/Laurel Trust
and its Trustees, as trustees but not individually or personally, acting from
time to time under the Trust Agreement, a copy of which is on file at the office
of the Secretary of The Commonwealth of Massachusetts and at the principal
office of the Dreyfus/Laurel Trust. The obligations of the Acquiring Fund
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, shareholders or representatives of the
Acquiring Fund personally, but bind only the Acquiring Fund's property, and all
persons dealing with any class of shares of the Acquiring Fund must look solely
to the Acquiring Fund's property belonging to such class for the enforcement of
any claims against the Acquiring Fund.
(b) The names "Dreyfus Debt and Equity Funds" and "Trustees of Dreyfus
Debt and Equity Funds" refer respectively to the Trust and its Trustees, as
trustees but not individually or personally, acting from time to time under the
Charter, a copy of which is on file at the office of the Secretary of The
Commonwealth of Massachusetts and at the principal office of the Trust. The
obligations of the Trust entered into in the name or on behalf of the Fund by
any of the Trustees, representatives or agents are made not individually, but in
such capacities, and are not binding upon any of the Trustees, shareholders or
representatives of the Trust personally, but bind only the Fund's property, and
all persons dealing with the Fund must look solely to the Fund's property for
the enforcement of any claims against the Fund.
11.8 Any references in this Agreement to actions taken, deliveries by
or to, representations and warranties made by or to, or obligations of, the Fund
shall be deemed references to actions taken, deliveries by or to,
representations and warranties made by or to, or obligations of, the Trust on
behalf of the Fund.
<PAGE>
IN WITNESS WHEREOF, the Dreyfus/Laurel Trust and the Trust have caused
this Agreement and Plan of Reorganization to be executed and attested on its
behalf by its duly authorized representatives as of the date first above
written.
THE DREYFUS / LAUREL FUNDS TRUST,
on behalf of Dreyfus Premier Limited Term High Income Fund
By: /S/ STEPHEN E. CANTER
------------------------------------
Stephen E. Canter,
President
ATTEST: /S/ STEVEN F. NEWMAN
----------------------------
Steven F. Newman,
Secretary
DREYFUS DEBT AND EQUITY FUNDS,
on behalf of Dreyfus Short Term High Yield Fund
By: /S/ STEPHEN E. CANTER
-----------------------------------
Stephen E. Canter,
President
ATTEST: /S/ JOHN B. HAMMALIAN
--------------------------
John B. Hammalian,
Secretary
<PAGE>
DREYFUS SHORT TERM HIGH YIELD FUND
The undersigned shareholder of Dreyfus Short Term High Yield Fund (the
"Fund"), a series of Dreyfus Debt and Equity Funds (the "Trust"), hereby
appoints John B. Hammalian and Steven F. Newman, and each of them, the attorneys
and proxies of the undersigned, with full power of substitution, to vote, as
indicated herein, all of the shares of beneficial interest of the Fund standing
in the name of the undersigned at the close of business on July 10, 2000, at a
Special Meeting of Shareholders to be held at the offices of The Dreyfus
Corporation, 200 Park Avenue, 7th Floor, Room 7G, New York, New York 10166, at
10:00 a.m. on Friday, September 8, 2000, and at any and all adjournments
thereof, with all of the powers the undersigned would possess if then and there
personally present and especially (but without limiting the general
authorization and power hereby given) to vote as indicated on the proposal, as
more fully described in the Prospectus/Proxy Statement for the meeting.
Please mark boxes in blue or black ink.
1. To approve an Agreement and Plan of Reorganization between the Fund
and Dreyfus Premier Limited Term High Income Fund (the "Acquiring Fund"),
providing for the transfer of all of the assets of the Fund, subject to its
liabilities, in exchange for Class A shares of the Acquiring Fund and the
assumption by the Acquiring Fund of the Fund's liabilities, and the pro rata
distribution of those shares to Fund's shareholders and subsequent termination
of the Fund.
FOR AGAINST ABSTAIN
|_| |_| |_|
2. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting, or any adjournment(s)
thereof.
THIS PROXY IS SOLICITED BY THE TRUST'S BOARD OF TRUSTEES AND WILL BE VOTED FOR
THE ABOVE PROPOSAL UNLESS OTHERWISE INDICATED.
Signature(s) should be exactly as name or names appearing on this
proxy. If shares are held jointly, each holder should sign. If signing is by
attorney, executor, administrator, trustee or guardian, please give full title.
Dated: ______________, 2000
______________________
Signature(s)
_______________________
Signature(s)
Sign, Date and Return the Proxy Card
Promptly Using the Enclosed Envelope
<PAGE>
PRELIMINARY COPY
DREYFUS PREMIER LIMITED TERM HIGH INCOME FUND
STATEMENT OF ADDITIONAL INFORMATION
________________ __, 2000
Acquisition of the Assets of
DREYFUS SHORT TERM HIGH INCOME FUND
144 Glenn Curtiss Boulevard
Uniondale, New York 11556-0144
1-800-645-6561
By and in Exchange for Class A Shares of
DREYFUS PREMIER LIMITED TERM HIGH INCOME FUND
144 Glenn Curtiss Boulevard
Uniondale, New York 11556-0144
1-800-645-6561
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the Prospectus/Proxy
Statement dated _____________ __, 2000, relating specifically to the proposed
transfer of all of the assets and liabilities of Dreyfus Short Term High Income
Fund (the "Fund"), a separate portfolio of Dreyfus Debt and Equity Funds (the
"Trust"), in exchange for Class A shares of Dreyfus Premier Limited Term High
Income Fund (the "Acquiring Fund"), a separate portfolio of The Dreyfus/Laurel
Funds Trust (the "Company"). The transfer is to occur pursuant to an Agreement
and Plan of Reorganization. This Statement of Additional Information consists of
this cover page and the following documents attached hereto:
1. The Acquiring Fund's Statement of Additional Information dated May
1, 2000.
2. The Acquiring Fund's Annual Report for the fiscal year ended
December 31, 1999.
3. The Fund's Annual Report for the fiscal year ended October 31,
1999.
4. The Fund's Semi-Annual Report for the six-month period ended April
30, 2000.
5. Pro Forma Financial Statements of the Acquiring Fund and Fund
giving effect to the proposed Exchange described in the Prospectus/Proxy
Statement.
The Acquiring Fund's Statement of Additional Information, the Pro
Forma Financial Statements and the financial statements included in the
Acquiring Fund's Annual Report and the Fund's Annual Report and Semi-Annual
Report are incorporated herein by reference. The Prospectus/Proxy Statement
dated ____________, 2000 may be obtained by writing to the Fund or Acquiring
Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144.
<PAGE>
------------------------------------------------------------------------------
DREYFUS PREMIER LIMITED TERM HIGH INCOME FUND
CLASS A, CLASS B, CLASS C AND CLASS R SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MAY 1, 2000
------------------------------------------------------------------------------
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of the
Dreyfus Premier Limited Term High Income Fund (the "Fund"), dated May 1, 2000,
as it may be revised from time to time. The Fund is a separate, diversified
portfolio of The Dreyfus/Laurel Funds Trust (the "Trust"), an open-end,
management investment company, known as a mutual fund, that is registered with
the Securities and Exchange Commission ("SEC"). To obtain a copy of the Fund's
Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale,
New York 11556-0144, or call one of the following numbers:
Call Toll Free 1-800-554-4611
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452
The financial statements for the fiscal year ended December 31, 1999,
including notes to the financial statements and supplementary information and
the Independent Auditors' Report, are included in the Annual Report to
shareholders. A copy of the Annual Report accompanies this Statement of
Additional Information. The financial statements included in the Annual Report,
and the Independent Auditors' Report thereon contained therein, and related
notes, are incorporated herein by reference.
TABLE OF CONTENTS
Page
Description of the Fund/Trust...................................B-2
Management of the Fund..........................................B-24
Management Arrangements.........................................B-28
Purchase of Shares..............................................B-30
Distribution and Service Plans..................................B-37
Redemption of Shares............................................B-39
Shareholder Services............................................B-44
Additional Information About Purchases, Exchanges
and Redemptions...............................................B-50
Determination of Net Asset Value................................B-51
Dividends, Other Distributions And Taxes........................B-52
Portfolio Transactions..........................................B-56
Performance Information.........................................B-58
Information About the Fund/Trust................................B-60
Counsel and Independent Auditors................................B-61
Year 2000 Issues................................................B-62
Appendix........................................................B-63
<PAGE>
DESCRIPTION OF THE FUND/TRUST
The Trust was organized as a business trust under the laws of the
Commonwealth of Massachusetts on March 30, 1979. The Trust is an open-end
management investment company comprised of separate portfolios, including the
Fund, each of which is treated as a separate fund. The Fund is diversified,
which means that, with respect to 75% of its total assets, the Fund will not
invest more than 5% of its assets in the securities of any single issuer.
The Fund's investment objective is to provide high current income. This
objective cannot be changed without approval by the holders of a majority (as
defined in the Investment Company Act of 1940, as amended (the "1940 Act")) of
the Fund's outstanding voting shares.
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
Dreyfus Service Corporation (the "Distributor") is the distributor of the
Fund's shares.
Certain Portfolio Securities
The following information regarding the securities that the Fund may
purchase supplements that found in the Fund's prospectus.
Investment Grade Obligations. Corporate obligations rated Baa or higher by
Moody's Investors Service, Inc. ("Moody's") or BBB or higher by Standard &
Poor's Rating Service, a division of McGraw-Hill Companies, Inc. ("S&P"), Fitch
IBCA, Inc. ("Fitch") or Duff & Phelps Credit Rating Co. ("Duff") are considered
by those rating agencies to be "investment grade" securities. The Fund may
invest in investment grade securities (or if unrated, of comparable quality as
determined by Dreyfus) when the yield differential between below investment
grade and investment grade securities narrows and the risk of loss may be
reduced with only a relatively small reduction in yield. The Fund also may
invest in investment grade securities when Dreyfus determines that a defensive
investment position is appropriate in light of market or economic conditions.
Lower Rated Securities. The Fund generally will invest in securities rated
below investment grade such as those rated Ba or lower by Moody's or BB or lower
by S&P, Fitch and Duff & Phelps Credit Rating Co. ("Duff" and with Moody's, S&P
and Fitch, the "Rating Agencies") (commonly known as junk bonds). The Fund is
permitted to invest in securities assigned ratings as low as the lowest ratings
assigned by the Rating Agencies. Such securities, though higher yielding, are
characterized by risk. See the Appendix for a general description of the Rating
Agencies' ratings. Although ratings may be useful in evaluating the safety of
interest and principal payments, they do not evaluate the market value risk of
these securities. The Fund will rely on the judgment, analysis and experience of
Dreyfus in evaluating the creditworthiness of an issuer. The Fund's ability to
achieve its investment objective may be more dependent on the credit analysis
undertaken by Dreyfus than might be the case for a fund that invests in higher
rated securities.
Investors should be aware that the market values of many of these
securities tend to be more sensitive to economic conditions than are higher
rated securities. These securities generally are considered by the Rating
Agencies to be predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation and
generally will involve more credit risk than securities in the higher rating
categories.
Companies that issue certain of these securities often are highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risk associated with acquiring the securities of such
issuers generally is greater than is the case with the higher rated securities.
For example, during an economic downturn or a sustained period of rising
interest rates, highly leveraged issuers of these securities may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations also may be affected adversely by
specific corporate developments, forecasts, or the unavailability of additional
financing. The risk of loss because of default by the issuer is significantly
greater for the holders of these securities because such securities generally
are unsecured and often are subordinated to other creditors of the issuer. Bond
prices are inversely related to interest rate changes; however, bond price
volatility also is inversely related to coupon. Accordingly, below investment
grade securities may be relatively less sensitive to interest rate changes than
higher quality securities of comparable maturity, because of their higher
coupon. This higher coupon is what the investor receives in return for bearing
greater credit risk.
Because there is no established retail secondary market for many of these
securities, the Fund anticipates that such securities could be sold only to a
limited number of dealers or institutional investors. To the extent a secondary
trading market for these securities does exist, it generally is not as liquid as
the secondary market for higher rated securities. The lack of a liquid secondary
market may have an adverse impact on market price and yield and the Fund's
ability to dispose of particular issues when necessary to meet the Fund's
liquidity needs or in response to a specific economic event such as a
deterioration in the creditworthiness of the issuer. The lack of a liquid
secondary market for certain securities also may make it more difficult for the
Fund to obtain accurate market quotations for purposes of valuing the Fund's
portfolio and calculating its net asset value ("NAV"). Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, may decrease
the values and liquidity of these securities. In such cases, judgment may play a
greater role in valuation because less reliable, objective data may be
available.
These securities may be particularly susceptible to economic downturns. It
is likely that an economic recession could disrupt severely the market for such
securities and may have an adverse impact on the value of such securities. In
addition, it is likely that any such economic downturn could adversely affect
the ability of the issuers of such securities to repay principal and pay
interest thereon and increase the incidence of default for such securities.
The Fund may acquire these securities during an initial offering. Such
securities may involve special risks because they are new issues. The Fund has
no arrangement with any person concerning the acquisition of such securities,
and Dreyfus will review carefully the credit and other characteristics pertinent
to such new issues.
The average distribution of investments of the Fund in corporate bonds by
ratings for the fiscal year ended December 31, 1999, calculated monthly on a
dollar weighted basis, was as follows:
Moody's S&P, Fitch or Duff Percentage
------- ------------------ ----------
Aaa AAA 1.5%
Baa BBB 1.1%
Ba BB 12.6%
B B 64.9%
Caa CCC 4.9%
Ca CC .8%
NR NR 4.2%*
----
90.0%**
The actual distribution of the Fund's corporate bond investments by
ratings on any given date will vary, and the distribution of the Fund's
investments by ratings as set forth above should not be considered as
representative of the Fund's future portfolio composition.
-----------------------
* These unrated securities have been determined by Dreyfus to be of
comparable quality to securities rated as follows: BBB (.1%), BB (.4%), B
(1.5%) and CCC (2.2%).
** The Fund also owns equity securities as follows: (.1%), preferred stocks
rated BB (1.0%) preferred stocks rated CCC (2.6%), convertible bonds rated
BBB (.9%) and convertible bonds rated B (4.4%).
U.S. Government Securities. Securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities include U.S. Treasury securities
which 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.
Municipal Obligations. Municipal obligations are debt obligations issued
by states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities, or
multistate agencies or authorities. Municipal obligations bear fixed, floating
or variable rates of interest. Certain municipal obligations are subject to
redemption at a date earlier than their stated maturity pursuant to call
options, which may be separated from the related municipal obligations and
purchased and sold separately. The Fund also may acquire call options on
specific municipal obligations. The Fund generally would purchase these call
options to protect the Fund from the issuer of the related municipal obligation
redeeming, or other holder of the call option from calling away, the municipal
obligation before maturity.
While, in general, municipal obligations are tax exempt securities having
relatively low yields as compared to taxable, non-municipal obligations of
similar quality, certain municipal obligations are taxable obligations, offering
yields comparable to, and in some cases greater than, the yields available on
other permissible Fund investments. Dividends received by shareholders on Fund
shares which are attributable to interest income received by the Fund from
municipal obligations generally will be subject to Federal income tax. The Fund
may invest in municipal obligations, the ratings of which correspond with the
ratings of other permissible Fund investments. The Fund currently intends to
invest no more than 25% of its assets in municipal obligations. However, this
percentage may be varied from time to time without shareholder approval.
Municipal obligations generally include debt obligations issued to obtain
funds for various public purposes as well as certain industrial development
bonds issued by or on behalf of public authorities. Municipal obligations are
classified as general obligation bonds, revenue bonds and notes. General
obligation bonds are secured by the issuer's pledge of its faith, credit and
taxing power for the payment of principal and interest. Revenue bonds are
payable from the revenue derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source, but not from the general taxing power. Industrial
development bonds, in most cases, are revenue bonds that generally do not carry
the pledge of the credit of the issuing municipality, but generally are
guaranteed by the corporate entity on whose behalf they are issued. Notes are
short-term instruments which are obligations of the issuing municipalities or
agencies and are sold in anticipation of a bond sale, collection of taxes or
receipt of other revenues. Municipal obligations include municipal
lease/purchase agreements which are similar to installment purchase contracts
for property or equipment issued by municipalities.
Mortgage-Related Securities. The Fund may invest in various
mortgage-related securities. Mortgage backed securities may represent an
ownership interest in a pool of residential mortgage loans. These securities are
designed to provide monthly payments of interest and principal to the investor.
The mortgagor's monthly payments to his/her lending institution are "passed
through" to an investor. Most issuers or poolers provide guarantees of payments,
regardless of whether or not the mortgagor actually makes the payment. The
guarantees made by issuers or poolers are supported by various forms of credit,
collateral, guarantees or insurance, including individual loan, title, pool and
hazard insurance purchased by the issuer. There can be no assurance that the
private issuers or poolers can meet their obligations under the policies.
Mortgage backed securities issued by private issuers or poolers, whether or not
such securities are subject to guarantees, may entail greater risk than
securities directly or indirectly guaranteed by the U.S. Government.
The mortgage-related securities which may be purchased include those with
fixed, floating and variable interest rates, those with interest rates that
change based on multiples of changes in interest rates and those with interest
rates that change inversely to changes in interest rates, as well as stripped
mortgage-backed securities. Stripped mortgage-backed securities usually are
structured with two classes that receive different proportions of interest and
principal distributions on a pool of mortgage-backed securities or whole loans.
A common type of stripped mortgage-backed security will have one class receiving
some of the interest and most of the principal from the mortgage collateral,
while the other class will receive most of the interest and the remainder of the
principal. Although certain mortgage-related securities are guaranteed by a
third party or otherwise similarly secured, the market value of the security,
which may fluctuate, is not secured. If a mortgage-related security is purchased
at a premium, all or part of the premium may be lost if there is a decline in
the market value of the security, whether resulting from changes in interest
rates or prepayments on the underlying mortgage collateral.
As with other interest-bearing securities, the prices of certain
mortgage-related securities are inversely affected by changes in interest rates.
However, although the value of a mortgage-related security may decline when
interest rates rise, the converse is not necessarily true, since in periods of
declining interest rates the mortgages underlying the security are more likely
to be prepaid. For this and other reasons, a mortgage-related security's stated
maturity may be shortened by unscheduled prepayments on the underlying
mortgages, and, therefore, it is not possible to predict accurately the
security's return to the Fund. Moreover, with respect to stripped
mortgage-backed securities, if the underlying mortgage securities experience
greater than anticipated prepayments of principal, the Fund may fail to fully
recoup its initial investment even if the securities rated in the highest rating
category by a nationally recognized statistical rating organization.
The mortgage-related securities in which the Fund may invest also include
multi-class pass-through certificates secured principally by mortgage loans on
commercial properties. These mortgage-related securities are structured
similarly to mortgage-related securities secured by pools of residential
mortgages. Commercial lending, however, generally is viewed as exposing the
lender to a greater risk of loss than one- to four-family residential lending.
Commercial lending, for example, typically involves larger loans to single
borrowers or groups of related borrowers than residential one- to four-family
mortgage loans. In addition, the repayment of loans secured by income producing
properties typically is dependent upon the successful operation of the related
real estate project and the cash flow generated therefrom. Consequently, adverse
changes in economic conditions and circumstances are more likely to have an
adverse impact on mortgage-related securities secured by loans on commercial
properties than on those secured by loans on residential properties.
During periods of rapidly rising interest rates, prepayments of
mortgage-backed securities may occur at slower than expected rates. Slower
prepayments effectively may change a mortgage-backed security that was
considered short- or intermediate-term at the time of purchase into a long-term
security. The values of long-term securities generally fluctuate more widely in
response to changes in interest rates than short- or intermediate-term
securities. Were the prepayments on the Fund's mortgage-backed securities to
decrease broadly, the Fund's average effective duration, and thus sensitivity to
increase rate fluctuations, would increase. Therefore, depending on the
circumstances, such an increase could result in an average effective duration of
more than 3.5 years.
Certificates of the Government National Mortgage Association ("GNMA") are
mortgage-backed securities representing part ownership of a pool of mortgage
loans. These loans are made by mortgage bankers, commercial banks, savings and
loan associations, and other lenders and are either insured by the Federal
Housing Administration or guaranteed by the Veterans Administration. A "pool" or
group of such mortgages is assembled and, after being approved by GNMA, is
offered to investors through securities dealers. Once approved by GNMA, the
timely payment of interest and principal on each mortgage is guaranteed by the
full faith and credit of the U.S. Government. Although the mortgage loans in a
pool underlying a GNMA Certificate will have maturities of up to 30 years, the
average life of a GNMA Certificate will be substantially less because the
mortgages will be subject to normal principal amortization and also may be
prepaid prior to maturity. Prepayment rates vary widely and may be affected by
changes in mortgage interest rates. In periods of falling interest rates, the
rate of prepayment on higher interest mortgage rates tends to increase, thereby
shortening the actual average life of the GNMA Certificate. Conversely, when
interest rates are rising, the rate of prepayment tends to decrease, thereby
lengthening the average life of the GNMA Certificates. Reinvestment of
prepayments may occur at higher or lower rates than the original yield of the
Certificates. Due to the prepayment feature and the need to reinvest prepayments
of principal at current rates, GNMA Certificates with underlying mortgages
bearing higher interest rates can be less effective than typical non-callable
bonds of similar maturities at locking in yields during periods of declining
interest rates, although they may have comparable risks of decline in value
during periods of rising interest rates.
The Federal National Mortgage Association ("FNMA") and the Federal Home
Loan Mortgage Corporation ("FHLMC") are Government sponsored corporations owned
by private stockholders. Each is subject to general regulation by an office
within HUD. FNMA and FHLMC purchase residential mortgages from a list of
approved seller/servicers which include state and federally chartered savings
and loan associations, mutual savings banks, commercial banks, credit unions and
mortgage bankers. Pass through securities issued by FNMA and FHLMC are
guaranteed by FNMA or FHLMC as to payment of principal and interest.
Collateralized Mortgage Obligations ("CMOs") are generally issued as a
series of different classes. Interest and principal payments on the mortgages
underlying any series will first be applied to meet the interest payment
requirements of each class in the series other than any class in respect of
which interest accrues but is not paid or any principal only class. Then,
principal payments on the underlying mortgages are generally applied to pay the
principal amount of the class that has the earliest maturity date. Once that
class is retired, the principal payments on the underlying mortgages are applied
to the class with the next earliest maturity date. This is repeated until all
classes are paid. Therefore, while each class of CMOs remains subject to
prepayment as the underlying mortgages prepay, structuring several classes of
CMOs in the stream of principal payments allows one to more closely estimate the
period of time when any one class is likely to be repaid.
Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers also
create mortgage backed securities in which the Fund can invest. Pools created by
such nongovernmental issuers generally offer a higher rate of interest than
Government and Government related pools because there are no direct or indirect
U.S. Government guarantees of payments in the former pools. However, timely
payment of interest and principal of these pools is supported by various forms
of insurance or guarantees, including individual loan, title, pool and hazard
insurance purchased by the issuer. The insurance and guarantees are issued by
U.S. Government entities, private insurers and the mortgage poolers. There can
be no assurance that the private insurers or mortgage poolers can meet their
obligations under the policies.
The Fund expects that U.S. Government or private entities may create
mortgage loan pools offering pass through investments in addition to those
described above. The mortgages underlying these securities may be alternative
mortgage instruments, that is, mortgage instruments whose principal or interest
payment may vary or whose terms to maturity may be shorter than previously
customary. As new types of mortgage backed securities are developed and offered
to investors, the Fund will, consistent with its investment objective and
policies, consider making investments in such new types of securities.
Other Asset Backed Securities. The Fund may also invest in non-mortgage
asset backed securities. Some non-mortgage asset backed securities are forms of
derivatives. The securitization techniques used for non-mortgage asset backed
securities are similar to those used for mortgage-related securities. The
collateral for these securities has included home equity loans, automobile and
credit card receivables, boat loans, computer leases, airplane leases, mobile
home loans, recreational vehicle loans and hospital account receivables. The
Fund may invest in these and other types of non-mortgage asset backed securities
that may be developed in the future.
Non-mortgage asset backed securities present certain risks that are not
presented by mortgage-backed securities. Primarily, these securities may provide
the Fund with a less effective security interest in the related collateral than
do mortgage-backed securities. Therefore, there is the possibility that
recoveries on the underlying collateral may not, in some cases, be available to
support payments on these securities.
The purchase of non-mortgage asset backed securities raises considerations
peculiar to the financing of the instruments underlying such securities. For
example, most organizations that issue non-mortgage asset backed securities
relating to motor vehicle installment purchase obligations perfect their
interests in their respective obligations only by filing a financing statement
and by having the servicer of the obligations, which is usually the originator,
take custody thereof. In such circumstances, if the servicer were to sell the
same obligations to another party, in violation of its duty not to do so, there
is a risk that such party could acquire an interest in the obligations superior
to that of the holders of the non-mortgage asset backed securities. Also,
although most such obligations grant a security interest in the motor vehicle
being financed, in most states the security interest in a motor vehicle must be
noted on the certificate of title to perfect such security interest against
competing claims of other parties. Due to the large number of vehicles involved,
however, the certificate of title to each vehicle financed, pursuant to the
obligations underlying the non-mortgage asset backed securities, usually is not
amended to reflect the assignment of the seller's security interest for the
benefit of the holders of the non-mortgage asset backed securities. Therefore,
there is the possibility that recoveries on repossessed collateral may not, in
some cases, be available to support payments on those securities. In addition,
various state and Federal laws give the motor vehicle owner the right to assert
against the holder of the owner's obligation certain defenses such owner would
have against the seller of the motor vehicle. The assertion of such defenses
could reduce payments on the related non-mortgage asset backed securities.
Insofar as credit card receivables are concerned, credit card holders are
entitled to the protection of a number of state and Federal consumer credit
laws, many of which give such holders the right to set off certain amounts
against balances owed on the credit card thereby reducing the amounts paid on
such receivables. In addition, unlike most other non-mortgage asset backed
securities, credit card receivables are unsecured obligations of the card
holder.
The development of non-mortgage asset backed securities is at an early
stage compared to mortgage backed securities. While the market for non-mortgage
securities is becoming increasingly liquid, the market for mortgage backed
securities issued by certain private organizations and non-mortgage asset backed
securities is not as well developed.
Senior-Subordinated Securities. Mortgage-related and non-mortgage asset
backed securities may be structured in multiple classes with one or more classes
subordinate to other classes as to payments of cash flow from, principal of
and/or interest on the underlying assets. In such a "senior/subordinated"
structure, defaults on the underlying assets are borne first by the holders of
the subordinated class or classes. The Fund may invest in such subordinated
securities, which typically entail greater credit risk but provide higher
yields.
Repurchase Agreements. The Fund may enter into repurchase agreements. In a
repurchase agreement, the Fund buys a security from a seller that has agreed to
repurchase the same security at a mutually agreed upon date and price. The
Fund's resale price will be in excess of the purchase price, reflecting an
agreed upon interest rate. This interest rate is effective for the period of
time the Fund is invested in the agreement and is not related to the coupon rate
on the underlying security. Repurchase agreements may also be viewed as a fully
collateralized loan of money by the Fund to the seller. The period of these
repurchase agreements will usually be short, from overnight to one week, and at
no time will the Fund invest in repurchase agreements for more than one year.
The Fund will always receive as collateral securities whose market value
including accrued interest is, and during the entire term of the agreement
remains, at least equal to 100% of the dollar amount invested by the Fund in
each agreement, including interest, and the Fund will make payment for such
securities only upon physical delivery or upon evidence of book entry transfer
to the account of the custodian. If the seller defaults, the Fund might incur a
loss if the value of the collateral securing the repurchase agreement declines
and might incur disposition costs in connection with liquidating the collateral.
In addition, if bankruptcy proceedings are commenced with respect to the seller
of a security which is the subject of a repurchase agreement, realization upon
the collateral by the Fund may be delayed or limited. The Fund seeks to minimize
the risk of loss through repurchase agreements by analyzing the creditworthiness
of the obligors under repurchase agreements, in accordance with the Fund's
credit guidelines.
Repurchase agreements are considered by the staff of the SEC to be loans
by the Fund. In an attempt to reduce the risk of incurring a loss on a
repurchase agreement, the Fund will enter into repurchase agreements only with
domestic banks with total assets in excess of $1 billion, or primary government
securities dealers reporting to the Federal Reserve Bank of New York, with
respect to securities of the type in which the Fund may invest, and will require
that additional securities be deposited with it if the value of the securities
purchased should decrease below the resale price.
Commercial Paper and Other Short-Term Corporate Obligations. These
instruments include variable amount master demand notes, which are obligations
that permit the Fund to invest fluctuating amounts at varying rates of interest
pursuant to direct arrangements between the Fund, as lender, and the borrower.
These notes permit daily changes in the amounts borrowed. Because these
obligations are direct lending arrangements between the lender and borrower, it
is not contemplated that such instruments generally will be traded, and there
generally is no established secondary market for these obligations, although
they are redeemable at face value, plus accrued interest, at any time.
Accordingly, where these obligations are not secured by letters of credit or
other credit support arrangements, the Fund's right to redeem is dependent on
the ability of the borrower to pay principal and interest on demand. Such
obligations frequently are not rated by credit rating agencies, and the Fund may
invest in them only if at the time of an investment the borrower meets the
criteria set forth below for other commercial paper issuers.
Commercial paper consists of short-term, unsecured obligations issued by
banks and corporations that have maturities ranging from two to 270 days. Each
instrument may be backed only by the credit of the issuer or may be backed by
some form of credit enhancement, typically in the form of a guarantee by a
commercial bank. Commercial paper backed by guarantees of foreign banks may
involve additional risk due to the difficulty of obtaining and enforcing
judgments against such banks and the generally less restrictive regulations to
which such banks are subject. 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, A-1 by S&P, F-1 by Fitch or Duff 1 by
Duff, (b) issued by companies having an outstanding unsecured debt issue
currently rated at least A3 by Moody's or A1 by S&P, Fitch or Duff or (c) if
unrated, determined to by Dreyfus to be of comparable quality to those rated
obligations which may be purchased by the Fund.
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 "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.
Zero Coupon Securities. The Fund may invest in zero coupon U.S. Treasury
securities, which are Treasury notes and bonds that have been stripped of their
unmatured interest coupons, the coupons themselves and receipts or certificates
representing interests in such stripped debt obligations and coupons. Zero
coupon securities also are issued by corporations and financial institutions
which constitute a proportionate ownership of the issuer's pool of underlying
U.S. Treasury securities. A zero coupon security pays no interest to its holder
during its life and is sold at a discount to its face value at maturity. The
market prices of zero coupon securities generally are more volatile than the
market prices of securities that pay interest periodically and are likely to
respond to a greater degree to changes in interest rates than non-zero coupon
securities having similar maturities and credit qualities.
Convertible Securities. Convertible securities may be converted at either
a stated price or stated rate into underlying shares of common stock.
Convertible securities have characteristics similar to both fixed-income and
equity securities. Convertible securities generally are subordinated to other
similar but non-convertible securities of the same issuer, although convertible
bonds, as corporate debt obligations, enjoy seniority in right of payment to all
equity securities, and convertible preferred stock is senior to common stock, of
the same issuer. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar non-convertible securities.
Although to a lesser extent than with fixed-income securities, the market
value of convertible securities tends to decline as interest rates increase and,
conversely, tends to increase as interest rates decline. In addition, because of
the conversion feature, the market value of convertible securities tends to vary
with fluctuations in the market value of the underlying common stock. A unique
feature of convertible securities is that as the market price of the underlying
common stock declines, convertible securities tend to trade increasingly on a
yield basis, and so may not experience market value declines to the same extent
as the underlying common stock. When the market price of the underlying common
stock increases, the prices of the convertible securities tend to rise as a
reflection of the value of the underlying common stock. While no securities
investments are without risk, investments in convertible securities generally
entail less risk than investments in common stock of the same issuer.
Convertible securities are investments that provide for a stable stream of
income with generally higher yields than common stocks. There can be no
assurance of current income because the issuers of the convertible securities
may default on their obligations. A convertible security, in addition to
providing fixed income, offers the potential for capital appreciation through
the conversion feature, which enables the holder to benefit from increases in
the market price of the underlying common stock. There can be no assurance of
capital appreciation, however, because securities prices fluctuate. Convertible
securities, however, generally offer lower interest or dividend yields than
non-convertible securities of similar quality because of the potential for
capital appreciation.
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 5% 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.
Common Stock. From time to time, the Fund may hold common stock sold in
units with, or attached to, debt securities purchased by the Fund. The Fund also
may hold common stock received upon the conversion of convertible securities.
Foreign Securities. The Fund may purchase securities of foreign issuers
and may invest in obligations of foreign branches of domestic banks and domestic
branches of foreign banks. Investment in foreign securities presents certain
risks, including those resulting from fluctuations in currency exchange rates,
revaluation of currencies, adverse political and economic developments, the
possible imposition of currency exchange blockages or other foreign governmental
laws or restrictions, reduced availability of public information concerning
issuers, and the fact that foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.
Moreover, securities of many foreign issuers may be less liquid and their prices
more volatile than those of comparable domestic issuers. In addition, with
respect to certain foreign countries, there is the possibility of expropriation,
confiscatory taxation and limitations on the use or removal of funds or other
assets of the Fund, including withholding of dividends. Foreign securities may
be subject to foreign government taxes that would reduce the yield on such
securities.
Developing countries have economic structures that are generally less
diverse and mature, and political systems that are less stable, than those of
developed countries. The markets of developing countries may be more volatile
than the markets of more mature economies; however, such markets may provide
higher rates of return to investors. Many developing countries providing
investment opportunities for the Fund have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have adverse
effects on the economies and securities markets of certain of these countries.
Foreign Government Obligations; Securities of Supranational Entities. The
Fund may invest in obligations issued or guaranteed by one or more foreign
governments or any of their political subdivisions, agencies or
instrumentalities that are determined by Dreyfus to be of comparable quality to
the other obligations in which the Fund may invest. Such securities also include
debt obligations of supranational entities. Supranational entities include
international organizations designated or supported by governmental entities to
promote economic reconstruction or development and international banking
institutions and related government agencies. Examples include the International
Bank for Reconstruction and Development (the World Bank), the Asian Development
Bank and the InterAmerican Development Bank.
Illiquid Investments. The Fund may invest up to 15% of the value of its
net assets in illiquid securities, including repurchase agreements and time
deposits with maturities in excess of seven days, certain mortgage-backed
securities, securities involved in swap, collar and floor transactions, and
privately negotiated traded options and securities used to cover such options.
Securities that have readily available market quotations are not deemed illiquid
for purposes of this limitation (irrespective of any legal or contractual
restrictions on resale). The Fund may invest in commercial obligations issued in
reliance on the so-called "private placement" exemption from registration
afforded by Section 4(2) of the Securities Act of 1933, as amended ("Section
4(2) paper"). The Fund may also purchase securities that are not registered
under the Securities Act of 1933, as amended, but that can be sold to qualified
institutional buyers in accordance with Rule 144A under that Act ("Rule 144A
securities"). Liquidity determinations with respect to Section 4(2) paper and
Rule 144A securities will be made by the Board of Trustees or by Dreyfus
pursuant to guidelines established by the Board. The Board or Dreyfus will
consider availability of reliable price information and other relevant
information in making such determinations. Section 4(2) paper is restricted as
to disposition under the federal securities laws, and generally is sold to
institutional investors, such as the Fund, that agree that they are purchasing
the paper for investment and not with a view to public distribution. Any resale
by the purchaser must be pursuant to registration or an exemption therefrom.
Section 4(2) paper normally is resold to other institutional investors like the
Fund through or with the assistance of the issuer or investment dealers who make
a market in the Section 4(2) paper, thus providing liquidity. Rule 144A
securities generally must be sold to other qualified institutional buyers. If a
particular investment in Section 4(2) paper or Rule 144A securities is not
determined to be liquid, that investment will be included within the percentage
limitation on investment in illiquid securities. The ability to sell Rule 144A
securities to qualified institutional buyers is a recent development and it is
not possible to predict how this market will mature. Investing in Rule 144A
securities could have the effect of increasing the level of Fund illiquidity to
the extent that qualified institutional buyers become, for a time, uninterested
in purchasing these securities from the Fund or other holders.
When purchasing securities that have not been registered under the
Securities Act of 1933, as amended, and are not readily marketable, the Fund
will endeavor, to the extent practicable, to obtain the right to registration at
the expense of the issuer. Generally, there will be a lapse of time between the
Fund's decision to sell any such security and the registration of the security
permitting sale. During any such period, the price of securities will be subject
to market fluctuations. During this period, the Fund's NAV could be adversely
effected.
Participation Interests. The Fund may invest in short-term corporate
obligations denominated in U.S. and foreign currencies that are originated,
negotiated and structured by a syndicate of lenders ("Co-Lenders") consisting of
commercial banks or other institutions, one or more of which administers the
security on behalf of the syndicate (the "Agent Bank"). Co-Lenders may sell such
securities to third parties called "Participants." The Fund may invest in such
securities either by participating as a Co-Lender at origination or by acquiring
an interest in the security from a Co-Lender or a Participant (collectively,
"participation interests"). Co-Lenders and Participants interposed between the
Fund and the corporate borrower (the "Borrower"), together with Agent Banks, are
referred herein as "Intermediate Participants." The Fund also may purchase a
participation interest in a portion of the rights of an Intermediate
Participant, which would not establish any direct relationship between the Fund
and the Borrower. In such cases, the Fund would be required to rely on the
Intermediate Participant that sold the participation interest not only for the
enforcement of the Fund's rights against the Borrower but also for the receipt
and processing of payments due to the Fund under the security. Because it may be
necessary to assert through an Intermediate Participant such rights as may exist
against the Borrower, in the event the Borrower fails to pay principal and
interest when due, the Fund may be subject to delays, expenses and risks that
are greater than those that would be involved if the Fund would enforce its
rights directly against the Borrower. Moreover, under the terms of a
participation interest, the Fund may be regarded as a creditor of the
Intermediate Participant (rather than of the Borrower), so that the Fund may
also be subject to the risk that the Intermediate Participant may become
insolvent. Similar risks may arise with respect to the Agent Bank if, for
example, assets held by the Agent Bank for the benefit of the Fund were
determined by the appropriate regulatory authority or court to be subject to the
claims of the Agent Bank's creditors. In such case, the Fund might incur certain
costs and delays in realizing payment in connection with the participation
interest or suffer a loss of principal and/or interest. Further, in the event of
the bankruptcy or insolvency of the Borrower, the obligation of the Borrower to
repay the loan may be subject to certain defenses that can be asserted by such
Borrower as a result of improper conduct by the Agent Bank or Intermediate
Participant.
The Fund will not act as an Agent Bank, guarantor, sole negotiator or sole
structuror with respect to securities that are the subject of a participation
interest. A participation interest gives the Fund an undivided interest in the
security in the proportion that the Fund's participation interest bears to the
total principal amount of the security. These instruments may have fixed,
floating or variable rates of interest. For certain participation interests, the
Fund will have the right to demand payment, on not more than seven days' notice,
for all or any part of the Fund's participation interest in the security, plus
accrued interest. As to these instruments, the Fund intends to exercise its
right to demand payment only upon a default under the terms of the security, as
needed to provide liquidity to meet redemptions, or to maintain or improve the
quality of its investment portfolio. The Fund will not invest more than 15% of
the value of its net assets in participation interests maturing in more than
seven days that do not have this demand feature, and in other securities that
are illiquid.
Certain Investments. From time to time, to the extent consistent with its
investment objective, policies and restrictions, the Fund may invest in
securities of companies with which Mellon Bank, N.A. ("Mellon Bank"), an
affiliate of Dreyfus, has a lending relationship.
Investment Techniques
In addition to the principal investment strategies discussed in the Fund's
Prospectus, the Fund also may engage in the investment techniques described
below. The Fund might not use, or may not have the ability to use, any of these
strategies and there can be no assurance that any strategy that is used will
succeed.
Portfolio Maturity. Under normal market conditions, the average effective
portfolio maturity of the Fund is expected to be four years or less. For
purposes of calculating average effective portfolio maturity, a security that is
subject to redemption at the option of the issuer on a particular date (the
"call date") which is prior to the security's stated maturity may be deemed to
mature on the call date rather than on its stated maturity date. The call date
of a security will be used to calculate average effective portfolio maturity
when Dreyfus reasonably anticipates, based upon information available to it,
that the issuer will exercise its right to redeem the security. Dreyfus may base
its conclusion on such factors as the interest rate paid on the security
compared to prevailing market rates, the amount of cash available to the issuer
of the security, events affecting the issuer of the security, and other factors
that may compel or make it advantageous for the issuer to redeem a security
prior to its stated maturity.
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.
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; to hedge the U.S.
dollar value of securities the Fund already owns, particularly if it expects a
decrease in the value of the currency in which the foreign security is
denominated; or to gain exposure to the foreign currency in an attempt to
realize gains.
Foreign currency transactions may involve, for example, the Fund's
purchase of foreign currencies for U.S. dollars or the maintenance of short
positions in foreign currencies, which would involve the Fund agreeing to
exchange an amount of a currency it did not currently own for another currency
at a future date in anticipation of a decline in the value of the currency sold
relative to the currency the Fund contracted to receive in the exchange. The
Fund's success in these transactions will depend principally on the ability of
Dreyfus to predict accurately the future exchange rates between foreign
currencies and the U.S. dollar.
Leverage. The Fund may borrow money for certain purposes. In addition to
borrowing for temporary or emergency purposes and in anticipation of share
redemptions, the Fund may borrow to facilitate trades in its portfolio
securities. This could occur, for example, when the Fund expects settlement on
its purchase of a security will occur within a shorter time than settlement on
its sale of a security. Borrowing exaggerates the effect on NAV of any increase
or decrease in the market value of the Fund's portfolio. Money borrowed will be
limited to 33 1/3% of the value of the Fund's total assets. These borrowings
will be subject to interest costs which may or may not be recovered by
appreciation of the securities purchased; in certain cases, interest costs may
exceed the return received on the securities purchased.
The Fund may enter into reverse repurchase agreements with banks, brokers
or dealers. This form of borrowing involves the transfer by the Fund of an
underlying debt instrument in return for cash proceeds based on a percentage of
the value of the security. The Fund retains the right to receive interest and
principal payments on the security. At an agreed upon future date, the Fund
repurchases the security at principal plus accrued interest. Except for these
transactions, the Fund's borrowings generally will be unsecured.
For borrowings for investment purposes, the 1940 Act requires the Fund to
maintain continuous asset coverage (that is, total assets including borrowings,
less liabilities exclusive of borrowings) of 300% of the amount borrowed. If the
required coverage should decline as a result of market fluctuations or other
reasons, the Fund may be required to sell some of its portfolio securities
within three days to reduce the amount of its borrowings and restore the 300%
asset coverage, even though it may be disadvantageous from an investment
standpoint to sell securities at that time. The Fund also may be required to
maintain minimum average balances in connection with such borrowing or pay a
commitment or other fee to maintain a line of credit; either of these
requirements would increase the cost of borrowing over the stated interest rate.
The SEC views reverse repurchase transactions as collateralized borrowings by
the Fund. To the extent the Fund enters into a reverse repurchase agreement, the
Fund will maintain in a segregated custodial account permissible liquid assets
at least equal to the aggregate amount of its reverse repurchase obligations,
plus accrued interest, in certain cases, in accordance with releases promulgated
by the SEC.
Forward Commitments. The Fund may purchase securities on a forward
commitment or when-issued basis, which means that delivery and payment take
place a number of days after the date of the commitment to purchase. The payment
obligation and the interest rate receivable on a forward commitment or
when-issued security are fixed when the Fund enters into the commitment, but the
Fund does not make payment until it receives delivery from the counterparty. The
Fund will commit to purchase such securities only with the intention of actually
acquiring the securities, but the Fund may sell these securities before the
settlement date if it is deemed advisable. A segregated account of the Fund
consisting of permissible liquid assets at least equal at all times to the
amount of the commitments will be established and maintained at the Fund's
custodian bank.
Securities purchased on a forward commitment or when-issued basis are
subject to changes in value (generally changing in the same way, i.e.,
appreciating when interest rates decline and depreciating when interest rates
rise) based upon the public's perception of the creditworthiness of the issuer
and changes, real or anticipated, in the level of interest rates. Securities
purchased on a forward commitment or when-issued basis may expose the Fund to
risks because they may experience such fluctuations prior to their actual
delivery. Purchasing securities on a when-issued basis can involve the
additional risk that the yield available in the market when the delivery takes
place actually may be higher than that obtained in the transaction itself.
Purchasing securities on a forward commitment or when-issued basis when the Fund
is fully or almost fully invested may result in greater potential fluctuation in
the value of the Fund's net assets and its NAV per share.
Short-Selling. In these transactions, the Fund sells a security it does
not own in anticipation of a decline in the market value of the security. To
complete the transaction, the Fund must borrow the security to make delivery to
the buyer. The Fund is obligated to replace the security borrowed by purchasing
it subsequently at the market price at the time of replacement. The price at
such time may be more or less than the price at which the security was sold by
the Fund, which would result in a loss or gain, respectively. Until the Fund
closes its short position or replaces the borrowed security, it will: (a)
maintain a segregated account, containing permissible liquid assets, at a level
such that the amount deposited in the account plus the amount deposited with the
broker as collateral always equals the current value of the security sold short;
or (b) otherwise cover its short position.
Securities will not be sold short if, after effect is given to any such
short sale, the total market value of all securities sold short would exceed 25%
of the value of the Fund's net assets. The Fund may not sell short the
securities of any single issuer listed on a national securities exchange to the
extent of more than 5% of the value of the Fund's net assets. The Fund may not
make a short sale which results in the Fund having sold short in the aggregate
more than 5% of the outstanding securities of any class of an issuer.
The Fund also may make short sales "against the box," in which the Fund
enters into a short sale of a security it owns in order to hedge an unrealized
gain on the security. At no time will more than 15% of the value of the Fund's
net assets be in deposits on short sales against the box.
Lending Portfolio Securities. The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to borrow
securities to complete certain transactions. The Fund continues to be entitled
to payments in amounts equal to the interest or other distributions payable on
the loaned securities which affords the Fund an opportunity to earn interest on
the amount of the loan and on the loaned securities' collateral. Loans of
portfolio securities may not exceed 33 1/3% of the value of the Fund's total
assets, and the Fund will receive collateral consisting of cash, U.S. government
securities or irrevocable letters of credit which will be maintained at all
times in an amount equal to at least 100% of the current market value of the
loaned securities. Such loans are terminable by the Fund at any time upon
specified notice. The Fund might experience risk of loss if the institution with
which it has engaged in a portfolio loan transaction breaches its agreement with
the Fund.
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 SEC currently
requires that the following conditions must be met whenever portfolio securities
are loaned: (1) the Fund must receive at least 100% cash collateral from the
borrower; (2) the borrower must increase such collateral whenever the market
value of the securities rises above the level of such collateral; (3) the Fund
must be able to terminate the loan at any time; (4) the Fund must receive
reasonable interest on the loan, as well as any dividends, interest or other
distributions payable on the loaned securities, and any increase in market
value; (5) the Fund may pay only reasonable custodian fees in connection with
the loan; and (6) while voting rights on the loaned securities may pass to the
borrower, the Trust'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, 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 and include financial futures contracts (including interest rate, index and
foreign currency futures contracts), options (including options on securities,
indices, foreign currencies and futures contracts), forward currency contracts,
mortgage-related securities, asset-backed securities, and interest rate, equity
index and currency swaps, caps, collars and floors. The Fund may invest in
Derivatives for a variety of reasons, including to preserve a return or spread,
to lock in unrealized market value gains or losses, to facilitate or substitute
for the sale or purchase of securities, to manage the duration of securities, to
alter the exposure of a particular investment or portion of the Fund's portfolio
to fluctuations in interest rates or currency rates, to uncap a capped security
or to convert a fixed rate security into a variable rate security or a variable
rate security into a fixed rate security. The Fund does not intend to invest in
futures and options except for hedging purposes, which may include preserving a
return or spread or locking in unrealized market value gains or losses. The Fund
will not invest in mortgage-related or non-mortgage asset backed securities in
an amount exceeding, in the aggregate, 25% of its net assets.
Derivatives may provide a cheaper, quicker or more specifically focused
way for the Fund to invest than "traditional" securities would. 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. While
Derivatives can be used effectively in furtherance of the Fund's investment
objective, under certain market conditions, they can increase the volatility of
the Fund's NAV, can decrease the liquidity of the Fund's portfolio and make more
difficult the accurate pricing of the Fund's portfolio. 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.
The Fund's ability to use Derivatives may be limited by market conditions,
regulatory limits and tax considerations. The Fund might not use any of these
strategies and there can be no assurance that any strategy that is used will
succeed.
The use of Derivatives involves special risks, including: (1) possible
imperfect or no correlation between price movements of the portfolio investments
(held or intended to be purchased) involved in the transaction and price
movements of the Derivatives involved in the transaction; (2) possible lack of a
liquid secondary market for any particular Derivative at a particular time; (3)
the need for additional portfolio management skills and techniques; (4) losses
due to unanticipated market price movements and changes in liquidity; (5) the
fact that, while such strategies can reduce the risk of loss, they can also
reduce the opportunity for gain, or even result in losses, by offsetting
favorable price movements in portfolio investments; (6) incorrect forecasts by
Dreyfus concerning interest or currency exchange rates or direction of price
fluctuations of the investment involved in the transaction, which may result in
the strategy being ineffective; (7) loss of premiums paid by the Fund on options
it purchases; and (8) the possible inability of the Fund to purchase or sell a
portfolio security at a time when it would otherwise be favorable for it to do
so, or the need to sell a portfolio security at a disadvantageous time, due to
the need for the Fund to maintain "cover" or to segregate securities in
connection with such transactions and the possible inability of the Fund to
close out or liquidate its positions.
Although the Fund will not be a commodity pool, certain Derivatives
subject the Fund to the rules of the Commodity Futures Trading Commission
("CFTC") which limit the extent to which the Fund can invest in such
Derivatives. The Fund may invest in futures contracts and options with respect
thereto or options on foreign currencies traded on an exchange regulated by the
CFTC for bona fide hedging purposes without limit. However, the Fund may not
invest in such contracts and options for other purposes if the aggregate initial
margin and premiums required to establish those positions (excluding the amount
by which options are "in-the-money") will exceed 5% of the liquidation value of
the Fund's portfolio, after taking into account unrealized profits and
unrealized losses on any contracts the Fund has entered into.
The Fund may invest up to 5% of its assets, represented by the premium
paid, in the purchase of call and put options. The Fund may write (i.e., sell)
covered call and put option contracts to the extent of 20% of the value of its
net assets at the time such option contracts are written. When required by the
SEC, 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, Dreyfus will consider the
creditworthiness of counterparties to over-the-counter Derivatives in the same
manner as it would review the credit quality of a security to be purchased by
the Fund. Over-the-counter Derivatives are less liquid than exchange-traded
Derivatives since the other party to the transaction may be the only investor
with sufficient understanding of the Derivative to be interested in bidding for
it.
Futures Transactions. The Fund may enter into futures contracts in U.S.
domestic markets, such as the Chicago Board of Trade and the International
Monetary Market of the Chicago Mercantile Exchange, or on exchanges located
outside the United States, such as the London International Financial Futures
Exchange and the Sydney Futures Exchange Limited. Foreign markets may offer
advantages such as trading opportunities or arbitrage possibilities not
available in the United States. Foreign markets, however, may have greater risk
potential than domestic markets. For example, some foreign exchanges are
principal markets so that no common clearing facility exists and an investor may
look only to the broker for performance of the contract. In addition, any
profits that the Fund might realize in trading could be eliminated by adverse
changes in the exchange rate, or the Fund could incur losses as a result of
those changes. Transactions on foreign exchanges may include both commodities
which are traded on domestic exchanges and those which are not. Unlike trading
on domestic commodity exchanges, trading on foreign commodity exchanges is not
regulated by the CFTC.
Engaging in these transactions involves risk of loss to the Fund which
could adversely affect the value of the Fund's net assets. Although the Fund
intends to purchase or sell futures contracts only if there is an active market
for such contracts, no assurance can be given that a liquid market will exist
for any particular contract at any particular time. Many futures exchanges and
boards of trade limit the amount of fluctuation permitted in futures contract
prices during a single trading day. Once the daily limit has been reached in a
particular contract, no trades may be made that day at a price beyond that limit
or trading may be suspended for specified periods during the trading day.
Futures contract prices could move to the limit for several consecutive trading
days with little or no trading, thereby preventing prompt liquidation of futures
positions and potentially subjecting the Fund to substantial losses.
Successful use of futures by the Fund also depends on the ability of
Dreyfus to predict correctly movements in the direction of the relevant market
and to ascertain the appropriate correlation between the transaction being
hedged and the price movements of the futures contract. For example, if the Fund
uses futures to hedge against the possibility of a decline in the market value
of securities held in its portfolio and the prices of such securities instead
increase, the Fund will lose part or all of the benefit of the increased value
of securities which it has hedged because it will have offsetting losses in its
futures positions. Furthermore, if in such circumstances the Fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements. The Fund may have to sell such securities at a time when it may be
disadvantageous to do so.
Pursuant to regulations and/or published positions of the SEC, the Fund
may be required to segregate cash or high quality money market instruments in
connection with its futures transactions in an amount generally equal to the
value of the underlying futures position exposure. The segregation of such
assets will have the effect of limiting the Fund's ability otherwise to invest
those assets.
The Fund may purchase and sell interest rate futures contracts. An
interest rate future obligates the Fund to purchase or sell an amount of a
specific debt security at a future date at a specific price. The Fund may also
purchase and sell currency futures. A foreign currency future obligates the Fund
to purchase or sell an amount of a specific currency at a future date at a
specific price.
Interest Rate Swaps. Interest rate swaps involve the exchange by the Fund
with another party of their respective commitments to pay or receive interest
(for example, an exchange of floating rate payments for fixed-rate payments).
The exchange commitments can involve payments to be made in the same currency or
in different currencies. The use of interest rate swaps is a highly specialized
activity which involves investment techniques and risks different from those
associated with ordinary portfolio security transactions. If Dreyfus is
incorrect in its forecasts of market values, interest rates and other applicable
factors, the investment performance of the Fund would diminish compared with
what it would have been if these investment techniques were not used. Moreover,
even if Dreyfus is correct in its forecasts, there is a risk that the swap
position may correlate imperfectly with the price of the asset or liability
being hedged. There is no limit on the amount of interest rate swap transactions
that may be entered into by the Fund. These transactions do not involve the
delivery of securities or other underlying assets or principal. Accordingly, the
risk of loss with respect to interest rate swaps is limited to the net amount of
interest payments that the Fund is contractually obligated to make. If the other
party to an interest rate swap defaults, the Fund's risk of loss consists of the
net amount of interest payments that the Fund contractually is entitled to
receive.
Credit Derivatives. The Fund may engage in credit derivative transactions.
There are two broad categories of credit derivatives: default price risk
derivatives and market spread derivatives. Default price risk derivatives are
linked to the price of reference securities or loans after a default by the
issuer or borrower, respectively. Market spread derivatives are based on the
risk that changes in market factors, such as credit spreads, can cause a decline
in the value of a security, loan or index. There are three basic transactional
forms for credit derivatives: swaps, options and structured instruments. The use
of credit derivatives is a highly specialized activity which involves strategies
and risks different from those associated with ordinary portfolio security
transactions. If Dreyfus is incorrect in its forecasts of default risks, market
spreads or other applicable factors, the investment performance of the Fund
would diminish compared with what it would have been if these techniques were
not used. Moreover, even if Dreyfus is correct in its forecasts, there is a risk
that a credit derivative position may correlate imperfectly with the price of
the asset or liability being hedged. There is no limit on the amount of credit
derivative transactions that may be entered into by the Fund. The Fund's risk of
loss in a credit derivative transaction varies with the form of the transaction.
For example, if the Fund purchases a default option on a security, and if no
default occurs with respect to the security, the Fund's loss is limited to the
premium it paid for the default option. In contrast, if there is a default by
the grantor of a default option, the Fund's loss will include both the premium
that it paid for the option and the decline in value of the underlying security
that the default option hedged.
Options--In General. The Fund may purchase and write (i.e., sell) call or
put options with respect to specific securities. A call option gives the
purchaser of the option the right to buy, and obligates the writer to sell, the
underlying security or securities at the exercise price at any time during the
option period, or at a specific date. Conversely, a put option gives the
purchaser of the option the right to sell, and obligates the writer to buy, the
underlying security or securities at the exercise price at any time during the
option period, or at a specific date.
A covered call option written by the Fund is a call option with respect to
which the Fund owns the underlying security or otherwise covers the transaction
by segregating cash or other securities. A put option written by the Fund is
covered when, among other things, cash or liquid securities having a value equal
to or greater than the exercise price of the option are placed in a segregated
account with the Fund's custodian to fulfill the obligation undertaken. The
principal reason for writing covered call and put options is to realize, through
the receipt of premiums, a greater return than would be realized on the
underlying securities alone. The Fund receives a premium from writing covered
call or put options which it retains whether or not the option is exercised.
There is no assurance that sufficient trading interest to create a liquid
secondary market on a securities exchange will exist for any particular option
or at any particular time, and for some options no such secondary market may
exist. A liquid secondary market in an option may cease to exist for a variety
of reasons. In the past, for example, higher than anticipated trading activity
or order flow, or other unforeseen events, at times have rendered certain of the
clearing facilities inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain types of orders
or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If, as a
covered call option writer, the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise or it otherwise covers its position.
The Fund may purchase and sell call and put options on foreign currency.
These options convey the right to buy or sell the underlying currency at a price
which is expected to be lower or higher than the spot price of the currency at
the time the option is exercised or expires. The Fund also may purchase
cash-settled options on equity index swaps and interest rate swaps,
respectively, in pursuit of its investment objective. Equity index swaps involve
the exchange by the Fund with another party of cash flows based upon the
performance of an index or a portion of an index of securities which usually
includes dividends. A cash-settled option on a swap gives the purchaser the
right, but not the obligation, in return for the premium paid, to receive an
amount of cash equal to the value of the underlying swap as of the exercise
date. These options typically are purchased in privately negotiated transactions
from financial institutions, including securities brokerage firms.
Successful use by the Fund of options will be subject to the ability of
Dreyfus to predict correctly movements in the prices of individual stocks, the
stock market generally, foreign currencies, or interest rates. To the extent
such predictions are incorrect, the Fund may incur losses.
Future Developments. The Fund may take advantage of opportunities in the
area of options and futures contracts and options on futures contracts and any
other Derivatives which are not presently contemplated for use by the Fund or
which are not currently available but which may be developed, to the extent such
opportunities are both consistent with the Fund's investment objective and
legally permissible for the Fund. Before entering into such transactions or
making any such investment, the Fund will provide appropriate disclosure in its
Prospectus or Statement of Additional Information.
Master/Feeder Option. The Trust may in the future seek to achieve the
Fund's investment objective by investing all of the Fund's net investable assets
in another investment Company having the same investment objective and
substantially the same investment policies and restrictions as those applicable
to the Fund. Shareholders of the Fund will be given at least 30 days' prior
notice of any such investment. Such investment would be made only if the
Trustees determine it to be in the best interest of the Fund and its
shareholders. In making that determination, the Trustees will consider, among
other things, the benefits to shareholders and/or the opportunity to reduce
costs and achieve operational efficiency. Although the Fund believes that the
Trustees will not approve an arrangement that is likely to result in higher
costs, no assurance is given that costs will be materially reduced if this
option is implemented.
Investment Restrictions
Fundamental. The Fund has adopted the following restrictions as
fundamental policies, which cannot be changed without approval by the holders of
a majority (as defined in the 1940 Act) of the Fund's outstanding voting shares.
The Fund may not:
1. Purchase any securities which would cause 25% or more of the value of
the Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities and
state or municipal governments and their political subdivisions are not
considered members of any industry.)
2. Borrow money or issue senior securities as defined in the 1940 Act,
except that (a) the Fund may borrow money in an amount not exceeding one third
of the Fund's total assets at the time of such borrowing, and (b) the Fund may
issue multiple classes of shares. The purchase or sale of options, forward
contacts, futures contracts, including those relating to indices, and options on
futures contracts or indices shall not be considered to involve the borrowing of
money or issuance of senior securities.
3. Purchase, with respect to 75% of the Fund's total assets, securities of
any issuer (other than securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities) if, as a result, (a) more than 5% of the
Fund's total assets would be invested in the securities of that issuer, or (b)
the Fund would hold more than 10% of the outstanding voting securities of that
issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments and repurchase agreements shall not
be treated as loans.
5. Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund from
investing in securities or other instruments backed by real estate, including
mortgage loans or securities of companies that engage in the real estate
business or invest or deal in real estate or interests therein).
6. Underwrite securities issued by any other person, except to the extent
that the purchase of securities and the later disposition of such securities in
accordance with the Fund's investment program may be deemed an underwriting.
7. Purchase or sell commodities, except that the Fund may enter into
options, forward contracts, and futures contracts, including those related to
indices, and options on futures contracts or indices.
The Fund may, notwithstanding any other fundamental investment policy or
limitation, invest all of its investable assets in securities of a single,
open-end management investment Trust with substantially the same fundamental
investment objective, policies, and limitations as the Fund.
Non-fundamental. The Fund has adopted the following
additional non-fundamental investment restrictions. These
non-fundamental restrictions may be changed without shareholder
approval, in compliance with applicable law and regulatory policy.
1. The Fund will not invest more than 15% of the value of its net assets
in illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, time deposits with maturities in excess of
seven days, and other securities which are not readily marketable. For purposes
of this limitation, illiquid securities shall not include commercial paper
issued pursuant to Section 4(2) of the Securities Act of 1933 and securities
which may be resold under Rule 144A under the Securities Act of 1933, provided
that the Board of Trustees, or its delegate, determines that such securities are
liquid, based upon the trading markets for the specific security.
2. The Fund will not invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation or acquisition
of assets and except to the extent otherwise permitted by the 1940 Act.
3. The Fund will not purchase securities on margin, but the Fund may make
margin deposits in connection with transactions in options, forward contracts,
futures contracts, and options on futures contracts.
4. The Fund will not sell securities short, or purchase, sell or write
puts, calls or combinations thereof, except as described in the Fund's
Prospectus and this Statement of Additional Information.
If a percentage restriction is adhered to at the time of an investment, a
later increase or decrease in such percentage resulting from a change in the
values of assets will not constitute a violation of such restriction, except as
otherwise required by the 1940 Act.
If the Fund's investment objective, policies, restrictions, practices or
procedures change, shareholders should consider whether the Fund remains an
appropriate investment in light of the shareholder's then-current position and
needs.
MANAGEMENT OF THE FUND
Trustees and Officers
The Trust's Board is responsible for the management and supervision of the
Fund. The Board approves all significant agreements between the Trust, on behalf
of the Fund, and those companies that furnish services to the Fund. These
companies are as follows:
The Dreyfus Corporation....................Investment Adviser
Dreyfus Service Corporaiton.......................Distributor
Dreyfus Transfer, Inc..........................Transfer Agent
Mellon Bank.........................................Custodian
The Trust has a Board composed of eight Trustees. The following lists the
Trustees and officers and their positions with the Trust and their present and
principal occupations during the past five years. Each Trustee who is an
"interested person" of the Trust (as defined in the 1940 Act) is indicated by an
asterisk(*). Each of the Trustees also serves as a Director of The
Dreyfus/Laurel Funds, Inc. and as a Trustee of The Dreyfus/Laurel Tax-Free
Municipal Funds and (collectively, with the Trust, the "Dreyfus/Laurel Funds")
and the Dreyfus High Yield Strategies Fund.
Trustees of the Trust
o+JOSEPH S. DIMARTINO. Chairman of the Board of the Trust. Since January 1995,
Mr. DiMartino has served as Chairman of the Board for various funds in the
Dreyfus Family of Funds. He is also a Director of The Muscular Dystrophy
Association; HealthPlan Services Corporation, a provider of marketing,
administrative and risk management services to health and other benefit
programs; Carlyle Industries, Inc. (formerly, Belding Heminway Company,
Inc.), a button packager and distributor, Century Business Services, Inc.
(formerly, International Alliance Services, Inc.), a provider of various
outsourcing functions for small and medium sized companies and QuikCat.com,
Inc., a private company engaged in the development of high speed movement,
routing, storage and encryption of data across cable, wireless and all
other modes of data transport. For more than five years prior to January
1995, he was President, a director and, until August 1994, Chief Operating
Officer of 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 until December 31, 1994,
he was a director of Mellon Financial Corporation. Age: 56 years old.
Address: 200 Park Avenue, New York, New York 10166.
o+JAMES M. FITZGIBBONS. Trustee of the Trust; Director, Lumber Mutual Insurance
Company; Director, Barrett Resources, Inc.; Chairman of the Board, Davidson
Cotton Company; former Chairman of the Board and CEO of Fieldcrest Cannon,
Inc. Age: 65 years old. Address: 40 Norfolk Road, Brookline, Massachusetts
02167.
o*J. TOMLINSON FORT. Trustee of the Trust; Of Counsel, Reed, Smith, Shaw &
McClay (law firm). Age: 72 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Trustee of the Trust; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; former Chairman of the Board and
Director, Rexene Corporation. Age: 78 years old. Address: Way Hollow Road
and Woodland Road, Sewickley, Pennsylvania 15143.
o+KENNETH A. HIMMEL. Trustee of the Trust; President & CEO, The Palladium
Company; President & CEO, Himmel and Company, Inc.; CEO, American Food
Management; former Director, The Boston Company, Inc. ("TBC"), and Boston
Safe Deposit and Trust Company, each an affiliate of Dreyfus. Age: 53 years
old. Address: 625 Madison Avenue, New York, New York 10022.
o+STEPHEN J. LOCKWOOD. Trustee of the Trust; Chairman of the Board and CEO, LDG
Reinsurance Corporation; Vice Chairman, HCCH. Age 52 years old. Address:
401 Edgewater Place, Wakefield, Massachusetts 01880.
o+ROSLYN M. WATSON. Trustee of the Trust; Principal, Watson Ventures, Inc.;
Director, American Express Centurion Bank; Director, Ontario Hydro Services
Company; Trustee, the Hyams Foundation, Inc. Age: 50 years old. Address: 25
Braddock Park, Boston, Massachusetts 02116-5816.
o+BENAREE PRATT WILEY. Trustee of the Trust; President and CEO of The
Partnership, an organization dedicated to increasing the representation of
African Americans in positions of leadership, influence and decision-making
in Boston, MA; Trustee, Boston College; Trustee, WGBH Educational
Foundation; Trustee, Children's Hospital; Director, The Greater Boston
Chamber of Commerce; Director, The First Albany Companies, Inc.; from April
1995 to March 1998, Director, TBC. Age: 53 years old. Address: 334 Boylston
Street, Suite 400, Boston, Massachusetts 02146.
--------------------------------
* "Interested person" of the Trust, as defined in the 1940 Act. o Member of
the Audit Committee. + Member of the Nominating Committee.
Officers of the Trust
STEPHEN E. CANTER. President of the Trust; President, Chief Operating Officer,
and Chief Investment Officer of Dreyfus; and an officer of other investment
companies advised and administered by Dreyfus. Mr. Canter also is a
Director or an Executive Committee Member of the other investment
management subsidiaries of Mellon Financial Corporation, each of which is
an affiliate of Dreyfus. He is 54 years old.
MARK N. JACOBS. Vice President of the Trust; Vice President, Secretary, and
General Counsel to Dreyfus; and an officer of other investment companies
advised and administered by Dreyfus. He is 54 years old.
JOSEPH CONNOLLY. Vice President and Treasurer of the Trust; Director - Mutual
Fund Accounting of Dreyfus; and an officer of other investment companies
advised and administered by Dreyfus. He is 42 years old.
STEVEN F. NEWMAN. Secretary of the Trust; Associate General Counsel and
Assistant Secretary of Dreyfus; and an officer of other investment
companies advised and administered by Dreyfus. He is 50 years old.
JEFF PRUSNOFSKY. Assistant Secretary of the Trust; Assistant General Counsel of
Dreyfus; and an officer of other investment companies advised and
administered by Dreyfus. He is 34 years old.
MICHAEL A. ROSENBERG. Assistant Secretary of the Trust; Associate General
Counsel of Dreyfus; and an officer of other investment companies advised
and administered by Dreyfus. He is 40 years old.
WILLIAM MCDOWELL. Assistant Treasurer of the Trust; Senior Accounting Manager -
Taxable Fixed Income of Dreyfus; and an officer of other investment
companies advised and administered by Dreyfus. He is 41 years old.
JAMES WINDELS. Assistant Treasurer of the Trust; Senior Treasury Manager of
Dreyfus; and an officer of other investment companies advised and
administered by Dreyfus. He is 41 years old.
The address of each Fund officer is 200 Park Avenue, New York, New York
10166.
No officer or employee of the Distributor (or of any parent, subsidiary or
affiliate thereof) receives any compensation from the Trust for serving as an
officer or Trustee of the Trust. The Dreyfus/Laurel Funds pay each
Director/Trustee who is not an "interested person" of the Trust (as defined in
the 1940 Act) $40,000 per annum, plus $5,000 per joint Dreyfus/Laurel Funds
Board meeting attended, $2,000 for separate committee meetings attended which
are not held in conjunction with a regularly scheduled Board meeting and $500
for Board meetings and separate committee meetings attended that are conducted
by telephone. The Dreyfus/Laurel Funds also reimburse each Director/Trustee who
is not an "interested person" of the Trust (as defined in the 1940 Act) for
travel and out-of-pocket expenses. The Chairman of the Board receives an
additional 25% of such compensation (with the exception of reimbursable
amounts). In the event that there is a joint committee meeting of the
Dreyfus/Laurel Funds and the Dreyfus High Yield Strategies Fund, the $2,000 fee
will be allocated between the Dreyfus/Laurel Funds and the Dreyfus High Yield
Strategies Fund.
In addition, the Trust currently has three Emeritus Board members who are
entitled to receive an annual retainer and a per meeting fee of one-half the
amount paid to them as Board members.
The aggregate amounts of fees and expenses received by each current
Trustee from the Trust for the fiscal year ended December 31, 1999, and from 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
members total compensation)* during the year ended December 31, 1999, were as
follows:
Total Compensation
Aggregate From the Trust
Name of Board Compensation and Fund Complex
Member From the Trust# Paid to Board Member
Joseph S. DiMartino** $25,000 $642,177 (189)
James M. Fitzgibbons $16,666 $74,989 (28)
J. Tomlinson Fort***. None none (28)
Arthur L. Goeschel $20,000 $80,989 (28)
Kenneth A. Himmel $16,666 $62,489 (28)
Stephen J. Lockwood $18,333 $68,989 (28)
Roslyn M. Watson $20,000 $80,989 (28)
Benaree Pratt Wiley $20,000 $80,989 (28)
----------------------------
# Amounts required to be paid by the Trust directly to the non-interested
Trustees, that would be applied to offset a portion of the management fee
payable to Dreyfus, are in fact paid directly by Dreyfus to the
non-interested Trustees. Amount does not include reimbursed expenses for
attending Board meetings, which amounted to $2,503.61 for the Trust.
* Represents the number of separate portfolios comprising the investment
companies in the Fund Complex, including the Fund, for which the Board
member serves.
** Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
*** J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board member
of the Trust and the funds in the Dreyfus/Laurel Funds and separately by
the Dreyfus High Yield Strategies Fund. For the fiscal year ended December
31, 1999, the aggregate amount of fees received by J. Tomlinson Fort from
Dreyfus for serving as a Board member of the Trust was $20,000. For the
year ended December 31, 1999, the aggregate amount of fees received by Mr.
Fort for serving as a Board member of all funds in the Dreyfus/Laurel Funds
(including the Trust) and Dreyfus High Yield Strategies Fund (for which
payment is made directly by the fund) was $80,989. In addition, Dreyfus
reimbursed Mr. Fort a total of $1,447.60 for expenses attributable to the
Trust's Board meetings which is not included in the $2,503.61 amount in
note # above.
The officers and Trustees of the Trust as a group owned beneficially less
than 1% of the total shares of the Fund outstanding as of April 3, 2000.
As of April 3, 2000, the following shareholder(s) owned beneficially or of
record 5% or more of Class A shares of the Fund: MLPF & S For The Sole Benefit
Of Its Customers, 4800 Deer Lake Dr. E., Floor 3, Jacksonville, FL 32246-6484,
18.55% and First Union Securities, Inc., TIFKAT LP, 111 East Kilbourn Avenue,
Milwaukee, WI 53202, 9.97%; and Turner Corp., 901 Main Street, Suite 4900,
Dallas, TX 75202-3714, 5.22%.
As of April 3, 2000 the following shareholder(s) owned beneficially or of
record 5% or more of Class B shares of the Fund: MLPF & S For The Sole Benefit
Of Its Customers, 4800 Deer Lake Dr. E., Floor 3, Jacksonville, FL 32246-6484,
37.52%.
As of April 3, 2000 the following shareholder(s) owned beneficially or of
record 5% or more of Class R shares of the Fund: MBCIC, C/O Mellon Bank, 919 N.
Market Street, Wilmington, DE 19801-3023, 51.18% and Boston & Co., P.O. Box
534005, Pittsburgh, PA, 15253, 39.65%.
A shareholder who beneficially owns, directly or indirectly, more than 25%
of the Fund's voting securities may be deemed a "control person" (as defined in
the 1940 Act) of the Fund.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Expenses" and "Management."
Dreyfus is a wholly-owned subsidiary of Mellon Bank, which is a
wholly-owned subsidiary of Mellon Financial Corporation ("Mellon"). Mellon is a
publicly owned multibank holding company incorporated under Pennsylvania law in
1971 and registered under the Federal Bank Holding Company Act of 1956, as
amended. Mellon provides a comprehensive range of financial products and
services in domestic and selected international markets. Mellon is among the 25
largest bank holding companies in the United States based on total assets.
Management Agreement. Dreyfus serves as the investment manager for the Fund
pursuant to an Investment Management Agreement with the Trust (the "Management
Agreement"), subject to the overall authority of the Trust's Board of Trustees
in accordance with Massachusetts law. Pursuant to the Management Agreement,
Dreyfus provides, or arranges for one or more third parties to provide,
investment advisory, administrative, custody, fund accounting and transfer
agency services to the Fund. As investment manager, Dreyfus manages the Fund by
making investment decisions based on the Fund's investment objective, policies
and restrictions. The Management Agreement is subject to review and approval at
least annually by the Board of Trustees.
The Management Agreement will continue from year to year provided that a
majority of the Trustees who are not "interested persons" (as defined in the
1940 Act) of the Trust and either a majority (as defined in the 1940 Act) of all
Trustees or a majority of the shareholders of the Fund approve its continuance.
The Trust may terminate the Management Agreement upon the vote of a majority of
the Board of Trustees or upon the vote of a majority of the Fund's outstanding
voting securities on 60 days' written notice to Dreyfus. Dreyfus may terminate
the Management Agreement upon 60 days' written notice to the Trust. The
Management Agreement will terminate immediately and automatically upon its
assignment.
The following persons are officers and/or directors of Dreyfus: Christopher
M. Condron, Chairman of the Board and Chief Executive Officer; Stephen E.
Canter, President, Chief Operating Officer, Chief Investment Officer and a
director; Thomas F. Eggers, Vice-Chairman-Institutional and a director; Lawrence
S. Kash, Vice Chairman; Ronald P. O'Hanley III, Vice Chairman; J. David Officer,
Vice Chairman and a director; William T. Sandalls, Jr., Executive Vice
President; Stephen R. Byers, Senior Vice President; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Diane P. Durnin, Vice
President-Product Development; Patrice M. Kozlowski, Vice President-Corporate
Communications; Mary Beth Leibig, Vice President-Human Resources; Ray Van Cott,
Vice-President-Information Systems; Theodore A. Schachar, Vice President-Tax;
Wendy Strutt, Vice President; Richard Terres, Vice President; William H.
Maresca, Controller; James Bitetto, Assistant Secretary; Steven F. Newman,
Assistant Secretary; and Mandell L. Berman, Burton C. Borgelt, Steven G.
Elliott, Martin C. McGuinn, Richard W. Sabo and Richard F. Syron, directors.
Dreyfus' Code of Ethics subjects its employees' personal securities
transactions to various restrictions to ensure that such trading does not
disadvantage any fund advised by Dreyfus. In that regard, portfolio managers and
other investment personnel of Dreyfus must preclear and report their personal
securities transactions and holdings, which are reviewed for compliance with the
Code of Ethics and are also subject to the oversight of Mellon's Investment
Ethics Committee. Portfolio managers and other investment personnel who comply
with the Code of Ethics's preclearance and disclosure procedures and the
requirements of the Committee, may be permitted to purchase, sell or hold
securities which also may be or are held in fund(s) they manage or for which
they otherwise provide investment advice.
Expenses. Under the Management Agreement, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of 0.70 of 1% of the value of the
Fund's average daily net assets. Dreyfus pays all of the Fund's expenses, except
brokerage fees, taxes, interest, fees and expenses of the non-interested
Trustees (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. Although Dreyfus does not pay for the fees and expenses
of the non-interested Trustees (including counsel fees), Dreyfus is
contractually required to reduce its investment management fee by an amount
equal to the Fund's allocable share of such fees and expenses. From time to
time, Dreyfus may voluntarily waive a portion of the investment management fees
payable by the Fund, which would have the effect of lowering the expense ratio
of the Fund and increasing return to investors. Expenses attributable to the
Fund are charged against the Fund's assets; other expenses of the Trust are
allocated among its funds on the basis determined by the Trustees, including,
but not limited to, proportionately in relation to the net assets of each fund.
For the period from May 30, 1997 (the date the Fund commenced operations)
to December 31, 1997, the Fund paid Dreyfus a management fee of $595,072. For
the fiscal year ended December 31, 1998 and 1999, the Fund paid Dreyfus a
management fee of $4,630,486, and $6,557,372, respectively.
The Distributor. Effective March 22, 2000, Dreyfus Service Corporation
became the distributor to the Fund. The Distributor, located at 200 Park Avenue,
New York, New York 10166, serves as the Fund's distributor on a best efforts
basis pursuant to an agreement which is renewable annually. Dreyfus may pay the
Distributor for shareholder services from Dreyfus' own assets, including past
profits but not including the management fee paid by the Fund. The Distributor
may use part or all of such payments to pay certain banks, securities brokers or
dealers and other financial institutions ("Agents") for these services. The
Distributor also acts as distributor for the other funds in the Dreyfus Family
of Funds.
From October 17, 1994 through March 21, 2000, the distributor of the
Fund's shares was Premier Mutual Fund Services, Inc. ("Premier"). Since the
Distributor was not the Fund's distributor as of the Fund's last fiscal year
end, the disclosure of amounts retained on the sale of shares of the Fund refers
to amounts retained by Premier.
For the fiscal year ended December 31, 1999, Premier retained $41,968.72
from the sales loads on the Fund's Class A shares. For the same period, Premier
retained $1,431,344 from the contingent deferred sales charge ("CDSC") on Class
B shares. For the same period, Premier retained $80,030 from the CDSC on Class C
shares. For the fiscal year ended December 31, 1998, Premier retained no sales
loads on the Fund's Class A shares. For the same period, Premier retained
$914,067 from the CDSC on Class B shares. For the same period, Premier retained
$182,439 from the CDSC on Class C shares. For the period from May 30, 1997 (the
date the Fund commenced operations) to December 31, 1997, Premier retained no
sales loads on the Fund's Class A shares. For the same period, Premier retained
$35,540 from the CDSC on Class B shares. For the same period, Premier retained
$10,967 from the CDSC on Class C shares.
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 transfer and dividend disbursing agent. Under a
transfer agency agreement with the Trust, Dreyfus Transfer, Inc. 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, Dreyfus
Transfer, Inc. 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, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as the custodian of the Fund's investments.
Under a custody agreement with the Trust, Mellon Bank holds the Fund's portfolio
securities and keeps all necessary accounts and records. Dreyfus Transfer, Inc.
and Mellon Bank, as custodian, have no part in determining the investment
policies of the Fund or which securities are to be purchased or sold by the
Fund.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies,"
"Services for Fund Investors," "Instructions for Regular Accounts," and
"Instructions for IRAs."
General. When purchasing Fund shares, you must specify which Class is
being purchased. The decision as to which Class of shares is most beneficial to
you depends on the amount and the intended length of your investment. You should
consider whether, during the anticipated life of your investment in the Fund,
the accumulated distribution fee, service fee and CDSC, if any, on Class B or
Class C shares would be less than the accumulated distribution fee and initial
sales charge on Class A shares purchased at the same time, and to what extent,
if any, such differential would be offset by the return on Class A shares.
Additionally, investors qualifying for reduced initial sales charges who expect
to maintain their investment for an extended period of time might consider
purchasing Class A shares because the accumulated continuing distribution and
service fees on Class B or Class C shares may exceed the accumulated
distribution fees and initial sales charge on Class A shares during the life of
the investment. Finally, you should consider the effect of the CDSC period and
any conversion rights of the Classes in the context of your own investment time
frame. For example, while Class C shares have a shorter CDSC period than Class B
shares, Class C shares do not have a conversion feature and, therefore, are
subject to ongoing distribution and service fees. Thus, Class B shares may be
more attractive than Class C shares to investors with longer term investment
outlooks. Generally, Class A shares may be more appropriate for investors who
invest $1,000,000 or more in Fund shares, but will not be appropriate for
investors who invest less than $50,000 in Fund shares. The Fund reserves the
right to reject any purchase order.
Class A shares, Class B shares and Class C shares may be purchased only by
clients of Agents, except that 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 Trust's Board, or the spouse
or minor child of any of the foregoing may purchase Class A shares directly
through the Distributor. Subsequent purchases may be sent directly to the
Transfer Agent or your Agent.
Class R shares are sold primarily to bank trust departments and other
financial service providers (including Mellon Bank and its affiliates) acting on
behalf of customers having a qualified trust or investment account or
relationship at such institution, or to customers who have received and hold
shares of the Fund distributed to them by virtue of such an account or
relationship. Class R shares may be purchased for a retirement plan only by a
custodian, trustee, investment manager or other entity authorized to act on
behalf of such a plan. Institutions effecting transactions in Class R shares for
the accounts of their clients may charge their clients direct fees in connection
with such transactions.
The minimum initial investment is $1,000. Subsequent investments must be
at least $100. The minimum initial investment for Dreyfus-sponsored
self-employed individual retirement plans ("Keogh Plans"), IRAs (including
regular IRAs, spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs and
rollover IRAs) and 403(b)(7) Plans with only one participant is $750 and $500
for Dreyfus-sponsored Education IRAs, with no minimum on subsequent purchases
except that the no minimum on Education IRAs does not apply until after the
first year. The initial investment must be accompanied by the Fund's Account
Application. 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.
The Internal Revenue Code of 1986, as amended (the "Code") imposes various
limitations on the amount that may be contributed annually to certain qualified
or non-qualified employee benefit plans or other programs, including pension,
profit-sharing and other deferred compensation plans, whether established by
corporations, partnerships, non-profit entities or state and local governments
("Retirement Plans"). These limitations apply with respect to participants at
the plan level and, therefore, do not directly affect the amount that may be
invested in the Fund by a Retirement Plan. Participants and plan sponsors should
consult their tax advisers for details.
Fund shares are sold on a continuous basis. NAV per share is determined as
of the close of trading on the floor of the New York Stock Exchange ("NYSE")
(currently 4:00 p.m., New York time), on each day the NYSE is open for business.
For purposes of determining NAV, options and futures contracts will be valued 15
minutes after the close of trading on the floor of the NYSE. NAV per share of
each class is computed by dividing the value of the Fund's net assets
represented by such class (i.e., the value of its assets less liabilities) by
the total number of shares of such class outstanding. For information regarding
the methods employed in valuing the Fund's investments, see "Determination of
Net Asset Value."
If an order is received in proper form by the Transfer Agent or other
entity authorized to receive orders on behalf of the Fund by the close of
trading on the floor of the NYSE (currently 4:00 p.m., New York time) on a
business day, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, Fund shares will be purchased at the public offering price determined
as of the close of trading on the floor of the NYSE on the next business day,
except where shares are purchased through a dealer as provided below.
Orders for the purchase of Fund shares received by dealers by the close of
trading on the floor of the NYSE on any business day and transmitted to the
Distributor or its designee by the close of its business day (normally 5:15
p.m., New York time) will be based on the public offering price per share
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, the orders will be based on the next determined NAV. It is the
dealers' responsibility to transmit orders so that they will be received by the
Distributor or its designee before the close of its business day. 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.
Agents may receive different levels of compensation for selling different
Classes of shares. Management understands that some Agents may impose certain
conditions on their clients which are different from those described in the
Fund's Prospectus, and, to the extent permitted by applicable regulatory
authority, may charge their clients direct fees which would be in addition to
any amounts which might be received under the Distribution and Service Plans.
Each Agent has agreed to transmit to its clients a schedule of such fees. You
should consult your Agent in this regard.
The Distributor may pay dealers a fee based on the amount invested through
such dealers in Fund shares by employees participating in qualified or
non-qualified employee benefit plans or other programs where (i) the employers
or affiliated employers maintaining such plans or programs have a minimum of 250
employees eligible for participation in such plans or programs or (ii) such
plan's or program's aggregate investment in the Dreyfus Family of Funds or
certain other products made available by the Distributor to such plans or
programs exceeds $1,000,000 ("Eligible Benefit Plans"). Generally, the fee paid
to dealers will not exceed 1% of the amount invested through such dealers. The
Distributor, however, may pay dealers a higher fee and reserves the right to
cease paying these fees at any time. The Distributor will pay such fees from its
own funds, other than amounts received from the Fund, including past profits or
any other source available to it.
Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
Fund's 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").
Class A Shares. The public offering price for Class A shares is the NAV of
that Class, plus a sales load as shown below:
Total Sales Load as a % Dealers'Reallowance
Amount of Transaction of Offering Price Per Share as a % of Offering Price
---------------------- --------------------------- ------------------------
Less than $50,000 4.50 4.25
$50,000 to less than $100,000 4.00 3.75
$100,000 to less than $250,000 3.00 2.75
$250,000 to less than $500,000 2.50 2.25
$500,000 to less than $1,000,000 2.00 1.75
$1,000,000 or more -0- -0-
Sales Loads -- Class A. The scale of sales loads applies to purchases of
Class A shares made by any "purchaser," which term includes an individual and/or
spouse purchasing securities for his, her or their own account or for the
account of any minor children, or a trustee or other fiduciary purchasing
securities for a single trust estate or a single fiduciary account (including a
pension, profit-sharing or other employee benefit trust created pursuant to a
plan qualified under Section 401 of the Code although more than one beneficiary
is involved; or a group of accounts established by or on behalf of the employees
of an employer or affiliated employers pursuant to an employee benefit plan or
other program (including accounts established pursuant to Sections 403(b),
408(k) and 457 of the Code); or an organized group which has been in existence
for more than six months, provided that it is not organized for the purpose of
buying redeemable securities of a registered investment company and provided
that the purchases are made through a central administration or a single dealer,
or by other means which result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering
price of the Fund's Class A shares. The example assumes a purchase of Class A
shares of the Fund aggregating less than $50,000 subject to the schedule of
sales charges set forth above and in the Fund's Prospectus at a price based upon
the NAV of a Class A share at the close of business on December 31, 1999.
NAV per Share $10.45
Per Share Sales Charge - 4.5% of offering price
(4.7% of NAV per share) $ .49
Per Share Offering Price to the Public $10.94
There is no initial sales charge on purchases of $1,000,000 or more of
Class A shares. However, if you purchase Class A shares without an initial sales
charge as part of an investment of at least $1,000,000 and redeem all or a
portion of those shares within one year of purchase, a CDSC of 1.00% will be
assessed at the time of redemption. The Distributor may pay Agents an amount up
to 1% of the NAV of Class A shares purchased by their clients that are subject
to a CDSC. The terms contained below under "Redemption of Shares - Contingent
Deferred Sales Charge - Class B Shares" (other than the amount of the CDSC and
time periods) and "Redemption of Shares - Waiver of CDSC" are applicable to the
Class A shares subject to a CDSC. Letter of Intent and Right of Accumulation
apply to such purchases of Class A shares.
Full-time employees of NASD member firms and full-time employees of other
financial institutions which have entered into an agreement with the Distributor
pertaining to the sale of Fund shares (or which otherwise have a brokerage
related or clearing arrangement with an NASD member firm or financial
institution with respect to the sale of such shares) may purchase Class A shares
for themselves directly or pursuant to an employee benefit plan or other
program, or for their spouses or minor children at NAV, provided that they have
furnished the Distributor with such information as it may request from time to
time in order to verify eligibility for this privilege. This privilege also
applies to full-time employees of financial institutions affiliated with NASD
member firms whose full-time employees are eligible to purchase Class A shares
at NAV. In addition, Class A shares are offered at NAV to 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
Trust's Board, or the spouse or minor child of any of the foregoing.
Class A shares are offered at NAV without a sales load to employees
participating in Eligible Benefit Plans. Class A shares also may be purchased
(including by exchange) at NAV without a sales load for Dreyfus-sponsored IRA
"Rollover Accounts" with the distribution proceeds from a qualified retirement
plan or a Dreyfus-sponsored 403(b)(7) plan, provided that, at the time of such
distribution, such qualified retirement plan or Dreyfus-sponsored 403(b)(7) plan
(a) met the requirements of an Eligible Benefit Plan and all or a portion of
such plan's assets were invested in funds in the Dreyfus Premier Family of
Funds, the Dreyfus Family of Funds, certain funds advised by Founders Asset
Management LLC ("Founders"), an affiliate of Dreyfus, or certain other products
made available by the Distributor to such plans, or (b) invested all of its
assets in certain funds in the Dreyfus Premier Family of Funds, the Dreyfus
Family of Funds, certain funds advised by Founders or certain other products
made available by the Distributor to such plans.
Class A shares may be purchased at NAV through certain broker-dealers and
other financial institutions which have entered into an agreement with the
Distributor, which includes a requirement that such shares be sold for the
benefit of clients participating in a "wrap account" or a similar program under
which such clients pay a fee to such broker-dealer or other financial
institution.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, through a broker-dealer or other financial institution with the
proceeds from the redemption of shares of a registered open-end management
investment company not managed by Dreyfus or its affiliates. The purchase of
Class A shares of the Fund must be made within 60 days of such redemption and
the shareholder must have either (i) paid an initial sales charge or a CDSC or
(ii) been obligated to pay at any time during the holding period, but did not
actually pay on redemption, a deferred sales charge with respect to such
redeemed shares.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, by (i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United States,
(ii) a State, county or city or intrumentality thereof, (iii) a charitable
organization (as defined in Section 501(c)(3) of the Code) investing $50,000 or
more in Fund shares, and (iv) a charitable remainder trust (as defined in
Section 664 of the Code).
The dealer reallowance may be changed from time to time but will remain
the same for all dealers. The Distributor, at its own expense, may provide
additional promotional incentives to dealers that sell shares of funds advised
by Dreyfus which are sold with a sales load, such as Class A shares. In some
instances, these incentives may be offered only to certain dealers who have sold
or may sell significant amounts of such shares.
Class B Shares. The public offering price for Class B shares is the NAV
per share of that Class. No initial sales charge is imposed at the time of
purchase. A CDSC is imposed, however, on certain redemptions of Class B shares
as described in the Fund's Prospectus.
Approximately six years after the date of purchase, Class B shares
automatically will convert to Class A shares, based on the relative NAVs for
shares of each such Class. Class B shares that have been acquired through the
reinvestment of dividends and distributions will be converted on a pro rata
basis together with other Class B shares, in the proportion that a shareholder's
Class B shares converting to Class A shares bears to the total Class B shares
not acquired through the reinvestment of dividends and distributions.
Class C Shares. The public offering price for Class C shares is the NAV
per share of that Class. No initial sales charge is imposed at the time of
purchase. A CDSC is imposed, however, on redemptions of Class C shares made
within the first year of purchase. See "Class B Shares" above and "How to Redeem
Shares."
Class B and C Shares. The Distributor compensates certain Agents for
selling Class B and Class C shares at the time of purchase from the
Distributor's own assets. The proceeds of the CDSC and the distribution fee, in
part, are used to defray these expenses.
Class R Shares. The public offering price for Class R shares
is the NAV per share of that Class.
Right of Accumulation--Class A Shares. Reduced sales loads apply to any
purchase of Class A shares, shares of other funds in the Dreyfus Premier Family
of Funds which are sold with a sales load, shares of certain other funds advised
by Dreyfus or Founders, which are sold with a sales load and shares acquired by
a previous exchange of such shares (hereinafter referred to as "Eligible
Funds"), by you and any related "purchaser" as defined above, where the
aggregate investment, including such purchase, is $50,000 or more. If, for
example, you previously purchased and still hold Class A shares of the Fund, or
shares of any other Eligible Fund or combination thereof, with an aggregate
current market value of $40,000 and subsequently purchase Class A shares of the
Fund or shares of an Eligible Fund having a current value of $20,000, the sales
load applicable to the subsequent purchase would be reduced to 4% of the
offering price. All present holdings of Eligible Funds may be combined to
determine the current offering price of the aggregate investment in ascertaining
the sales load applicable to each subsequent purchase.
To qualify for reduced sales loads, at the time of purchase you or your
Agent must notify the Distributor if orders are made by wire, or the Transfer
Agent if orders are made by mail. The reduced sales load is subject to
confirmation of your holdings through a check of appropriate records.
TeleTransfer Privilege. You may purchase Fund shares by telephone through
the TeleTransfer Privilege if you have checked the appropriate box and supplied
the necessary information on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. The 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 that is an
Automated Clearing House ("ACH") member may be so designated. 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 the Transfer Agent and the NYSE 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 NYSE are
open for business, or orders made on Saturday, Sunday or any Fund holiday (e.g.,
when the NYSE 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 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 - TeleTransfer Privilege." 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.
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.
In-Kind Purchases. If the following conditions are satisfied, the Fund may
at its discretion, permit the purchase of shares through an "in-kind" exchange
of securities. Any securities exchanged must meet the investment objective,
policies and limitations of the Fund, must have a readily ascertainable market
value, must be liquid and must not be subject to restrictions on resale. The
market value of any securities exchanged, plus any cash, must be at least equal
to $25,000. Shares purchased in exchange for securities generally cannot be
redeemed for fifteen days following the exchange in order to allow time for the
transfer to settle.
The basis of the exchange will depend upon the relative NAVs of the shares
purchased and securities exchanged. Securities accepted by the Fund will be
valued in the same manner as the Fund values its assets. Any interest earned on
the securities following their delivery to the Fund and prior to the exchange
will be considered in valuing the securities. All interest, dividends,
subscription or other rights attached to the securities become the property of
the Fund, along with the securities. For further information about "in-kind"
purchases, call 1-800-554-4611.
Share Certificates. Share certificates are issued upon
written request only. No certificates are issued for fractional
shares.
DISTRIBUTION AND SERVICE PLANS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Your Investment."
Class A, Class B and Class C shares are subject to annual fees for
distribution and shareholder services.
The SEC has adopted Rule 12b-1 under the 1940 Act (the "Rule") regulating
the circumstances under which investment companies such as the Trust may,
directly or indirectly, bear the expenses of distributing their shares. The Rule
defines distribution expenses to include expenditures for "any activity which is
primarily intended to result in the sale of fund shares." The Rule, among other
things, provides that an investment company may bear such expenses only pursuant
to a plan adopted in accordance with the Rule.
Distribution Plan--Class A Shares. The Trust has adopted a Distribution
Plan pursuant to the Rule with respect to the Class A shares of the Fund ("Class
A Plan"), whereby Class A shares of the Fund may spend annually up to 0.25% of
the average of its net assets to compensate Mellon Bank and its affiliates
(including but not limited to Dreyfus and the Distributor) for shareholder
servicing activities and the Distributor for shareholder servicing activities
and expenses primarily intended to result in the sale of Class A shares of the
Fund. The Class A Plan allows the Distributor to make payments from the Rule
12b-1 fees it collects from the Fund to compensate Agents that have entered into
Selling Agreements ("Agreements") with the Distributor. Under the Agreements,
the Agents are obligated to provide distribution related services with regard to
the Fund and/or shareholder services to the Agent's clients that own Class A
shares of the Fund.
The Class A Plan provides that a report of the amounts expended under the
Class A Plan, and the purposes for which such expenditures were incurred, must
be made to the Trust's Trustees for their review at least quarterly. In
addition, the Class A Plan provides that it may not be amended to increase
materially the costs which the Fund may bear for distribution pursuant to the
Class A Plan without approval of the Fund's shareholders, and that other
material amendments of the Class A Plan must be approved by the vote of a
majority of the Trustees and of the Trustees who are not "interested persons"
(as defined in the 1940 Act) of the Trust or the Distributor and who do not have
any direct or indirect financial interest in the operation of the Class A Plan,
cast in person at a meeting called for the purpose of considering such
amendments. The Class A Plan is subject to annual approval by the entire Board
of Trustees and by the Trustees who are neither interested persons nor have any
direct or indirect financial interest in the operation of the Class A Plan, by
vote cast in person at a meeting called for the purpose of voting on the Class A
Plan. The Class A Plan is terminable, as to the Fund's Class A shares, at any
time by vote of a majority of the Trustees who are not interested persons and
have no direct or indirect financial interest in the operation of the Class A
Plan or by vote of the holders of a majority of the outstanding shares of such
class of the Fund.
Distribution and Service Plans -- Class B and Class C Shares.In addition
to the above described current Class A Plan for Class A shares, the Board of
Trustees has adopted a Service Plan (the "Service Plan") under the Rule for
Class B and Class C shares, pursuant to which the Fund pays the Distributor,
and/or any of its affiliates, a fee at the annual rate of 0.25% of the value of
the average daily net assets of Class B and Class C shares for the provision of
certain services to the holders of Class B and Class C shares. The services
provided may include personal services relating to shareholder accounts, such as
answering shareholder inquiries regarding the Fund and providing reports and
other information, and providing services related to the maintenance of such
shareholder accounts. With regard to such services, each Agent is required to
disclose to its clients any compensation payable to it by the Fund and any other
compensation payable by its clients in connection with the investment of their
assets in Class B and Class C shares. The Distributor may pay one or more Agents
in respect of services for these Classes of shares. The Distributor determines
the amounts, if any, to be paid to Agents under the Service Plan and the basis
on which such payments are made. The Trust's Board of Trustees has also adopted
a Distribution Plan pursuant to the Rule with respect to Class B and Class C
shares (the "Distribution Plan") pursuant to which the Fund pays the Distributor
for distributing the Fund's Class B and Class C shares at an aggregate annual
rate of 0.50% and 0.75% of the value of the average daily net assets of Class B
and Class C shares, respectively. The Trust's Board of Trustees believes that
there is a reasonable likelihood that the Distribution and Service Plans (the
"Plans") will benefit the Fund and the holders of Class B and Class C shares.
A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the Trustees
for their review. In addition, each Plan provides that it may not be amended to
increase materially the cost which holders of Class B or Class C shares may bear
pursuant to the Plan without the approval of the holders of such Classes and
that other material amendments of the Plan must be approved by the Board of
Trustees and by the Trustees who are not interested persons of the Fund and have
no direct or indirect financial interest in the operation of the Plan or in any
agreements entered into in connection with the Plan, by vote cast in person at a
meeting called for the purpose of considering such amendments. Each Plan is
subject to annual approval by such vote of the Trustees cast in person at a
meeting called for the purpose of voting on the Plan. Each Plan may be
terminated at any time by vote of a majority of the Trustees who are not
interested persons and have no direct or indirect financial interest in the
operation of the Plan or in any agreements entered into in connection with the
Plan or by vote of the holders of a majority of Class B and Class C shares.
An Agent entitled to receive compensation for selling and servicing the
Fund's shares may receive different compensation with respect to one Class of
shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under the Distribution and Service Plans are payable
without regard to actual expenses incurred. The Fund and the Distributor may
suspend or reduce payments under the Distribution and Service Plans at any time,
and payments are subject to the continuation of the Fund's Plans and the
Agreements described above. From time to time, the Agents, the Distributor and
the Fund may voluntarily agree to reduce the maximum fees payable under the
Plans.
From October 17, 1994 through March 21, 2000, Premier acted as the Fund's
distributor and received payments under the Class A Plan, Distribution Plan and
Service Plan. Set forth below are the total amounts paid by the Fund to Premier,
as the distributor, for shareholder servicing activities and expenses primarily
intended to result in the sale of Class A shares of the Fund, with respect to
the Class A Plan, for distributing the Fund's Class B and Class C shares, with
respect to the Distribution Plan, and for the provision of certain services to
the holders of Class B and Class C shares with respect to the Service Plan, for
the fiscal year ended December 31, 1999. Also set forth below are payments
received by the Distributor, prior to it becoming the fund's distributor, for
shareholder servicing activities and expenses primarily intended to result in
the sale of Class A shares of the Fund, with respect to the Class A Plan, and
for the provision of certain services to the holders of Class B and Class C
shares, with respect to the Service Plan, for the same time period.
For the fiscal year ended December 31, 1999, the Fund paid Premier and the
Distributor $294,733 and $40,328, respectively, pursuant to the Class A Plan.
For the fiscal year ended December 31, 1999, the Fund paid Premier $2,994,350
and $1,527,402, pursuant to the Distribution Plan with respect to Class B and
Class C shares, respectively, and paid Premier and the Distributor $221,668 and
$1,275,507, respectively, pursuant to the Service Plan with respect to Class B
shares and $42,057 and $467,077, respectively, pursuant to the Service Plan with
respect to Class C shares.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies," "Services
For Fund Investors," "Instructions for Regular Accounts" and "Instructions for
IRAs."
General. If you hold Fund shares of more than one class, any request for
redemption must specify the class of shares being redeemed. If you fail to
specify the class of shares to be redeemed or if you own fewer shares of the
class than specified to be redeemed, the redemption request may be delayed until
the Transfer Agent receives further instructions from you or your Agent.
The Fund imposes no charges (other than any applicable CDSC) when shares
are redeemed. Agents may charge their clients a fee for effecting redemptions of
Fund shares. Any certificates representing Fund shares being redeemed must be
submitted with the redemption request. The value of the shares redeemed may be
more or less than their original cost, depending upon the Fund's then-current
NAV per share.
Procedures. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or, through the Check Writing Privilege
with respect to Class A shares only, which is granted automatically (if you
invest in Class A shares) unless you specifically refuse it by checking the
applicable "No" box on the Account Application. The Check Writing Privilege may
be established for an existing account by a separate signed Shareholder Services
Form. You also may redeem shares through the TeleTransfer Privilege if you have
checked the appropriate box and supplied the necessary information on the
Account Application or have filed a Shareholders Services Form with the Transfer
Agent. If you are a client of certain Agents ("Selected Dealers"), you may
redeem Fund shares through the Selected Dealer. Other redemption procedures may
be in effect for clients of other Agents and institutions. The Fund makes
available to certain large institutions the ability to issue redemption
instructions through compatible computer facilities. The Fund reserves the right
to refuse any request made by 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
Check Writing or TeleTransfer Privilege.
You may redeem Fund 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 the TeleTransfer privilege or
telephone exchange privilege, which is granted automatically unless you refuse
it, you authorize the Transfer Agent to act on telephone instructions (including
The Dreyfus Touch(R) automated telephone system) from any person representing
himself or herself to be you, or a representative of your 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
TeleTransfer redemption or an 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 TeleTransfer redemption had
been used. During the delay, the Fund's NAV may fluctuate.
Check Writing Privilege - Class A. Investors may write Redemption Checks
("Checks") drawn on their Fund accounts. The Fund provides Checks to investors
in Class A shares automatically upon opening an account, unless such investors
specifically refuse the Check Writing Privilege by checking the applicable "No"
box on the Account Application. Checks will be sent only to the registered
owner(s) of the account and only to the address of record. The Check Writing
Privilege may be established for an existing account by a separate signed
Shareholder Services Form. The Account Application or Shareholder Services Form
must be manually signed by the registered owner(s). Checks are drawn on the
investor's Fund account and may be made payable to the order of any person in an
amount of $500 or more. When a Check is presented to the Transfer Agent for
payment, the Transfer Agent, as the investor's agent, will cause the Fund to
redeem a sufficient number of full and fractional Class A shares in the
investor's account to cover the amount of the Check. Potential fluctuations in
the NAV of Class A should be considered in determining the amount of a Check.
Dividends are earned until the Check clears. After clearance, a copy of the
Check will be returned to the investor. Investors generally will be subject to
the same rules and regulations that apply to checking accounts, although
election of this Privilege creates only a shareholder-transfer agent
relationship with the Transfer Agent.
If the amount of the Check is greater than the value of the shares in an
investor's account, the Check will be returned marked insufficient funds. Checks
should not be used to close an account. Checks are free but the Transfer Agent
will impose a fee for stopping payment of a Check upon request or if the
Transfer Agent cannot honor a Check because of insufficient funds or other valid
reason. Investors should date Checks with the current date when writing them.
Please do not postdate Checks. If Checks are postdated, the Transfer Agent will
honor, upon presentment, even if presented before the date of the Check, all
postdated Checks which are dated within six months of presentment for payment,
if they are otherwise in good order.
This privilege will be terminated immediately, without notice, with
respect to any account which is, or becomes, subject to backup withholding on
redemptions. Any Check written on an account which has become subject to backup
withholding on redemptions will not be honored by the Transfer Agent.
Redemption Through a Selected Dealer. Customers of Selected Dealers may
make redemption requests to their Selected Dealer. If the Selected Dealer
transmits the redemption request so that it is received by the Transfer Agent
prior to the close of trading on the floor of the NYSE (currently 4:00 p.m., New
York time), 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 NYSE, 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.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of Fund shares held by shareholders. Repurchase orders received by
dealers by the close of trading on the floor of the NYSE on any business day and
transmitted to the Distributor or its designee prior to the close of its
business day (normally 5:15 p.m., New York time) are effected at the price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, the Fund shares will be redeemed at the next determined NAV per
share. It is the responsibility of the Selected Dealer to transmit orders on a
timely basis. The Selected Dealer may charge the shareholder a fee for executing
the order. This repurchase arrangement is discretionary and may be withdrawn at
any time.
Reinvestment Privilege. Upon written request, you may reinvest up to the
number of Class A or Class B shares you have redeemed, within 45 days of
redemption, at the then-prevailing NAV without a sales load, or reinstate your
account for the purpose of exercising Fund Exchanges. Upon reinstatement, with
respect to Class B shares, or Class A shares if such shares were subject to a
CDSC, your account will be credited with an amount equal to the CDSC previously
paid upon redemption of the Class A or Class B shares reinvested. The
Reinvestment Privilege may be exercised only once.
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 ACH member may be designated. Redemption proceeds will
be on deposit in your account at an ACH member bank ordinarily two days after
receipt of the redemption request. Investors should be aware that if they have
selected the TeleTransfer Privilege, any request for a wire redemption will be
effected as a TeleTransfer transaction through the ACH system unless more prompt
transmittal specifically is requested. Holders of jointly registered Fund or
bank accounts may redeem through the TeleTransfer Privilege for transfer to
their bank account only up to $500,000 within any 30-day period. See "Purchase
of Shares--TeleTransfer Privilege."
Stock Certificates; Signatures. Any certificates representing Fund shares
to be redeemed must be submitted with the redemption request. Written redemption
requests must be signed by each shareholder, including each owner of a joint
account, and each signature must be guaranteed. Signatures on endorsed
certificates submitted for redemption also must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations,
as well as from participants in the NYSE Medallion Signature Program, the
Securities Transfer Agents Medallion Program ("STAMP") and the Stock Exchanges
Medallion Program. Guarantees must be signed by an authorized signatory of the
guarantor and "Signature-Guaranteed" must appear with the signature. The
Transfer Agent may request additional documentation from corporations,
executors, administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular verification.
For more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
Redemption Commitment. The Fund has committed itself to pay in cash all
redemption requests by any shareholder of record, limited in amount during any
90-day period to the lesser of $250,000 or 1% of the value of the Fund's net
assets at the beginning of such period. Such commitment is irrevocable without
the prior approval of the SEC. In the case of requests for redemptions in excess
of such amount, the Trustees reserve the right to make payments in whole or in
part in securities (which may include non-marketable securities) or other assets
in case of an emergency or any time a cash distribution would impair the
liquidity of the Fund to the detriment of the existing shareholders. In such
event, the securities would be valued in the same manner as the Fund's portfolio
is valued. If the recipient sold such securities, brokerage charges might be
incurred.
Suspension of Redemptions. The right of redemption may be suspended or the
date of payment postponed (a) during any period when the NYSE 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 SEC so that disposal of the Fund's investments or
determination of its NAV is not reasonably practicable, or (c) for such other
periods as the SEC by order may permit to protect the Fund's shareholders.
Contingent Deferred Sales Charge - Class B Shares. A CDSC payable to the
Distributor is imposed on any redemption of Class B shares which reduces the
current NAV of your Class B shares to an amount which is lower than the dollar
amount of all payments by you for the purchase of Class B shares of the Fund
held by you at the time of redemption. No CDSC will be imposed to the extent
that the NAV of the Class B shares redeemed does not exceed (i) the current NAV
of Class B shares acquired through reinvestment of dividends or other
distributions, plus (ii) increases in the NAV of Class B shares above the dollar
amount of all your payments for the purchase of Class B shares of the Fund held
by you at the time of redemption.
If the aggregate value of the Class B shares redeemed has declined below
their original cost as a result of the Fund's performance, a CDSC may be applied
to the then-current NAV rather than the purchase price.
In circumstances where the CDSC is imposed, the amount of the charge will
depend on the number of years from the time you purchased the Class B shares
until the time of redemption of such shares. Solely for purposes of determining
the number of years from the time of any payment for the purchase of Class B
shares, all payments during a month will be aggregated and deemed to have been
made on the first day of the month.
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible rate.
It will be assumed that the redemption is made first of amounts representing
shares acquired pursuant to the reinvestment of dividends and distributions;
then of amounts representing the increase in NAV of Class B shares above the
total amount of payments for the purchase of Class B shares made during the
preceding six years; then of amounts representing the cost of shares purchased
six years prior to the redemption; and finally, of amounts representing the cost
of shares held for the longest period of time within the applicable six-year
period.
For example, assume an investor purchased 100 shares at $10 per share for
a cost of $1,000. Subsequently, the shareholder acquired five additional shares
through dividend reinvestment. During the second year after the purchase the
investor decided to redeem $500 of his or her investment. Assuming at the time
of the redemption the NAV has appreciated to $12 per share, the value of the
investor's shares would be $1,260 (105 shares at $12 per share). The CDSC would
not be applied to the value of the reinvested dividend shares and the amount
which represents appreciation ($260). Therefore, $240 of the $500 redemption
proceeds ($500 minus $260) would be charged at a rate of 4% (the applicable rate
in the second year after purchase) for a total CDSC of $9.60.
For purposes of determining the applicable CDSC payable with respect to
redemption of Class B shares of the Fund where such shares were acquired through
exchange of Class B shares of another fund advised by Dreyfus, the year since
purchase payment was made is based on the date of purchase of the original Class
B shares of the fund exchanged.
Contingent Deferred Sales Charge - Class C Shares. A CDSC of 1% payable to
the Distributor is imposed on any redemption of Class C shares within one year
of the date of purchase. The basis for calculating the payment of any such CDSC
will be the method used in calculating the CDSC for Class B shares. See
"Contingent Deferred Sales Charge - Class B Shares" above.
Waiver of CDSC. The CDSC applicable to Class B and Class C shares (and to
certain Class A shares) may be waived in connection with (a) redemptions made
within one year after the death or disability, as defined in Section 72(m)(7) of
the Code, of the shareholder, (b) redemptions by employees participating in
Eligible Benefit Plans, (c) redemptions as a result of a combination of any
investment company with the Fund by merger, acquisition of assets or otherwise,
(d) a distribution following retirement under a tax-deferred retirement plan or
upon attaining age 70 1/2 in the case of an IRA or Keogh plan or custodial
account pursuant to Section 403(b) of the Code, and (e) redemptions pursuant to
the Automatic Withdrawal Plan, as described below. If the Trust's Board
determines to discontinue the waiver of the CDSC, the disclosure herein will be
revised appropriately. Any Fund shares subject to a CDSC which were purchased
prior to the termination of such waiver will have the CDSC waived as provided in
the Prospectus or this Statement of Additional Information at the time of the
purchase of such shares.
To qualify for a waiver of the CDSC, at the time of redemption you must
notify the Transfer Agent or your Agent must notify the Distributor. Any such
qualification is subject to confirmation of your entitlement.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Account Policies" and
"Services for Fund Investors."
Fund Exchanges. You may purchase, in exchange for shares of the Fund,
shares of the same Class of another fund in the Dreyfus Premier Family of Funds,
shares of the same Class of certain funds advised by Founders, or shares of
certain other funds in the Dreyfus Family of Funds, to the extent such shares
are offered for sale in your state residence. Shares of the same Class of such
other funds purchased by exchange will be purchased on the basis of relative NAV
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 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 other distributions of any such funds (collectively referred to
herein as "Purchased Shares") may be exchanged for shares of other
funds sold with a sales load (referred to herein as "Offered
Shares"), provided that, if the sales load applicable to the Offered
Shares exceeds the maximum sales load that could have been imposed in
connection with the Purchased Shares (at the time the Purchased
Shares were acquired), without giving effect to any reduced loads,
the difference will be deducted.
E. Shares of funds subject to a CDSC that are exchanged for shares of
another fund will be subject to the higher applicable CDSC of the two
funds and, for purposes of calculating CDSC rates and conversion
periods, if any, will be deemed to have been held since the date the
shares being exchanged were initially purchased.
To accomplish an exchange under item D above, an investor's Agent must
notify the Transfer Agent of the investor's prior ownership of shares with a
sales load and the investor's account number. Any such exchange is subject to
confirmation of an investor's holdings through a check of appropriate records.
You also may exchange your Fund shares that are subject to a CDSC for
shares of Dreyfus Worldwide Dollar Money Market Fund, Inc. The shares so
purchased will be held in a special account created solely for this purpose
("Exchange Account"). Exchanges of shares from an Exchange Account only can be
made into certain other funds managed or administered by Dreyfus. No CDSC is
charged when an investor exchanges into an Exchange Account; however, the
applicable CDSC will be imposed when shares are redeemed from an Exchange
Account or other applicable Fund account. Upon redemption, the applicable CDSC
will be calculated without regard to the time such shares were held in an
Exchange Account. See "Redemption of Shares." Redemption proceeds for Exchange
Account shares are paid by Federal wire or check only. Exchange Account shares
also are eligible for the Auto-Exchange Privilege, Dividend Sweep and the
Automatic Withdrawal Plan.
To request an exchange, an investor or an investor's Agent acting on the
investor's behalf 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. The Telephone Exchange Privilege may be
established for an existing account by written request signed by all
shareholders on the account, by a separate signed Shareholder Services Form,
available by calling 1-800-554-4611, or by oral request from any of the
authorized signatories on the account, also by calling 1-800-554-4611. By using
the Telephone Exchange Privilege, the investor authorizes the Transfer Agent to
act on telephonic instructions (including over The Dreyfus Touch(R) automated
telephone system) from any person representing himself or herself to be the
investor or a representative of the investor's 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. 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 SEC.
Exchanges of Class R shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such investor's
Retirement Plan account in another fund.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made.
Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege permits
you to purchase (on a semi-monthly, monthly, quarterly or annual basis), in
exchange for shares of the Fund, shares of the same Class of another fund in the
Dreyfus Premier Family of Funds, shares of the same Class of certain funds
advised by Founders, or shares of certain other funds in the Dreyfus Family of
Funds, of which you are a shareholder. The amount the investor designates, 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 the investor has selected. This Privilege is
available only for existing accounts. With respect to Class R shares held by a
Retirement Plan, exchanges may be made only between the investor's Retirement
Plan account in one fund and such investor's Retirement Plan account in another
fund. Shares will be exchanged on the basis of relative NAV per share 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 the investor's
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 IRAs 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.
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 Dreyfus Premier Limited
Term High Income Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. 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 Premier Family of Funds, the Dreyfus Family of Funds or
the Dreyfus Founders Family of Funds eligible to participate in this Privilege,
or to obtain an Auto-Exchange Authorization Form, please call toll free
1-800-554-4611.
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. 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 and, therefore, an exchanging shareholder
(other than a tax-exempt Retirement Plan) may realize a taxable gain or loss.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-554-4611. The Fund reserves the right to reject any
exchange request in whole or in part. The Fund exchange service or the Dreyfus
Auto-Exchange Privilege may be modified or terminated at any time upon notice to
shareholders.
Dreyfus-Automatic Asset Builder(R). Dreyfus-Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000 per
transaction) at regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you. Only an account
maintained at a domestic financial institution which is an ACH 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 1-800-554-4611. You may cancel your participation
in this Privilege or change the amount of purchase at any time by mailing
written notification to Dreyfus Premier Limited Term High Income Fund, P.O. Box
6587, Providence, Rhode Island 02940-6587 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.
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 other
distributions, the investor's shares will be reduced and eventually may be
depleted. An Automatic Withdrawal Plan may be established by filing an Automatic
Withdrawal Plan application with the Transfer Agent or by oral request from any
of the authorized signatories on the account by calling 1-800-554-4611.
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.
Particular Retirement Plans, including Dreyfus-sponsored Retirement Plans,
may permit certain participants to establish an automatic withdrawal plan from
such Retirement Plans. Participants should consult their Retirement Plan sponsor
and tax adviser for details. Such a withdrawal plan is different from the
Automatic Withdrawal Plan. The Automatic Withdrawal Plan may be ended at any
time by the shareholder, the Fund or the Transfer Agent. Shares for which
certificates have been issued may not be redeemed through the Automatic
Withdrawal Plan.
No CDSC with respect to Class B shares will be imposed on withdrawals made
under the Automatic Withdrawal Plan, provided that the amounts withdrawn under
the plan do not exceed on an annual basis 12% of the account value at the time
the shareholder elects to participate in the Automatic Withdrawal Plan.
Withdrawals with respect to Class B shares under the Automatic Withdrawal Plan
that exceed on an annual basis 12% of the value of the shareholder's account
will be subject to a CDSC on the amounts exceeding 12% of the initial account
value. Class C shares, and Class A shares to which a CDSC applies, that are
withdrawn pursuant to the Automatic Withdrawal Plan will be subject to any
applicable CDSC. Purchases of additional Class A shares where the sales load is
imposed concurrently with withdrawals of Class A shares generally are
undesirable.
Dividend Options. Dreyfus Dividend Sweep allows you to invest
automatically your dividends or dividends and capital gain distributions, if
any, from the Fund in shares of the same Class of another fund in the Dreyfus
Premier Family of Funds, shares of the same Class of certain funds advised by
Founders, or shares of certain other funds in the Dreyfus Family of Funds, of
which you are a shareholder. Shares of certain other funds in other funds
purchased pursuant to this Privilege will be purchased on the basis of relative
NAV per share as follows:
A. Dividends and other 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 other 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 other 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 other distributions are
being swept, without giving effect to any reduced loads, the
difference will be deducted.
D. Dividends and other distributions paid by a fund may be invested in
shares of other funds that impose a CDSC and the applicable CDSC, if
any, will be imposed upon redemption of such shares.
Dividend ACH permits you to transfer electronically dividends or dividends
and other distributions, if any, from the Fund to a designated bank account.
Only an account maintained at a domestic financial institution which is an ACH
member may be so designated. Banks may charge a fee for this service.
For more information concerning these Privileges, or to request a Dividend
Options Form, please call toll free 1-800-554-4611. You may cancel these
Privileges by mailing written notification to Dreyfus Premier Limited Term High
Income Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. To select a new
fund after cancellation, you must submit a new Dividend Options Form. Enrollment
in or cancellation of these privileges is effective three business days
following receipt. These privileges are available only for existing accounts and
may not be used to open new accounts. Minimum subsequent investments do not
apply for Dreyfus Dividend Sweep. The Fund may modify or terminate these
privileges at any time or charge a service fee. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs or other retirement plans are
not eligible for Dreyfus Dividend Sweep.
Government Direct Deposit Privilege. 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.
You should consider whether Direct Deposit of your entire payment into a fund
with fluctuating NAV, such as the Fund, may be appropriate for you. To enroll in
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 from your Agent or by
calling 1-800-554-4611. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency. Further,
the Fund may terminate your participation upon 30 days' notice to you.
Letter of Intent--Class A Shares. By signing a Letter of Intent form,
which can be obtained by calling 1-800-554-4611, you become eligible for the
reduced sales load applicable to the total number of Eligible Fund shares
purchased in a 13-month period pursuant to the terms and conditions set forth in
the Letter of Intent. A minimum initial purchase of $5,000 is required. To
compute the applicable sales load, the offering price of shares you hold (on the
date of submission of the Letter of Intent) in any Eligible Fund that may be
used toward "Right of Accumulation" benefits described above may be used as a
credit toward completion of the Letter of Intent. However, the reduced sales
load will be applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in the
Letter of Intent for payment of a higher sales load if you do not purchase the
full amount indicated in the Letter of Intent. The escrow will be released when
you fulfill the terms of the Letter of Intent by purchasing the specified
amount. If your purchases qualify for a further sales load reduction, the sales
load will be adjusted to reflect your total purchase at the end of 13 months. If
total purchases are less than the amount specified, you will be requested to
remit an amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If such
remittance is not received within 20 days, the Transfer Agent, as
attorney-in-fact pursuant to the terms of the Letter of Intent, will redeem an
appropriate number of Class A shares of the Fund held in escrow to realize the
difference. Signing a Letter of Intent does not bind you to purchase, or the
Fund to sell, the full amount indicated at the sales load in effect at the time
of signing, but you must complete the intended purchase to obtain the reduced
sales load. At the time you purchase Class A shares, you must indicate your
intention to do so under a Letter of Intent. Purchases pursuant to a Letter of
Intent will be made at the then-current NAV plus the applicable sales load in
effect at the time such Letter of Intent was executed.
Retirement Plans. The Fund makes available a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, rollover IRAs and
Education IRAs), 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
1-800-554-4611; for SEP-IRAs, 401(k) Salary Reduction Plans and 403(b)(7) Plans,
please call 1-800-322-7880.
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 adoption of 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 form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may not
be made in advance of receipt of funds.
Each investor should read the prototype retirement plan and the
appropriate form of custodial agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
ADDITIONAL INFORMATION ABOUT PURCHASES,
EXCHANGES AND REDEMPTIONS
The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculation on short-term market
movements. A pattern of frequent purchases and exchanges can be disruptive to
efficient portfolio management and, consequently, can be detrimental to the
Fund's performance and its shareholders. Accordingly, if the Fund's management
determines that an investor is engaged in excessive trading, the Fund, with or
without prior notice, may temporarily or permanently terminate the availability
of Fund exchanges, or reject in whole or part any purchase or exchange request,
with respect to such investor's account. Such investors also may be barred from
purchasing other funds in the Dreyfus Family of Funds. Generally, an investor
who makes more than four exchanges out of the Fund during any calendar year or
who makes exchanges that appear to coincide with an active market-timing
strategy may be deemed to be engaged in excessive trading. Accounts under common
ownership or control will be considered as one account for purposes of
determining a pattern of excessive trading. In addition, the Fund may refuse or
restrict purchase or exchange requests by any person or group if, in the
judgment of the Fund's management, the Fund would be unable to invest the money
effectively in accordance with its investment objective and policies or could
otherwise be adversely affected or if the Fund receives or anticipates receiving
simultaneous orders that may significantly affect the Fund (e.g., amounts equal
to 1% or more of the Fund's total assets). If an exchange request is refused,
the Fund will take no other action with respect to the shares until it receives
further instructions from the investor. The Fund may delay forwarding redemption
proceeds for up to seven days if the investor redeeming shares is engaged in
excessive trading or if the amount of the redemption request otherwise would be
disruptive to efficient portfolio management or would adversely affect the Fund.
The Fund's policy on excessive trading applies to investors who invest in
the Fund directly or through financial intermediaries, but does not apply to the
Dreyfus Auto-Exchange Privilege, to any automatic investment or withdrawal
privilege described herein, or to non-IRA plan accounts.
During times of drastic economic or market conditions, the Fund may
suspend Fund exchanges temporarily without notice and treat exchange requests
based on their separate components - redemption orders with a simultaneous
request to purchase the other fund's shares. In such a case, the redemption
request would be processed at the Fund's next determined NAV but the purchase
order would be effective only at the NAV next determined after the fund being
purchased receives the proceeds of the redemption, which may result in the
purchase being delayed.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies."
Valuation of Portfolio Securities. Substantially all of the Fund's
investments (excluding short-term investments) are valued each business day by
an independent pricing service (the "Service") approved by the Fund's Board.
Securities valued by the Service for which quoted bid prices in the judgment of
the Service are readily available and are representative of the bid side of the
market are valued at the mean between the quoted bid prices (as obtained by the
Service from dealers in such securities) and asked prices (as calculated by the
Service based upon its evaluation of the market for such securities). Other debt
securities valued by the Service are carried at fair value as determined by the
Service, based on methods which include consideration of: yields or prices of
securities of comparable quality, coupon, maturity and type; indications as to
values from dealers; and general market conditions. Short-term investments are
not valued by the Service and are carried at amortized cost, which approximates
value. Debt securities that are not valued by the Service are valued at the
average of the most recent bid and asked prices in the market in which such
investments are primarily traded, or at the last sales price for securities
traded primarily on an exchange. In the absence of reported sales of investments
traded primarily on an exchange, the average of the most recent bid and asked
prices is used. Bid price is used when no asked price is available. Investments
traded in foreign currencies are translated to U.S. dollars at the prevailing
rates of exchange. If the Fund has to obtain prices as of the close of trading
on various exchanges throughout the world, the calculation of NAV may not take
place contemporaneously with the determination of prices of certain of the
Fund's securities. Expenses and fees, including the management fee, are accrued
daily and are taken into account for the purpose of determining the NAV of Fund
shares.
NYSE Closings. The holidays (as observed) on which the NYSE
-------------
is currently scheduled to be closed are: New Year's Day, Dr.
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distributions and Taxes."
General. The Fund ordinarily declares daily and pays monthly dividends
from its net investment income and distributes net realized capital gains and
gains from foreign currency transactions, if any, once a year, but it may make
distributions on a more frequent basis to comply with the distribution
requirements of the Code, in all events in a manner consistent with the 1940
Act. All expenses are accrued daily and deducted before declaration of dividends
to investors. The Fund will not make distributions from net realized capital
gains unless all capital loss carryovers, if any, have been utilized or have
expired. Shares begin accruing dividends on the day following the date of
purchase. The Fund's earnings for Saturdays, Sundays and holidays are declared
as dividends on the next business day. If you redeem all shares in your account
at any time during the month, all dividends to which you are entitled will be
paid to you along with the proceeds of the redemption. Dividends paid by each
Class are calculated at the same time and in the same manner and are in the same
amount, except that the expenses attributable solely to a particular Class are
borne exclusively by that Class. Class B and Class C shares will receive lower
per share dividends than Class A shares, which will in turn receive lower per
share dividends than Class R shares, because of the higher expenses borne by the
relevant Classes.
Investors other than qualified retirement plans may choose whether to
receive dividends and other distributions in cash, to receive dividends in cash
and reinvest other distributions in additional Fund shares at NAV, or to
reinvest both dividends and other distributions in additional Fund shares at
NAV; dividends and other distributions paid to qualified retirement plans are
reinvested automatically in additional Fund shares at NAV.
It is expected that the Fund will continue to qualify for treatment as a
regulated investment company ("RIC") under the Code so long as such
qualification is in the best interests of its shareholders. Such qualification
will relieve the Fund of any liability for federal income tax to the extent its
earnings and realized gains are distributed in accordance with applicable
provisions of the Code. To qualify for treatment as a RIC under the Code, the
Fund -- which is treated as a separate corporation for federal tax purposes --
(1) must distribute to its shareholders each year at least 90% of its investment
company taxable income (generally consisting of net investment income, net
short-term capital gains and net gains from certain foreign currency
transactions) ("Distribution Requirement"), (2) must derive at least 90% of its
annual gross income from specified sources ("Income Requirement"), and (3) must
meet certain asset diversification and other requirements. The term "regulated
investment company" does not imply the supervision of management or investment
practices or policies by any government agency. If the Fund failed to qualify
for treatment as a RIC for any taxable year, (1) it would be taxed at corporate
rates on the full amount of its taxable income for that year without being able
to deduct the distributions it makes to its shareholders and (2) the
shareholders would treat all those distributions, including distributions of net
capital gain (the excess of net long-term capital gain over net short-term
capital loss), as dividends (that is, ordinary income) to the extent of the
Fund's earnings and profits. In addition, the Fund could be required to
recognize unrealized gains, pay substantial taxes and interest and make
substantial distributions before requalifying for RIC treatment. The Fund will
be subject to a non-deductible 4% excise tax ("Excise Tax") to the extent it
fails to distribute substantially all of its taxable investment income and
capital gains.
Distributions. If you elect to receive dividends and other distributions
in cash, and your distribution check is returned to the Fund as undeliverable or
remains uncashed for six months, the Fund reserves the right to reinvest that
distribution and all future distributions payable to you in additional Fund
shares at NAV. No interest will accrue on amounts represented by uncashed
distribution or redemption checks.
Dividends derived from net investment income, together with distributions
from net realized short-term capital gains, net realized gains from certain
foreign currency transactions and all or a portion of any gains realized from
the sale or other disposition of certain market discount bonds (collectively,
"dividend distributions"), will be taxable to U.S. shareholders, including
certain non-qualified retirement plans, as ordinary income to the extent of the
Fund's earnings and profits, whether received in cash or reinvested in
additional Fund shares. Distributions from net capital gain (the excess of net
long-term capital gain over net short-term capital loss) are taxable to those
shareholders as long-term capital gains regardless of how long the shareholders
have held their Fund shares and whether the distributions are received in cash
or reinvested in additional Fund shares.
Dividend distributions paid by the Fund to a non-resident foreign investor
generally are subject to U.S. withholding tax at the rate of 30%, unless the
non-resident foreign investor claims the benefit of a lower rate specified in a
tax treaty. Capital gain distributions paid by the Fund to a non-resident
foreign investor, as well as the proceeds of any redemptions by such an
investor, regardless of the extent to which gain or loss may be realized,
generally are not subject to U.S. withholding tax. However, such distributions
may be subject to backup withholding, unless the foreign investor certifies his
or her non-U.S. residency status.
Notice as to the tax status of your dividends and other distributions will
be mailed to you annually. You also will receive periodic summaries of your
account that will include information as to distributions paid during the year.
Dividends and other distributions paid by the Fund to qualified retirement
plans ordinarily will not be subject to taxation until the proceeds are
distributed from the plans. The Fund will not report to the IRS distributions
paid to such plans. Generally, distributions from qualified retirement plans,
except those representing returns of non-deductible contributions thereto, will
be taxable as ordinary income and, if made prior to the time the participant
reaches age 59 1/2, generally will be subject to an additional tax equal to 10%
of the taxable portion of the distribution. The administrator, trustee or
custodian of a qualified retirement plan will be responsible for reporting
distributions from the plan to the IRS. Moreover, certain contributions to a
qualified retirement plan in excess of the amounts permitted by law may be
subject to an excise tax. If a distributee of an "eligible rollover
distribution" from a qualified retirement plan does not elect to have the
distribution paid directly from the plan to an eligible retirement plan in a
"direct rollover," the distribution is subject to 20% income tax withholding.
The Fund must withhold and remit to the U.S. Treasury ("backup
withholding") 31% of dividends, capital gain distributions and redemption
proceeds, regardless of the extent to which gain or loss may be realized,
payable to an individual or certain other non-corporate shareholder if the
shareholder fails to furnish a TIN to the Fund and certify that it is correct.
Backup withholding at that rate also is required from dividends and capital gain
distributions payable to such a shareholder if (1) the shareholder fails to
certify that he or she has not received notice from the IRS of being subject to
backup withholding as a result of a failure properly to report taxable dividend
or interest income on a federal income tax return or (2) the IRS notifies the
Fund to institute backup withholding because the IRS determines that the
shareholder's TIN is incorrect or that the shareholder has failed properly to
report such income. A TIN is either the Social Security number, IRS individual
taxpayer identification number or employer identification number of the record
owner of an account. Any tax withheld as a result of backup withholding does not
constitute an additional tax imposed on the record owner and may be claimed as a
credit on his or her federal income tax return.
Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares below
the cost of his or her investment. Such a distribution would be a return on
investment in an economic sense, although taxable as discussed above. In
addition, if a shareholder sells shares of the Fund held for six months or less
and receives any capital gain distributions with respect to those shares, any
loss incurred on the sale of those shares will be treated as a long-term capital
loss to the extent of those distributions.
Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a date
in any of those months are deemed to have been paid by the Fund and received by
the shareholders on December 31 of that year if the distributions are paid by
the Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.
Interest received by the Fund may be subject to income, withholding or
other taxes imposed by foreign countries and U.S. possessions that would reduce
the yield on its securities. Tax conventions between certain countries and the
United States may reduce or eliminate these foreign taxes, however, and many
foreign countries do not impose taxes on capital gains in respect of investments
by foreign investors.
Foreign Currency and Hedging Transactions. Gains from the sale or other
disposition of foreign currencies (except certain gains that may be excluded by
future regulations), and gains from options, futures and forward contracts
derived by the Fund with respect to its business of investing in securities or
foreign currencies, will qualify as permissible income under the Income
Requirement.
Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gains and losses. However, a portion of the gains or losses
from the disposition of foreign currencies and certain
foreign-currency-denominated instruments (including debt instruments and
financial forward, futures contracts and options) 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 disposition of certain market discount bonds and from
engaging in "conversion transactions" that otherwise would be treated as capital
gain may be treated as ordinary income. "Conversion transactions" are defined to
include certain option and straddle investments.
Under Section 1256 of the Code, any gain or loss realized by the Fund on
the exercise or lapse of, or closing transactions respecting, certain options,
futures and forward contracts ("Section 1256 Contracts") 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 Section 1256 contracts remaining
unexercised at the end of the Fund's taxable year will be treated as sold for
their then fair market value (a process known as "marking-to-market"), resulting
in additional gain or loss to the Fund characterized in the same manner.
Offsetting positions held by the Fund involving certain options, futures
or forward contracts may constitute "straddles", which are defined to include
"offsetting positions" in actively traded personal property. Under Section 1092
of the Code, any loss from the disposition of a position in a straddle generally
may be deducted only to the extent the loss exceeds the unrealized gain on the
offsetting position(s) of the straddle. In addition, these rules may postpone
the recognition of loss that otherwise would be recognized under the
mark-to-market rule discussed above. The regulations under Section 1092 also
provide certain "wash sale" rules, which apply to transactions where a position
is sold at a loss and a new offsetting position is acquired within a prescribed
period, and "short sale" rules applicable to straddles. If the Fund makes
certain elections (including an election as to straddles that include a position
in one or more Section 1256 Contracts (so-called "mixed straddles")), the
amount, character, and timing of recognition of gains and losses from the
affected straddle positions would be determined under rules that vary according
to the elections made. Because only a few of the regulations implementing the
straddle rules have been promulgated, the tax consequences to the Fund of
straddle transactions are not entirely clear.
Investment by the Fund in securities issued or acquired at a discount (for
example, zero coupon securities) could, under special tax rules, affect the
amount and timing of distributions to shareholders by causing the Fund to
recognize income prior to the receipt of cash payments. For example, the Fund
would be required to take into gross income annually a portion of the discount
(or deemed discount) at which the securities were issued and could need to
distribute that income to satisfy the Distribution Requirement and avoid
imposition of the 4% excise tax referred to in the Fund's Prospectus under
"Dividends, Other Distributions and Taxes." In that case, the Fund may have to
dispose of securities it might otherwise have continued to hold in order to
generate cash to satisfy these requirements.
State and Local Taxes. Depending upon the extent of its activities in
states and localities in which it is deemed to be conducting business, the fund
may be subject to the tax laws thereof. Shareholders are advised to consult
their tax advisers concerning the application of state and local taxes to them.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal income
taxation of a shareholder who, as to the United States, is a non-resident alien
individual, a foreign trust or estate, a foreign corporation or a foreign
partnership (a "foreign shareholder") depends on whether the income from the
Fund is "effectively connected" with a U.S. trade or business carried on by the
shareholder, as discussed below. Special U.S. federal income tax rules that
differ from those described below may apply to certain foreign persons who
invest in the Fund, such as a foreign shareholder entitled to claim the benefits
of an applicable tax treaty. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of an
investment in the Fund.
Foreign Shareholders - Income Not Effectively Connected. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the foreign
shareholder generally will be subject to U.S. federal withholding tax of 30% (or
lower treaty rate). Capital gains realized by foreign shareholders on the sale
of Fund shares and distributions to them of net capital gain generally will not
be subject to U.S. federal income tax unless the foreign shareholder is a
non-resident alien individual and is physically present in the United States for
more than 182 days during the taxable year. In the case of certain foreign
shareholders, the Fund may be required to withhold U.S. Federal income tax at a
rate of 31% of capital gain distributions and of the gross proceeds from a
redemption of Fund shares unless the shareholder furnishes the Fund with a
certificate regarding the shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by the foreign shareholder, then all distributions
to that shareholder and any gains realized by that shareholder on the
disposition of Fund shares will be subject to U.S. federal income tax at the
graduated rates applicable to U.S. citizens and domestic corporations, as the
case may be. Foreign shareholders also may be subject to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to federal estate tax on their U.S. situs property, such as shares of
the Fund, that they own at the time of their death. Certain credits against that
tax and relief under applicable tax treaties may be available.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund by
Dreyfus. Debt securities purchased and sold by the Fund are generally traded on
a net basis (i.e., without commission) through dealers acting for their own
account and not as brokers, or otherwise involve transactions directly with the
issuer of the instrument. This means that a dealer (the securities firm or bank
dealing with the Fund) makes a market for securities by offering to buy at one
price and sell at a slightly higher price. The difference between the prices is
known as a spread. Other portfolio transactions may be executed through brokers
acting as agent. The Fund will pay a spread or commissions in connection with
such transactions. Dreyfus uses its best efforts to obtain execution of
portfolio transactions at prices which are advantageous to the Fund and at
spreads and commission rates, if any, which are reasonable in relation to the
benefits received. Dreyfus also places transactions for other accounts that it
provides with investment advice.
Brokers and dealers involved in the execution of portfolio transactions on
behalf of the Fund are selected on the basis of their professional capability
and the value and quality of their services. In selecting brokers or dealers,
Dreyfus will consider various relevant factors, including, but not limited to,
the size and type of the transaction; the nature and character of the markets
for the security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer; the broker-dealer's
execution services rendered on a continuing basis; and the reasonableness of any
spreads (or commissions, if any). Any spread, commission, fee or other
remuneration paid to an affiliated broker-dealer is paid pursuant to the Trust's
procedures adopted in accordance with Rule 17e-1 under the 1940 Act.
Brokers or dealers may be selected who provide brokerage and/or research
services to the Fund and/or other accounts over which Dreyfus or its affiliates
exercise investment discretion. Such services may include advice concerning the
value of securities; the advisability of investing in, purchasing or selling
securities; the availability of securities or the purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and performance of
accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to the Fund and/or its other
clients; and, conversely, such information provided by brokers or dealers who
have executed transaction orders on behalf of other clients of Dreyfus may be
useful to Dreyfus in carrying out its obligations to the Fund. The receipt of
such research services does not reduce Dreyfus' normal independent research
activities; however, it enables Dreyfus to avoid the additional expenses which
might otherwise be incurred if it were to attempt to develop comparable
information through its own staff.
Dreyfus may use research services of and place brokerage transactions with
broker-dealers affiliated with it or Mellon Bank if the commissions are
reasonable, fair and comparable to commissions charged by non-affiliated
brokerage firms for similar services. For the period from May 30, 1997 (the date
the Fund commenced operations ) to December 31, 1997 and for the fiscal year
ended December 31, 1998 and December 31, 1999 the Fund did not pay any brokerage
commissions.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made for
these other accounts. It sometimes happens that the same security is held by
more than one of the accounts managed by Dreyfus. Simultaneous transactions may
occur when several accounts are managed by the same investment manager,
particularly when the same investment instrument is suitable for the investment
objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated in
accordance with a formula considered by Dreyfus to be equitable to each account.
In some cases this system could have a detrimental effect on the price or volume
of the investment instrument as far as the Fund is concerned. In other cases,
however, the ability of the Fund to participate in volume transactions will
produce better executions for the Fund. While the Trustees will continue to
review simultaneous transactions, it is their present opinion that the
desirability of retaining Dreyfus as investment manager to the Fund out weighs
any disadvantages that may be said to exist from exposure to simultaneous
transactions.
Portfolio Turnover. While securities are purchased for the Fund on the
basis of potential for high current income and not for short-term trading
profits, the portfolio turnover rate of the Fund may exceed 100%. A portfolio
turnover rate or 100% would occur, for example, if all the securities held by
the Fund were replaced once in a period of one year. A higher rate of portfolio
turnover (100% or greater) involves correspondingly greater brokerage
commissions and other expenses that must be born directly by the Fund and, thus,
indirectly by its shareholders. In addition, a high rate of portfolio turnover
may result in the realization of larger amounts of short-term capital gains
that, when distributed to the Fund's shareholder, are taxable to them as
ordinary income. Nevertheless, security transactions will be based only upon
investment considerations and will not be limited by any other considerations
when Dreyfus deems it appropriate to make changes in the Fund's assets. The
portfolio turnover rate for the Fund is calculated by dividing the lesser of the
Fund's annual sales or purchases of portfolio securities (exclusive of purchases
and sales of securities whose maturities at the time of acquisition were one
year or less) by the monthly average value of securities in the Fund during the
year. Portfolio turnover may vary from year to year as well as within a year. In
periods in which extraordinary market conditions prevail, Dreyfus will not be
deterred from changing the Fund's investment strategy as rapidly as needed, in
which case higher turnover rates can be anticipated.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Past Performance."
The Fund's current yield for the 30-day period ended December 31, 1999 was
9.95%, 9.91%, 9.66% and 10.69% for its Class A, Class B, Class C and Class R
shares, respectively. Current yield is computed pursuant to a formula which
operates, with respect to each Class of shares, as follows: the amount of the
Fund's expenses with respect to such Class of shares accrued for the 30-day
period (net of reimbursements) is subtracted from the amount of the dividends
and interest earned (computed in accordance with regulatory requirements) by the
Fund with respect to such Class of shares during the period. That result is then
divided by the product of: (a) the average daily number of shares outstanding
during the period that were entitled to receive dividends, and (b) the maximum
offering price per share in the case of Class A shares or the NAV per share in
the case of Class B, Class C and Class R shares on the last day of the period
less any undistributed earned income per share reasonably expected to be
declared as a dividend shortly thereafter. The quotient is then added to 1, and
that sum is raised to the 6th power, after which 1 is subtracted. The current
yield is then arrived at by multiplying the result by 2.
Average annual total returns (expressed as a percentage) for Class A,
Class B, Class C and Class R shares of the Fund for the periods noted were:
Average Annual Total Return for the
Period Ended December 31, 1999
1 Year Since Inception
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Class A shares (2.56)% 0.97% (6/2/97)
Class B shares (2.21)% 1.32% (6/2/97)
Class C shares 0.31% 2.01% (6/2/97)
Class R shares 2.24% 3.01% (6/2/97)
Inception date appears in parentheses following the average annual total return
since inception.
The foregoing chart assumes, where applicable, deduction of the maximum
sales load from the hypothetical initial investment at the time of purchase and
the assessment of the maximum CDSC.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at NAV per share (maximum offering
price in the case of Class A) with a hypothetical $1,000 payment made at the
beginning of the period (assuming the reinvestment of dividends and other
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 average annual total return figures
calculated in accordance with such formula assumes that, in the case of Class A
shares, the maximum sales load has been deducted from the hypothetical initial
investment at the time of purchase or, in the case of Class B or C shares the
maximum applicable CDSC has been paid upon redemption at the end of the period.
The Fund's total return for Class A shares for the period June 2, 1997
(inception date of Class A shares) to December 31, 1999 was 2.53%. Based on NAV
per share, the total return for Class A was 7.37% for this period. The Fund's
total return for Class B and Class C shares for the period from June 2, 1997
(inception date of Class B and Class C shares) to December 31, 1999 was 3.44%
and 5.28%, respectively. Without giving effect to the applicable CDSC, the total
return for Class B and Class C shares for this period was 5.95% and 5.28%,
respectively. The Fund's total return for Class R shares for the period from
June 2, 1997 (inception date of Class R shares) to December 31, 1999 was 7.95%.
Total return is calculated by subtracting the amount of a Fund's NAV
(maximum offering price in the case of Class A shares) per share at the
beginning of a stated period from the NAV (maximum offering price in the case of
Class A shares) per share at the end of the period (after giving effect to the
reinvestment of dividends and other distributions during the period and any
applicable CDSC), and dividing the result by the NAV (maximum offering price in
the case of Class A shares) per share at the beginning of the period. Total
return also may be calculated based on the NAV per share at the beginning of the
period instead of the maximum offering price per share at the beginning of the
period for Class A shares or without giving effect to any applicable CDSC at the
end of the period for Class B or C shares. In such cases, the calculation would
not reflect the deduction of the sales load with respect to Class A shares or
any applicable CDSC with respect to Class B or C shares, which, if reflected
would reduce the performance quoted.
From time to time, advertising materials for the Fund may include (i)
biographical information relating to its portfolio manager, including honors or
awards received, and may refer to or include commentary by the Fund's portfolio
manager relating to investment strategy, asset growth, current or past business,
political, economic or financial conditions and other matters of general
interest to investors; (ii) information concerning retirement and investing for
retirement, including statistical data or general discussions about the growth
and development of Dreyfus Retirement Services (in terms of new customers,
assets under management, market share, etc.) and its presence in the defined
contribution plan market; (iii) the approximate number of then-current Fund
shareholders; and (iv) discussions of the risk and reward potential of the high
yield securities markets and its comparative performance in the overall
securities markets.
From time to time, the Fund's advertising materials may refer to Lipper,
Morningstar, or Value Line Rankings or ratings, and the related analyses
supporting such rankings or ratings.
From time to time, the Fund may compare its performance against inflation
with the performance of other instruments against inflation, such as short-term
Treasury Bills (which are direct obligations of the U.S. Government), bonds,
stocks, and FDIC-insured bank money market accounts.
INFORMATION ABOUT THE FUND/TRUST
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "The Fund."
Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. Fund shares
are without par value, have no preemptive or subscription rights, and are freely
transferable. The Fund is one of three portfolios of the Trust. Fund shares have
equal rights in liquidation.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Trust to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Trustees or the
appointment of auditors. However, the holders of at least 10% of the shares
outstanding and entitled to vote may require the Trust to hold a special meeting
of shareholders for purposes of removing a Trustee from office or any other
purpose. Shareholders may remove a Trustee by the affirmative vote of two-thirds
of the Trust's outstanding voting shares. In addition, the Board of Trustees
will call a meeting of shareholders for the purpose of electing Trustees if, at
any time, less than a majority of the Trustees then holding office have been
elected by shareholders.
The Trust is a "series fund," which is a mutual fund divided into separate
portfolios, each of which is treated as a separate entity for certain matters
under the 1940 Act and for other purposes. A shareholder of one portfolio is not
deemed to be a shareholder of any other portfolio. For certain matters
shareholders vote together as a group; as to others they vote separately by
portfolio, or, where matters affect different classes of a portfolio
differently, by class.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an investment
company, such as the Trust, will not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each series affected by such matter. Rule 18f-2 further provides that a series
shall be deemed to be affected by a matter unless it is clear that the interests
of each series in the matter are identical or that the matter does not affect
any interest of such series. The Rule exempts the selection of independent
accountants and the election of Trustees from the separate voting requirements
of the Rule.
The Fund will send annual and semi-annual financial statements to all of
its shareholders.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Agreement and Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or a Trustee. The Agreement and Declaration of Trust provides for
indemnification from Fund property for all losses and expenses of any
shareholder held personally liable for the obligations of the Fund. Thus, the
risk of a shareholder's incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund itself would be unable
to meet its obligations, a possibility which Dreyfus believes is remote. Upon
payment of any liability incurred by the Fund, the shareholder of the Fund
paying such liability will be entitled to reimbursement from the general assets
of the Fund. The Trustees intend to conduct the operations of the Fund in such a
way so as to avoid, as far as possible, ultimate liability of the shareholders
for liabilities of the Fund.
COUNSEL AND INDEPENDENT AUDITORS
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W.,
Second Floor, Washington, D.C. 20036-1800, has passed upon the
legality of the shares offered by the Prospectus and this Statement
of Additional Information.
KPMG LLP, 757 Third Avenue, New York, NY 10017, was appointed by the
Trustees to serve as the Fund's independent auditors for the year ending
December 31, 2000, providing audit services including (1) examination of the
annual financial statements, (2) assistance, review and consultation in
connection with SEC filings and (3) review of the annual federal income tax
return filed on behalf of the Fund.
YEAR 2000 ISSUES
The fund could be adversely affected if the computer systems used by
Dreyfus and the fund's other service providers do not properly process and
calculate date-related information from and after January 1, 2000. Dreyfus has
taken steps designed to avoid year 2000-related problems in its systems and to
monitor the readiness of other service providers.
In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
APPENDIX
DESCRIPTION OF S&P'S, MOODY'S, FITCH
AND DUFF RATINGS
S&P's
Bond Ratings
AAA An obligation rated 'AAA' has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation
is extremely strong.
AA An obligation rated 'AA' differs from the highest rated issues only in
small degree. The obligors capacity to meet its financial commitment on
the obligation is very strong.
A An obligation rated 'A' is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity
to meet its financial commitment on the obligation is still strong.
BBB An obligation rated 'BBB' exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
Obligations rated 'BB', 'B', 'CCC', 'CC', and 'C' are regarded as having
significant speculative characteristics. 'BB' indicates the least
degree of speculation and 'C' the highest. While such obligations will
likely have some quality and protective characteristics, these may be
outweighed by large uncertainties or major exposures to adverse
conditions.
BB An obligation rated 'BB' is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions, which
could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
B An obligation rated 'B' is more vulnerable to nonpayment than
obligations rated 'BB', but the obligor currently has the capacity to
meet its financial commitment on the obligation. Adverse business,
financial, or economic conditions will likely impair the obligor's
capacity or willingness to meet its financial commitment on the
obligation.
CCC An obligation rated 'CCC' is currently vulnerable to nonpayment and is
dependent upon favorable business, financial and economic conditions
for the obligor to meet its financial commitment on the obligation. In
the event of adverse business, financial, or economic conditions, the
obligor is not likely to have the capacity to meet its financial
commitment on the obligation.
CC An obligation rated 'CC' is currently highly vulnerable to nonpayment.
C The 'C' rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments
on this obligation are being continued.
D An obligation rated 'D' is in payment default. The 'D'
rating category is used when payments on a obligation are
not made on the date due even if the applicable grace
period has not expired, unless S&P believes that such
payments will be made during such grace period. The `D'
rating also will be used upon the filing of a bankruptcy
petition or the taking of a similar action if payments on
an obligation are jeopardized.
The ratings from 'AA' to 'CCC' may be modified by the addition of a plus
(+) or a minus (-) sign to show relative standing within the major
rating categories.
Note Ratings
SP-1 Strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the term of
the notes.
SP-3 Speculative capacity to pay principal and interest.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no
more than 365 days.
A-1 This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issuers designated `A-1.'
A-3 Issues carrying this designation have an adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher
designations.
B Issues rated `B' are regarded as having only speculative capacity for
timely payment.
C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D Debt rated `D' is in payment default. The `D' rating category is used
when interest payments of principal payments are not made on the date
due, even if the applicable grace period has not expired, unless S&P
believes such payments will be made during such grace period.
Moody's
Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment
risk and generally are referred to as "gilt edge."
Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure.
While the various protective elements are likely to
change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of
such issues.
Aa Bonds which are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they
comprise what generally are known as high-grade bonds.
They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater
amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in
Aaa securities.
A Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
some time in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor
poorly secured). Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
short-comings.
C Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative standing
within each generic rating classification from Aa through B. The
modifier 1 indicates a ranking for the security in the higher end of a
rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates a ranking in the lower end of a rating category.
Notes and other Short-Term Obligations
There are four rating categories for short-term obligations that define
an investment grade situation. These are designated Moody's Investment
Grade as MIG 1 (best quality) through MIG 4 (adequate quality).
Short-term obligations of speculative quality are designated SG.
In the case of variable rate demand obligations (VRDOs), a two
component rating is assigned. The first element represents an
evaluation of the degree of risk associated with scheduled principal
and interest payments, and the other represents an evaluation of the
degree of risk associated with the demand feature. The short-term
rating assigned to the demand feature of VRDOs is designated as VMIG.
When either the long- or short-term aspect of a VRDO is not rated, that
piece is designated NR, e.g., Aaa/NR or NR/VMIG 1.
MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG-2/
MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/
VMIG 3 This designation denotes favorable quality. All security elements are
accounted for but there is lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and
market access for refinancing is likely to be less well established.
MIG 4/
VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and although
not distinctly or predominantly speculative, there is specific risk.
Commercial Paper Rating
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated
issuers:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
o Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to
a lesser degree. Earnings trends and coverage ratios, while sound, may
be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of
industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require
relatively high financial leverage. Adequate alternative liquidity is
maintained.
Fitch
Bond Ratings
AAA Highest credit quality. 'AAA' ratings denote the lowest expectation of
credit risk. They are assigned only in case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is
highly unlikely to be adversely affected by foreseeable events.
AA Very high credit quality. 'AA' ratings denote a very low expectation of
credit risk. They indicate very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
A High credit quality. 'A' ratings denote a low expectation of credit
risk. The capacity for timely payment of financial commitments is
considered strong. This capacity may, nevertheless, be more vulnerable
to changes in circumstances or in economic conditions than is the case
for higher ratings.
BBB Good credit quality. 'BBB' ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of
financial commitments is considered adequate, but adverse changes in
circumstances and in economic conditions are more likely to impair this
capacity. This is the lowest investment-grade category.
BB Speculative. 'BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse economic
change over time; however, business or financial alternatives may be
available to allow financial commitments to be met. Securities rated in
this category are not investment grade.
B Highly speculative. 'B' ratings indicate that significant credit risk
is present, but a limited margin of safety remains. Financial
commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and economic
environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained,
favorable business or economic developments. A 'CC' rating indicates
that default of some kind appears probable. 'C' ratings signal imminent
default.
DDD, DD,
and D Default. Securities are not meeting current obligations and are
extremely speculative. `DDD' designates the highest potential for
recovery of amounts outstanding on any securities involved. For U.S.
corporates, for example, 'DD' indicates expected recovery of 50% - 90%
of such outstandings, and 'D' the lowest recovery potential, i.e.
below 50%.
Short-Term and Commercial Paper Ratings
A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and thus
places greater emphasis on the liquidity necessary to meet financial commitments
in a timely manner.
F-1 Highest credit quality. Indicates the strongest capacity for timely
payment of financial commitments; may have an added "+" to denote any
exceptionally strong credit feature.
F-2 Good credit quality. A satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as great as in
the case of the higher ratings.
F-3 Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could
result in a reduction to non-investment grade.
B Speculative. Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in
financial and economic conditions.
C High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable
business and economic environment.
D Default. Denotes actual or imminent payment default.
"+" or "-" may be appended to a rating to denote relative status within
major rating categories. Such suffixes are not added to the `AAA'
long-term rating category, to categories below `CCC', or to short-term
ratings other than `F-1'.
Duff
Long-Term Ratings
AAA Highest credit quality. The risks factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk
is modest but
AA may vary slightly from time to time because of economic conditions.
AA-
A+ Protection factors are average but adequate. However, risk factors are
A more variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered sufficient for
BBB prudent investment. Considerable variability in risk during
BBB- economic cycles.
BB+ Below investments grade but deemed likely to meet obligations when due.
BB Present or prospective financial protection factors fluctuate
BB- according to industry conditions or company fortunes. Overall
quality may move up or down frequently within this category.
B+ Below investment grade and possessing risk that obligations will
not be met when due. Financial protection factors will fluctuate
B widely according to economic cycles, industry conditions and/or
B- company fortunes. Potential exists for frequent changes in the rating
within this category or into a higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty exists
as to timely payment of principal, interest or preferred dividends.
Protection factors are narrow and risk can be substantial with
unfavorable economic/industry conditions, and/or with unfavorable
company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
Short-Term and Commercial Paper Ratings
D-1+ Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of
funds, is outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
minor.
D-1- High certainly of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very
small.
D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge
total financial requirements, access to capital markets is good. Risk
factors are small.
D-3 Satisfactory liquidity and other protection factors qualify issues as
to investment grade. Risk factors are larger and subject to more
variation. Nevertheless, timely payment is expected.
D-4 Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service. Operating factors and market
access may be subject to a high degree of variation.
D-5 Issuer failed to meet scheduled principal and/or interest payments.
<PAGE>
Dreyfus Premier
Limited Term
High Income Fund
ANNUAL REPORT December 31, 1999
(reg.tm)
The views expressed herein are current to the date of this report. These views
and the composition of the fund's portfolio are subject to change at any time
based on market and other conditions.
* Not FDIC-Insured
* Not Bank-Guaranteed
* May Lose Value
Year 2000 Issues (Unaudited)
The fund could be adversely affected if the computer systems used by Dreyfus and
the fund's other service providers do not properly process and calculate
date-related information from and after January 1, 2000. Dreyfus has taken steps
designed to avoid year 2000-related problems in its systems and to monitor the
readiness of other service providers. In addition, issuers of securities in
which the fund invests may be adversely affected by year 2000-related problems.
This could have an impact on the value of the fund's investments and its share
price.
Contents
THE FUND
--------------------------------------------------
2 Letter from the President
3 Discussion of Fund Performance
6 Fund Performance
8 Statement of Investments
16 Statement of Assets and Liabilities
17 Statement of Operations
18 Statement of Changes in Net Assets
20 Financial Highlights
22 Notes to Financial Statements
27 Independent Auditors' Report
28 Important Tax Information
FOR MORE INFORMATION
---------------------------------------------------------------------------
Back Cover
The Fund
Dreyfus Premier
Limited Term High Income Fund
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this annual report for Dreyfus Premier Limited Term
High Income Fund covering the 12-month period from January 1, 1999, through
December 31, 1999. Inside, you'll find valuable information about how the fund
was managed during the reporting period, including a discussion with Roger King,
portfolio manager and member of the Dreyfus Taxable Fixed Income Team.
The past year was challenging for most fixed-income investors. Faster than
expected economic growth in the U.S. and overseas fueled concerns that
long-dormant inflationary pressures might re-emerge, potentially reducing the
future value of bonds' interest and principal payments. These concerns prompted
the Federal Reserve Board to raise key short-term interest rates three times
during the summer and fall of 1999 in an attempt to prevent a reacceleration of
inflation.
While U.S. Treasury and agency securities declined sharply in this environment
during 1999, prices of higher yielding securities -- such as corporate bonds and
mortgage-backed securities -- fell less severely. In an environment of robust
economic growth, investors appeared more comfortable owning bonds that are
influenced primarily by credit risk, and they avoided securities that are most
affected by interest-rate risk.
We appreciate your confidence over the past year, and we look forward to your
continued participation in Dreyfus Premier Limited Term High Income Fund
Sincerely,
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
January 14, 2000
DISCUSSION OF FUND PERFORMANCE
Roger King, Portfolio Manager Dreyfus Taxable Fixed Income Team
How did Dreyfus Premier Limited Term High Income Fund perform relative to its
benchmark?
For the 12-month period ended December 31, 1999, the fund achieved a total
return of 1.99% for Class A shares, 1.48% for Class B shares, 1.23% for Class C
shares and 2.24% for Class R shares.(1) This compares to a total return of 2.51%
for the fund's benchmark, the Merrill Lynch High Yield Master II Index, for the
same period.(2)
Because of its restricted maturity and duration, we also gauge the fund's
performance against a shorter term index, the Dreyfus Customized Limited Term
High Yield Index, which produced a total return of 5.23% for the period.(3) This
blended index is composed of four shorter term sub-indices of the Merrill Lynch
High Yield Master II Index.
We attribute the fund' s performance primarily to our continuing efforts to
restructure the portfolio in order to improve credit quality. A significant
portion of our holdings are rated B or below. However, the market's strength was
concentrated in higher quality credits within the high yield market, as
investors generally avoided credit risk.
What is the fund's investment approach?
The fund seeks high current income by investing primarily in high yield,
fixed-income securities. We attempt to reduce interest-rate risk by maintaining
an effective average portfolio maturity of four years or less and an effective
average portfolio duration of three-and-one-half years or less. However, there
is no limit on the maturity of individual securities. In most cases, shorter
portfolio maturities are believed to help reduce interest-rate risk and credit
risk.
We typically invest most of the fund's assets in fixed-income securities of
below-investment-grade credit quality. Issuers of below-investment-grade
securities may be in the early stages of development or The Fund may have highly
leveraged balance sheets. To compensate buyers for taking greater credit risk,
these bonds must offer higher yields than those offered by investment-grade
bonds.
Our investment approach is based on careful credit analysis. We thoroughly
analyze the business, management and financial strength of the companies whose
bonds we buy, and then project each issuer's ability to repay its debt.
What other factors influenced the fund's performance?
As 1999 began, it quickly became apparent that fears of economic weakness in
overseas markets were largely unfounded. The troubled economies of Japan and
Southeast Asia strengthened while the U.S. economy barreled ahead. In this
environment, the high yield market recovered from the steep drop it experienced
in late 1998, outperforming most other fixed-income market segments over the
first three months of 1999. Such recovery, however, proved short-lived as lack
of investor demand brought negative returns back to the high yield market.
Investor sentiment quickly shifted away from concerns that the economy might
slow to fears that it might grow too quickly. Concerned that unsustainable
economic growth might reignite inflationary pressures, the Federal Reserve Board
increased short-term interest rates three times during the summer and fall. In
response to these rate hikes, the fixed-income market experienced a general
decline.
A major force driving the decline was concern over year-end liquidity issues
during the transition from 1999 to 2000. In anticipation of Y2K-related problems
that ultimately proved to be overblown, investors stepped up redemptions of high
yield mutual funds, and fund managers sold securities in order to have more cash
on hand in anticipation of potential further redemptions. At the same time, many
institutional investors stopped buying and selling high yield securities,
further reducing liquidity. This created a market in which a large supply of
high yield issues was met with weak demand. In such a market, prices inevitably
decline.
Other factors have continued to put pressure on the high yield market. The
threat of higher interest rates has had a negative influence on investor
psychology throughout the entire bond market. Default rates have risen, as some
bonds issued in 1997 and 1998 have not met interest payments. While it is
difficult to quantify, many investors who have traditionally participated in the
high yield market appear to have lost interest, finding other types of
investments that they consider more appealing.
What is the fund's current strategy?
We have continued our efforts to restructure the portfolio to take better
advantage of market strengths and protect the portfolio from a potential
recurrence of market instability. First, we shortened the fund's effective
maturity and duration to keep cash available. Second, our focus on bonds rated
double-B has improved the fund's credit quality. Third, we have continued to
focus on defensive sectors -- such as broadcasting and entertainment -- that
historically do well in all economic environments. These steps are designed to
help us seek to provide shareholders with high levels of current income while at
the same time limiting exposure to broader market risks.
January 14, 2000
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID,
AND DOES NOT TAKE INTO CONSIDERATION THE MAXIMUM INITIAL SALES CHARGE IN THE
CASE OF CLASS A SHARES, OR THE APPLICABLE CONTINGENT DEFERRED SALES CHARGES
IMPOSED ON REDEMPTIONS IN THE CASE OF CLASS B AND CLASS C SHARES. HAD THESE
CHARGES BEEN REFLECTED, RETURNS WOULD HAVE BEEN LOWER. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND INVESTMENT RETURN FLUCTUATE
SUCH THAT UPON REDEMPTION, FUND SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST.
(2) SOURCE: BLOOMBERG L.P. -- THE MERRILL LYNCH HIGH YIELD MASTER II INDEX IS AN
UNMANAGED PERFORMANCE BENCHMARK COMPOSED OF U.S. DOMESTIC AND YANKEE BONDS RATED
BELOW INVESTMENT GRADE WITH AT LEAST $100 MILLION PAR AMOUNTS OUTSTANDING AND
GREATER THAN OR EQUAL TO ONE YEAR TO MATURITY. ALL DIVIDENDS AND CAPITAL GAINS
ARE REINVESTED.
(3) SOURCE: BLOOMBERG L.P. -- THE DREYFUS CUSTOMIZED LIMITED TERM HIGH YIELD
INDEX IS COMPOSED OF FOUR SUB-INDICES OF THE MERRILL LYNCH HIGH YIELD MASTER II
INDEX. THESE SUB-INDICES, BLENDED AND MARKET WEIGHTED, ARE (I) BB-RATED, 1-3
YEARS, (II) B-RATED, 1-3 YEARS, (III) BB-RATED, 3-5 YEARS, AND (IV) B-RATED, 3-5
YEARS. UNLIKE THE DREYFUS CUSTOMIZED LIMITED TERM HIGH YIELD INDEX, WHICH IS
COMPOSED OF BONDS RATED NO LOWER THAN "B," THE FUND CAN INVEST IN BONDS WITH
LOWER CREDIT RATINGS THAN "B" AND AS LOW AS "D." ALL DIVIDENDS AND CAPITAL GAINS
ARE REINVESTED.
The Fund
FUND PERFORMANCE
Comparison of change in value of $10,000 investment in Dreyfus Premier Limited
Term High Income Fund Class A shares, Class B shares, Class C shares and Class R
shares with the Merrill Lynch High Yield Master II Index and a Customized
Limited Term High Yield Index
((+)) SOURCE: BLOOMBERG L.P.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN EACH OF THE CLASS A, CLASS
B, CLASS C AND CLASS R SHARES OF DREYFUS PREMIER LIMITED TERM HIGH INCOME FUND
ON 6/2/97 (INCEPTION DATE) TO A $10,000 INVESTMENT MADE ON THAT DATE IN TWO
DIFFERENT INDICES: (1) THE MERRILL LYNCH HIGH YIELD MASTER II INDEX AND (2) THE
CUSTOMIZED LIMITED TERM HIGH YIELD INDEX WHICH HAS BEEN CONSTRUCTED BY THE
DREYFUS CORPORATION. FOR COMPARATIVE PURPOSES, THE VALUES OF THE INDICES ON
5/31/97 ARE USED AS THE BEGINNING VALUES ON 6/2/97. ALL DIVIDENDS AND CAPITAL
GAIN DISTRIBUTIONS ARE REINVESTED. THE CUSTOMIZED LIMITED TERM HIGH YIELD INDEX
IS CALCULATED ON A YEAR-TO-YEAR BASIS.
THE FUND SEEKS TO ACHIEVE ITS OBJECTIVE BY INVESTING IN LOWER RATED FIXED-INCOME
SECURITIES AND BY MAINTAINING AN EFFECTIVE AVERAGE PORTFOLIO MATURITY OF 4 YEARS
OR LESS AND AN EFFECTIVE AVERAGE DURATION OF 3.5 YEARS OR LESS. THE FUND'S
PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT THE MAXIMUM INITIAL SALES
CHARGE ON CLASS A SHARES, THE MAXIMUM CONTINGENT DEFERRED SALES CHARGES ON CLASS
B AND CLASS C SHARES AND ALL OTHER APPLICABLE FEES AND EXPENSES ON ALL CLASSES.
THE MERRILL LYNCH HIGH YIELD MASTER II INDEX IS AN UNMANAGED PERFORMANCE
BENCHMARK COMPOSED OF U.S. DOMESTIC AND YANKEE BONDS RATED BELOW INVESTMENT
GRADE WITH AT LEAST $100 MILLION PAR AMOUNTS OUTSTANDING AND GREATER THAN OR
EQUAL TO ONE YEAR TO MATURITY. BOTH INTEREST AND PRICE CHANGES ARE CALCULATED
DAILY BASED ON AN ACCRUED SCHEDULE AND TRADER PRICING. THE CUSTOMIZED LIMITED
TERM HIGH YIELD INDEX IS COMPOSED OF FOUR SUB-INDICES OF THE MERRILL LYNCH HIGH
YIELD MASTER II INDEX. THE SUB-INDICES, BLENDED AND MARKET WEIGHTED, ARE (I)
BB-RATED 1-3 YEARS, (II) B-RATED 1-3 YEARS, (III) BB-RATED 3-5 YEARS, AND (IV)
B- RATED 3-5 YEARS. UNLIKE THE CUSTOMIZED LIMITED TERM HIGH YIELD INDEX, WHICH
IS COMPOSED OF BONDS RATED NO LOWER THAN "B", THE FUND CAN INVEST IN BONDS WITH
LOWER CREDIT RATINGS THAN "B" AND AS LOW AS "D."
NEITHER OF THE FOREGOING INDICES TAKE INTO ACCOUNT CHARGES, FEES AND OTHER
EXPENSES. FURTHER INFORMATION RELATING TO FUND PERFORMANCE, INCLUDING EXPENSE
REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION
OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT.
<TABLE>
Average Annual Total Returns AS OF 12/31/99
Inception From
Date 1 Year Inception
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A SHARES
WITH SALES CHARGE (4.5%) 6/2/97 (2.56)% 0.97%
WITHOUT SALES CHARGE 6/2/97 1.99% 2.79%
CLASS B SHARES
WITH REDEMPTION((+)) 6/2/97 (2.21)% 1.32%
WITHOUT REDEMPTION 6/2/97 1.48% 2.27%
CLASS C SHARES
WITH REDEMPTION((+)(+)) 6/2/97 0.31% 2.01%
WITHOUT REDEMPTION 6/2/97 1.23% 2.01%
CLASS R SHARES 6/2/97 2.24% 3.01%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
((+)) THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS B SHARES IS 4%
AND IS REDUCED TO 0% AFTER SIX YEARS, AT WHICH TIME CLASS B SHARES
CONVERT TO CLASS A SHARES.
((+)(+)) THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS C SHARES IS
1% FOR SHARES REDEEMED WITHIN ONE YEAR OF THE DATE OF PURCHASE.
The Fund
STATEMENT OF INVESTMENTS
<TABLE>
December 31, 1999
Principal
BONDS AND NOTES--94.7% Amount($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AIRCRAFT & AEROSPACE--6.6%
AM General, Ser. B,
Sr. Notes, 12.875%, 2002 11,858,000 10,642,555
Aircraft Lease Portfolio Securitisation 96-1,
Pass-Through Trust, Ctfs.,
Cl. D, 12.75%, 2006 812,929 804,800
Airplanes Pass-Through Trust,
Pass-Through Ctfs.,
Ser. 1, Cl. D, 10.875%, 2019 22,000,000 19,043,420
American Pacific,
Sr. Notes, 9.25%, 2005 7,000,000 7,070,000
Atlantic Coast Airlines,
Gtd. Pass through Ctfs.,
Ser. 1977-1D, 7.97%, 2000 974,272 (a) 974,901
Burke Industries,
Sr. Notes, 9.881%, 2007 7,000,000 (b) 2,695,000
L-3 Communications, Ser. B,
Sr. Sub. Notes, 10.375%, 2007 9,750,000 10,115,625
Midway Airlines,
Pass-Through Ctfs.,
Ser. 1998-1, Cl. D, 8.86%, 2003 4,502,000 (a) 4,420,716
55,767,017
AUTOMOTIVE--3.3%
Aetna Industries,
Sr. Notes, 11.875%, 2006 12,000,000 11,715,000
Hayes Lemmerz International,
Sr. Sub. Notes, 11%, 2006 7,000,000 7,350,000
Penda, Ser. B,
Sr. Notes, 10.75%, 2004 8,913,000 8,556,480
27,621,480
BROADCASTING--2.9%
Capstar Broadcasting Partners,
Sr. Discount Notes, 0/12.75%, 2009 1,750,000 (c) 1,566,250
Lin Holdings,
Sr. Discount Notes, 0/10%, 2008 9,000,000 (c) 6,108,750
Paxson Communications,
Sr. Sub. Notes, 11.625%, 2002 14,000,000 14,630,000
Univision Network Holding,
Sub. Notes, 7%, 2002 2,550,575 1,815,000
24,120,000
BUSINESS SERVICES--1.1%
Pierce Leahy,
Sr. Sub. Notes, 11.125%, 2006 9,000,000 9,585,000
Principal
BONDS AND NOTES (continued) Amount($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
CABLE TELEVISION--9.7%
Adelphia Communications:
Ser. B, Sr. Notes, 9.5%, 2004 5,000,000 5,025,000
Sr. Discount Notes, 0%, 2003 5,500,000 3,960,000
Sr. Notes, 9.25%, 2002 4,000,000 4,000,000
Sr. Notes, 9.75%, 2002 1,700,000 1,717,000
Diamond Cable Communications,
Sr. Discount Notes, 0/11.75%, 2005 9,950,000 (c) 9,452,500
Galaxy Telecom,
Sr. Sub. Notes, 12.375%, 2005 9,400,000 10,011,000
NTL:
Ser. A, Sr. Discount Notes, 0/12.75%, 2005 5,500,000 (c) 5,500,000
Sr. Discount Notes, 0/11.2%, 2007 7,000,000 (c) 6,702,500
Pegasus Communications, Ser. A,
Sr. Sub. Notes, 12.5%, 2007 14,500,000 (a) 15,877,500
Pegasus Media & Communications, Ser. B,
Sr. Sub. Notes, 12.5%, 2005 13,540,000 14,690,900
Telewest Communications,
Sr. Discount Notes, 0/11%, 2007 5,000,000 (c) 4,687,500
81,623,900
CASINOS & GAMING--2.3%
Circus Circus Enterprises,
Sr. Sub. Notes, 6.75%, 2003 1,500,000 1,425,000
Players International,
Sr. Notes, 10.875%, 2005 17,040,000 17,977,200
19,402,200
CHEMICALS--2.2%
Arco Chemical,
Deb., 9.9%, 2000 2,600,000 2,630,750
ISP Holdings:
Ser. B, Sr. Notes, 9.75%, 2002 5,770,000 5,806,063
Ser. B, Sr. Notes, 9%, 2003 9,750,000 9,555,000
17,991,813
COMMERCIAL MORTGAGE
PASS-THROUGH CTFS.--1.2%
GS Mortgage Securities II,
Ser. 1999-FL2A, Cl. G, 8.549%, 2013 4,000,000 (a,b) 3,699,760
Nomura Depositor Trust:
Ser. 1998-STI, Cl. B2, 9.694%, 2003 5,000,000 (a,b) 4,550,781
Ser. 1998 STIA, Cl. B2A, 9.694%, 2003 2,000,000 (a,b) 1,820,313
10,070,854
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (continued) Amount($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
CONSTRUCTION--1.6%
Aaf-Mcquay,
Sr. Notes, 8.875%, 2003 9,000,000 7,976,250
ICF Kaiser International,
Sr. Sub. Notes, 13%, 2003 11,050,000 (d) 5,552,625
13,528,875
CONSUMER--5.8%
BPC Holding, Ser. B,
Sr. Secured Notes, 13.25%, 2006 5,329,000 (b) 5,142,485
Coinmachine, Ser. D,
Sr. Notes, 11.75%, 2005 15,915,000 16,472,025
Graham Packaging/GPC Capital, Ser. B,
Floating Interest Rate Sub. Term Securities,
9.224%, 2008 1,500,000 (b) 1,402,500
Hosiery Corp. of America,
Sr. Sub. Notes, 13.75%, 2002 13,000,000 13,585,000
Sharp Do Brazil,
Medium-Term Notes, 9.625%, 2000 3,500,000 (d,e) 533,750
Sweetheart Cup,
Sr. Sub. Notes, 9.625%, 2000 11,500,000 11,442,500
48,578,260
ENERGY--2.1%
Clark USA, Ser. B,
Sr. Notes, 10.875%, 2005 5,386,000 2,181,330
Dual Drilling,
Sr. Sub. Notes, 9.875%, 2004 3,300,000 3,405,511
Louis Dreyfus Natural Gas,
Sr. Sub. Notes, 9.25%, 2004 4,000,000 4,004,948
Statia Terminals, Ser. B,
First Mortgage, 11.75%, 2003 8,000,000 8,190,000
17,781,789
ENTERTAINMENT--2.7%
American Skiing, Ser. B,
Sr. Sub. Notes, 12%, 2006 22,915,000 21,024,512
United Artists Theatres, Ser. B,
Floating Rate Sr. Sub. Notes, 10.553%, 2007 8,000,000 (d) 1,600,000
22,624,512
FINANCIAL--2.0%
Imperial Credit Capital Trust I, Ser. A,
Remarketed Par Securities, 10.25%, 2002 500,000 387,249
Loomis Fargo & Co.,
Sr. Notes, 10%, 2004 5,375,000 5,348,125
Principal
BONDS AND NOTES (continued) Amount($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL (CONTINUED)
Reliance Group Holdings:
Sr. Notes, 9%, 2000 6,500,000 5,768,750
Sr. Sub. Deb., 9.75%, 2003 4,700,000 3,677,750
Republic National Bank of New York,
Deb., 9.65%, 2003 2,000,000 (a) 1,359,702
16,541,576
FOOD & BEVERAGES--5.0%
Chiquita Brands International,
Conv. Sub. Notes, 7%, 2001 9,150,000 7,137,000
Envirodyne Industries,
Sr. Notes, 10.25%, 2001 14,000,000 8,400,000
Pilgrims Pride,
Sr. Sub. Notes, 10.875%, 2003 2,000,000 2,030,000
Sun World International, Ser. B,
First Mortgage, 11.25%, 2004 23,500,000 24,087,500
41,654,500
FOREST PRODUCTS--6.3%
Maxxam Group Holdings,
Sr. Secured Notes, 12%, 2003 45,115,000 42,182,525
Stone Container Finance,
Sr. Notes, 11.5%, 2006 10,000,000 (a) 10,650,000
52,832,525
HEALTH CARE--1.1%
Eye Care Centers of America,
Floating Interest Rate Sub. Term Securities,
10.114%, 2008 3,000,000 (b) 2,115,000
Tenet Healthcare,
Sr. Notes, 7.875%, 2003 7,500,000 7,303,125
9,418,125
INDUSTRIAL--3.2%
Anacomp, Ser. D,
Sr. Sub. Notes, 10.875%, 2004 5,000,000 5,000,000
Applied Extrusion Technology, Ser. B,
Sr. Notes, 11.5%, 2002 12,880,000 13,266,400
HCC Industries,
Sr. Sub. Notes, 10.75%, 2007 6,360,000 3,720,600
Hawk, Ser. B,
Sr. Notes, 10.25%, 2003 3,083,000 2,975,095
TEKNI-PLEX, Ser. B,
Sr. Notes, 11.25%, 2007 1,185,000 1,285,725
The Fund
Principal
BONDS AND NOTES (continued) Amount($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL (CONTINUED)
Vicap, S.A. de C.V.,
Gtd. Sr. Notes, 10.25%, 2002 500,000 485,000
26,732,820
METALS--2.2%
Northwestern Steel & Wire,
Sr. Notes, 9.5%, 2001 5,000,000 2,275,000
Renco Metals,
Sr. Notes, 11.5%, 2003 18,870,000 15,945,150
18,220,150
PUBLISHING--.7%
Day International Group, Ser. B,
Sr. Sub. Notes, 11.125%, 2005 5,200,000 5,356,000
REAL ESTATE--1.5%
Meditrust:
Conv. Notes, 7.5%, 2001 1,000,000 827,500
Medium-Term Notes, 7.77%, 2002 7,250,000 5,978,705
Rockefeller Center Properties,
Conv. Deb., 0%, 2000 7,255,000 6,094,200
12,900,405
RETAIL--2.2%
Cafeteria Operators
(Gtd. by Furrs/Bishops Specialty Group),
Sr. Secured Notes, 12%, 2001 7,481,650 7,444,242
Core-Mark International,
Sr. Notes, 11.375%, 2003 3,180,000 3,040,875
Petro Stopping Centers/Financial,
Sr. Notes, 10.5%, 2007 7,800,000 7,273,500
Woolworth,
Notes, 7%, 2000 1,000,000 991,413
18,750,030
SHIPPING--.6%
Gearbulk Holdings,
Sr. Notes, 11.25%, 2004 2,000,000 2,065,000
Stena AB,
Sr. Notes, 10.5%, 2005 3,500,000 3,202,500
5,267,500
SUPERMARKETS--1.0%
Pathmark Stores,
Notes, 10.75%, 2003 4,000,000 500,000
Principal
BONDS AND NOTES (continued) Amount($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
SUPERMARKETS (CONTINUED)
Shoppers Food Warehouse,
Sr. Notes, 9.75%, 2004 7,400,000 7,881,000
8,381,000
TECHNOLOGY--1.4%
Baan,
Conv. Sub. Notes, 4.5%, 2001 10,000,000 8,975,000
Viasystems,
Sr. Sub. Notes, 9.75%, 2007 5,750,000 3,076,250
12,051,250
TELECOMMUNICATIONS/CARRIERS--8.9%
GST USA,
Sr. Discount Notes, 0/13.875%, 2005 2,500,000 (c) 1,862,500
Hermes Europe Railtel,
Sr. Notes, 11.5%, 2007 14,750,000 15,266,250
Intermedia Communications,
Sr. Discount Notes, 0/12.5%, 2006 14,500,000 (c) 12,760,000
MJD Communications,
Floating Rate Notes, 10.321%, 2008 9,000,000 (b) 8,428,500
NEXTEL Communications,
Sr. Notes, 9.75%, 2004 9,500,000 9,832,500
Qwest Communications International, Ser. B,
Sr. Notes, 10.875%, 2007 15,000,000 16,875,000
WorldPort Communications,
Sr. Notes, 11.688%, 2000 10,000,000 (a,d) 10,000,000
75,024,750
TEXTILES--.7%
Sassco Fashions,
Sr. Notes, 12.75%, 2004 5,700,000 5,329,500
Texfi Industries,
Sr. Sub. Deb., 8.75%, 2000 5,100,000 (d) 204,000
5,533,500
TRANSPORTATION--3.6%
Eletson Holdings,
First Pfd. Ship Mortgage, 9.25%, 2003 1,750,000 1,618,750
MTL, Ser. B,
Floating Interest Rate Sub. Term Securities,
10.931%, 2006 5,000,000 (b) 4,468,750
US Airways,
Pass-Through Ctfs.:
Ser. 1993-A, Cl. A2, 9.625%, 2003 3,855,000 3,770,063
Ser. 1993-A, Cl. A3, 10.375%, 2013 11,000,000 10,734,867
The Fund
Principal
BONDS AND NOTES (CONTINUED) Amount($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION (CONTINUED)
Union Pacific,
Sub. Deb, 5.5%, 2033 4,348,000 3,016,261
ValuJet,
Sr. Notes, 10.25%, 2001 7,675,000 6,667,656
30,276,347
UTILITIES--.5%
Hidroelectrica Piedra del Aguila:
Notes, 8%, 2009 3,500,000 (a) 2,135,000
Notes, 8.25%, 2009 3,500,000 (a) 2,170,000
4,305,000
WIRELESS COMMUNICATIONS--12.3%
Cencall Communications,
Sr. Notes, 10.125%, 2004 7,500,000 7,800,000
Clearnet Communications,
Sr. Discount Notes, 0/14.75%, 2005 19,600,000 (c) 19,330,500
Comunicacion Celular,
Sr. Discount Notes, 0/14.125%, 2005 13,250,000 (a,c) 6,360,000
Microcell Telecommunications, Ser. B,
Sr. Discount Notes, 0/14%, 2006 10,000,000 (c) 8,875,000
Occidente y Caribe Celular, Ser. B,
Sr. Discount Notes, 0/14%, 2004 11,000,000 (c) 4,950,000
Omnipoint Communications,
Floating Rate Notes, 9.254%, 2006 4,844,553 (a,b) 4,754,299
Orion Network Systems,
Sr. Discount Notes, 0/12.5%, 2007 32,045,000 (c) 14,900,925
Pagemart Nationwide,
Sr. Discount Notes, 0/15%, 2005 13,500,000 (c) 12,082,500
WinStar Communications,
Sr. Discount Notes, 0/14%, 2005 23,000,000 (c) 22,425,000
WinStar Equipment,
Sr. Notes, 12.5%, 2004 2,000,000 2,150,000
103,628,224
TOTAL BONDS AND NOTES
(cost $918,456,193) 795,569,402
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--.1% Shares Value ($)
------------------------------------------------------------------------------------------------------------------------------------
BROADCASTING--.1%
Spanish Broadcasting System, Cl. A 21,400 (a,f) 522,160
UnitedGlobalCom, Cl. A 906 (f) 63,986
586,146
COMMON STOCKS (CONTINUED) Shares Value ($)
------------------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT--.0%
Discovery Zone (warrants) 4,000 (a,f) 4
Discovery Zone, Cl. A (warrants) 37,400 (a,f) 37
Discovery Zone, Cl. B (warrants) 37,400 (a,f) 37
78
TELECOMMUNICATIONS/CARRIERS--.0%
Worldport Communications (warrants) 277,493 (a,f) 2,775
WIRELESS COMMUNICATIONS--.0%
Comunicacion Celular (warrants) 1,750 (a,f) 87,719
TOTAL COMMON STOCKS
(cost $558,359) 676,718
------------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--.6%
------------------------------------------------------------------------------------------------------------------------------------
PUBLISHING
Newscorp Overseas,
Ser. A, Cum., $2.15625
(cost $5,454,716) 216,973 4,664,920
------------------------------------------------------------------------------------------------------------------------------------
Principal
SHORT-TERM INVESTMENTS--3.3% Amount($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER--1.2%
Halliburton,
7.25%, 2000 10,000,000 9,995,972
U.S. TREASURY BILLS--2.1%
4.96%, 3/30/2000 17,945,000 17,721,226
TOTAL SHORT-TERM INVESTMENTS
(cost $27,720,927) 27,717,198
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $952,190,195) 98.7% 828,628,238
CASH AND RECEIVABLES (NET) 1.3% 11,275,840
NET ASSETS 100.0% 839,904,078
A SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF
1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION,
NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT DECEMBER 31, 1999, THESE
SECURITIES AMOUNTED TO $69,385,704 OR 8.3% OF NET ASSETS.
B VARIABLE RATE SECURITY--INTEREST RATE SUBJECT TO PERIODIC CHANGE.
C ZERO COUPON UNTIL A SPECIFIED DATE AT WHICH TIME THE STATED COUPON RATE
BECOMES EFFECTIVE UNTIL MATURITY.
D NON-INCOME PRODUCING--SECURITY IN DEFAULT.
E REFLECTS DATE SECURITY CAN BE REDEEMED AT HOLDER'S OPTION; THE STATED
MATURITY IS 10/30/2005.
F NON-INCOME PRODUCING.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 952,190,195 828,628,238
Interest and dividends receivable 21,887,511
Receivable for shares of Beneficial Interest subscribed 1,823,441
852,339,190
--------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 926,968
Due to Distributor 124,952
Cash overdraft due to Custodian 4,488,430
Payable for shares of Beneficial Interest redeemed 6,894,762
12,435,112
--------------------------------------------------------------------------------
NET ASSETS ($) 839,904,078
--------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 996,807,773
Accumulated undistributed investment income-net 2,504,477
Accumulated net realized gain (loss) on investments (35,846,215)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 3 (123,561,957)
NET ASSETS ($) 839,904,078
<TABLE>
NET ASSET VALUE PER SHARE
Class A Class B Class C Class R
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Assets ($) 106,959,437 562,604,605 170,011,283 328,753
Shares Outstanding 10,235,192 53,843,701 16,262,197 31,483
-----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE ($) 10.45 10.45 10.45 10.44
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
--------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INCOME:
Interest 99,624,971
Cash dividends 4,870,053
TOTAL INCOME 104,495,024
EXPENSES:
Management fee--Note 2(a) 6,557,372
Distribution and service fees--Note 2(b) 6,863,122
Interest expense--Note 4 68,831
TOTAL EXPENSES 13,489,325
INVESTMENT INCOME--NET 91,005,699
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 3 ($):
Net realized gain (loss) on investments (18,202,136)
Net unrealized appreciation (depreciation) on investments (58,693,550)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (76,895,686)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 14,110,013
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF CHANGES IN NET ASSETS
Year Ended December 31,
---------------------------------
1999 1998
--------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 91,005,699 59,847,911
Net realized gain (loss) on investments (18,202,136) (17,497,235)
Net unrealized appreciation (depreciation)
on investments (58,693,550) (62,388,806)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 14,110,013 (20,038,130)
--------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net:
Class A shares (13,467,432) (10,382,991)
Class B shares (57,065,809) (35,300,767)
Class C shares (18,945,063) (13,155,121)
Class R shares (22,591) (12,480)
TOTAL DIVIDENDS (89,500,895) (58,851,359)
--------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS ($)
Net proceeds from shares sold:
Class A shares 129,666,728 127,961,825
Class B shares 178,313,048 440,097,645
Class C shares 65,677,422 184,901,944
Class R shares 209,810 --
Dividends reinvested:
Class A shares 6,252,511 6,262,565
Class B shares 15,659,923 9,117,590
Class C shares 5,791,684 3,905,817
Class R shares 13,585 12,480
Cost of shares redeemed:
Class A shares (165,607,547) (40,179,581)
Class B shares (134,189,892) (48,434,992)
Class C shares (89,350,304) (33,282,236)
Class R shares (10) (10)
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS 12,436,958 650,363,047
TOTAL INCREASE (DECREASE) IN NET ASSETS (62,953,924) 571,473,558
--------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 902,858,002 331,384,444
END OF PERIOD 839,904,078 902,858,002
Undistributed investment income--net 2,504,477 999,673
SEE NOTES TO FINANCIAL STATEMENTS.
Year Ended December 31,
---------------------------------
1999 1998
--------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
CLASS A (A)
Shares sold 11,720,706 10,556,558
Shares issued for dividends reinvested 570,644 523,771
Shares redeemed (15,044,058) (3,364,705)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (2,752,708) 7,715,624
--------------------------------------------------------------------------------
CLASS B (A)
Shares sold 16,090,888 36,142,877
Shares issued for dividends reinvested 1,437,007 764,857
Shares redeemed (12,369,337) (4,116,604)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING 5,158,558 32,791,130
--------------------------------------------------------------------------------
CLASS C
Shares sold 5,912,749 15,092,226
Shares issued for dividends reinvested 530,024 327,575
Shares redeemed (8,200,482) (2,814,091)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (1,757,709) 12,605,710
--------------------------------------------------------------------------------
CLASS R
Shares sold 18,989 --
Shares issued for dividends reinvested 1,248 1,035
Shares redeemed (1) --
NET INCREASE (DECREASE) IN SHARES OUTSTANDING 20,236 1,035
(A) DURING THE PERIOD ENDED DECEMBER 31, 1999, 6,007 CLASS B SHARES
REPRESENTING $62,981 WERE AUTOMATICALLY CONVERTED TO 6,010 CLASS A SHARES.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the
fiscal periods indicated. All information (except portfolio turnover rate)
reflects financial results for a single fund share. Total return shows how much
your investment in the fund would have increased (or decreased) during each
period, assuming you had reinvested all dividends and distributions. These
figures have been derived from the fund's financial statements.
<TABLE>
CLASS A SHARES CLASS B SHARES
---------------------- ----------------------------
Year Ended December 31, Year Ended December 31,
---------------------------- ----------------------------
1999 1998 1997(a) 1999 1998 1997(a)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA ($):
Net asset value, beginning of period 11.33 12.46 12.50 11.33 12.46 12.50
Investment Operations:
Investment income-net 1.12 1.15 .71 1.06 1.09 .66
Net realized and unrealized gain (loss)
on investments (.90) (1.14) (.04) (.89) (1.14) (.04)
Total from Investment Operations .22 .01 .67 .17 (.05) .62
Distributions:
Dividends from investment income-net (1.10) (1.14) (.71) (1.05) (1.08) (.66)
Net asset value, end of period 10.45 11.33 12.46 10.45 11.33 12.46
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (B) 1.99 (.10) 9.16(c) 1.48 (.61) 8.57(c)
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses to
average net assets .95 .95 .95(c) 1.45 1.45 1.45(c)
Ratio of interest expense to
average net assets .01 .02 .08(c) .01 .02 .09(c)
Ratio of net investment income
to average net assets 10.19 9.55 9.34(c) 9.70 9.02 8.73(c)
Portfolio Turnover Rate 40.79 45.34 28.83(d) 40.79 45.34 28.83(d)
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
($ x 1,000) 106,959 147,131 65,705 562,605 551,415 198,057
A FROM MAY 30, 1997 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1997.
B EXCLUSIVE OF SALES CHARGE.
C ANNUALIZED.
D NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
CLASS C SHARES CLASS R SHARES
---------------------- ----------------------------
Year Ended December 31, Year Ended December 31,
---------------------------- ----------------------------
1999 1998 1997(a) 1999 1998 1997(a)
------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value, beginning of period 11.33 12.47 12.50 11.32 12.45 12.50
Investment Operations:
Investment income-net 1.04 1.06 .65 1.05 1.25 .81
Net realized and unrealized gain (loss)
on investments (.90) (1.15) (.03) (.80) (1.21) (.14)
Total from Investment Operations .14 (.09) .62 .25 .04 .67
Distributions:
Dividends from investment income-net (1.02) (1.05) (.65) (1.13) (1.17) (.72)
Net asset value, end of period 10.45 11.33 12.47 10.44 11.32 12.45
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (B) 1.23 (.93) 8.47(c) 2.24 .14 9.26(c)
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses to
average net assets 1.70 1.70 1.70(c) .70 .70 .75(c)
Ratio of interest expense to
average net assets .01 .02 .09(c) .01 .03 .05(c)
Ratio of net investment income
to average net assets 9.45 8.77 8.54(c) 10.65 10.41 10.08(c)
Portfolio Turnover Rate 40.79 45.34 28.83(d) 40.79 45.34 28.83(d)
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
($ x 1,000) 170,011 204,184 67,495 329 127 127
A FROM MAY 30, 1997 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1997.
B EXCLUSIVE OF SALES CHARGE.
C ANNUALIZED.
D NOT ANNUALIZED.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
Dreyfus Premier Limited Term High Income Fund (the "fund") is a separate
diversified series of The Dreyfus/Laurel Funds Trust (the "Trust") which is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company and operates as a series company
currently offering three series including the fund. The fund's investment
objective is to provide high current income. The Dreyfus Corporation (the
" Manager" ) serves as the fund's investment manager. The Manager is a direct
subsidiary of Mellon Bank, N.A. (" Mellon Bank" ), which is a wholly-owned
subsidiary of Mellon Financial Corporation.
Premier Mutual Fund Services, Inc. (the "Distributor") is the distributor of the
fund' s shares. The fund is authorized to issue an unlimited number of shares of
Beneficial Interest in the following classes of shares: Class A, Class B, Class
C and Class R. Class A, Class B and Class C shares are sold primarily to retail
investors through financial intermediaries and bear a distribution fee and/or
service fee. Class A shares are sold with a front-end sales charge, while Class
B and Class C shares are subject to a contingent deferred sales charge ("CDSC").
Class R shares are sold primarily to bank trust departments and other financial
service providers (including Mellon Bank and its affiliates) acting on behalf of
customers having a qualified trust or investment account or relationship at such
institution, and bear no distribution or service fees. Class R shares are
offered without a front-end sales charge or CDSC. Each class of shares has
identical rights and privileges, except with respect to distribution and service
fees and voting rights on matters affecting a single class.
Investment income, net of expenses (other than class specific expenses) and
realized and unrealized gains and losses are allocated daily to each class of
shares based upon the relative proportion of net assets of each class.
The fund' s financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(a) Portfolio valuation: Investments in securities (excluding short-term
investments other than U.S. Treasury Bills) are valued each business day by an
independent pricing service (" Service" ) approved by the Board of Trustees.
Investments for which quoted bid prices are readily available and are
representative of the bid side of the market in the judgment of the Service are
valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of securities of comparable quality, coupon, maturity and
type; indications as to values from dealers; and general market conditions.
Securities for which there are no such valuations are valued at fair value as
determined in good faith under the direction of the Board of Trustees.
Short-term investments, other than U.S. Treasury Bills, are carried at amortized
cost, which approximates value.
(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 discount on investments, is recognized on the
accrual basis.
(c) Distributions to shareholders: It is the policy of the fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain, if any, are normally declared and paid
annually, but the fund may make distributions on a more frequent basis to comply
with the distribution requirements of the Internal Revenue Code of 1986, as
amended (the "Code"). 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 pro
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
visions of the Code, and to make distributions of taxable income sufficient to
relieve it from substantially all Federal income and excise taxes.
The fund has an unused capital loss carryover of approximately $35,475,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to December 31, 1999. If not
applied, $8,327,000 of the carryover expires in fiscal 2006 and $27,148,000
expires in fiscal 2007.
NOTE 2--Investment Management Fee and Other Transactions with Affiliates:
(a) Investment management fee: Pursuant to an Investment Management
agreement with the Manager, the Manager provides or arranges for one or more
third parties and/or affiliates to provide investment advisory, administrative,
custody, fund accounting and transfer agency services to the fund. The Manager
also directs the investments of the fund in accordance with its investment
objective, policies and limitations. For these services, the fund is
contractually obligated to pay the Manager a fee, calculated daily and paid
monthly, at the annual rate of .70% of the value of the fund's average daily net
assets. Out of its fee, the Manager pays all of the expenses of the fund except
brokerage fees, taxes, interest, commitment fees, Rule 12b-1 distribution fees
and expenses, service fees and expenses of non-interested Trustees (including
counsel fees) and extraordinary expenses. In addition, the Manager is required
to reduce its fee in an amount equal to the fund's allocable portion of fees and
expenses of the non-interested Trustees (including counsel fees). Each Trustee
receives $40,000 per year, plus $5,000 for each joint Board meeting of The
Dreyfus/Laurel Funds, Inc., The Dreyfus/Laurel Tax-Free Municipal Funds, and The
Dreyfus/Laurel Funds Trust (the "Dreyfus/Laurel Funds") attended, $2,000 for
separate committee meetings attended which are not held in conjunction with a
regularly scheduled board meeting and $500 for Board meetings and separate
committee meetings attended that are conducted by telephone and is reimbursed
for travel and out-of-pocket expenses. The Chairman of the Board receives an
additional 25% of such compensation (with the exception of reimbursable
amounts). In the event that there is a joint committee meeting of the
Dreyfus/Laurel Funds and the Dreyfus High Yield Strategies Fund, the $2,000 fee
will be allocated between the Dreyfus/Laurel Funds and the Dreyfus High Yield
Strategies Fund. These fees and expenses are charged and allocated to each
series based on net assets. Amounts required to be paid by the Trust directly to
the non-interested Trustees, that would be applied to offset a portion of the
management fee payable to the Manager, are in fact paid directly by the Manager
to the non-interested Trustees.
(b) Distribution and service plan: Under the Distribution Plan (the "Plan")
adopted pursuant to Rule 12b-1 under the Act, Class A shares pay annually up to
. 25% of the value of the average daily net assets attributable to its Class A
shares to compensate the Distributor and Dreyfus Service Corporation, an
affiliate of the Manager, for shareholder servicing activities and the
Distributor for activities and expenses primarily intended to result in the sale
of Class A shares. Under the Plan, Class B and Class C shares pay the
Distributor for distributing the fund' s Class B and Class C shares at an
aggregate annual rate of .50% and .75% of the value of the average daily net
assets of Class B and Class C shares, respectively. Class B and Class C shares
are also subject to a Service Plan adopted pursuant to Rule 12b-1, under which
Class B and Class C shares pay Dreyfus Service Corporation or the Distributor
for providing certain services to the holders of their shares a fee at the
annual rate of .25% of the value of the average daily net assets of Class B and
Class C shares. Class R shares bear no distribution or service fee. During the
period ended December 31, 1999, Class A, Class B and Class C shares were charged
$335,061, $2,994,350 and $1,527,402, respectively pursuant to the Plan and Class
B and Class C shares were charged $1,497,175 and $509,134 respectively, pursuant
to the Service Plan.
Under its terms, the Plan and Service Plan shall remain in effect from year to
year, provided such continuance is approved annually by a vote of majority of
those Trustees who are not "interested persons" of the Trust and who have no
direct or indirect financial interest in the operation of or in any agreement
related to the Plan or Service Plan.
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities, during the period ended December 31, 1999, amounted to
$363,864,190 and $369,580,417, respectively.
At December 31, 1999, accumulated net unrealized depreciation on investments was
$123,561,957, consisting of $3,302,526 gross unrealized appreciation and
$126,864,483 gross unrealized depreciation.
At December 31, 1999, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
NOTE 4--Bank Lines of Credit:
The fund may borrow up to $20 million for leveraging purposes under a short-term
unsecured line of credit and participates with other Dreyfus-managed funds in a
$100 million unsecured line of credit primarily to be utilized for temporary or
emergency purposes, including the financing of redemptions. Interest is charged
to the fund at rates which are related to the Federal Funds rate in effect at
the time of borrowings.
The average daily amount of borrowings outstanding during the period ended
December 31, 1999 was approximately $1,281,700 with a related weighted average
annualized interest rate of 5.37%.
NOTE 5--Subsequent Event:
In June 1999, Worldport Communications ("Worldport") a security in the fund's
portfolio was not redeemed at it's maturity date. Consequently, interest accrual
ceased at that point due to the financial status of Worldport. On January 19,
2000, the fund was able to redeem the security, and proceeds of $12.2 million
was received. This represented $10 million par amount, $1.2 million of original
interest accrued and an additional $1.0 million interest and penalties received
that had not been accrued for on the fund's books and records as of December 31,
1999.
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders
The Dreyfus/Laurel Funds Trust:
We have audited the accompanying statement of assets and liabilities of Dreyfus
Premier Limited Term High Income Fund of The Dreyfus/Laurel Funds Trust,
including the statement of investments, as of December 31, 1999, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the periods presented herein. 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 also 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, 1999, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Dreyfus Premier Limited Term High Income Fund of The Dreyfus/Laurel Funds Trust
as of December 31, 1999, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the periods presented herein, in
conformity with generally accepted accounting principles.
New York, New York
February 9, 2000
The Fund
IMPORTANT TAX INFORMATION (Unaudited)
The fund designates 5.52% of the ordinary dividends paid during the fiscal year
ended December 31, 1999 as qualifying for the corporate dividends received
deduction.
For More Information
Dreyfus Premier Limited Term
High Income Fund
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
Transfer Agent & Dividend Disbursing Agent
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Distributor
Premier Mutual Fund Services, Inc.
60 State Street
Boston, MA 02109
To obtain information:
BY TELEPHONE Call your financial representative
or 1-800-554-4611
BY MAIL Write to:
The Dreyfus Premier Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
(c) 2000 Dreyfus Service Corporation 029AR9912
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS
PREMIER LIMITED TERM HIGH INCOME FUND CLASS A SHARES, CLASS B
SHARES, CLASS C SHARES AND CLASS R SHARES WITH THE MERRILL LYNCH
HIGH YIELD MASTER II INDEX AND A CUSTOMIZED LIMITED TERM HIGH YIELD INDEX
EXHIBIT A:
DREYFUS DREYFUS DREYFUS DREYFUS
PREMIER PREMIER PREMIER PREMIER
CUSTO- LIMITED LIMITED LIMITED LIMITED
MERRILL MIZED TERM TERM TERM TERM
LYNCH LIMITED HIGH HIGH HIGH HIGH
HIGH TERM INCOME INCOME INCOME INCOME
YIELD HIGH FUND FUND FUND FUND
PERIOD MASTER YIELD (CLASS A (CLASS B (CLASS C (CLASS R
II INDEX* INDEX * SHARES) SHARES) SHARES) SHARES)
6/2/97 10,000 10,000 9,549 10,000 10,000 10,000
12/31/97 10,856 10,632 10,063 10,504 10,497 10,544
12/31/98 11,176 11,128 10,053 10,441 10,399 10,559
12/31/99 11,457 11,711 10,253 10,344 10,527 10,795
*Source: Bloomberg L.P.
Dreyfus
Short Term
High Yield Fund
ANNUAL REPORT October 31, 1999
(reg.tm)
The views expressed herein are current to the date of this report. These views
and the composition of the fund's portfolio are subject to change at any time
based on market and other conditions.
* Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Year 2000 Issues (Unaudited)
The fund could be adversely affected if the computer systems used by The Dreyfus
Corporation and the fund's other service providers do not properly process and
calculate date-related information from and after January 1, 2000. The Dreyfus
Corporation is working to avoid Year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by Year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
Contents
THE FUND
--------------------------------------------------
2 Letter from the President
3 Discussion of Fund Performance
6 Fund Performance
7 Statement of Investments
14 Statement of Assets and Liabilities
15 Statement of Operations
16 Statement of Changes in Net Assets
17 Financial Highlights
18 Notes to Financial Statements
22 Report of Independent Auditors
23 Important Tax Information
FOR MORE INFORMATION
---------------------------------------------------------------------------
Back Cover
The Fund
Dreyfus
Short Term High Yield Fund
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this annual report for Dreyfus Short Term High Yield
Fund, covering the 12-month period from November 1, 1998 through October 31,
1999. Inside, you' ll find valuable information about how the fund was managed
during the reporting period, including a discussion with the fund's portfolio
manager, Roger King, a member of the Dreyfus Taxable Fixed Income Team.
The past 12 months have been highly volatile for most bonds. Although U.S.
Treasury securities began the reporting period in the wake of a rally caused
primarily by a "flight to quality" amid the spread of the global financial
crisis in overseas markets, most higher yielding sectors of the bond market had
declined sharply. The Federal Reserve Board responded to the global financial
crisis last fall by reducing short-term interest rates. Its strategy apparently
was effective, and the U.S. economy remained strong through the remainder of the
reporting period.
Because inflation is more likely to rise in a strong economy, the overall bond
market -- including U.S. Treasury securities -- declined during the first 10
months of 1999. To help forestall a rise of inflation, the Federal Reserve Board
raised short-term interest rates twice during the summer of 1999, effectively
reversing most of last fall's interest-rate cuts. Higher interest rates led to
some erosion of bond prices, especially among the higher yielding market
sectors. In this environment, however, the yields of many higher yielding bonds
-- including corporate bonds and U.S. government agency securities -- have
recently been quite attractive compared to the yields of U.S. Treasury
securities of comparable maturity.
We appreciate your confidence over the past year, and we look forward to your
continued participation in Dreyfus Short Term High Yield Fund.
Sincerely,
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
November 15, 1999
DISCUSSION OF FUND PERFORMANCE
Roger King, Portfolio Manager Dreyfus Taxable Fixed Income Team
How did Dreyfus Short Term High Yield Fund perform relative to its benchmark?
For the 12-month period ended October 31, 1999, the fund produced a total return
of 3.06% .(1) This compares to a 5.61% return for the fund's benchmark, the
Merrill Lynch High-Yield Master II Index for the same period.(2)
Because of its restricted maturity and duration, we also gauge the fund's
performance against a shorter term measure: a Dreyfus Customized Limited Term
High Yield Index, which produced a 7.19% return for the period.(3) This blended
index is composed of four shorter term sub-indices of the Merrill Lynch
High-Yield Master II Index.(3)
We attribute the fund's performance largely to our investment strategy. While
the fund' s average effective maturity was less than that of the Merrill Lynch
Index, its average credit quality was also lower. Pricing for lower quality high
yield bonds was generally difficult through most of the 12 months, most notably
over the recent few months, as evidenced by the fund' s 0.15% year-to-date
return through October 31, 1999. Unfortunately the strength in the market was
concentrated in the higher quality credits within the high yield market, as high
yield investors generally shunned added credit risk.
What is the fund's investment approach?
The fund seeks to maximize current income by investing in high yield
fixed-income securities. We limit the average effective portfolio maturity and
average effective duration of the fund to three years or less.
We normally invest most of the fund's assets in fixed-income securities of below
investment-grade credit quality. Issuers of below investment-grade securities
may be in early stages of development or may have highly leveraged balance
sheets. To compensate the buyer for the The Fund greater risk, these companies
must offer higher yields than those offered by more highly rated firms.
Our approach to selecting individual issues is based on careful credit analysis.
We thoroughly analyze the business, management, financial strength and
competition of each of the companies whose bonds we buy, and then project each
issuer's ability to repay its debt.
What other factors influenced the fund's performance?
When the reporting period began, fixed-income investors were concerned that
economic weakness in overseas markets might reduce earnings growth for many U.S.
companies, including issuers of high yield bonds. It quickly became apparent,
however, that these fears were largely unfounded. In fact, the troubled
economies of Japan and Southeast Asia strengthened while economic growth in the
U.S. barreled ahead. In this environment, the high yield market recovered from
the steep drop it experienced in the latter part of 1998, indeed, outperforming
most other fixed-income market segments over the first three months of 1999.
This recovery, however, proved short-lived as liquidity pressures and lack of
demand brought negative returns back to the high yield market over recent
months.
During May and June, investor sentiment shifted away from a concern that the
economy might slow to fear that it might grow too quickly and awaken
inflationary pressures. As a result of inflation fears, the Federal Reserve
Board increased short-term interest rates twice. In response to these rate
hikes, the fixed-income market experienced a general decline.
Most importantly, pressure on bond prices continued through the third quarter of
1999. The high yield market has fallen, albeit gradually, to levels seen at the
depth of the October 1998 financial crisis. The major force driving the decline
has been concern over calendar-year-end liquidity. In anticipation of problems
which we believe will likely prove unfounded, investors have stepped up
redemptions of high yield mutual funds and fund managers have sold securities in
order to have more cash on hand in anticipation of potential further
redemptions. At the
same time, institutional investors have, to a large extent, stopped buying and
selling, further reducing market liquidity. This has created a market in which a
large supply of high yield issues has been met by a weak demand; in such a
market, bond prices inevitably decline.
What is the fund's current strategy?
We have worked steadily to restructure the fund to protect it from market
illiquidity. As a first step, we shortened the fund's effective maturity and
duration. Second, our new focus on bonds rated BB has improved the fund's
overall credit quality. Third, we continue to place industry focus on more
defensive sectors, such as broadcasting and entertainment, which historically
have been less volatile in different economic environments. These steps are
designed to help us provide shareholders with high levels of current income and
limit performance volatility by improving the fund's overall liquidity profile.
November 15, 1999
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND
INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION FUND SHARES MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST.
(2) SOURCE: BLOOMBERG L.P. -- THE MERRILL LYNCH HIGH-YIELD MASTER II INDEX IS
AN UNMANAGED PERFORMANCE BENCHMARK COMPOSED OF U.S. DOMESTIC AND YANKEE BONDS
RATED BELOW INVESTMENT GRADE WITH AT LEAST $100 MILLION PAR AMOUNTS OUTSTANDING
AND GREATER THAN OR EQUAL TO ONE YEAR TO MATURITY.
(3) SOURCE: BLOOMBERG L.P. -- THE DREYFUS CUSTOMIZED LIMITED TERM HIGH YIELD
INDEX IS COMPOSED OF FOUR SUB-INDICES OF THE MERRILL LYNCH HIGH-YIELD MASTER
INDEX II. THESE SUB-INDICES, BLENDED AND MARKET WEIGHTED, ARE (I) BB-RATED, 1-3
YEARS, (II) B-RATED 1-3 YEARS, (III) BB-RATED, 3-5 YEARS, AND (IV) B-RATED, 3-5
YEARS. UNLIKE THE DREYFUS CUSTOMIZED LIMITED TERM HIGH YIELD INDEX, WHICH IS
COMPOSED OF BONDS RATED NO LOWER THAN "B", THE PORTFOLIO CAN INVEST IN BONDS
WITH LOWER CREDIT RATINGS THAN "B" AND AS LOW AS "D."
The Fund
FUND PERFORMANCE
Comparison of change in value of $10,000 investment in Dreyfus Short Term High
Yield Fund with the Merrill Lynch High Yield Master II Index and a Customized
Limited Term High Yield Index
--------------------------------------------------------------------------------
Average Annual Total Returns AS OF 10/31/99
Inception From
Date 1 Year Inception
-------------------------------------------------------------------------------
Fund 8/16/96 3.06% 5.40%
((+)) SOURCE: BLOOMBERG L.P.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN DREYFUS SHORT TERM HIGH
YIELD FUND ON 8/16/96 (INCEPTION DATE) TO A $10,000 INVESTMENT MADE ON THAT DATE
IN THE MERRILL LYNCH HIGH YIELD MASTER II INDEX (THE "MERRILL INDEX"), AS WELL
AS TO A CUSTOMIZED "LIMITED TERM HIGH YIELD INDEX" WHICH HAS BEEN CONSTRUCTED BY
THE DREYFUS CORPORATION, EACH OF WHICH IS DESCRIBED BELOW. THE CUSTOMIZED
LIMITED TERM HIGH YIELD INDEX HAS BEEN USED BY THE FUND'S PORTFOLIO MANAGER
SINCE THE FUND'S INCEPTION AS A BENCHMARK IN MANAGING THE FUND BECAUSE OF THE
MATURITY AND DURATION RESTRICTIONS ON THE FUND AND THE LACK OF A REPRESENTATIVE
BROAD-BASED SHORTER TERM HIGH-YIELD SECURITIES INDEX. FOR COMPARATIVE PURPOSES,
THE VALUE OF EACH INDEX ON 8/31/96 IS USED AS THE BEGINNING VALUE ON 8/16/96.
ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE CUSTOMIZED
LIMITED TERM HIGH YIELD INDEX IS CALCULATED ON A YEAR-TO-YEAR BASIS.
THE FUND SEEKS TO ACHIEVE ITS OBJECTIVE BY INVESTING IN HIGH-YIELD SECURITIES,
AND BY MAINTAINING AN AVERAGE EFFECTIVE PORTFOLIO MATURITY AND AVERAGE DURATION
OF THREE YEARS OR LESS. THE FUND'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES
INTO ACCOUNT ALL APPLICABLE FEES AND EXPENSES. THE MERRILL INDEX IS A MARKET
CAPITALIZATION-WEIGHTED INDEX INCLUDING ALL DOMESTIC AND YANKEE HIGH-YIELD BONDS
WITH AT LEAST $100 MILLION PAR AMOUNT OUTSTANDING AND GREATER THAN OR EQUAL TO
ONE YEAR TO MATURITY. BOTH INTEREST AND PRICE CHANGES ARE CALCULATED DAILY BASED
ON AN ACCRUED SCHEDULE AND TRADER PRICING. THE CUSTOMIZED LIMITED TERM HIGH
YIELD INDEX IS COMPOSED OF FOUR SUBINDICES OF THE MERRILL INDEX. THESE
SUBINDICES, BLENDED AND MARKET WEIGHTED, ARE (I) BB-RATED 1-3 YEARS, (II)
B-RATED 1-3 YEARS, (III) BB-RATED 3-5 YEARS, AND (IV) B-RATED 3-5 YEARS. UNLIKE
THE CUSTOMIZED LIMITED TERM HIGH YIELD INDEX, WHICH IS COMPOSED OF BONDS RATED
NO LOWER THAN "B," THE FUND CAN INVEST IN BONDS WITH LOWER CREDIT RATINGS THAN
"B" AND AS LOW AS "D". THE MERRILL INDEX INCLUDES "C"-RATED BONDS. NEITHER INDEX
TAKES INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION
RELATING TO FUND PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE,
IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE
IN THIS REPORT.
STATEMENT OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
Principal
BONDS AND NOTES--94.1% Amount ($) Value ($)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AIRCRAFT & AEROSPACE--2.0%
AM General, Ser. B,
Sr. Notes, 12.875%, 2002 912,000 816,240
Aircraft Lease Portfolio Securitisation 96-1,
Pass-Through Trust, Ctfs.,
Cl. D, 12.75%, 2006 515,872 510,713
America West Airlines Pass-Through Trust,
Pass-Through Ctfs.,
Ser. 1996-1, Cl. D, 8.16%, 2002 181,233 180,039
Burke Industries,
Sr. Notes, 9.881%, 2007 2,000,000 (a) 1,310,000
2,816,992
AUTOMOTIVE--3.1%
Aetna Industries,
Sr. Notes, 11.875%, 2006 3,000,000 3,352,500
Penda, Ser. B,
Sr. Notes, 10.75%, 2004 1,000,000 965,000
4,317,500
BROADCASTING--4.2%
Paxson Communications,
Sr. Sub. Notes, 11.625%, 2002 4,000,000 4,160,000
Univision Network Holding,
Sub. Notes, 7%, 2002 2,550,575 1,808,010
5,968,010
BUILDING MATERIALS--1.1%
ICF Kaiser International,
Sr. Sub. Notes, 13%, 2003 3,000,000 (b) 1,511,250
BUSINESS SERVICES--3.0%
Corporate Express,
Conv. Sub. Notes, 4.5%, 2000 2,988,000 2,969,325
Pierce Leahy,
Sr. Sub. Notes, 11.125%, 2006 1,130,000 1,203,450
4,172,775
CABLE TELEVISION-10.3%
Adelphia Communications, Ser. B,
Sr. Notes, 10.25%, 2000 600,000 609,000
Century Communications,
Sr. Notes, 0%, 2003 2,000,000 1,440,000
Diamond Cable Communications:
Sr. Discount Notes, 13.25%, 2004 2,250,000 2,407,500
Sr. Discount Notes, 0/11.75%, 2005 2,000,000 (c) 1,835,000
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
-----------------------------------------------------------------------------------------------------------------
CABLE TELEVISION (CONTINUED)
Digital Television Service/Capital, Ser. B,
Sr. Sub. Notes, 12.5%, 2007 2,000,000 2,110,000
Helicon Group,
Sr. Notes, 11%, 2003 2,500,000 2,587,500
Net Sat Servicos,
Sr. Secured Notes, 12.75%, 2001 500,000 (d) 462,500
Pegasus Media & Communications, Ser. B,
Sr. Sub. Notes, 12.5%, 2005 2,775,000 2,997,000
14,448,500
CHEMICALS--2.1%
ISP Holdings, Ser. B,
Sr. Notes, 9.75%, 2002 3,000,000 3,030,000
COMMERCIAL MORTGAGE
PASS-THROUGH CTFS.--2.6%
GS Mortgage Securities II,
Ser. 1999-FL2A, Cl. G, 7.468%, 2013 2,000,000 (a,e) 1,866,060
Nomura Depositor Trust,
Ser. 1998-STI, Cl. B2, 9.656%, 2003 2,000,000 (a,e) 1,806,563
3,672,623
CONSUMER--5.7%
BPC Holding, Ser. B,
Sr. Secured Notes, 12.5%, 2006 350,000 324,625
Hosiery Corp. of America,
Sr. Sub. Notes, 13.75%, 2002 2,000,000 2,080,000
Sharp Do Brazil,
Medium-Term Notes, 9.625%, 2000 1,000,000 (f) 352,500
Southland,
Deb., 5%, 2003 3,250,000 2,770,625
Sweetheart Cup,
Sr. Sub. Notes, 9.625%, 2000 2,500,000 2,437,500
7,965,250
ENERGY--1.1%
Clark USA, Ser. B,
Sr. Notes, 10.875%, 2005 2,000,000 1,590,000
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
-----------------------------------------------------------------------------------------------------------------
ENTERTAINMENT--3.2%
American Skiing, Ser. B,
Sr. Sub. Notes, 12%, 2006 4,000,000 3,670,000
United Artists Theatres, Ser. B,
Floating Rate Notes, 10.553%, 2007 4,000,000 (a) 820,000
4,490,000
FINANCIAL--1.1%
Imperial Credit Capital Trust I, Ser. A,
Remarketed Par Securities, 10.25%, 2002 2,000,000 1,588,050
FOOD & BEVERAGES--1.4%
Envirodyne Industries,
Sr. Notes, 10.25%, 2001 2,000,000 1,490,000
Sun World International, Ser. B,
First Mortgage, 11.25%, 2004 450,000 453,938
1,943,938
FOREST PRODUCTS--4.4%
Maxxam Group Holdings,
Sr. Secured Notes, 12%, 2003 6,110,000 6,171,100
HEALTH CARE-.8%
EyeCare Centers of America,
Floating Interest Rate Sub. Term Securities, 9.04%, 2008 1,500,000 (a) 1,087,500
INDUSTRIAL--.4%
Applied Extrusion Technology, Ser. B,
Sr. Notes, 11.5%, 2002 500,000 515,000
INSURANCE--2.8%
Reliance Group Holdings,
Sr. Notes, 9%, 2000 3,900,000 3,988,526
METALS--5.2%
Northwestern Steel & Wire,
Sr. Notes, 9.5%, 2001 2,000,000 890,000
Oregon Steel Mills,
First Mortgage, 11%, 2003 2,448,000 2,509,200
Renco Metals,
Sr. Notes, 11.5%, 2003 4,500,000 3,937,500
7,336,700
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
-----------------------------------------------------------------------------------------------------------------
PACKAGING--1.7%
Stone Container,
Sr. Notes, 9.875%, 2001 1,050,000 1,055,250
Vicap, S.A. de C.V.,
Gtd. Sr. Notes, 10.25%, 2002 1,500,000 1,402,500
2,457,750
REAL ESTATE--6.0%
Associated Estates Realty,
Sr. Notes, 8.375%, 2000 1,500,000 1,485,354
Meditrust:
Conv. Notes, 7.5%, 2001 2,500,000 2,278,125
Medium-Term Notes, 7.77%, 2002 1,000,000 930,485
Notes, 7.6%, 2001 395,000 376,663
Rockefeller Center Properties,
Conv. Deb., 0%, 2000 4,000,000 3,360,000
8,430,627
RETAIL--.7%
Cafeteria Operators
(Gtd. by Furrs/Bishops Specialty Group),
Sr. Secured Notes, 12%, 2001 1,000,000 970,000
SUPERMARKETS--.7%
Pathmark Stores,
Discount Notes, 0/10.75%, 2003 1,000,000 (c) 980,000
TECHNOLOGY--1.8%
Baan,
Conv. Sub. Notes, 4.5%, 2001 3,000,000 2,512,500
TELECOMMUNICATION/CARRIERS--2.8%
GST USA,
Sr. Discount Notes, 0/13.875%, 2005 1,000,000 (c) 765,000
Orion Network Systems,
Sr. Discount Notes, 0/12.5%, 2007 7,000,000 (c) 3,115,000
3,880,000
TEXTILES--2.7%
Sassco Fashions,
Sr. Notes, 12.75%, 2004 3,317,519 3,217,994
Texfi Industries,
Sr. Sub. Deb., 8.75%, 1999 2,500,000 (b) 550,000
3,767,994
TRANSPORTATION-10.5%
Eletson Holdings,
First Pfd. Ship Mortgage Notes, 9.25%, 2003 850,000 769,250
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
-----------------------------------------------------------------------------------------------------------------
TRANSPORTATION (CONTINUED)
International Shipholding,
Sr. Notes, 9%, 2003 3,000,000 2,985,000
MTL, Ser. B,
Floating Interest Rate Sub. Term Securities,
10.32%, 2006 3,000,000 (a) 2,655,000
OMI,
Sr. Notes, 10.25%, 2003 2,000,000 2,025,000
Petro Stopping Centers/Financial,
Sr. Notes, 10.5%, 2007 2,000,000 1,930,000
Union Pacific,
Sub. Deb, 5.5%, 2033 3,068,000 2,234,134
ValuJet,
Sr. Notes, 10.25%, 2001 2,450,000 2,143,750
14,742,134
UTILITIES--.1%
Hidroelectrica Piedra Aguila,
Medium-Term Notes, 10.625%, 2001 500,000 (b) 201,250
WIRELESS COMMUNICATIONS--12.6%
Clearnet Communications,
Sr. Discount Notes, 0/14.75%, 2005 2,000,000 (c) 1,902,500
Comunicacion Celular,
Sr. Discount Notes, 0/14.125%, 2005 2,500,000 (c,e) 1,268,750
Dial Call Communications,
Sr. Notes, 10.25%, 2005 2,791,000 2,860,775
Microcell Telecommunications, Ser. B,
Sr. Discount Notes, 0/14%, 2006 5,000,000 (c) 4,125,000
Mobile Telecommunications,
Sr. Notes, 13.5%, 2002 1,200,000 1,365,000
Occidente y Caribe Celular, Ser. B,
Sr. Discount Notes, 0/14%, 2004 5,000,000 (c) 2,637,500
Pagemart Nationwide,
Sr. Discount Notes, 0/15%, 2005 2,495,000 (c) 2,183,125
WinStar Communications,
Sr. Discount Notes, 0/14%, 2005 1,600,000 (c) 1,416,000
17,758,650
TOTAL BONDS AND NOTES
(cost $155,912,678) 132,314,619
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
COMMON STOCKS--.1% Shares Value ($)
-----------------------------------------------------------------------------------------------------------------
CONSUMER--.0%
Discovery Zone (warrants) 1,000 (e,g) 1
Discovery Zone, Cl. A, (warrants) 5,100 (e,g) 5
Discovery Zone, Cl. B, (warrants) 5,100 (e,g) 5
Signature Brands (warrants) 750 (e,g) --
Sun International Hotels 198 (e,g) 4,009
4,020
WIRELESS COMMUNICATIONS--.1%
Comunicacion Celular warrants 1,500 (e,g) 90,188
TOTAL COMMON STOCKS
(cost $151,136) 94,208
-----------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--1.3%
-----------------------------------------------------------------------------------------------------------------
BROADCASTING--1.2%
Spanish Broadcasting System:
Ser. A, Cum., $142.50 229 243,885
Ser. A, Cum., $142.50 1,315 (e) 1,400,475
1,644,360
ENERGY--.1%
Contour Energy,
Cum. Conv., $2.625 34,700 (g) 138,800
TOTAL PREFERRED STOCKS
(cost $2,540,075) 1,783,160
Principal
SHORT-TERM INVESTMENTS--2.3% Amount ($) Value ($)
-----------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER;
Transamerica Financial,
5.34%, 11/1/1999
(cost $3,295,000) 3,295,000 3,295,000
-----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $161,898,889) 97.8% 137,486,987
CASH AND RECEIVABLES (NET) 2.2% 3,126,183
NET ASSETS 100.0% 140,613,170
(A) VARIABLE RATE SECURITY--INTEREST RATE SUBJECT TO PERIODIC CHANGE.
(B) NON-INCOME PRODUCING--SECURITY IN DEFAULT.
(C) ZERO COUPON UNTIL A SPECIFIED DATE AT WHICH TIME THE STATED COUPON RATE
BECOMES EFFECTIVE UNTIL MATURITY.
(D) REFLECTS DATE SECURITY CAN BE REDEEMED AT HOLDER'S OPTION; THE STATED
MATURITY IS 8/5/2004.
(E) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF
1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION,
NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT OCTOBER 31, 1999, THESE
SECURITIES AMOUNTED TO $6,436,056 OR 4.6% OF NET ASSETS.
(F) REFLECTS DATE SECURITY CAN BE REDEEMED AT HOLDER'S OPTION; THE STATED
MATURITY IS 10/30/2005.
(G) NON-INCOME PRODUCING SECURITY.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 161,898,889 137,486,987
Interest and dividends receivable 3,290,421
Receivable for investment securities sold 420,930
Prepaid expenses and other assets 18,401
141,216,739
--------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 98,808
Due to Distributor 30,542
Cash overdraft due to Custodian 262,756
Payable for shares of Beneficial Interest redeemed 158,918
Accrued expenses 52,545
603,569
--------------------------------------------------------------------------------
NET ASSETS ($) 140,613,170
--------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 176,702,652
Accumulated undistributed investment income--net 207,747
Accumulated net realized gain (loss) on investments (11,885,327)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 (24,411,902)
--------------------------------------------------------------------------------
NET ASSETS ($) 140,613,170
--------------------------------------------------------------------------------
SHARES OUTSTANDING
(unlimited number of $.001 par value shares of Beneficial
Interest authorized) 13,230,429
NET ASSET VALUE, offering and redemption price per share ($) 10.63
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS
Year Ended October 31, 1999
--------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INCOME:
Interest 19,697,938
Cash dividends 194,854
TOTAL INCOME 19,892,792
EXPENSES:
Management fee--Note 3(a) 1,115,088
Shareholder servicing costs--Note 3(b) 594,401
Interest expense--Note 2 167,281
Professional fees 43,992
Registration fees 34,985
Prospectus and shareholders' reports 25,306
Custodian fees--Note 3(b) 16,162
Trustees' fees and expenses--Note 3(c) 11,186
Miscellaneous 12,603
TOTAL EXPENSES 2,021,004
INVESTMENT INCOME--NET 17,871,788
--------------------------------------------------------------------------------
<PAGE>
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (9,919,365)
Net unrealized appreciation (depreciation) on investments (1,835,044)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (11,754,409)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 6,117,379
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF CHANGES IN NET ASSETS
Year Ended October 31,
----------------------------
1999 1998
--------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 17,871,788 19,007,204
Net realized gain (loss) on investments (9,919,365) (1,959,796)
Net unrealized appreciation (depreciation)
on investments (1,835,044) (22,833,877)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 6,117,379 (5,786,469)
--------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net (17,829,858) (18,947,207)
Net realized gain on investments -- (1,405,597)
TOTAL DIVIDENDS (17,829,858) (20,352,804)
--------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS ($):
Net proceeds from shares sold 128,889,888 248,552,018
Dividends reinvested 11,014,692 14,395,569
Cost of shares redeemed (164,056,826) (207,057,502)
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS (24,152,246) 55,890,085
TOTAL INCREASE (DECREASE) IN NET ASSETS (35,864,725) 29,750,812
--------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 176,477,895 146,727,083
END OF PERIOD 140,613,170 176,477,895
Undistributed investment income--net 207,747 165,817
--------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (SHARES):
Shares sold 11,336,857 19,465,771
Shares issued for dividends reinvested 981,803 1,140,837
Shares redeemed (14,528,971) (16,472,534)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (2,210,311) 4,134,074
SEE NOTES TO FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the fund's financial
statements.
<TABLE>
Year Ended October 31,
-----------------------------------------------------------
1999 1998 1997 1996(a)
------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
<S> <C> <C> <C> <C>
Net asset value, beginning of period 11.43 12.98 12.69 12.50
Investment Operations:
Investment income--net 1.16 1.22 1.29 .26
Net realized and unrealized gain (loss)
on investments (.80) (1.44) .34 .19
Total from Investment Operations .36 (.22) 1.63 .45
Distributions:
Dividends from investment income--net (1.16) (1.21) (1.29) (.26)
Dividends from net realized gain on
investments -- (.12) (.05) --
Total Distributions (1.16) (1.33) (1.34) (.26)
Net asset value, end of period 10.63 11.43 12.98 12.69
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 3.06 (2.18) 13.38 17.02(b)
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses to average
net assets 1.08 1.06 1.09 .92(b)
Ratio of interest expense to average
net assets .10 .12 .22 --
Ratio of net investment income
to average net assets 10.42 9.58 10.02 9.76(b)
Decrease reflected in above expense ratios
due to undertakings by the Manager -- -- .02 1.62(b)
Portfolio Turnover Rate 64.80 71.00 102.59 77.79(c)
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period ($ X 1,000) 140,613 176,478 146,727 18,779
(A) FROM AUGUST 16, 1996 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1996.
(B) ANNUALIZED.
(C) NOT ANNUALIZED.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
Dreyfus Short Term High Yield Fund (the "fund") is a separate diversified series
of Dreyfus Debt and Equity Funds (the "Company") which is registered under the
Investment Company Act of 1940, as amended (the "Act" ), as an open-end
management investment company and operates as a series company currently
offering six series, including the fund. The fund's investment objective is to
provide high current income. The Dreyfus Corporation (the "Manager") serves as
the fund' s investment adviser. The Manager is a direct subsidiary of Mellon
Bank, N.A. (" Mellon"), which is a wholly-owned subsidiary of Mellon Financial
Corporation. Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the fund's shares, which are sold to the public without a sales
charge.
The Company accounts separately for the assets, liabilities and operations of
each series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series are allocated
among them on a pro rata basis.
The fund' s financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(A) PORTFOLIO VALUATION: Investments in securities (excluding short-term
investments, other than U.S. Treasury Bills) are valued each business day by an
independent pricing service (" Service" ) approved by the Board of Trustees.
Investments for which quoted bid prices are readily available and are
representative of the bid side of the market in the judgment of the Service are
valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of securities of comparable quality, coupon, maturity and
type; indications as to values from dealers; and general market conditions.
Securities for which there are no such valuations are valued at fair value as
determined in good faith under the direction of the Board of Trustees.
Short-term investments, excluding U.S. Treasury Bills, are carried at amortized
cost, which approximates value.
(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 discount on investments, is recognized on the
accrual basis. Under the terms of the custody agreement, the fund received net
earnings credits of $13,338 during the period ended October 31, 1999 based on
available cash balances left on deposit. Income earned under this arrangement is
included in interest income.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the fund to declare dividends
daily from investment income-net. Such dividends are paid monthly. Dividends
from net realized capital gain, if any, are normally declared and paid annually,
but the fund may make distributions on a more frequent basis to comply with the
distribution requirements of the Internal Revenue Code of 1986, as amended (the
" Code" ). 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 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 $11,879,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to October 31, 1999. If not
applied, $1,960,000 of the carryover expires in fiscal 2006 and $9,919,000
expires in fiscal 2007.
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--Bank Lines of Credit:
The fund may borrow up to $10 million for leveraging purposes under a short-term
unsecured line of credit and participates with other Dreyfus-managed funds in a
$100 million unsecured line of credit primarily to be utilized for temporary or
emergency purposes, including the financing of redemptions. Interest is charged
to the fund at rates which are related to the Federal Funds rate in effect at
the time of borrowings.
The average daily amount of borrowings outstanding under both arrangements
during the period ended October 31, 1999 was approximately $3,242,700, with a
related weighted average annualized interest rate of 5.16%.
NOTE 3--Management Fee and Other Transactions With Affiliates:
(A) Pursuant to a management agreement with the Manager, the management fee is
computed at the annual rate of .65 of 1% of the value of the fund's average
daily net assets and is payable monthly.
(B) Under the Shareholder Services Plan, the fund pays the Distributor at an
annual rate of .25 of 1% of the value of the fund's average daily net assets for
the provision of certain services. The services provided may include personal
services relating to shareholder accounts, such as answering shareholder
inquiries regarding the fund and providing reports and other information, and
services related to the maintenance of shareholder accounts. The Distributor may
make payments to Service Agents (a securities dealer, financial institution or
other industry professional) in respect of these services. The Distributor
determines the amounts to be paid to Service Agents. During the period ended
October 31, 1999, the fund was charged $428,880 pursuant to the Shareholder
Services Plan.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the
Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the fund. During the period
ended October 31, 1999, the fund was charged $100,483 pursuant to the transfer
agency agreement.
The fund compensates Mellon under a custody agreement for providing custodial
services for the fund. During the period ended October 31, 1999, the fund was
charged $16,162 pursuant to the custody agreement.
(C) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Company 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 4--Securities Transactions:
The aggregate amount of purchases and sales (including paydowns) of investment
securities, excluding short-term securities, during the period ended October 31,
1999, amounted to $105,683,042 and $129,018,474, respectively.
At October 31, 1999, accumulated net unrealized depreciation on investments was
$24,411,902, consisting of $378,797 gross unrealized appreciation and
$24,790,699 gross unrealized depreciation.
At October 31, 1999, the cost of investments for Federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
The Fund
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Trustees
Dreyfus Short Term High Yield Fund
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Dreyfus Short Term High Yield Fund (one of the
funds constituting Dreyfus Debt and Equity Funds) as of October 31, 1999, and
the related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
financial highlights for each of the years indicated therein. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included verification by
examination of securities held by the custodian as of October 31, 1999 and
confirmation of securities not held by the custodian by correspondence with
others. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Dreyfus Short Term High Yield Fund at October 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the indicated years, in conformity with generally accepted accounting
principles.
New York, New York
December 10, 1999
IMPORTANT TAX INFORMATION (Unaudited)
In accordance with Federal tax law, the fund hereby designates 1.068% of the
ordinary dividends paid during the fiscal year ended October 31, 1999 as
qualifying for the corporate dividends received deduction. Shareholders will
receive notification in January 2000 of the percentage applicable to the
preparation of their 1999 income tax returns.
The Fund
NOTES
For More Information
Dreyfus Short Term High Yield Fund
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Distributor
Premier Mutual Fund Services, Inc.
60 State Street
Boston, MA 02109
To obtain information:
BY TELEPHONE Call 1-800-645-6561
BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request to [email protected]
ON THE INTERNET Information can be viewed online or downloaded from:
http://www.dreyfus.com
(c) 1999 Dreyfus Service Corporation 044AR9910
<PAGE>
Pro Forma Statement of Assets and Liabilities
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Premier Limited Dreyfus
Term High Short Term Pro Forma
Income High Yield Combined
Fund Fund Adjustments (Note 1)
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value - See Statement
of Investments* $738,310,046 $89,058,132 - $827,368,178
Cash 28,435 45,027 73,462
Interest receivable 17,749,573 2,190,126 19,939,699
Receivable for shares of Beneficial Interest subscribed 2,709,436 - 2,709,436
Prepaid expenses and other assets 43,951 9,297 53,248
------------- ------------- ------------ ------------
Total Assets 758,841,441 91,302,582 850,144,023
------------- ------------- ------------ ------------
LIABILITIES:
Due to The Dreyfus Corporation and affiliates 443,247 84,464 527,711
Payable for shares of Beneficial Interest redeemed 3,338,630 146,768 3,485,398
Dividends payable 6,120,413 - 6,120,413
Accrued expenses 467,253 43,965 511,218
------------- ------------- ------------ ------------
Total Liabilities 10,369,543 275,197 10,644,740
------------- ------------- ------------ ------------
NET ASSETS $748,471,898 $91,027,385 $839,499,283
============= ============= ============ ============
REPRESENTED BY:
Paid-in capital $933,893,757 $136,137,876 $1,070,031,633
Accumulated undistributed investment income-net 2,938,738 346,213 3,284,951
Accumulated net realized gain (loss) on investments (52,910,432) (23,232,849) (76,143,281)
Accumulated net unrealized appreciation (depreciation)
on investments (135,450,165) (22,223,855) (157,674,020)
------------- ------------- ------------ ------------
NET ASSETS $748,471,898 $91,027,385 $839,499,283
============= ============= ============ ============
Shares of Beneficial Interest outstanding (unlimited
number of $.001 par value shares authorized):
Dreyfus Premier Limited Term High Income Fund
Class A Shares 8,876,038
===========
Class B Shares 50,813,790
===========
Class C Shares 14,567,926
===========
Class R Shares 24,582
===========
Shares of Beneficial Interest outstanding (unlimited number
of $.001 par value shares authorized):
Dreyfus Short Term High Yield Fund 9,279,296
==========
NET ASSET VALUE per share:
Dreyfus Premier Limited Term High Income Fund
Class A Shares
($89,436,949 / 8,876,038 shares) $10.08
Class B Shares ======
($511,941,172 / 50,813,790 shares) $10.07
Class C Shares ======
($146,846,287 / 14,567,926 shares) $10.08
Class R Shares ======
($247,490 / 24,582 shares) $10.07
Dreyfus Short Term High Yield Fund
($91,027,385 / 9,279,296 shares) $9.81
=========
Pro forma Combined Portfolio - Class A Shares
($180,464,334 / 17,906,781 shares) $10.08
Pro forma Combined Portfolio - Class B Shares ======
($511,941,172 / 50,813,790 shares) $10.07
Pro forma Combined Portfolio - Class C Shares ======
($146,846,287 / 14,567,926 shares) $10.08
Pro forma Combined Portfolio - Class R Shares ======
($247,490 / 24,582 shares) $10.07
* Investments in securities, at cost $873,760,211 $111,281,987 $985,042,198
============ ============ =============
</TABLE>
See notes to pro forma financial statements.
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA STATEMENT OF OPERATIONS
-----------------------------------------------------------------------------------------------------------------------------------
FOR THE TWELVE MONTHS ENDED APRIL 30, 2000 (UNAUDITED)
DREYFUS
PREMIER LIMITED DREYFUS
TERM HIGH SHORT TERM PRO FORMA
INCOME HIGH YIELD COMBINED
FUND FUND ADJUSTMENTS (NOTE 1)
------------------- --------------- -------------- --------------
INVESTMENT INCOME:
<S> <C> <C> <C>
INCOME: Interest Income $ 97,979,952 $ 106,846 $ 98,086,798
Dividends 2,863,647 15,696,962 18,560,609
------------------- --------------- --------------
TOTAL INCOME
100,843,599 15,803,808 116,647,407
------------------- --------------- --------------
EXPENSES: Management fee $ 6,240,391 $ 874,195 $ 67,245(a) 7,181,831
Distribution and service fees 6,564,213 - 473,337(b) 7,037,550
Interest 43,543 91,360 134,903
Shareholder servicing costs 473,337 (473,337)(c) -
Custodian fees 14,688 (14,688)(c) -
Prospectus and shareholders' reports 27,726 (27,726)(c) -
Professional fees 32,430 (32,430)(c) -
Registration fees 30,973 (30,973)(c) -
Trustees/Directors' fees and expenses 9,474 (9,474)(c) -
Miscellaneous 12,262 (12,262)(c) -
------------------ --------------- -------------- --------------
TOTAL EXPENSES 12,848,147 1,566,445 (60,308) 14,354,284
------------------- --------------- -------------- --------------
INVESTMENT INCOME-NET 87,995,452 14,237,363 60,308 102,293,123
------------------- --------------- -------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments $(16,975,409) $(13,691,692) $(30,667,101)
Net unrealized appreciation
(depreciation) on
investments (78,290,399) (3,265,855) (81,556,254)
------------------- --------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (95,265,808) (16,957,547) (112,223,355)
------------------- --------------- -------------- --------------
NET (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ (7,270,356) $ (2,720,184) $ 60,308 (9,930,232)
=================== =============== ============== ==============
(a) Reflects the higher management fee by Dreyfus Premier Limited Term High Income Fund.
(b) To conform to Dreyfus Premier Limited Term High Income Funds presentation of shareholder servicing cost.
(c) Reflects the anticipated savings of the Merger.
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
PRO FORMA STATEMENT OF INVESTMENTS
DREYFUS PREMIER LIMITED TERM HIGH INCOME FUND
APRIL 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT ($) VALUE ($)
-------------------- ---------
Dreyfus Dreyfus
Premier Dreyfus Premier Dreyfus
Limited Short Limited Short
Term Term Pro Term Term Pro
High High Forma High High Forma
Income Yield Combined Income Yield Combined
Fund Fund (Note 1) Fund Fund (Note 1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BONDS AND NOTES 96.3%
AIRCRAFT & AEROSPACE 6.7%
AM General, Ser. B,
Sr. Notes, 12.875%, 2002 11,858,000 912,000 12,770,000 10,731,490 825,360 11,556,850
Aircraft Lease Portfolio Securitisation 96-1,
Pass-Through Trust, Ctfs.,
Cl. D, 12.75%, 2006 812,929 515,872 1,328,801 796,671 505,555 1,302,226
Airplanes Pass-Through Trust,
Pass-Through Ctfs.,
Ser. 1, Cl. D, 10.875%, 2019 21,758,000 21,758,000 18,262,795 18,262,795
American Pacific,
Sr. Notes, 9.25%, 2005 9,750,000 9,750,000 9,993,750 9,993,750
America West Airlines Pass-Through Trust,
Pass-Through Ctfs.,
Ser. 1996-1, Cl. D, 8.16%, 2002 77,350 77,350 75,542 75,542
L-3 Communications, Ser. B,
Sr. Sub. Notes, 10.375%, 2007 9,750,000 9,750,000 9,847,500 9,847,500
Midway Airlines,
Pass-Through Ctfs.,
Ser. 1998-1, Cl. D, 8.86%, 2003 4,383,325 4,383,325 4,279,856 4,279,856
53,912,062 1,406,457 55,318,519
AUTOMOTIVE 3.9%
Aetna Industries,
Sr. Notes, 11.875%, 2006 12,000,000 3,000,000 15,000,000 10,890,000 2,722,500 13,612,500
Hayes Lemmerz International,
Sr. Sub. Notes, 11%, 2006 7,000,000 7,000,000 7,087,500 7,087,500
Penda, Ser. B,
Sr. Notes, 10.75%, 2004 10,413,000 1,000,000 11,413,000 10,829,520 1,040,000 11,869,520
28,807,020 3,762,500 32,569,520
BROADCASTING 2.8%
Capstar Broadcasting Partners,
Sr. Discount Notes, 0/12.75%, 2009 1,750,000 1,750,000(a) 1,548,750 1,548,750
Lin Holdings,
Sr. Discount Notes, 0/10%, 2008 9,000,000 9,000,000(a) 5,400,000 5,400,000
Paxson Communications,
Sr. Sub. Notes, 11.625%, 2002 14,000,000 14,000,000 14,315,000 14,315,000
Univision Network Holding,
Sub. Notes, 7%, 2002 2,550,575 2,550,575 1,860,000 1,860,000
23,123,750 23,123,750
BUSINESS SERVICES 1.3%
Pierce Leahy,
Sr. Sub. Notes, 11.125%, 2006 9,000,000 1,130,000 10,130,000 9,225,000 1,158,250 10,383,250
CABLE TELEVISION 11.1%
Adelphia Communications:
Ser. B, Sr. Notes, 9.5%, 2004 5,000,000 5,000,000 4,925,000 4,925,000
Ser. B, Sr. Notes, 10.25%, 2000 600,000 600,000 604,968 604,968
Sr. Discount Notes, 0%, 2003 5,500,000 5,500,000 4,070,000 4,070,000
Sr. Notes, 9.25%, 2002 4,000,000 4,000,000 3,940,000 3,940,000
Sr. Notes, 9.75%, 2002 1,700,000 1,700,000 1,706,375 1,706,375
Century Communications,
Sr. Notes, 0%, 2003 2,000,000 2,000,000 1,480,000 1,480,000
Diamond Cable Communications,
Sr. Discount Notes, 13.25%, 2004 2,250,000 2,250,000 2,396,250 2,396,250
Sr. Discount Notes, 0/11.75%, 2005 9,950,000 2,000,000 11,950,000(a) 9,402,750 1,890,000 11,292,750
Galaxy Telecom,
Sr. Sub. Notes, 12.375%, 2005 9,400,000 9,400,000 8,977,000 8,977,000
NTL:
Ser. A, Sr. Discount Notes, 0/12.75%, 2005 5,500,000 5,500,000(a) 5,678,750 5,678,750
Sr. Discount Notes, 0/11.2%, 2007 7,000,000 7,000,000(a) 6,667,500 6,667,500
Net Sat Servicos,
Sr. Secured Notes, 12.75%, 2001 500,000 500,000(g) 506,250 506,250
Pegasus Communications, Ser.A,
Sr. Sub. Notes, 12.5%, 2007 14,500,000 2,000,000 16,500,000 15,152,500 2,090,000 17,242,500
Pegasus Media & Communications, Ser. B,
Sr. Sub. Notes, 12.5%, 2005 13,540,000 2,775,000 16,315,000 14,453,950 2,962,312 17,416,262
Telewest Communications,
Sr. Discount Notes, 0/11%, 2007 5,000,000 5,000,000(a) 4,725,000 4,725,000
79,698,825 11,929,780 91,628,605
CASINOS & GAMING 2.3%
Circus Circus Enterprises,
Sr. Sub. Notes, 6.75%, 2003 1,500,000 1,500,000 1,378,125 1,378,125
Players International,
Sr. Notes, 10.875%, 2005 17,040,000 17,040,000 17,764,200 17,764,200
19,142,325 19,142,325
CHEMICALS 2.4%
Arco Chemical,
Deb., 9.9%, 2000 2,600,000 2,600,000 2,597,650 2,597,650
ISP Holdings:
Ser. B, Sr. Notes, 9.75%, 2002 5,770,000 3,000,000 8,770,000 5,510,350 2,865,000 8,375,350
Ser. B, Sr. Notes, 9%, 2003 9,750,000 9,750,000 8,970,000 8,970,000
17,078,000 2,865,000 19,943,000
COMMERCIAL MORTGAGE
PASS-THROUGH CTFS. 1.7%
GS Mortgage Securities II,
Ser. 1999-FL2A, Cl. G, 7.98%, 2013 4,000,000 2,000,000 6,000,000(b,c) 3,729,000 1,864,500 5,593,500
Nomura Depositor Trust:
Ser. 1998-STI, Cl. B2, 10.10%, 2003 5,000,000 2,000,000 7,000,000(b,c) 4,603,125 1,841,250 6,444,375
Ser. 1998 ST IA, Cl. B2A, 10.10%, 2003 2,000,000 2,000,000(b,c) 1,841,250 1,841,250
10,173,375 3,705,750 13,879,125
CONSTRUCTION 1.8%
Aaf-Mcquay,
Sr. Notes, 8.875%, 2003 9,000,000 9,000,000 7,830,000 7,830,000
ICF Kaiser International,
Sr. Sub. Notes, 13%, 2003 11,050,000 3,000,000 14,050,000 (d) 5,428,313 1,473,750 6,902,063
13,258,313 1,473,750 14,732,063
CONSUMER 7.3%
BPC Holding, Ser. B,
Sr. Secured Notes, 12.5%, 2006 5,329,000 373,000 5,702,000 (c) 4,278,051 299,440 4,577,491
Coinmachine, Ser. D,
Sr. Notes, 11.75%, 2005 19,915,000 1,500,000 21,415,000 17,624,775 1,327,500 18,952,275
Graham Packaging/GPC Capital, Ser. B,
Floating Interest Rate Sub. Term
Securities, 9.845%, 2008 1,500,000 1,500,000 (c) 1,305,000 1,305,000
Hosiery Corp. of America,
Sr. Sub. Notes, 13.75%, 2002 13,000,000 2,000,000 15,000,000 13,585,000 2,090,000 15,675,000
Sharp Do Brazil,
Medium-Term Notes, 9.625%, 2000 3,500,000 1,000,000 4,500,000(d,e) 682,500 195,000 877,500
Southland,
Deb., 5%, 2003 3,250,000 3,250,000 2,860,000 2,860,000
Sweetheart Cup,
Sr. Sub. Notes, 9.625%, 2000 13,525,000 2,500,000 16,025,000 13,525,000 2,500,000 16,025,000
51,000,326 9,271,940 60,272,266
ENERGY 2.4%
Clark USA, Ser. B,
Sr. Notes, 10.875%, 2005 5,000,000 5,000,000 2,675,000 2,675,000
Louis Dreyfus Natural Gas,
Sr. Sub. Notes, 9.25%, 2004 9,000,000 9,000,000 9,028,053 9,028,053
Statia Terminals, Ser.B,
First Mortgage, 11.75%, 2003 8,000,000 8,000,000 7,960,000 7,960,000
19,663,053 19,663,053
ENTERTAINMENT 2.3%
American Skiing, Ser. B,
Sr. Sub. Notes, 12%, 2006 22,915,000 22,915,000 19,305,888 19,305,888
FINANCIAL 3.1%
First Palm Beach Bancorp,
Notes, 10.35%, 2002 4,375,000 4,375,000 4,342,187 4,342,187
Imperial Credit Capital Trust I, Ser. A,
Remarketed Par Securities, 10.25%, 2002 500,000 2,000,000 2,500,000 386,269 1,545,078 1,931,347
Loomis Fargo & Co.,
Sr. Notes, 10%, 2004 5,375,000 5,375,000 5,213,750 5,213,750
Reliance Group Holdings:
Sr. Notes, 9%, 2000 6,500,000 3,900,000 10,400,000 5,882,500 3,529,500 9,412,000
Sr. Sub. Deb., 9.75%, 2003 4,700,000 4,700,000 3,219,500 3,219,500
Republic National Bank of New York,
Deb., 9.65%, 2003 2,000,000 2,000,000(b) 1,750,246 1,750,246
20,794,452 5,074,578 25,869,030
FOOD & BEVERAGES 5.0%
Chiquita Brands International,
Conv. Sub. Deb., 7%, 2001 9,150,000 9,150,000 7,686,000 7,686,000
Envirodyne Industries,
Sr. Notes, 10.25%, 2001 14,000,000 2,000,000 16,000,000 7,490,000 1,070,000 8,560,000
Pilgrims Pride,
Sr. Sub. Notes, 10.875%, 2003 2,000,000 2,000,000 2,015,000 2,015,000
Sun World International, Ser. B,
First Mortgage, 11.25%, 2004 23,500,000 450,000 23,950,000 22,442,500 429,750 22,872,250
39,633,500 1,499,750 41,133,250
FOREST PRODUCTS 6.8%
Maxxam Group Holdings,
Sr. Secured Notes, 12%, 2003 45,115,000 5,110,000 50,225,000 40,829,075 4,624,550 45,453,625
Stone Container Finance,
Sr. Notes, 11.5%, 2006 10,000,000 10,000,000(b) 10,375,000 10,375,000
51,204,075 4,624,550 55,828,625
HEALTH CARE 1.2%
Eye Care Centers of America,
Floating Interest Rate Sub. Term
Securities, 10.114%, 2008 3,000,000 1,500,000 4,500,000(c) 1,635,000 817,500 2,452,500
Tenet Healthcare,
Sr. Notes, 7.875%, 2003 7,500,000 7,500,000 7,331,250 7,331,250
8,966,250 817,500 9,783,750
INDUSTRIAL 4.1%
Anacomp, Ser. D,
Sr. Sub. Notes, 10.875%, 2004 5,000,000 5,000,000 4,625,000 4,625,000
Applied Extrusion Technology, Ser. B,
Sr. Notes, 11.5%, 2002 12,880,000 500,000 13,380,000 12,976,600 503,750 13,480,350
Atlantis Group,
Sr. Notes, 11%, 2003 1,325,000 1,325,000 1,331,625 1,331,625
HCC Industries,
Sr. Sub. Notes, 10.75%, 2007 6,360,000 6,360,000 3,211,800 3,211,800
Hawk, Ser. B,
Sr. Notes, 10.25%, 2003 4,532,000 4,532,000 4,146,780 4,146,780
J.B. Poindexter & Co.,
Sr. Notes, 12.5%, 2004 4,125,000 4,125,000 3,918,750 3,918,750
TEKNI-PLEX, Ser. B,
Sr. Notes, 11.25%, 2007 1,185,000 1,185,000 1,226,475 1,226,475
Vicap, S.A. de C.V.,
Gtd. Sr. Notes, 10.25%, 2002 500,000 1,500,000 2,000,000 477,500 1,432,500 1,910,000
31,914,530 1,936,250 33,850,780
METALS 1.9%
Northwestern Steel & Wire,
Sr. Notes, 9.5%, 2001 5,000,000 2,000,000 7,000,000 2,268,750 907,500 3,176,250
Oregon Steel Mills,
First Mortgage, 11%, 2003 698,000 698,000 520,010 520,010
Renco Metals,
Sr. Notes, 11.5%, 2003 18,870,000 4,500,000 23,370,000 9,906,750 2,362,500 12,269,250
12,175,500 3,790,010 15,965,510
OIL & GAS 0.8%
R&B Falcon,
Sr. Notes, 6.5%, 2003 7,200,000 7,200,000 6,624,000 6,624,000
PUBLISHING 0.6%
Day International Group, Ser. B,
Sr. Sub. Notes, 11.125%, 2005 5,200,000 5,200,000 5,187,000 5,187,000
REAL ESTATE 2.4%
Meditrust:
Conv. Notes, 7.5%, 2001 1,000,000 2,500,000 3,500,000 887,500 2,218,750 3,106,250
Medium-Term Notes, 7.77%, 2002 7,250,000 1,000,000 8,250,000 6,101,919 841,644 6,943,563
Notes, 7.6%, 2001 395,000 395,000 289,831 289,831
Rockefeller Center Properties,
Conv. Deb., 0%, 2000 7,255,000 4,000,000 11,255,000 6,130,475 3,380,000 9,510,475
13,119,894 6,730,225 19,850,119
RETAIL 1.5%
Cafeteria Operators
(Gtd. by Furrs/Bishops Specialty Group),
Sr. Secured Notes, 12%, 2001 7,481,650 1,000,000 8,481,650 7,444,242 995,000 8,439,242
Core-Mark International,
Notes, 11.375%, 2003 3,180,000 3,180,000 2,973,300 2,973,300
Woolworth,
Notes, 7%, 2000 1,000,000 1,000,000 997,052 997,052
11,414,594 995,000 12,409,594
SHIPPING 0.6%
Gearbulk Holdings,
Sr. Notes, 11.25%, 2004 2,000,000 2,000,000 2,010,000 2,010,000
Stena AB,
Sr. Notes, 10.5%, 2005 3,500,000 3,500,000 3,255,000 3,255,000
5,265,000 5,265,000
SUPERMARKETS 0.9%
Shoppers Food Warehouse,
Sr. Notes, 9.75%, 2004 7,400,000 7,400,000 7,770,000 7,770,000
TECHNOLOGY 0.3%
Baan,
Conv. Sub. Notes, 4.5%, 2001 2,325,000 675,000 3,000,000 1,756,840 510,050 2,266,890
TELECOMMUNICATION/CARRIERS 6.4%
GST USA,
Sr. Discount Notes, 0/13.875%, 2005 2,500,000 1,000,000 3,500,000(a) 1,037,500 415,000 1,452,500
Hermes Europe Railtel,
Sr. Notes, 11.5%, 2007 14,750,000 14,750,000 13,348,750 13,348,750
Intermedia Communications,
Sr. Discount Notes, 0/12.5%, 2006 14,500,000 14,500,000(a) 13,702,500 13,702,500
MJD Communications,
Floating Rate Notes, 10.321%, 2008 9,000,000 9,000,000(c) 8,677,440 8,677,440
Qwest Communications International, Ser. B,
Sr. Notes, 10.875%, 2007 15,000,000 15,000,000 16,047,210 16,047,210
52,813,400 415,000 53,228,400
TEXTILES 0.6%
Sassco Fashions,
Sr. Notes, 12.75%, 2004 5,700,000 3,317,519 9,017,519 3,220,500 1,874,398 5,094,898
Texfi Industries,
Sr. Sub. Deb., 8.75%, 1999 5,100,000 2,500,000 7,600,000(d) 102,000 50,000 152,000
3,322,500 1,924,398 5,246,898
TRANSPORTATION 6.3%
Eletson Holdings,
First Pfd. Ship Mortgage Notes, 9.25%, 2003 2,750,000 850,000 3,600,000 2,543,750 786,250 3,330,000
International Shipholding,
Sr. Notes, 9%, 2003 1,000,000 3,000,000 4,000,000 972,500 2,917,500 3,890,000
MTL, Ser. B,
Floating Interest Rate Sub. Term
Securities, 10.96%, 2006 5,000,000 3,000,000 8,000,000(c) 3,775,000 2,265,000 6,040,000
OMI,
Sr. Notes, 10.25%, 2003 2,000,000 2,000,000 2,020,000 2,020,000
Petro Stopping Centers/Financial,
Sr. Notes, 10.5%, 2007 7,800,000 2,000,000 9,800,000 6,825,000 1,750,000 8,575,000
Union Pacific,
Sub. Deb, 5.5%, 2033 4,348,000 3,068,000 7,416,000 3,656,370 2,579,978 6,236,348
US Airways:
Pass-Through Ctfs.,
Ser. 1993-A, Cl. A2, 9.625%, 2003 3,855,000 3,855,000 3,532,117 3,532,117
Ser. 1993-A, Cl. A3, 10.375%, 2013 11,000,000 11,000,000 8,978,904 8,978,904
ValuJet,
Sr. Notes, 10.25%, 2001 7,675,000 2,450,000 10,125,000 6,945,875 2,217,250 9,163,125
37,229,516 14,535,978 51,765,494
UTILITIES 0.6%
Hidroelectrica Piedra del Aguila:
Notes, 8%, 2009 3,500,000 250,000 3,750,000(b) 2,502,500 178,750 2,681,250
Notes, 8.25%, 2009 3,500,000 250,000 3,750,000(b) 2,196,250 156,875 2,353,125
4,698,750 335,625 5,034,375
WIRELESS COMMUNICATIONS 7.2%
Comunicacion Celular,
Sr. Discount Notes, 0/14.125%, 2005 13,250,000 2,500,000 15,750,000(a,b) 8,745,000 1,650,000 10,395,000
Microcell Telecommunications, Ser. B,
Sr. Discount Notes, 0/14%, 2006 10,000,000 5,000,000 15,000,000(a) 9,075,000 4,537,500 13,612,500
Occidente y Caribe Celular, Ser. B,
Sr. Discount Notes, 0/14%, 2004 11,000,000 5,000,000 16,000,000(a) 6,847,500 3,112,500 9,960,000
Orion Network Systems,
Sr. Discount Notes, 0/12.5%, 2007 32,045,000 32,045,000(a) 12,337,325 12,337,325
Pagemart Nationwide,
Sr. Discount Notes, 15%, 2005 13,500,000 13,500,000(a) 13,567,500 13,567,500
50,572,325 9,300,000 59,872,325
96.3%
TOTAL BONDS AND NOTES
(cost $844,010,386, $109,402,326 and $953,412,712, respectively) 708,850,063 88,062,341 796,912,404
SHARES
COMMON STOCKS 0.2%
BROADCASTING 0.1%
Spanish Broadcasting System, Cl. A 21,400 21,400(b,f) 399,913 399,913
UnitedGlobalCom, Cl. A 906 906(f) 48,131 48,131
448,044 448,044
ENTERTAINMENT 0.0%
Discovery Zone (warrants) 4,000 1,000 5,000(b,f) 4 1 5
Discovery Zone, Cl. A (warrants) 37,400 5,100 42,500(b,f) 37 5 42
Discovery Zone, Cl. B (warrants) 37,400 5,100 42,500(b,f) 37 5 42
Signature Brands (warrants) 750 750(b,f) -- --
Sun International Hotels 198 198(b,f) 3,812 3,812
78 3,823 3,901
TELECOMMUNICATION/CARRIERS 0.1%
WorldPort Communications (warrants) 277,493 277,493(b,f) 806,464 806,464
WIRELESS COMMUNICATIONS 0.0%
Comunicacion Celular (warrants) 1,750 1,500 3,250(b,f) 43,969 37,687 81,656
TOTAL COMMON STOCKS
(cost $558,359, $151,136 and $709,495, respectively) 1,298,555 41,510 1,340,065
PREFERRED STOCKS 0.5%
ENERGY; 0.0%
Contour Energy,
Cum. Conv., $2.625 34,700 34,700(f) 119,281 119,281
PUBLISHING 0.5%
Newscorp Overseas,
Ser. A, Cum., $2.15625 216,973 216,973 4,434,386 4,434,386
TOTAL PREFFERRED STOCKS
(cost $5,454,716, $893,525 and $6,348,241, respectively) 4,434,386 119,281 4,553,667
SHORT-TERM INVESTMENTS 3.0% PRINCIPAL AMOUNT ($)
--------------------
COMMERCIAL PAPER;
Dow Chemical,
6.03%, 2000 11,000,000 11,000,000 10,996,315 10,996,315
Volkswagen of America,
6.04%, 2000 12,735,000 835,000 13,570,000 12,730,727 835,000 13,565,727
TOTAL SHORT-TERM INVESTMENTS
(cost $23,735,000, $835,000 and $24,570,000, respectively) 23,727,042 835,000 24,562,042
TOTAL INVESTMENTS
(cost $873,760,211, $111,281,987 and $985,042,198,respectively) 100.00% 738,310,046 89,058,132 827,368,178
a Zero coupon until a specified date at which time the stated coupon rate
becomes effective until maturity.
b Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At April 30, 2000, these
securities amounted to $ 41,519,303 or 5.0% of pro forma combined net assets.
c Variable rate security-interest rate subject to periodic change.
d Non-income producing-security in default.
e Reflects date security can be redeemed at holder's option; the stated maturity is 10/30/2005.
f Non-income producing security.
g Reflects date security can be redeemed at holder's option; the stated maturity is 8/5/2004.
</TABLE>
Dreyfus Premier Limited Term High Income Fund
NOTES TO PRO FORMA FINANCIAL STATEMENTS (Unaudited)
NOTE 1.--Basis of Combination:
At special meetings of the Boards held on May 31, 2000 and June 7,
2000, respectively, the Boards of Trustees of The Dreyfus/Laurel Funds Trust and
Dreyfus Debt and Equity Funds each approved an Agreement and Plan of
Reorganization pursuant to which, subject to approval by the shareholders of
Dreyfus Short Term High Yield Fund ( the "Fund"), a series of Dreyfus Debt and
Equity Funds, the Fund will transfer all of its assets, subject to its
liabilities, to Dreyfus Premier Limited Term High IncomeYield Fund ( the
"Premier Fund"), a series of The Dreyfus/Laurel Funds Trust, in exchange for a
number of Class A shares of the Premier Fund equal in value to the assets of the
Fund (the "Exchange"). Class A shares of the Premier Fund then will be
distributed to Fund shareholders on a pro rata basis in liquidation of the Fund.
The Exchange will be accounted for as a tax free merger of investment
companies. The unaudited pro forma statement of investments and statement of
assets and liabilities reflect the financial position of the Premier Fund and
the Fund at April 30, 2000. The unaudited pro forma statement of operations
reflects the results of operations of the Premier Fund and the Fund for the
twelve months ended April 30, 2000. These statements have been derived from the
Funds' respective books and records utilized in calculating daily net asset
value at the dates indicated above under generally accepted accounting
principles. The historical cost of investment securities will be carried forward
to the surviving entity and results of operations of the Premier Fund for
pre-combination periods will not be restated.
The pro forma statements of investments, assets and liabilities and
operations should be read in conjunction with the historical financial
statements of the Funds included or incorporated by reference in the respective
Statements of Additional Information. The pro forma combined financial
statements are presented for information only and may not necessarily be
representative of what the actual combined financial statements would have been
had the reorganization occurred at April 30, 2000.
All costs with respect to the Exchange will be borne by The Dreyfus
Corporation.
NOTE 2.--Portfolio Valuation:
Investments in securities (excluding short-term investments other than
U.S. Treasury Bills) are valued each business day by an independent pricing
service ("Service") approved by the Board of Trustees. Investments for which
quoted bid prices are readily available and are representative of the bid side
of the market and in the judgment of the Service are valued at the mean between
the quoted bid prices (as obtained by the Service from dealers in such
securities) and asked prices (as calculated by the Service based upon its
evaluation of the market for such securities). Other investments (which
constitute a majority of the portfolio securities) are carried at fair value as
determined by the Service, based on methods which include consideration of:
yields or prices of securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Securities
for which there are no such valuations are valued at fair value as determined in
good faith under the direction of the respective Board of Trustees. Short-term
investments, excluding U.S. Treasury Bills, are carried at amortized cost, which
approximates value.
NOTE 3.--Capital Shares:
The pro forma net asset value per share assumes 9,030,743 additional
Class A shares of Beneficial Interest of the Premier Fund were issued in
connection with the proposed acquisition by the Premier Fund of the Fund as of
April 30, 2000. The pro forma number of shares that would be issuable was
calculated by dividing the net assets of the Fund at April 30, 2000 by the net
asset value per share of the Premier Fund (Class A shares) at April 30, 2000 of
$10.08. The pro forma combined number of Class A shares outstanding of
17,906,781 consists of the 9,030,743 Class A shares issuable to the Fund as a
result of the merger and the 8,876,038 Class A shares of the Premier Fund
outstanding at April 30, 2000.
NOTE 4.--Pro Forma Operating Expenses:
The accompanying pro forma financial statements reflect changes in
fund expenses as if the merger had taken place on April 30, 2000. Although it is
anticipated that there will be an elimination of certain duplicative expenses as
a result of the Exchange, the actual amount of such expenses cannot be
determined because it is not possible to predict the cost of future operations.
NOTE 5.--Federal Income Taxes:
Each fund has elected to be taxed as a "regulated investment company"
under the Internal Revenue Code. After the Exchange, the Premier Fund intends to
continue to qualify as a regulated investment company, if such qualification is
in the best interests of its shareholders, by complying with the provisions
available to certain investment companies, as defined in applicable sections of
the Internal Revenue Code, and to make distributions of taxable income
sufficient to relieve it from all, or substantially all, Federal income taxes.
The identified cost of investments for the Funds is substantially the
same for both financial accounting and Federal income tax purposes. The tax cost
of investments will remain unchanged for the combined entity.
<PAGE>
THE DREYFUS/LAUREL FUNDS TRUST
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION.
------- ---------------
The response to this item is incorporated by reference to Item 25 of
Part C of Post-Effective Amendment No. 112 to the Registrant's Registration
Statement on Form N-1A, filed on May 1, 2000.
ITEM 16. Exhibits - All references are to Post-Effective Amendments
to the Registrant's Registration Statement on Form N-1A (File
No. 33-43846) (the "Registration Statement") unless otherwise
noted.
(1)(a) Second Amended and Restated Agreement and Declaration of Trust.
Incorporated by reference to Post-Effective Amendment No. 87.
(1)(b) Amendment No. 1 to Registrant's Second Amended and Restated
Agreement and Declaration of Trust filed on February 7, 1994.
Incorporated by reference to Post-Effective Amendment No. 90.
(1)(c) Amendment No. 2 to Registrant's Second Amended and Restated
Agreement and Declaration of Trust filed on March 31, 1994.
Incorporated by reference to Post-Effective Amendment No. 90.
(1)(d) Amendment No. 3 to Registrant's Second Amended and Restated
Agreement and Declaration of Trust. Incorporated by reference to
Post-Effective Amendment No. 93.
(1)(e) Amendment No. 4 to Registrant's Second Amended and Restated
Agreement and Declaration of Trust. Incorporated by reference to
Post-Effective Amendment No. 93.
(1)(f) Amendment No. 8 to Registrant's Second Amended and Restated
Agreement and Declaration of Trust. Incorporated by reference to
Post-Effective Amendment No. 112.
(2) Amended and Restated By-Laws. Incorporated by reference to
Post-Effective Amendment No. 75.
(3) Not Applicable.
(4) Agreement and Plan of Reorganization.*
(5) Not Applicable.
(6)(a) Investment Management Agreement between the Registrant and Mellon
Bank, N.A., dated April 4, 1994. Incorporated by reference to
Post- Effective Amendment No. 90.
(6)(b) Assignment Agreement among the Registrant, Mellon Bank, N.A. and
The Dreyfus Corporation, dated as of October 17, 1994 (relating
to Investment Management Agreement dated April 4, 1994).
Incorporated by reference to Post-Effective Amendment No. 93.
(7) Distribution Agreement between the Registrant and Dreyfus Service
Corporation. Incorporated by reference to Post-Effective
Amendment No. 112.
(8) Not Applicable.
(9) Custody and Fund Accounting Agreement between the Registrant and
Mellon Bank, N.A., dated April 4, 1994. Incorporated by reference
to Post-Effective Amendment No. 102.
(10) Restated Distribution Plan (relating to Class A Shares).
Incorporated by reference to Post-Effective Amendment No. 93.
(11)(a) Opinion of counsel is incorporated by reference to the
Registration Statement and to Post-Effective Amendment No. 93.
(11)(b) Consent of counsel.
(12) Opinion and consent of counsel regarding tax matter.**
(13) Not Applicable.
(14) Consent of Independent Auditors.
(15) Not Applicable.
(16) Powers of Attorney. Incorporated by reference to Post-Effective
Amendment No. 112 and to the Signature Page hereof.
(17)(a) Form of Proxy.*
(17)(b) Registrant's Prospectus for Dreyfus Premier Limited Term High
Income Fund dated May 1, 2000.
(17)(c) Dreyfus Short Term High Yield Fund's Prospectus dated March 1,
2000.
------------------------
* Filed herewith as part of the Prospectus/Proxy Statement.
** To be filed by Post-Effective Amendment.
ITEM 17. UNDERTAKINGS.
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(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this registration statement by any
person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act of 1933, as amended,
the reoffering prospectus will contain the information called for
by the applicable registration form for reofferings by persons
who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an
amendment to the registration statement and will not be used
until the amendment is effective, and that, in determining any
liability under the Securities Act of 1933, as amended, each
post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of
the securities at that time shall be deemed to be the initial
bona fide offering of them.
(3) The undersigned Registrant agrees to file by post-effective
amendment the final opinion of counsel regarding tax matters
within a reasonable period of time after receiving such opinion.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement
has been signed on behalf of the Registrant, in the City of New York, State of
New York, on the 19th day of June, 2000.
THE DREYFUS/LAUREL FUNDS TRUST
(Registrant)
By: /S/STEPHEN E. CANTER
---------------------------------
Stephen E. Canter, President
POWER OF ATTORNEY
Each person whose signature appears below on this Registration
Statement hereby constitutes and appoints John B. Hammalian and Jeff Prusnofsky,
and each of them, with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities (until
revoked in writing) to sign any and all amendments to this Registration
Statement (including post-effective amendments and amendments thereto), and to
file the same, with al exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1993, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
/S/STEPHEN E. CANTER President June 19, 2000
----------------------
Stephen E. Canter (Principal Executive
Officer)
/S/ JOSEPH W. CONNOLLY Vice President and June 19, 2000
----------------------
Joseph W. Connolly Treasurer (Principal
Financial and Accounting
Officer)
/S/JOSEPH S. DIMARTINO Chairman of the Board June 19, 2000
----------------------
Joseph S. DiMartino
/S/JAMES M. FITZGIBBONS Trustee June 19, 2000
-----------------------
James M. Fitzgibbons
/S/J. TOMLINSON FORT Trustee June 19, 2000
--------------------
J. Tomlinson Fort
/S/ARTHUR L. GOESCHEL Trustee June 19, 2000
---------------------
Arthur L. Goeschel
/S/KENNETH A. HIMMEL Trustee June 19, 2000
--------------------
Kenneth A. Himmel
/S/STEPHEN J. LOCKWOOD Trustee June 19, 2000
----------------------
Stephen J. Lockwood
/S/ROSLYN M. WATSON Trustee June 19, 2000
-------------------
Roslyn M. Watson
/S/BENAREE PRATT WILEY Trustee June 19, 2000
----------------------
Benaree Pratt Wiley
EXHIBIT INDEX
Exhibit 11(b) Consent of Counsel
Exhibit 14 Consent of Independent Auditors
Exhibit 17(a) Registrant's Prospectus for Dreyfus Premier Limited Term High
Income Fund dated May 1, 2000.
Exhibit 17(b) Dreyfus Short Term High Yield Bond Fund's Prospectus dated
March 1, 2000.
