DREYFUS STRATEGIC INCOME
1 INVESTMENT OBJECTIVE
The goal of Dreyfus Strategic Income is to maximize current income
by investing principally in debt securities of domestic and foreign
issuers.
2 INVESTMENT STRATEGY
Under normal circumstances Dreyfus Strategic Income will invest at
least 65% of its net assets
in debt securities, such as bonds, debentures, notes,
mortgage-related securities, convertible debt obligations and
convertible preferred stocks
of domestic and foreign issuers. Currently, the
Fund invests primarily in investment grade securities but may
invest up to 20% of its assets in debt securities rated Ba by Moody's or
BB by Standard & Poor's. In addition, the Fund may invest up to 30% of
its total assets in securities of foreign issuers.
In an effort to increase return, the Fund may engage in certain
advanced trading techniques such as leveraging, short-selling, options
and futures transactions, currency transactions and lending portfolio
securities.
3 INVESTMENT RISKS AND
POTENTIAL REWARDS
Risks
* The Fund's net asset value is not fixed and should be expected to
fluctuate.
* The prices of debt securities are inversely affected by changes
in interest rates and, therefore, are subject to the risk of market
price fluctuations.
* Higher-yielding (and therefore, higher-risk) debt securities are
subject to greater volatility and less liquidity than certain
lower-yielding, higher-rated debt securities.
* Investments in foreign securities and the use of advanced
trading techniques can involve greater risk and may be less liquid and
more volatile than more conventional investments.
Rewards
* This Fund seeks a higher level of income than lower-yielding,
fixed-price money market mutual funds.
* Successful use of advanced trading techniques may result in
increased total return.
4 APPROPRIATE FOR INVESTORS WHO:
* Are seeking to maximize current income through a portfolio
consisting primarily of foreign and domestic debt securities.
* Are purchasing as a supplement to an overall investment program
and are willing to undertake the risks involved.
* Have an investment horizon of at least 5 years.
5 FEES AND EXPENSES
Shareholder Transaction Expenses are paid by investors when purchasing or
redeeming Fund shares.
Maximum Sales Load Imposed
on Purchases (as a percentage of
offering price) None
Annual Fund Operating Expenses are taken directly from the assets of the
Fund, and are reflected in the Fund's net asset value.
(as a percentage of average daily net assets)
Management Fee .60%
Other Expenses .45%
Total Fund Operating Expenses 1.05%
Example:
You would pay the following expenses on a $1,000 investment,
assuming (1) a 5% annual return and (2) redemption at the end of each
time period:
1 Year 3 Years 5 Years 10 Years
$11 $33 $58 $128
This is an illustration only; actual expenses and returns will vary.
6 PAST PERFORMANCE
Calendar Year Total Return
____________________________
| Calendar | Total |
| Year | Return |
____________________________
| 1994 | -6.33% |
| 1993 | 15.10% |
| 1992 | 9.00% |
| 1991 | 19.09% |
| 1990 | 5.54% |
| 1989 | 13.86% |
| 1988 | 11.09% |
| 1987 | 5.59% |
____________________________
Average Annual Total Return
for period ended 6/30/95
1 Year 5 years From Inception
10/3/86
------ ------- ---------------
13.95% 10.59% 9.87%
Past performance is no guarantee of future results; net asset value, yield
and investment return fluctuate so that an investor's share may be worth
more or less than original cost upon redemption. The Fund charged a maximum
sales load of 3.00% until July 24, 1995 which is not reflected in the
performance figures quoted above.
7 INVESTMENT ADVISER
The Dreyfus Corporation is the Fund's investment adviser.
8 PURCHASES
The minimum initial investment is $2,500. The initial investment
must be accompanied by
the Fund's Account Application. Subsequent
investments must be at least $500. You may
purchase Fund shares by check or wire, or through the Dreyfus
TeleTransfer privilege.
9 REDEMPTIONS
You can sell Fund shares by written request, telephone, Dreyfus
TeleTransfer ($500 minimum, $150,000 maximum) and wire redemption
($1,000 minimum, $250,000 maximum). When a redemption request is
received in proper form, the Fund will redeem the shares at the next
determined net asset value.
10 DISTRIBUTIONS
Dividends are declared daily and paid monthly; capital gains, if
any, are declared and paid annually. Dividends and capital gains can be
mailed to you, sent directly to your bank, swept into another Dreyfus
account or reinvested back into your Fund to purchase shares at net
asset value.
11 OTHER SERVICES
* Telephone Exchange Privilege
* Dreyfus-AUTOMATIC Asset BuilderRegistration Mark
* Dreyfus Dividend Options
* Dreyfus Payroll Savings Plan
Mutual fund shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency. The
net asset value of bond funds will fluctuate.
DREYFUS
STRATEGIC
INCOME
A bond
mutual fund
FUND PROFILE
This Profile contains key information about the Fund. More details appear in
the Fund's accompanying Prospectus.
Copy Rights 1995, Dreyfus Service Corporation, Broker-Dealer
Premier Mutual Fund Services, Distributor 031retpro1-957
Registration Mark
FOR USE BY BANKS ONLY
July 24, 1995
DREYFUS STRATEGIC INCOME
Supplement to Prospectus Dated March 1, 1995
As Revised, July 24, 1995
All mutual fund shares involve certain investment risks, including
the possible loss of principle.
031/s072495IST
- ----------------------------------------------------------------------------
PROSPECTUS
MARCH 1, 1995
AS REVISED, JULY 24, 1995
DREYFUS STRATEGIC INCOME
- ----------------------------------------------------------------------------
DREYFUS STRATEGIC INCOME (THE "FUND") IS AN OPEN-END, DIVERSIFIED,
MANAGEMENT INVESTMENT COMPANY, KNOWN AS A MUTUAL FUND. IT SEEKS TO MAXIMIZE
CURRENT INCOME BY INVESTING PRINCIPALLY IN DEBT SECURITIES OF DOMESTIC AND
FOREIGN ISSUERS.
YOU CAN INVEST, REINVEST OR REDEEM SHARES AT ANY TIME WITHOUT CHARGE
OR PENALTY. YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING DREYFUS
TELETRANSFER.
THE DREYFUS CORPORATION PROFESSIONALLY MANAGES THE FUND'S PORTFOLIO.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED MARCH 1, 1995, WHICH
MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF CERTAIN
AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST TO SOME
INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND
IS INCORPORATED HEREIN BY REFERENCE. FOR A FREE COPY, WRITE TO THE FUND AT
144 GLENN CURTISS BOULEVARD, UNIONDALE, NEW YORK 11556-0144, OR CALL
1-800-645-6561. WHEN TELEPHONING, ASK FOR OPERATOR 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM TIME TO
TIME.
- ----------------------------------------------------------------------------
TABLE OF CONTENTS
Page
Annual Fund Operating Expenses.................... 3
Condensed Financial Information................... 4
Description of the Fund........................... 5
Management of the Fund............................ 14
How to Buy Fund Shares............................ 15
Shareholder Services.............................. 17
How to Redeem Fund Shares......................... 20
Shareholder Services Plan......................... 22
Dividends, Distributions and Taxes................ 23
Performance Information........................... 24
General Information............................... 25
Appendix.......................................... 26
- ----------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- ----------------------------------------------------------------------------
This Page Intentionally Left Blank
Page 2
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
<S> <C> <C> <C> <C>
Management Fees........................................................................ .60%
Other Expenses ........................................................................ .45%
Total Fund Operating Expenses.......................................................... 1.05%
Example: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
You would pay the following
expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at
the end of each time period: $11 $33 $58 $128
</TABLE>
- ----------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL
RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL
RETURN GREATER OR LESS THAN 5%.
- ----------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in understanding
the various costs and expenses borne by the Fund, the payment of which will
reduce investors' annual return. The information in the foregoing table does
not reflect any fee waivers or expense reimbursement arrangements that may be
in effect. You can purchase Fund shares without charge directly from the
Fund's distributor; a nominal fee may be charged if transactions in Fund
shares are effected through a securities dealer, bank or other financial
institution. See "Management of the Fund," "How to Buy Fund Shares" and
"Shareholder Services Plan."
Page 3
CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited by Ernst &
Young LLP, the Fund's independent auditors, whose report thereon appears in
the Fund's Statement of Additional Information. Further financial data and
related notes are included in the Fund's Statement of Additional Information,
available upon request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share
of beneficial interest outstanding, total investment return, ratios to
average net assets and other supplemental data for each year indicated. This
information has been derived from the Fund's financial statements.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------------
1986(1) 1987 1988 1989 1990 1991 1992 1993 1994
------ ----- ----- ----- ----- ---- ----- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PERSHAREDATA:
Net asset value, beginning of year...... $13.50 $13.51 $12.57 $12.94 $13.37 $12.35 $13.44 $14.02 $15.36
----- ------ ------ ------- ------- ------ ------- ------ ------
INVESTMENT OPERATIONS:
Investment income-net................... .06 1.19 1.24 1.21 1.18 1.16 1.07 1.01 .95
Net realized and unrealized gain
(loss) on investments................... -- (.95) .74 .44 (1.02) 1.09 .58 1.41 (2.04)
----- ------ ------ ------- ------- ------ ------- ------ ------
TOTAL FROM INVESTMENT OPERATIONS........ .06 .24 1.98 1.65 .16 2.25 1.65 2.42 (1.09)
----- ------ ------ ------- ------- ------ ------- ------ ------
DISTRIBUTIONS:
Dividends from investment income-net.... (.05) (1.18) (1.24) (1.22) (1.18) (1.16) (1.07) (1.01) (.95)
Dividends from net realized
gain on investments..................... -- -- (.37) -- -- -- -- (.07) (.37)
----- ------ ------ ------- ------- ------ ------- ------ ------
TOTAL DISTRIBUTIONS..................... (.05) (1.18) (1.61) (1.22) (1.18) (1.16) (1.07) (1.08) (1.32)
----- ------ ------ ------- ------- ------ ------- ------ ------
Net asset value, end of year............ $13.51 $12.57 $12.94 $13.37 $12.35 $13.44 $14.02 $15.36 $12.95
====== ====== ====== ====== ====== ======= ====== ====== =====
TOTAL INVESTMENT RETURN .................. 5.03%(2) 1.74% 16.71% 13.44% 1.32% 18.93% 12.64% 17.93% (7.44%)
RATIOS/SUPPLEMENTAL DATA:
Ratio of operating expenses to
average net assets...................... -- .26% .49% .50% .50% .72% .85% .84% .94%
Ratio of interest expense and dividends on
securities sold short to average net assets.. -- .15% .17% .34% .32% .15% -- -- --
Ratio of net investment income to
average net assets...................... 5.64%(2) 9.40% 9.72% 9.34% 9.24% 8.93% 7.58% 6.83% 6.84%
Decrease reflected in above expense
ratios due to undertakings by The Dreyfus
Corporation (limited to the expense limitaion
provision of the Management Agreement).. 1.50%(2) 1.24% 1.01% 1.00% 1.00% .78% .40% .24% .11%
Portfolio Turnover Rate................. -- 76.01% 154.73% 93.41% 16.40% 16.08% 72.82% 118.38% 161.35%
Net Assets, end of year
(000's Omitted)........... $1,525 $31,809 $39,058 $41,679 $41,927 $57,336 $149,801 $375,459 $322,487
- --------------------
(1) From October 1, 1986 (commencement of operations) to October 31, 1986.
(2) Annualized.
</TABLE>
Further information about the Fund's performance is contained in the
Fund's annual report, which may be obtained without charge by writing to the
address or calling the number set forth on the cover page of this Prospectus.
Page 4
DEBT OUTSTANDING
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------
1986(1) 1987 1988 1989 1990 1991 1992 1993 1994
------ ----- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Amount of debt outstanding at end of year (in thousands) -- -- $650 -- -- -- -- -- --
Average amount of debt outstanding throughout year
(in thousands)(2)................ -- $460 $739 $1,321 $1,408 $1,011 -- -- --
Average number of shares outstanding throughout year
(in thousands)(3)............... -- 2,077 2,737 3,093 3,260 3,661 -- -- --
Average amount of debt per share throughout year..... -- $.22 $.27 $.43 $.43 $.28 -- -- --
- -------------
(1)From October 1, 1986 (commencement of operations) to October 31, 1986.
(2)Based upon daily outstanding borrowings.
(3)Based upon month-end balances.
</TABLE>
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund seeks to maximize current income by investing principally in
debt securities of domestic and foreign issuers. The Fund's investment
objective cannot be changed without approval by the holders of a majority (as
defined in the Investment Company Act of 1940) of the Fund's outstanding
voting shares. There can be no assurance that the Fund's investment objective
will be achieved.
MANAGEMENT POLICIES
At least 65% of the Fund's total assets ordinarily will be invested
in debt securities, such as bonds, debentures, notes, mortgage-related
securities, convertible debt obligations and convertible preferred stocks, of
domestic and foreign issuers. See "Certain Portfolio Securities" below. The
issuers of these obligations include governments, their political
subdivisions, agencies or municipalities, and corporations. It is a
fundamental policy of the Fund that at least 95% of these obligations when
purchased by the Fund will have a rating of at least Caa by Moody's Investors
Service, Inc. ("Moody's") or CCC by Standard & Poor's Corporation ("Standard
& Poor's") or will be of comparable quality as determined by The Dreyfus
Corporation. It currently is the intention of the Fund, however, to invest in
debt securities rated no lower than Ba by Moody's or BB by Standard & Poor's
and that no more than 20% of the Fund's total assets be invested in debt
securities rated Ba by Moody's and BB by Standard & Poor's. Debt securities
rated Baa by Moody's and BBB by Standard & Poor's are considered investment
grade obligations which lack outstanding investment characteristics and may
have speculative characteristics as well. See "Risk Factors_Lower Rated
Securities" below for a discussion of certain risks. The Fund may hold
securities with ratings higher than those set forth above when the yield
differential between lower rated and higher rated fixed-income securities
narrows and the risk of loss may be reduced substantially with only a
relatively small reduction in yield and also when market or economic
conditions dictate a more defensive strategy. The Fund will be particularly
alert to favorable arbitrage opportunities (such as those resulting from
favorable interest rate differentials) arising from the relative yields of
the various types of securities in which the Fund may invest and market
conditions generally.
The Fund may invest up to 25% of its total assets in the securities
of issuers having their principal business activities in the same industry.
The Fund may invest up to 5% of its total assets in securities of companies
that have been in continuous operation for fewer than three years.
The Fund may invest up to 30% of its total assets in debt securities
of foreign companies and foreign governments. Among the foreign securities in
which the Fund may invest are the foreign bank obligations described under
"Certain Portfolio Securities," as well as Eurodollar debt obligations, which
are U.S. dollar-denominated debt obligations issued by foreign issuers, often
guaranteed by subsidiaries of domestic companies.
In connection with its purchases of convertible securities, the Fund
from time to time may hold common stock received upon the conversion of the
security. The Fund does not intend to retain the common stock in its
portfolio and will sell it as promptly as it can and in a manner which it
believes will reduce the risk to the Fund of loss in connection with the
sale.
Page 5
The Fund may invest in money market instruments consisting of U.S.
Government securities, certificates of deposit, time deposits, bankers'
acceptances, short-term investment grade corporate bonds and other short-term
debt instruments, and repurchase agreements, as described below under
"Certain Portfolio Securities." Under normal market conditions, the Fund may
invest up to 35% of its assets in money market instruments. However, when The
Dreyfus Corporation determines that adverse market conditions exist, the Fund
may adopt a temporary defensive posture and invest its entire portfolio in
money market instruments.
In an effort to increase total return, the Fund may engage in various
investment techniques such as leveraging, short-selling, options
transactions, currency transactions and lending portfolio securities, each of
which involves risk. See "Risk Factors_Other Investment Considerations"
below.
INVESTMENT TECHNIQUES
LEVERAGE THROUGH BORROWING - The Fund may borrow for investment purposes up
to 33-1/3% of the value of its total assets. This borrowing, which is known as
leveraging, generally will be unsecured, except to the extent the Fund enters
into the reverse repurchase agreements described below. Leveraging will
exaggerate the effect on net asset value of any increase or decrease in the
market value of the Fund's portfolio. Money borrowed for leveraging will be
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.
Among the forms of borrowing in which the Fund may engage is the
entry into reverse repurchase agreements with banks, brokers or dealers.
These transactions involve 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.
SHORT-SELLING - The Fund may make short sales, which are transactions in
which the Fund sells a security it does not own in anticipation of a decline
in the market value of that security. To complete such a transaction, the
Fund must borrow the security to make delivery to the buyer. The Fund then is
obligated to replace the security borrowed by purchasing it 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.
The Fund will incur a loss as a result of the short sale if the price
of the security increases between the date of the short sale and the date on
which the Fund replaces the borrowed security. The Fund will realize a gain
if the security declines in price between those dates.
No securities will 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 sell short the securities of any class of an issuer to the extent, at
the time of the transaction, of more than 5% of the outstanding securities of
that class.
In addition to the short sales discussed above, the Fund also may
make short sales "against the box," a transaction in which the Fund enters
into a short sale of a security which the Fund owns. The Fund at no time will
have more than 15% of the value of its net assets in deposits on short sales
against the box.
CALL AND PUT OPTIONS ON SPECIFIC SECURITIES - The Fund may invest up to 5%
of its assets, represented by the premium paid, in the purchase of call and
put options in respect of specific securities (or groups or "baskets" of
specific securities) in which the Fund may invest. The Fund may write 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. A call option gives the
purchaser of the option the right to buy, and obligates the writer to sell,
the underlying security at the exercise price at any time during the option
period. Conversely, a put option gives the
Page 6
purchaser of the option the right to sell, and obligates the writer to buy,
the underlying security at the exercise price at any time during the option
period. A covered call option sold by the Fund, which is a call option with
respect to which the Fund owns the underlying security, exposes the Fund
during the term of the option to possible loss of opportunity to realize
appreciation in the market price of the underlying security or to possible
continued holding of a security which might otherwise have been sold to
protect against depreciation in its market price. The principal reason for
writing covered call options is to realize, through the receipt of premiums,
a greater return than would be realized on the Fund's portfolio securities
alone. A covered put option sold by the Fund exposes the Fund during the
term of the option to a decline in price of the underlying security.
Similarly, the principal reason for writing covered put options is to realize
income in the form of premiums. A put option sold by the Fund is covered when,
among other things, cash or liquid securities are placed in a segregated
account with the Fund's custodian to fulfill the obligation undertaken.
To close out a position when writing covered options, the Fund may
make a "closing purchase transaction" by purchasing an option on the same
security with the same exercise price and expiration date as the option it
has previously written. To close out the position as a purchaser of an
option, the Fund may make a "closing sale transaction," which involves
liquidating the Fund's position by selling the option previously purchased.
The Fund will realize a profit or loss from a closing purchase or sale transac
tion depending upon the difference between the amount paid to purchase an
option and the amount received from the sale thereof.
The Fund intends to treat options in respect of specific securities
that are not traded on a national securities exchange and the securities
underlying covered call options written by the Fund as illiquid securities.
See "Certain Portfolio Securities_Illiquid Securities" below.
The Fund will purchase options only to the extent permitted by the
policies of state securities authorities in states where shares of the Fund
are qualified for offer and sale.
FOREIGN CURRENCY TRANSACTIONS - The Fund may engage in currency exchange
transactions either on a spot (i.e., cash) basis at the rate prevailing in
the currency exchange market, or through entering into forward contracts to
purchase or sell currencies. A forward currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date, which
must be more than two days from the date of the contract, at a price set at
the time of the contract. These contracts are entered into in the interbank
market conducted directly between currency traders (typically commercial
banks or other financial institutions) and their customers.
OPTIONS ON FOREIGN CURRENCY - The Fund may purchase and sell call and put
options on foreign currency for the purpose of hedging against changes in
future currency exchange rates. Call options convey the right to buy the
underlying currency at a price which is expected to be lower than the spot
price of the currency at the time the option expires. Put options convey the
right to sell the underlying currency at a price which is anticipated to be
higher than the spot price of the currency at the time the option expires.
The Fund may use foreign currency options under the same circumstances that
it could use currency forward and futures transactions as described above.
See also "Call and Put Options on Specific Securities" above.
FUTURE DEVELOPMENTS - The Fund may take advantage of opportunities in the
area of options and any other derivative investments 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.
LENDING PORTFOLIO SECURITIES - From time to time, the Fund may lend
securities from its portfolio to brokers, dealers and other financial
institutions needing to borrow securities to complete certain transactions.
Such loans may not exceed 331/3% of the value of the Fund's total assets. In
connection with such loans, 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
Page 7
market value of the loaned securities. The Fund can increase its income
through the investment of such collateral. The Fund continues to be entitled
to payments in amounts equal to the interest or other distributions payable
on the loaned security and receives interest on the amount of the loan. Such
loans will be terminable 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.
FORWARD COMMITMENTS - The Fund may purchase securities on a when-issued or
forward commitment basis, which means that the price is fixed at the time of
commitment, but delivery and payment ordinarily take place a number of days
after the date of the commitment to purchase. The Fund will make commitments
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. The Fund will not accrue income in respect of a
security purchased on a when-issued or forward commitment basis prior to its
stated delivery date.
Securities purchased on a when-issued or forward commitment basis and
certain other securities held in the Fund's portfolio are subject to changes
in value (both 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 when-issued or forward commitment basis may expose the Fund to risk because
they may experience such fluctuations prior to their actual delivery.
Purchasing securities on a when-issued or forward commitment 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. A segregated account of the Fund consisting of cash, cash
equivalents or U.S. Government securities or other high quality liquid debt
securities at least equal at all times to the amount of the when-issued or
forward commitments will be established and maintained at the Fund's
custodian bank. Purchasing securities on a when-issued or forward commitment
basis when the Fund is fully or almost fully invested may result in greater po
tential fluctuations in the value of the Fund's net assets and its net asset
value per share.
FORWARD ROLL TRANSACTIONS - In order to enhance income, the Fund may enter
into forward roll transactions with respect to mortgage-related securities
issued by the Government National Mortgage Association, the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation. In a
forward roll transaction, the Fund sells a mortgage security to a financial
institution, such as a bank or broker-dealer, and simultaneously agrees to
repurchase a similar security from the institution at a later date at an
agreed-upon price. The mortgage securities that are repurchased will bear the
same interest rate as those sold, but generally will be collateralized by
different pools of mortgages with different prepayment histories than those
sold. During the period between the sale and repurchase, the Fund will not be
entitled to receive interest and principal payments on securities sold.
Proceeds of the sale will be invested in short-term instruments, particularly
repurchase agreements, and the income from these investments, together with
any additional fee income received on the sale will generate income for the
Fund exceeding the yield on the securities sold. Forward roll transactions
involve the risk that the market value of the securities sold by the Fund may
decline below the repurchase price of those securities. A segregated account
of the Fund consisting of cash, U.S. Government securities or other high
quality liquid debt securities at least equal to the amount of the repurchase
price (including accrued interest) will be established and maintained at the
Fund's custodian bank.
CERTAIN PORTFOLIO SECURITIES
CONVERTIBLE SECURITIES - The Fund may purchase convertible securities, which
are fixed-income securities, such as bonds or preferred stock, that may be
converted at either a stated price or stated rate into underlying shares of
common stock. Convertible securities have general characteristics similar to
both fixed-income and equity securities. Although to a lesser extent than
with fixed-income
Page 8
securities generally, 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, and, therefore, also will react
to variations in the general market for equity securities. 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.
As fixed-income securities, convertible securities are investments
that provide for a stable stream of income with generally higher yields than
common stocks. Of course, like all fixed-income securities, there can be no
assurance of current income because the issuers of the convertible securities
may default on their obligations. Convertible securities, however, generally
offer lower interest or dividend yields than non-convertible securities of
similar quality because of the potential for capital appreciation. 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 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.
U.S. GOVERNMENT SECURITIES - The Fund may purchase securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities. Some
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, for example, Government National Mortgage Association
pass-through certificates, are supported by the full faith and credit of the
U.S. Treasury; others, such as those of the Federal Home Loan Banks, by the
right of the issuer to borrow from the Treasury; others, such as those issued
by the Federal National Mortgage Association, by discretionary authority of
the U.S. Government to purchase certain obligations of the agency or
instrumentality; and others, such as those issued by the Student Loan
Marketing Association, only by the credit of the agency or instrumentality.
These securities bear fixed, floating or variable rates of interest.
Principal and interest may fluctuate based on generally recognized reference
rates or the relationship of rates. 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. The Fund will invest in such securities only
when it is satisfied that the credit risk with respect to the issuer is
minimal.
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. The Fund also may invest in zero coupon securities 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 amount of the discount
fluctuates with the market price of the security. 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.
Page 9
REPURCHASE AGREEMENTS - Repurchase agreements involve the acquisition by the
Fund of an underlying debt instrument, subject to an obligation of the seller
to repurchase, and the Fund to resell, the instrument at a fixed price,
usually not more than one week after its purchase. Certain costs may be
incurred by the Fund in connection with the sale of the securities if the
seller does not repurchase them in accordance with the repurchase agreement.
In addition, if bankruptcy proceedings are commenced with respect to the
seller of the securities, realization on the securities by the Fund may be
delayed or limited.
BANK OBLIGATIONS - The Fund may purchase certificates of deposit, time
deposits, bankers' acceptances and other short-term obligations issued by
domestic banks, foreign subsidiaries of domestic banks, foreign branches of
domestic banks, and domestic and foreign branches of foreign banks, domestic
savings and loan associations and other banking institutions. With respect to
such securities issued by foreign branches of domestic banks, foreign
subsidiaries 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. Such risks include possible
future political and economic developments, the possible imposition of
foreign withholding taxes on interest income payable on the securities, the
possible establishment of exchange controls or the adoption of other foreign
governmental restrictions which might adversely affect the payment of
principal and interest on these securities and the possible seizure or
nationalization of foreign deposits. See "Risk Factors_Investing in Foreign
Securities" below.
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 at a stated interest rate. Time
deposits which may be held by the Fund will not benefit from insurance from
the Bank Insurance Fund or the Savings Association Insurance Fund
administered by the Federal Deposit Insurance Corporation. The Fund will not
invest more than 15% of the value of its net assets in time deposits that are
illiquid and in other illiquid securities.
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 of the drawer to pay the face amount of
the instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
COMMERCIAL PAPER - Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs. The commercial
paper purchased by the Fund will consist only of direct obligations which, at
the time of their purchase, are (a) rated not lower than Prime-1 by Moody's
or A-l by Standard & Poor's, (b) issued by companies having an outstanding
unsecured debt issue currently rated at least Aa3 by Moody's or AA by
Standard & Poor's, or (c) if unrated, determined by The Dreyfus Corporation
to be of comparable quality to those rated obligations which may be purchased
by the Fund.
MORTGAGE-RELATED SECURITIES - The Fund may invest in mortgage-related
securities which are collateralized by pools of mortgage loans assembled for
sale to investors by various governmental agencies, such as the Government
National Mortgage Association and government-related organizations such as
the Federal National Mortgage Association and the Federal Home Loan Mortgage
Corporation, as well as by private issuers such as commercial banks, savings
and loan institutions, mortgage banks and private mortgage insurance
companies, and similar foreign entities. The mortgage-related securities in
which the Fund may invest 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
which are derivative multiclass mortgage 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
Page 10
the principal from the mortgage collateral, while the other class will
receive most of the interest and the remainder of the principal. In the
most extreme case, one class will receive all of the interest (the
interest-only or "IO" class), while the other class will receive all of the
principal (the principal-only or "PO" class). 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 so secured. If the Fund purchases a mortgage-related security 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 in the underlying mortgage collateral. As with other
interest-bearing securities, the prices of certain mortgage-backed securities
are inversely affected by changes in interest rates, while others may not be.
However, though 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 prepay. 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 in these securities even if the securities are
rated in the highest rating category by a nationally recognized statistical
rating organization. In addition, regular payments received in respect of
mortgage-related securities include both interest and principal. No assurance
can be given as to the return the Fund will receive when these amounts are
reinvested. The Fund also may invest in collateralized mortgage obligations
structured on pools of mortgage pass-through certificates or mortgage loans.
Collateralized mortgage obligations will be purchased only if rated in one of
the two highest rating categories by Moody's or Standard & Poor's, or, if unra
ted, deemed to be of comparable quality by The Dreyfus Corporation. For
further discussion concerning the investment considerations involved see
"Risk Factors_Other Investment Considerations" below, and "Investment
Objective and Management Policies_Portfolio Securities_Mortgage-Related
Securities" in the Fund's Statement of Additional Information.
ILLIQUID SECURITIES - The Fund may invest up to 15% of the value of its net
assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Fund's investment
objective. Such securities may include securities that are not readily
marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, repurchase agreements providing for
settlement in more than seven days after notice, certain options traded in
the over-the-counter market and securities used to cover such options, and
certain mortgage-backed securities, such as certain collateralized mortgage
obligations and stripped mortgage-backed securities. As to these securities,
the Fund is subject to a risk that should the Fund desire to sell them when a
ready buyer is not available at a price the Fund deems representative of
their value, the value of the Fund's net assets could be adversely affected.
CERTAIN FUNDAMENTAL POLICIES - The Fund may: (i) with respect to 75% of the
Fund's assets, invest up to 5% of the value of its total assets in securities
of any one issuer or purchase up to 10% of the voting securities of any one
issuer; (ii) purchase securities of any company having less than three years'
continuous operation (including operations of any predecessors) if such
purchase does not cause the value of the Fund's investments in all such
companies to exceed 5% of the value of its assets; (iii) borrow money to the
extent permitted under the Investment Company Act of 1940, which currently
limits borrowing to no more than 331/3% of the value of the Fund's total
assets; and (iv) invest up to 25% of its total assets in securities of
issuers in a single industry, provided that, when the Fund has adopted a
temporary defensive posture, there shall be no such limitation on investments
in securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. This paragraph describes fundamental policies that cannot
be changed without approval by the holders of a majority (as defined in the
Investment Company Act of 1940) of the Fund's outstanding voting shares.
Page 11
RISK FACTORS
CERTAIN INVESTMENT TECHNIQUES - The use of speculative investment techniques
such as leveraging, short-selling, short-term trading, engaging in options
and currency transactions and lending portfolio securities involves greater
risk than that incurred by many other funds with a similar objective. These
risks are described above under "Investment Techniques." In addition, using
these techniques may produce higher than normal portfolio turnover and may
affect the degree to which the Fund's net asset value fluctuates. Higher
portfolio turnover rates are likely to result in comparatively greater
brokerage commissions or transaction costs. Short-term gains realized from
portfolio transactions are taxable to shareholders as ordinary income. You
should purchase Fund shares only as a supplement to an overall investment
program and only if you are willing to undertake the risks involved in
speculative investing.
The Fund's ability to engage in certain short-term transactions may
be limited by the requirement that, to qualify as a regulated investment
company, the Fund must earn less than 30% of its gross income from the
disposition of securities held for less than three months. This 30% test
limits the extent to which the Fund may sell securities held for less than
three months and write options expiring in less than three months, among
other strategies. However, portfolio turnover will not otherwise be a limiting
factor when making investment decisions. Under normal market conditions, the
Fund's portfolio turnover rate will not exceed 150%. See "Portfolio
Transactions" in the Statement of Additional Information.
LOWER RATED SECURITIES - You should carefully consider the relative risks of
investing in the higher yielding (and, therefore, higher risk) debt
securities in which the Fund may invest. These are securities such as those
rated Ba by Moody's or BB by Standard & Poor's. They generally are not meant
for short-term investing and may be subject to certain risks with respect to
the issuing entity and to greater market fluctuations than certain lower
yielding, higher rated fixed-income securities. Securities rated Ba by
Moody's are judged to have speculative elements; their future cannot be
considered as well assured and often the protection of interest and principal
payments may be very moderate. Securities rated BB by Standard & Poor's are
regarded as having predominantly speculative characteristics and, while such
obligations have less near-term vulnerability to default than other
speculative grade debt, they face major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to inadequ
ate capacity to meet timely interest and principal payments. See "Appendix"
in the Fund's Statement of Additional Information for a general description
of Moody's and Standard & Poor's ratings of debt obligations. The ratings of
Moody's and Standard & Poor's represent their opinions as to the quality of
the securities which they undertake to rate. It should be emphasized,
however, that ratings are relative and subjective and, although ratings may
be useful in evaluating the safety of interest and principal payments, they
do not evaluate the market value risk of these securities. Therefore,
although these ratings may be an initial criterion for selection of portfolio
investments, The Dreyfus Corporation also will evaluate these securities and
the ability of the issuers of such securities to pay interest and principal.
The Fund's ability to achieve its investment objective may be more dependent
on The Dreyfus Corporation's credit analysis than might be the case for a
fund that invested in higher rated securities. Once the rating of a portfolio
security has been changed, the Fund will consider all circumstances deemed
relevant in determining whether to continue to hold the security.
The market price and yield of bonds rated Ba by Moody's and BB by
Standard & Poor's are more volatile than those of higher rated bonds. Factors
adversely affecting the market price and yield of these securities will
adversely affect the Fund's net asset value. In addition, the retail
secondary market for these bonds may be less liquid than that of higher rated
bonds; adverse conditions could make it difficult at times for the Fund to
sell certain securities or could result in lower prices than those used in
calculating the Fund's net asset value.
The market values of certain lower rated debt securities tend to
reflect individual corporate developments to a greater extent than do higher
rated securities, which react primarily to fluctuations in the
Page 12
general level of interest rates, and tend to be more sensitive to economic
conditions than are higher rated securities. Companies that issue such bonds
often are highly leveraged and may not have available to them more traditional
methods of financing. Therefore, the risk associated with acquiring the
securities of such issuers generally is greater than is the case with higher
rated securities.
The Fund may invest in zero coupon securities and pay-in-kind bonds
(bonds which pay interest through the issuance of additional bonds), rated as
low as Ba by Moody's and as low as BB by Standard & Poor's, which involve
special considerations. These securities may be subject to greater
fluctuations in value due to changes in interest rates than interest-bearing
securities and thus may be considered more speculative than comparably rated
interest-bearing securities. See "Other Investment Considerations" below, and
"Investment Objective and Management Policies_ Risk Factors_Lower Rated
Securities" and "Dividends, Distributions and Taxes" in the Fund's Statement
of Additional Information.
INVESTING IN FOREIGN SECURITIES - In making foreign investments, the Fund
will give appropriate consideration to the following factors, among others.
Foreign securities markets generally are not as developed or
efficient as those in the United States. Securities of some foreign issuers
are less liquid and more volatile than securities of comparable U.S. issuers.
Similarly, volume and liquidity in most foreign securities markets are less
than in the United States and, at times, volatility of price can be greater
than in the United States. The issuers of some of these securities, such as
foreign bank obligations, may be subject to less stringent or different
regulation than are U.S. issuers. In addition, there may be less publicly
available information about a non-U.S. issuer, and non-U.S. issuers generally
are not subject to uniform accounting and financial reporting standards,
practices and requirements comparable to those applicable to U.S. issuers.
Because evidences of ownership of such securities usually are held
outside the United States, the Fund will be subject to additional risks which
include possible adverse political and economic developments, possible
seizure or nationalization of foreign deposits and possible adoption of
governmental restrictions which might adversely affect the payment of
principal and interest on the foreign securities or might restrict the
payment of principal and interest to investors located outside the country of
the issuer, whether from currency blockage or otherwise. Custodial expenses
for a portfolio of non-U.S. securities generally are higher than for a
portfolio of U.S. securities.
Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in
U.S. dollars may be affected favorably or unfavorably by changes in currency
rates and exchange control regulations. Some currency exchange costs may be
incurred when the Fund changes investments from one country to another.
Furthermore, some of these securities may be subject to brokerage
taxes levied by foreign governments, which have the effect of increasing the
cost of such investment and reducing the realized gain or increasing the
realized loss on such securities at the time of sale. Income received by the
Fund from sources within foreign countries may be reduced by withholding and
other taxes imposed by such countries. Tax conventions between certain
countries and the United States, however, may reduce or eliminate such taxes.
All such taxes paid by the Fund will reduce its net income available for
distributions to investors.
FOREIGN CURRENCY EXCHANGE - 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.
The foreign currency market offers less protection against defaults
in the forward trading of currencies than is available when trading in
currencies occurs on an exchange. Since a forward currency contract is not
guaranteed by an exchange or clearinghouse, a default on the contract would
deprive the
Page 13
Fund of unrealized profits or force the Fund to cover its
commitments for purchase or resale, if any, at the current market price.
FOREIGN COMMODITY TRANSACTIONS - Unlike trading on domestic commodity
exchanges, trading on foreign commodity exchanges is not regulated by the
CFTC and may be subject to greater risks than trading on domestic exchanges.
For example, some foreign exchanges are principal markets so that no common
clearing facility exists and a trader may look only to the broker for
performance of the contract. In addition, unless the Fund hedges against
fluctuations in the exchange rate between the U.S. dollar and the currencies
in which trading is done on foreign exchanges, 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.
OTHER INVESTMENT CONSIDERATIONS - The Fund's net asset value is not fixed
and should be expected to fluctuate.
Investors should be aware that equity securities fluctuate in value,
often based on factors unrelated to the value of the issuer of the
securities, and that fluctuations can be pronounced. Changes in the value of
the Fund's securities will result in changes in the value of the Fund's
shares and thus the Fund's yield and total return to investors.
No assurance can be given as to the liquidity of the market for
certain mortgage-backed securities, such as collateralized mortgage
obligations and stripped mortgage-backed securities. Determination as to the
liquidity of such securities are made in accordance with guidelines
established by the Fund's Board of Trustees. In accordance with such
guidelines, The Dreyfus Corporation monitors the Fund's investments in such
securities with particular regard to trading activity, availability of
reliable price information and other relevant information.
Federal income tax law requires the holder of a zero coupon security
or of certain pay-in-kind bonds to accrue income with respect to these
securities prior to the receipt of cash payments. To maintain its
qualification as a regulated investment company and avoid liability for
Federal income taxes, the Fund may be required to distribute such income
accrued with respect to these securities and may have to dispose of portfolio
securities under disadvantageous circumstances in order to generate cash to
satisfy these distribution requirements.
Investment decisions for the Fund are made independently from those
of the other investment companies advised by The Dreyfus Corporation.
However, if such other investment companies are prepared to invest in, or
desire to dispose of, securities of the type in which the Fund invests at the
same time as the Fund, available investments or opportunities for sales will
be allocated equitably to each investment company. In some cases, this
procedure may adversely affect the size of the position obtained for or
disposed of by the Fund or the price paid or received by the Fund.
MANAGEMENT OF THE FUND
The Dreyfus Corporation, located at 200 Park Avenue, New York, New
York 10166, was formed in 1947 and serves as the Fund's investment adviser.
The Dreyfus Corporation is a wholly-owned subsidiary of Mellon Bank, N.A.,
which is a wholly-owned subsidiary of Mellon Bank Corporation ("Mellon"). As
of June 30, 1995, The Dreyfus Corporation managed or administered
approximately $76 billion in assets for more than 1.8 million investor
accounts nationwide.
The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the Fund,
subject to the overall authority of the Fund's Trustees in accordance with
Massachusetts law. The Fund's primary portfolio manager is Garitt Kono. He
has held that position since June 1994 and has been employed by The Dreyfus
Corporation since September, 1992. For more than five years prior to joining
The Dreyfus Corporation, Mr. Kono was Vice President-Fixed Income at The
First Boston Corporation. The Fund's other portfolio managers are identified
in the Fund's Statement of Additional
Page 14
Information. The Dreyfus Corporation also provides research services for the
Fund as well as for other funds advised by The Dreyfus Corporation through a
professional staff of portfolio managers and securities analysts.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international
markets. Mellon is among the twenty-five largest bank holding companies in
the United States based on total assets. Mellon's principal wholly-owned
subsidiaries are Mellon Bank, N.A., Mellon Bank (DE) National Association,
Mellon Bank (MD), The Boston Company, Inc., AFCOCredit Corporation and a
number of companies known as Mellon Financial Services Corporations. Through
its subsidiaries, including The Dreyfus Corporation, Mellon managed
approximately $200 billion in assets as of March 31, 1995, including $72
billion in mutual fund assets. As of March 31, 1995, Mellon,
through various subsidiaries, provided non-investment services, such as
custodial or administration services, for approximately $680 billion in
assets, including $67 billion in mutual fund assets.
For the fiscal year ended October 31, 1994, the Fund paid The Dreyfus
Corporation a management fee at the annual rate of .60 of 1% of the value of
the Fund's average daily net assets. From time to time, The Dreyfus
Corporation may waive receipt of its fees and/or voluntarily assume certain
expenses of the Fund, which would have the effect of lowering the Fund's
overall expense ratio and increasing yield to investors at the time such
amounts are waived or assumed, as the case may be. The Fund will not pay The
Dreyfus Corporation at a later time for any amounts it may waive, nor will
the Fund reimburse The Dreyfus Corporation for any amounts it may assume. The
Dreyfus Corporation or its affiliates may pay certain entities, including
banks, an account fee and also a fee in connection with the servicing of Fund
shareholders.
The Fund's distributor is Premier Mutual Fund Services, Inc. (the
"Distributor"), located at One Exchange Place, Boston, Massachusetts 02109.
The Distributor's ultimate parent is Boston Institutional Group, Inc.
The Shareholder Services Group, Inc., a subsidiary of First Data
Corporation, P.O. Box 9671, Providence, Rhode Island 02940-9671, is the
Fund's Transfer and Dividend Disbursing Agent (the "Transfer Agent"). The
Bank of New York, 90 Washington Street, New York, New York 10286, is the
Fund's Custodian.
HOW TO BUY FUND SHARES
Fund shares are sold without a sales charge. You may be charged a
nominal fee if you effect transactions in Fund shares through a securities
dealer, bank or other financial institution (collectively, "Service Agents").
Share certificates are issued only upon your written request. No certificates
are issued for fractional shares. The Fund reserves the right to reject any
purchase order.
The minimum initial purchase is $2,500, or $1,000 if you are a client
of a Service Agent which has made an aggregate minimum initial purchase for
its customers of $2,500. Subsequent investments must be at least $500. The
initial investment must be accompanied by the Fund's Account Application. For
full-time or part-time employees of The Dreyfus Corporation or any of its
affiliates or subsidiaries, directors of The Dreyfus Corporation, Board
members of a fund advised by The Dreyfus Corporation, including members of
the Fund's Board, or the spouse or minor child of any of the foregoing, the
minimum initial investment is $1,000. For full-time or part-time employees of
The Dreyfus Corporation or any of its affiliates or subsidiaries who elect to
have a portion of their pay directly deposited into their Fund account, the
minimum initial investment is $50. The Fund reserves the right to offer Fund
shares without regard to minimum purchase requirements to employees
participating in certain qualified and 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.
Page 15
You may purchase Fund shares by check or wire, or through the Dreyfus
TELETRANSFER Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds," or, if for Dreyfus retirement plan accounts, to
"The Dreyfus Trust Company, Custodian." Payments to open new accounts which
are mailed should be sent to The Dreyfus Family of Funds, P.O. Box 9387,
Providence, Rhode Island 02940-9387, together with your Account Application.
For subsequent investments, your Fund account number should appear on the
check and an investment slip should be enclosed and sent to The Dreyfus
Family of Funds, P.O. Box 105, Newark, New Jersey 07101-0105. For Dreyfus
retirement plan accounts, both initial and subsequent investments should be
sent to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427. Neither initial nor subsequent investments should be
made by third party check. Purchase orders may be delivered in person only to
a Dreyfus Financial Center. THESE ORDERS WILL BE FORWARDED TO THE FUND AND
WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For the location of the nearest
Dreyfus Financial Center, please call one of the telephone numbers listed
under "General Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, DDA #8900119330/Dreyfus
Strategic Income, for purchase of Fund shares in your name. The wire must
include your Fund account number (for new accounts, your Taxpayer
Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable. If your initial purchase of
Fund shares is by wire, please call 1-800-645-6561 after completing your wire
payment to obtain your Fund account number. Please include your Fund account
number on the Fund's Account Application and promptly mail the Account
Application to the Fund, as no redemptions will be permitted until the
Account Application is received. You may obtain further information about
remitting funds in this manner from your bank. All payments should be made in
U.S. dollars and, to avoid fees and delays, should be drawn only on U.S.
banks. A charge will be imposed if any check used for investment in your
account does not clear. The Fund makes available to certain large
institutions the ability to issue purchase instructions through compatible
computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member. You must direct the
institution to transmit immediately available funds through the Automated
Clearing House to The Bank of New York with instructions to credit your Fund
account. The instructions must specify your Fund account registration and
your Fund account number PRECEDED BY THE DIGITS "1111."
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or nonqualified 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 one million dollars ("Eligible Benefit
Plans"). All present holdings of shares of funds in the Dreyfus Family of
Funds by an Eligible Benefit Plan will be aggregated to determine the fee
payable with respect to each such purchase of Fund shares. The Distributor res
erves 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.
Fund shares are sold on a continuous basis at the net asset value per
share next determined after an order in proper form is received by the
Transfer Agent or other agent. Net asset value per share is determined as of
the close of trading on the floor of the New York Stock Exchange (currently
4:00 p.m., New York time), on each day the New York Stock Exchange is open
for business. For purposes of determining net asset value per share, options
contracts will be valued 15 minutes after the close of trad-
Page 16
ing on the floor of the New York Stock Exchange. Net asset value per share is
computed by dividing the value of the Fund's net assets (i.e., the value of
its assets less liabilities) by the total number of shares outstanding. The
Fund's investments are valued based on market value or, where market quotations
are not readily available, based on fair value as determined in good
faith by the Board of Trustees. For further information regarding the
methods employed in valuing Fund investments, see "Determination of Net Asset
Value" in the Fund's Statement of Additional Information.
For certain institutions that have entered into agreements with the
Distributor, payment for the purchase of Fund shares may be transmitted, and
must be received by the Transfer Agent, within three business days after the
order is placed. If such payment is not received within three business days
after the order is placed, the order may be canceled and the institution
could be held liable for resulting fees and/or losses.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
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").
DREYFUS TELETRANSFER PRIVILEGE - You may purchase Fund shares (minimum $500,
maximum $150,000 per day) by telephone if you have checked the appropriate
box and supplied the necessary information on the Fund's Account Application
or have filed a Shareholder Services Form with the Transfer Agent. The
proceeds will be transferred between the bank account designated in one of
these documents and your Fund account. Only a bank account maintained in a
domestic financial institution which is an Automated Clearing House member
may be so designated. The Fund may modify or terminate this Privilege at any
time or charge a service fee upon notice to shareholders. No such fee
currently is contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of Fund shares by telephoning
1-800-221-4060 or, if you are calling from overseas, call 1-401-455-3306.
SHAREHOLDER SERVICES
FUND EXCHANGES - You may purchase, in exchange for shares of the Fund, shares
of certain other funds managed or administered by The Dreyfus Corporation, to
the extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
Fund exchanges may be exercised twice during the calendar year as described
below. If you desire to use this service, you should consult your Service
Agent or call 1-800-645-6561 to determine if it is available and whether any
other conditions are imposed on its use.
To request an exchange, you must give exchange instructions to the
Transfer Agent in writing or by telephone. Before any exchange, you must
obtain and should review a copy of the current prospectus of the fund into
which the exchange is being made. Prospectuses may be obtained by calling
1-800-645-6561. Except in the case of Personal Retirement Plans, the shares
being exchanged must have a current value of at least $500; furthermore, when
establishing a new account by exchange, the shares being exchanged must have
a value of at least the minimum initial investment required for the fund into
which the exchange is being made. The ability to issue exchange instructions
by telephone is given to all Fund shareholders automatically, unless you
check the applicable "No"box on the Account Application, indicating that you
specifically refuse this Privilege. The Telephone Exchange Privilege may be
established for an existing account by written request, signed by all
shareholders on the account, or by a separate signed Shareholder Services
Form, also available by calling 1-800-645-6561. If you have established the
Telephone Exchange Privilege, you may telephone exchange instructions by
calling 1-800-221-4060 or, if you are calling from overseas, call
1-401-455-3306. See "How to Redeem Fund Shares_Procedures." Upon an exchange
into a new account, the following
Page 17
shareholder services and privileges, as applicable and where available, will
be automatically carried over to the fund into which the exchange is made:
Telephone Exchange Privilege, Wire Redemption Privilege, Dreyfus TELETRANSFER
Privilege and the dividend/capital gain distribution option (except for
Dreyfus Dividend Sweep) selected by the investor.
Shares will be exchanged at the next determined net asset value;
however, a sales load may be charged with respect to exchanges into funds
sold with a sales load. If you are exchanging into a fund that charges a
sales load, you may qualify for share prices which do not include the sales
load or which reflect a reduced sales load, if the shares of the fund from
which you are exchanging were: (a) purchased with a sales load, (b) acquired
by a previous exchange from shares purchased with a sales load, or (c)
acquired through reinvestments of dividends or distributions paid with
respect to the foregoing categories of shares. To qualify, at the time of
your exchange you must notify the Transfer Agent or your Service Agent must
notify the Distributor. Any such qualification is subject to confirmation of
your holdings through a check of appropriate records. See "Shareholder
Services" in the Fund's Statement of Additional Information. No fees
currently are charged shareholders directly in connection with exchanges,
although the Fund reserves the right, upon not less than 60 days' written
notice, to charge shareholders a nominal fee in accordance with rules
promulgated by the Securities and Exchange Commission. The Fund reserves the
right to reject any exchange request in whole or in part. The availability of
Fund Exchanges may be modified or terminated at any time upon notice to
shareholders.
With respect to any investor who has exchanged out of the Fund twice
during the calendar year, further purchase orders (including those pursuant
to exchange instructions) relating to any shares of the Fund will be rejected
for the remainder of the calendar year. Management believes that this policy
will enable shareholders to change their investment program, while protecting
the Fund against disruptions in portfolio management resulting from frequent
transactions by those seeking to time market fluctuations. Exchanges made
through omnibus accounts for various retirement plans are not subject to such
limit on exchanges.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
DREYFUS AUTO-EXCHANGE PRIVILEGE - Dreyfus Auto-Exchange Privilege enables
you to invest regularly (on a semi-monthly, monthly, quarterly or annual
basis), in exchange for shares of the Fund, in shares of other funds in the
Dreyfus Family of Funds of which you are currently an investor. The amount
you designate, which can be expressed either in terms of a specific dollar or
share amount ($100 minimum), will be exchanged automatically on the first
and/or fifteenth of the month according to the schedule you have selected.
Shares will be exchanged at the then current net asset value; however, a
sales load may be charged with respect to exchanges into funds sold with a
sales load. See "Shareholder Services" in the Statement of Additional
Information. The right to exercise this Privilege may be modified or
cancelled by the Fund or the Transfer Agent. You may modify or cancel your
exercise of this Privilege at any time by writing to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. The Fund may
charge a service fee for the use of this Privilege. No such fee currently is
contemplated. The exchange of shares of one fund for shares of another is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder and, therefore, an exchanging shareholder may
realize a taxable gain or loss. For more information concerning this
Privilege and the funds in the Dreyfus Family of Funds eligible to
participate in this Privilege, or to obtain a Dreyfus Auto-Exchange
Authorization Form, please call toll free 1-800-645-6561.
DREYFUS-AUTOMATIC ASSET BUILDER Registration Mark - Dreyfus-AUTOMATIC Asset
Builder permits you to purchase Fund shares (minimum of $100 and maximum of
$150,000 per transaction) at regular intervals selected by you. Fund shares
are purchased by transferring funds from the bank account designated by you.
At your option, the bank account designated by you will be debited in the
specified amount, and Fund shares will be purchased, once a month, on either
the first or fifteenth day, or twice a month, on both days. Only an account
maintained at a
Page 18
domestic financial institution which is an Automated Clearing House member may
be so designated. To establish a Dreyfus-AUTOMATIC Asset Builder account, you
must file an authorization form with the Transfer Agent. You may obtain the
necessary authorization form by calling 1-800-645-6561. You may cancel your
participation in this Privilege or change the amount of purchase at any time
by mailing written notification to The Dreyfus Family of Funds, P.O. Box 6527,
Providence, Rhode Island 02940-6527, or, if for Dreyfus Retirement Plan
accounts, to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427, and the notification will be effective three business
days following receipt. The Fund may modify or terminate this Privilege at any
time or charge a service fee. No such fee currently is contemplated.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE - Dreyfus Government Direct
Deposit Privilege enables you to purchase 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 auto
matically deposited into your Fund account. You may deposit as much of your
payments as you elect. To enroll in Dreyfus Government Direct Deposit, you
must file with the Transfer Agent a completed Direct Deposit Sign-Up Form for
each type of payment that you desire to include in this Privilege. The
appropriate form may be obtained by calling 1-800-645-6561. Death or legal
incapacity will terminate your participation in this Privilege. You may elect
at any time to terminate your participation by notifying in writing the
appropriate Federal agency. Further, the Fund may terminate your
participation upon 30 days' notice to you.
DREYFUS PAYROLL SAVINGS PLAN - Dreyfus Payroll Savings Plan permits you to
purchase Fund shares (minimum of $100 per transaction) automatically on a
regular basis. Depending upon your Employer's direct deposit program, you may
have part or all of your paycheck transferred to your existing Dreyfus
account electronically through the Automated Clearing House system at each
pay period. To establish a Dreyfus Payroll Savings Plan account, you must
file an authorization form with your employer's payroll department. Your
employer must complete the reverse side of the form and return it to The
Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671.
You may obtain the necessary authorization form by calling
1-800-645-6561. You may change the amount of purchase or cancel the
authorization only by written notification to your employer. It is the sole
responsibility of your employer, not the Distributor, The Dreyfus
Corporation, the Fund, the Transfer Agent or any other person, to arrange for
transactions under the Dreyfus Payroll Savings Plan. The Fund may modify or
terminate this Privilege at any time or charge a service fee. No such fee
currently is contemplated. Shares held under Keogh Plans, IRAs or other
retirement plans are not eligible for this Privilege.
DREYFUS DIVIDEND OPTIONS - Dreyfus Dividend Sweep enables you to invest
automatically dividends or dividends and capital gain distributions, if any,
paid by the Fund in shares of another fund in the Dreyfus Family of Funds of
which you are a shareholder. Shares of the other fund will be purchased at
the then-current net asset value; however, a sales load may be charged with
respect to investments in shares of a fund sold with a sales load. If you are
investing in a fund that charges a sales load, you may qualify for share
prices which do not include the sales load or which reflect a reduced sales
load. If you are investing in a fund that charges a contingent deferred sales
charge, the shares purchased will be subject on redemption to the contingent
deferred sales charge, if any, applicable to the purchased shares. See
"Shareholder Services" in the Statement of Additional Information. Dreyfus
Dividend ACH permits you to transfer electronically dividends or dividends
and capital gain distributions, if any, from the Fund to a designated bank
account. Only such an account maintained at a domestic financial institution
which is an Automated Clearing House member may be so designated. Banks may
charge a fee for this service.
For more information concerning these privileges or to request a
Dividend Options Form, please call toll free 1-800-645-6561. You may cancel
these privileges by mailing written notification to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. 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
Page 19
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 these privileges.
AUTOMATIC WITHDRAWAL PLAN - The Automatic Withdrawal Plan permits you to
request withdrawal of a specified dollar amount (minimum of $50) on either a
monthly or quarterly basis if you have a $5,000 minimum account. An
application for the Automatic Withdrawal Plan can be obtained by calling
1-800-645-6561. There is a service charge of 50cents for each withdrawal
check. The Automatic Withdrawal Plan may be ended at any time by you, the
Fund or the Transfer Agent. Shares for which certificates have been issued
may not be redeemed through the Automatic Withdrawal Plan.
RETIREMENT PLANS - The Fund offers a variety of pension and profit-sharing
plans, including Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover Accounts,"
401(k) Salary Reduction Plans and 403(b)(7) Plans. Plan support services also
are available. You can obtain details on the various plans by calling the
following numbers toll free: for Keogh Plans, please call 1-800-358-5566; for
IRAs and IRA "Rollover Accounts," please call 1-800-645-6561; for SEP-IRAs,
401(k) Salary Reduction Plans and 403(b)(7) Plans, please call 1-800-322-7880.
HOW TO REDEEM FUND SHARES
GENERAL - You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent, as described below.
When a request is received in proper form, the Fund will redeem the shares at
the next determined net asset value.
The Fund imposes no charges when shares are redeemed. Service Agents
may charge a nominal fee for effecting redemptions of Fund shares. Any
certificates representing Fund shares being redeemed must be submitted with
the redemption request. The value of the shares redeemed may be more or less
than their original cost, depending on the Fund's then-current net asset
value.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission. HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY DREYFUS
TELETRANSFER OR THROUGH DREYFUS-AUTOMATIC ASSET BUILDER AND SUBSEQUENTLY
SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION
PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR
PURCHASE CHECK, DREYFUS TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC ASSET
BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION,
THE FUND WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR
PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS
DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE DREYFUS
TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER AGAINST
WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR
SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT
COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO
THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE
AND BE PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF
BENEFICIAL OWNERSHIP. Fund shares will not be redeemed until the Transfer
Agent has received your Account Application.
The Fund reserves the right to redeem your account at its option upon
not less than 30 days' written notice if your account's net asset value is
$500 or less and remains so during the notice period.
PROCEDURES - You may redeem shares by using the regular redemption procedure
through the Transfer Agent, the Wire Redemption Privilege, the Telephone
Redemption Privilege, or the Dreyfus
Page 20
TELETRANSFER Privilege. The Fund makes available to certain large institutions
the ability to issue redemption instructions through compatible computer
facilities.
In addition, the Distributor or its designee will accept orders from
dealers with which the Distributor has sales agreements for the repurchase of
shares held by shareholders. Repurchase orders received by the dealer prior
to the close of trading on the New York Stock Exchange on a 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 New York Stock
Exchange on that day. Otherwise, the shares will be redeemed at the next
determined net asset value. It is the responsibility of the dealer to
transmit orders on a timely basis. The dealer may charge the shareholder a
fee for executing the order. This repurchase arrangement is discretionary and
may be withdrawn at any time.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Fund's Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select a telephone redemption
privilege or telephone exchange privilege (which is granted automatically
unless you refuse it), you authorize the Transfer Agent to act on telephone
instructions from any person representing himself or herself to be you, and
reasonably believed by the Transfer Agent to be genuine. The Fund will
require the Transfer Agent to employ reasonable procedures, such as requiring
a form of personal identification, to confirm that instructions are genuine
and, if it does not follow such procedures, the Fund or the Transfer Agent
may be liable for any losses due to unauthorized or fraudulent instructions.
Neither the Fund nor the Transfer Agent will be liable for following
telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used. During the delay, the Fund's net asset value may fluctuate.
REGULAR REDEMPTION - Under the regular redemption procedure, you may redeem
shares by written request mailed to The Dreyfus Family of Funds, P.O. Box
6527, Providence, Rhode Island 02940-6527. Redemption requests for Dreyfus
Retirement Plan accounts should be sent to The Dreyfus Trust Company,
Custodian, P.O. Box 6427, Providence, Rhode Island 02940-6427. Redemption
requests may be delivered in person only to a Dreyfus Financial Center. THESE
REQUESTS WILL BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON
RECEIPT THEREBY. For the location of the nearest Dreyfus Financial Center,
please call one of the telephone numbers listed under "General Information."
Redemption requests must be signed by each shareholder, including each owner
of a joint account, and each signature must be guaranteed. The Transfer Agent
has adopted standards and procedures pursuant to which signature-guarantees
in proper form generally will be accepted from domestic banks, brokers,
dealers, credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations, as well as from
participants in the New York Stock Exchange Medallion Signature Program, the
Securities Transfer Agents Medallion Program ("STAMP"), and the Stock
Exchanges Medallion Program. If you have any questions with respect to
signature-guarantees, please call one of the telephone numbers listed under
"General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
WIRE REDEMPTION PRIVILEGE - You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. To establish the Wire Redemption Privilege, you must
check the appropriate box and supply the necessary information on the Fund's
Account Application or file a Shareholder Services Form with the Transfer
Agent. You may direct that redemption proceeds be
Page 21
paid by check (maximum $150,000 per day) made out to the owners of record and
mailed to your address. Redemption proceeds of less than $1,000 will be paid
automatically by check. Holders of jointly registered Fund or bank accounts
may have redemption proceeds of not more than $250,000 wired within any
30-day period. You may telephone redemption requests by calling 1-800-221-4060
or, if you are calling from overseas, call 1-401-455-3306. The Fund reserves
the right to refuse any redemption request, including requests made shortly
after a change of address, and may limit the amount involved or the number of
such requests. This Privilege may be modified or terminated at any time by
the Transfer Agent or the Fund. The Fund's Statement of Additional Information
sets forth instructions for transmitting redemption requests by wire. Shares
held under Keogh Plans, IRAs or other retirement plans, and shares for which
certificates have been issued, are not eligible for this Privilege.
TELEPHONE REDEMPTION PRIVILEGE - You may redeem Fund shares (maximum
$150,000 per day) by telephone if you have checked the appropriate box on the
Fund's Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The redemption proceeds will be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-221-4060 or, if you are calling from overseas, call 1-401-455-3306. 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 telephone redemption requests. This Privilege may
be modified or terminated at any time by the Transfer Agent or the Fund.
Shares held under Keogh Plans, IRAs or other retirement plans, and shares for
which certificates have been issued, are not eligible for this Privilege.
DREYFUS TELETRANSFER PRIVILEGE - You may redeem Fund shares (minimum $500 per
day) by telephone if you have checked the appropriate box and supplied the
necessary information on the Fund's Account Application or have filed a
Shareholder Services Form with the Transfer Agent. The proceeds will be
transferred between your Fund account and the bank account designated in one
of these documents. Only such an account maintained in a domestic financial
institution which is an Automated Clearing House member may be so designated.
Redemption proceeds will be on deposit in your account at an Automated
Clearing House member bank ordinarily two days after receipt of the
redemption request or, at your request, paid by check (maximum $150,000 per
day) and mailed to your address. Holders of jointly registered Fund or bank
accounts may redeem through the Dreyfus TELETRANSFER Privilege for transfer
to their bank account not more than $250,000 within any 30-day period. 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
this Privilege at any time or charge a service fee upon notice to
shareholders. No such fee currently is contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of Fund shares by telephoning
1-800-221-4060 or, if you are calling from overseas, call 1-401-455-3306.
Shares held under Keogh Plans, IRAs or other retirement plans, and shares
issued in certificate form, are not eligible for this Privilege.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan, pursuant to which
the Fund pays the Distributor for the provision of certain services to
shareholders a fee at the annual rate of .25 of 1% of the value of the Fund's
average daily net assets. The services provided may include personal services
relating to shareholder accounts, such as answering shareholder inquiries
regarding the Fund and providing reports and other information, and services
related to the maintenance of shareholder accounts. The Distributor may make
payments to Service Agents in respect of these services. The Distributor
determines the amounts to be paid to Service Agents.
Page 22
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily declares dividends from its net investment income
on each day that the New York Stock Exchange is open for business. The Fund's
earnings for Saturdays, Sundays and holidays are declared as dividends on the
preceding business day. Dividends usually are paid on the last business day
of each month and automatically reinvested in additional Fund shares at net
asset value, without a sales load, unless you elect payment in cash. If you
redeem all shares in your account at any time during the month, all dividends
to which you are entitled will be paid to you along with the proceeds of the
redemption. Distributions of net realized securities gains, if any, generally
are declared and paid once a year, 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"), in all events in a
manner consistent with the Investment Company Act of 1940. The Fund will not
make distributions from net realized securities gains unless capital loss
carryovers, if any, have been utilized or have expired. You may choose
whether to receive distributions in cash or to reinvest such amounts in
additional Fund shares at net asset value without a sales load. All expenses
are accrued daily and deducted before declaration of dividends.
Fund shares begin earning income dividends on the day immediately
available funds ("Federal Funds" (monies of member banks within the Federal
Reserve System which are held on deposit at a Federal Reserve Bank)) are
received by the Transfer Agent in written or telegraphic form. If a purchase
order is not accompanied by remittance in Federal Funds, there may be a delay
between the time the purchase order becomes effective and the time the shares
purchased start earning dividends. If your payment is not made in Federal
Funds, it must be converted into Federal Funds. This usually occurs within
one business day of receipt of a bank wire and within two business days of
receipt of a check drawn on a member bank of the Federal Reserve System.
Checks drawn on banks which are not members of the Federal Reserve System may
take considerably longer to convert into Federal Funds.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by the Fund will be taxable to U.S. shareholders
as ordinary income whether received in cash or reinvested in additional Fund
shares. Distributions from net realized long-term capital gains of the Fund
to U.S. shareholders generally are taxable as long-term capital gains for
Federal income tax purposes, regardless of how long shareholders have held
their Fund shares and whether such distributions are received in cash or
reinvested in additional Fund shares. The Code provides that the net capital
gain of an individual generally will not be subject to Federal income tax at
a rate in excess of 28%. Dividends and distributions may be subject to state
and local taxes.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by the Fund to a foreign investor generally are
subject to U.S. nonresident withholding taxes at the rate of 30%, unless the
foreign investor claims the benefit of a lower rate specified in a tax
treaty. Distributions from net realized long-term securities gains paid by
the Fund to a foreign investor, as well as the proceeds of any redemptions
from a foreign investor's account, regardless of the extent to which gain or
loss may be realized, generally will not be subject to U.S. nonresident
withholding tax. However, such distributions may be subject to backup
withholding, as described below, unless the foreign investor certifies his
non-U.S. residency status.
Notice as to the tax status of your dividends and distributions is
mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions from
securities gains, if any, paid during the year.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends, distributions
from net realized securities gains of the Fund and the
Page 23
proceeds of any redemption, regardless of the extent to which gain or loss
may be realized, paid to a shareholder if such shareholder fails to certify
either that the TIN furnished in connection with opening an account is
correct, or that such shareholder has not received notice from the IRS of
being subject to backup withholding as a result of a failure to properly
report taxable dividend or interest income on a Federal income tax return.
Furthermore, the IRS may notify the Fund to institute backup withholding if
the IRS determines that a shareholder's TIN is incorrect or if a shareholder
has failed to properly report dividend and interest income on your Federal
income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the
record owner of the account, and may be claimed as a credit on the record
owner's Federal income tax return.
Management of the Fund believes that the Fund has qualified for the
fiscal year ended October 31, 1994 as a "regulated investment company" under
the Code. The Fund intends to continue to so qualify if such qualification is
in the best interests of its shareholders. Such qualification relieves the
Fund of any liability for Federal income taxes to the extent its earnings are
distributed in accordance with applicable provisions of the Code. In
addition, the Fund is subject to a non-deductible 4% excise tax, measured
with respect to certain undistributed amounts of taxable investment income
and capital gains.
You should consult your tax adviser regarding specific questions as
to Federal, state and local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance may be calculated on several
bases, including current yield, average annual total return, and/or total
return.
Current yield refers to the Fund's annualized net investment income
per share over a 30-day period, expressed as a percentage of the net asset
value per share at the end of the period. For purposes of calculating current
yield, the amount of net investment income per share during that 30-day
period, computed in accordance with regulatory requirements, is compounded by
assuming that it is reinvested at a constant rate over a six-month period. An
identical result is then assumed to have occurred during a second six-month
period which, when added to the result for the first six months, provides an
"annualized" yield for an entire one-year period. Calculations of the Fund's
current yield may reflect absorbed expenses pursuant to expense limitations
in effect. See "Management of the Fund."
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment in the Fund was purchased with an
initial payment of $1,000 and that the investment was redeemed at the end of
a stated period of time, after giving effect to the reinvestment of dividends
and distributions during the period. The return is expressed as a percentage
rate which, if applied on a compounded annual basis, would result in the
redeemable value of the investment at the end of the period. Advertisements
of the Fund's performance will include the Fund's average annual total return
for one, five and ten year periods, or for shorter time periods depending
upon the length of time during which the Fund has operated.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the net asset
value per share at the beginning of the period. Advertisements may include
the percentage rate of total return or may include the value of a
hypothetical investment at the end of the period which assumes the
application of the percentage rate of total return.
Performance will vary from time to time and past results are not
necessarily representative of future results. Investors should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance informa-
Page 24
tion, such as that described above, may not provide a basis for comparison
with other investments or other investment companies using a different method
of calculating performance.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., Moody's Bond Survey Bond Index, Lehman Brothers
Municipal Bond Index, Morningstar, Inc., Value Line Mutual Fund Survey and
other industry publications.
GENERAL INFORMATION
The Fund was organized as an unincorporated business trust under the
laws of the Commonwealth of Massachusetts pursuant to an Agreement and
Declaration of Trust (the "Trust Agreement") dated July 24, 1985, and
commenced operations on October 1, 1986. The Fund is authorized to issue an
unlimited number of shares of beneficial interest, par value $.001 per share.
Each share has one vote.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Trust Agreement disclaims shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be given
in each agreement, obligation or instrument entered into or executed by the
Fund or a Trustee. The Trust Agreement provides for indemnification from the
Fund's property for all losses and expenses of any shareholder held personally
liable for the obligations of the Fund. Thus, the risk of a shareholder's
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its
obligations, a possibility which management believes is remote. Upon payment
of any liability incurred by the Fund, the shareholder paying such liability
will be entitled to reimbursement from the general assets of the Fund. The
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. As described under "Management of the Fund" in the
Fund's Statement of Additional Information, the Fund ordinarily will not hold
shareholder meetings; however, shareholders under certain circumstances may
have the right to call a meeting of shareholders for the purpose of voting to
remove Trustees.
The Transfer Agent maintains a record of your ownership and sends you
confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561. In New York City, call
1-718-895-1206; outside the U.S. and Canada, call 516-794-5452.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 25
APPENDIX
The average distribution of investments in corporate bonds by ratings
for the fiscal year ended October 31, 1994, calculated monthly on a dollar
weighted basis, was as follows:
<TABLE>
<CAPTION>
MOODY'S INVESTORS STANDARD & POOR'S
SERVICE, INC. OR CORPORATION PERCENTAGE
----------------- ------------------ -------------
<S> <C> <C> <C>
Aaa AAA 22.92%
Aa AA 8.16
A A 24.39
Baa BBB 27.05
Ba BB 11.68
B B 2.77
Caa CCC .22
Unrated Unrated 2.81*
--------
100.00%
========
</TABLE>
The actual distribution of the Fund's corporate bond investments by
ratings on any given date will vary. In addition, 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.
* Included under the Unrated category are securities comprising 2.81%,
while unrated, have been determined by The Dreyfus Corporation to be of
comparable quality to securities rated Ba/BB.
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Page 27
DREYFUS
Strategic
Income
(Lion Logo)
Prospectus
Registration Mark
Copy Rights1995 Dreyfus Service Corporation
031p15072495
