File Nos. 33-7172
811-4748
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 16 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 16 [ X ]
(Check appropriate box or boxes.)
DREYFUS INCOME FUNDS
(formerly, Dreyfus Strategic Income)
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6000
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box)
immediately upon filing pursuant to paragraph (b)
----
X on September 20, 1996 pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(i)
----
on (date) pursuant to paragraph (a)(i)
----
75 days after filing pursuant to paragraph (a)(ii)
----
on (date) pursuant to paragraph (a)(ii) of Rule 485
----
If appropriate, check the following box:
this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
----
Registrant has registered an indefinite number of shares of beneficial
interest under the Securities Act of 1933 pursuant to Section 24(f) of the
Investment Company Act of 1940. Registrant's Rule 24f-2 Notice for the
fiscal year ended October 31, 1995 was filed on December 18, 1995.
DREYFUS INCOME FUNDS
Cross-Reference Sheet Pursuant to Rule 495(b)
Page in the
Items in Dreyfus High Yield
Portfolio Securities
Form N-1A Caption Fund Prospectus
_________ _______ ____________________
1 Cover Page Cover
2 Synopsis *
3 Condensed Financial Information 5
4 General Description of Registrant 5
5 Management of the Fund 8
5(a) Management's Discussion of Fund's 19
Performance
6 Capital Stock and Other Securities 20
7 Purchase of Securities Being Offered 9
8 Redemption or Repurchase 15
9 Pending Legal Proceedings *
Items in
Part B of
Form N-1A Caption Page
_________ _______ ____
10 Cover Page Cover
11 Table of Contents Cover
12 General Information and History *
13 Investment Objectives and Policies B-2
14 Management of the Fund B-18
15 Control Persons and Principal B-23
Holders of Securities
16 Investment Advisory and Other B-23
Services
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
DREYFUS INCOME FUNDS
Cross-Reference Sheet Pursuant to Rule 495(b) (continued)
Items in
Part B of
Form N-1A Caption Page
_________ _______ _____
17 Brokerage Allocation B-25
18 Capital Stock and Other Securities B-37
19 Purchase, Redemption and Pricing B-25, B-26,
of Securities Being Offered B-31
20 Tax Status B-32
21 Underwriters B-25
22 Calculations of Performance Data B-36
23 Financial Statements B-48
Items in
Part C of
Form N-1A Caption Page
_________ _______ _____
24 Financial Statements and Exhibits C-1
25 Persons Controlled by or Under C-4
Common Control with Registrant
26 Number of Holders of Securities C-4
27 Indemnification C-4
28 Business and Other Connections of C-5
Investment Adviser
29 Principal Underwriters C-12
30 Location of Accounts and Records C-15
31 Management Services C-15
32 Undertakings C-15
____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
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PROSPECTUS SEPTEMBER 20, 1996
DREYFUS HIGH YIELD SECURITIES FUND
- ------------------------------------------------------------------------------
DREYFUS HIGH YIELD SECURITIES FUND (THE "FUND") IS A SEPARATE
DIVERSIFIED PORTFOLIO OF DREYFUS INCOME FUNDS, AN OPEN-END, MANAGEMENT
INVESTMENT COMPANY (THE "COMPANY"), KNOWN AS A MUTUAL FUND. THE FUND'S
INVESTMENT OBJECTIVE IS TO MAXIMIZE TOTAL RETURN, CONSISTING OF CAPITAL
APPRECIATION AND CURRENT INCOME.
THE FUND SEEKS TO ACHIEVE ITS OBJECTIVE BY INVESTING UP TO ALL OF ITS
ASSETS IN LOWER RATED FIXED-INCOME SECURITIES, COMMONLY KNOWN AS "JUNK
BONDS." INVESTMENTS OF THIS TYPE ARE SUBJECT TO A GREATER RISK OF LOSS OF
PRINCIPAL AND NON-PAYMENT OF INTEREST. INVESTORS SHOULD CAREFULLY ASSESS THE
RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND. SEE "DESCRIPTION OF THE
FUND--MANAGEMENT POLICIES" AND "INVESTMENT CONSIDERATIONS AND RISKS--HIGH
YIELD-LOWER RATED SECURITIES."
YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING DREYFUS
TELETRANSFER.
IN SOME CASES, SHAREHOLDERS WILL BE CHARGED A REDEMPTION FEE WHICH
WILL BE DEDUCTED FROM REDEMPTION PROCEEDS ON SHARES HELD LESS THAN SIX
MONTHS.
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 SEPTEMBER 20, 1996,
WHICH MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF
CERTAIN AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST
TO SOME INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION AND IS INCORPORATED HEREIN BY REFERENCE. THE SECURITIES AND
EXCHANGE COMMISSION MAINTAINS A WEB SITE (HTTP://WWW.SEC.GOV) THAT CONTAINS
THE STATEMENT OF ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY REFERENCE,
AND OTHER INFORMATION REGARDING THE FUND. FOR A FREE COPY OF THE STATEMENT OF
ADDITIONAL INFORMATION, 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.
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.
TABLE OF CONTENTS
PAGE
ANNUAL FUND OPERATING EXPENSES.................... 4
CONDENSED FINANCIAL INFORMATION................... 5
DESCRIPTION OF THE FUND........................... 5
MANAGEMENT OF THE FUND............................ 8
HOW TO BUY SHARES................................. 9
SHAREHOLDER SERVICES.............................. 12
HOW TO REDEEM SHARES.............................. 15
SHAREHOLDER SERVICES PLAN......................... 17
DIVIDENDS, DISTRIBUTIONS AND TAXES................ 18
PERFORMANCE INFORMATION........................... 19
GENERAL INFORMATION............................... 20
APPENDIX.......................................... 21
Page 2
[This Page Intentionally Left Blank]
Page 3
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> <C>
Redemption Fee (as a percentage of amount
redeemed for shares held less than six
months)...................................................................... 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees.............................................................. .65%
Other Expenses............................................................... 1.00%
Total Fund Operating Expenses ............................................... 1.65%
EXAMPLE: 1 YEAR 3 YEARS
You would pay the following
expenses on a $1,000 invest-
ment, assuming (1) 5% annual
return and (2) redemption at
the end of each time period: $17 $52
</TABLE>
- ------------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF 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 costs and expenses borne by the Fund and investors, the payment of which
will reduce investors' annual return. The redemption fee is charged upon
certain redemptions or exchanges of Fund shares occurring less than six
months following the issuance of such shares and is retained by the Fund. The
information in the foregoing table does not reflect any fee waivers or
expense reimbursement arrangements that may be in effect. Certain Service
Agents (as defined below) may charge their clients direct fees for effecting
transactions in Fund shares; such fees are not reflected in the foregoing
table. For a further description of the various costs and expenses incurred
in the operation of the Fund, as well as expense reimbursement or waiver
arrangements, see "Management of the Fund," "How to Buy Shares," "How to
Redeem Shares" and "Shareholder Services Plan."
Page 4
CONDENSED FINANCIAL INFORMATION
The information in the following table below sets forth certain
information covering the Fund's investment results for the period indicated.
Further financial data and related notes are included in the Statement of
Additional Information, available upon request.
<TABLE>
<CAPTION>
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 the period March 25, 1996
(commencement of operations) through July 31, 1996 (unaudited). This
information has been derived from the Fund's financial statements.
PER SHARE DATA:
<S> <C>
Net asset value, beginning of period...................................... $12.50
-------
INVESTMENT OPERATIONS:
Investment income-net..................................................... .36
Net realized and unrealized gain on investments........................... .67
-------
TOTAL FROM INVESTMENT OPERATIONS.......................................... 1.03
-------
DISTRIBUTIONS:
Dividends from investment income-net...................................... (.24)(2)(3)
-------
Net asset value, end of period............................................ $13.29
-------
TOTAL INVESTMENT RETURN..................................................... 8.23%
=======
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets................................... _
Ratio of net investment income to average net assets...................... 10.61%(2)
Decrease reflected in above expense ratios due to undertakings by The
Dreyfus Corporation
(limited to the expense limitation provision of the management agreement). 1.65%(2)
Portfolio Turnover Rate................................................... 175.42%
Net Assets, end of period (000's omitted)................................. $21,946
(1) Not annualized.
(2) Annualized.
(3) Exclusive of redemption fee.
</TABLE>
Further information about the Fund's performance will be contained in
the Fund's annual report for the fiscal year ending October 31, 1996, which
will be available approximately at the end of December 1996, and which may be
obtained without charge by writing to the address or calling the number set
forth on the cover page of this Prospectus.
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund's investment objective is to maximize total return,
consisting of capital appreciation and current income. It cannot be changed
without approval by the holders of a majority (as defined in the Investment
Company Act of 1940, as amended (the "1940 Act")), of the Fund's outstanding
voting shares. There can be no assurance that the Fund's investment objective
will be achieved.
MANAGEMENT POLICIES
Under normal market conditions, the Fund will invest at least 65% of
the value of its net assets in bonds, debentures, notes and other debt
instruments (collectively, "Fixed-Income Securities") rated below investment
grade, or, if unrated, determined by The Dreyfus Corporation to be of
comparable quality. Fixed-Income Securities also include mortgage-related
securities, asset-backed securities, zero coupon securities, municipal
obligations, preferred stock, convertible debt obligations and convertible
preferred stock. The issuers of Fixed-Income Securities may include domestic
and foreign corporations,
Page 5
partnerships, trusts or similar entities, and governmental entities or their
political subdivisions, agencies or instrumentalities. The Fund may invest in
companies in, or governments of, developing countries. The Fund's portfolio
will be invested without regard to maturity.
Securities rated below investment grade are those rated lower than
Baa by Moody's Investors Service, Inc. ("Moody's") and BBB by Standard &
Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc. ("S&P"),
Fitch Investors Service, L.P. ("Fitch") or Duff & Phelps Credit Rating Co.
("Duff"). These securities carry a high degree of risk and are considered
speculative by the credit rating agencies. See "Investment Considerations and
Risks _ High Yield-Lower Rated Securities" and "Appendix _ Certain Portfolio
Securities _ High Yield-Lower Rated Securities" below for a discussion of
certain risks, and "Appendix" in the Statement of Additional Information. The
Fund may hold investment grade rated Fixed-Income Securities (or unrated
securities of comparable quality) when the yield differential between below
investment grade and investment grade securities narrows and the risk of loss
may be reduced with only a relatively small reduction in yield. The Fund also
may invest in investment grade rated Fixed-Income Securities when The Dreyfus
Corporation determines that a defensive investment position is appropriate in
light of market or economic conditions.
The Fund may invest in money market instruments consisting of U.S.
Government securities, certificates of deposit, time deposits, bankers'
acceptances, short-term investment grade corporate bonds and other short-term
debt instruments, and repurchase agreements, as set forth under "Appendix
_Certain Portfolio Securities _ Money Market Instruments." Under normal
market conditions, the Fund does not expect to have a substantial portion of
its assets invested in money market instruments. However, when The Dreyfus
Corporation determines that adverse market conditions exist, the Fund may
adopt a temporary defensive posture and invest all of its assets in money
market instruments.
The Fund's annual portfolio turnover rate is not expected to exceed
200%. Higher portfolio turnover rates usually generate additional brokerage
commissions and expenses and the short-term gains realized from these
transactions are taxable to shareholders as ordinary income. The Fund
currently intends, to a limited extent, to engage in various investment
techniques, such as foreign currency transactions, options and futures
transactions, swaps, lending portfolio securities and short-selling. For a
discussion of the investment techniques and their related risks, see For a
discussion of the investment techniques and their related risks, see
"Investment Considerations and Risks" and "Appendix_Investment Techniques"
below and "Investment Objectives and Management Policies _ Management
Policies" in the Statement of Additional Information.
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL -- The Fund's net asset value per share should be expected to
fluctuate. The Fund's investment in high yield Fixed-Income Securities may
cause the Fund's share price to be highly volatile at times. Investors should
consider the Fund as a supplement to an overall investment program and should
invest only if they are willing to undertake the risks involved. See
"Investment Objectives and Management Policies_Management Policies" in the
Statement of Additional Information for a further discussion of certain
risks.
HIGH YIELD-LOWER RATED SECURITIES -- The Fund generally will invest in
Fixed-Income Securities rated below investment grade such as those rated Ba
by Moody's and BB by S&P, Fitch and Duff or as low as the lowest rating
assigned by Moody's, S&P, Fitch or Duff (commonly known as junk bonds). They
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. The retail secondary market for these securities may
be less liquid than that of higher rated securities; adverse conditions could
make it diffi-
Page 6
cult 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.
Bond prices are inversely related to interest rate changes; however,
bond price volatility also is inversely related to coupon. Accordingly, below
investment grade Fixed-Income Securities may be relatively less sensitive to
interest rate changes than higher quality Fixed-Income Securities of
comparable maturity, because of their higher coupon. This higher coupon is
what the investor receives in return for bearing greater credit risk. The
higher credit risks associated with below investment grade Fixed-Income
Securities potentially can have greater affect on the value of such
securities than may be the case with higher quality issues of comparable
maturity. See "Appendix _ Certain Portfolio Securities _ High Yield-Lower
Rated Securities" below and "Appendix" in the Statement of Additional
Information.
FOREIGN SECURITIES -- Foreign securities markets generally are not as
developed or efficient as those in the United States. Securities of some
foreign issuers are less liquid and more volatile than securities of
comparable U.S. issuers. Similarly, volume and liquidity in most foreign
securities markets are less than in the United States and, at times,
volatility of price can be greater than in the United States.
Because evidences of ownership of such securities usually are held
outside the United States, the Fund will be subject to additional risks which
include possible adverse political and economic developments, seizure or
nationalization of foreign deposits and adoption of governmental restrictions
which might adversely affect the payment of principal and interest on the
foreign securities or restrict the payment of principal and interest to
investors located outside the country of the issuer, whether from currency
blockage or otherwise.
Developing countries have economic structures that are generally less
diverse and mature, and political systems that are less stable, than those of
developed countries. The markets of developing countries may be more volatile
than the markets of more mature economies; however, such markets may provide
higher rates of return to investors. Many developing countries providing
investment opportunities for the Fund have experienced substantial, and in
some periods extremely high, rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates have had and may continue to have
adverse effects on the economies and securities markets of certain of these
countries.
Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in
U.S. dollars may be affected favorably or unfavorably by changes in currency
rates and exchange control regulations.
FOREIGN CURRENCY TRANSACTIONS -- Currency exchange rates may fluctuate
significantly over short periods of time. They generally are determined by
the forces of supply and demand in the foreign exchange markets and the
relative merits of investments in different countries, actual or perceived
changes in interest rates and other complex factors, as seen from an
international perspective. Currency exchange rates also can be affected
unpredictably by intervention by U.S. or foreign governments or central
banks, or the failure to intervene, or by currency controls or political
developments in the United States or abroad. See "Appendix _ Investment
Techniques _Foreign Currency Transactions."
USE OF DERIVATIVES -- The Fund may invest, to a limited extent, in
derivatives ("Derivatives"). These are financial instruments which derive
their performance, at least in part, from the performance of an underlying
asset, index or interest rate. The Derivatives the Fund may use include
options and futures, mortgage-related securities, asset-backed securities and
swaps. While Derivatives can be used effectively in furtherance of the Fund's
investment objective, under certain market conditions, they can increase the
volatility of the Fund's net asset value, can decrease the liquidity of the
Fund's portfolio and make more difficult the accurate pricing of the Fund's
portfolio. See "Appendix _ Investment Techniques_
Page 7
Use of Derivatives" below and "Investment Objectives and Management Policies _
Management Policies _ Derivatives" in the Statement of Additional Information.
SIMULTANEOUS INVESTMENTS -- Investment decisions for the Fund are made
independently from those of the other investment companies advised by The
Dreyfus Corporation. If, however, such other investment companies desire to
invest in, or dispose of, the same securities as the Fund, available
investments or opportunities for sales will be allocated equitably to each
investment company. In some cases, this procedure may adversely affect the
size of the position obtained for or disposed of by the Fund or the price
paid or received by the Fund.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- 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 July 31, 1996, The Dreyfus Corporation managed
or administered approximately $79 billion in assets for more than 1.7 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
Company, subject to the authority of the Company's Board in accordance with
Massachusetts law. The Fund's primary portfolio manager is Roger King. He has
held that position since March 1996, and has been employed by The Dreyfus
Corporation since February 1996. Prior thereto, Mr. King was a Vice President
of High Yield Research, and, most recently, Director of High Yield Research
at Citibank Securities, Inc. The Fund's other portfolio managers are
identified in the Statement of Additional Information. The Dreyfus
Corporation also provides research services for the Fund and 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., AFCO Credit Corporation and a
number of companies known as Mellon Financial Services Corporations. Through
its subsidiaries, including The Dreyfus Corporation, Mellon managed more than
$220 billion in assets as of June 30, 1996, including approximately $83
billion in proprietary mutual fund assets. As of June 30, 1996, Mellon,
through various subsidiaries, provided non-investment services, such as
custodial or administration services, for more than $876 billion in assets,
including approximately $57 billion in mutual fund assets.
Under the terms of the Management Agreement, the Fund has agreed to
pay The Dreyfus Corporation a monthly fee at the annual rate of .65 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
expense ratio of the Fund and increasing yield to investors. 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.
In allocating brokerage transactions for the Fund, The Dreyfus
Corporation seeks to obtain the best execution of orders at the most
favorable net price. Subject to this determination, The Dreyfus Corporation
may consider, among other things, the receipt of research services and/or the
sale of shares of the Fund or other funds managed, advised or administered by
The Dreyfus Corporation as factors in
Page 8
the selection of broker-dealers to execute portfolio transactions for the
Fund. See "Portfolio Transactions" in the Statement of Additional Information.
The Dreyfus Corporation may pay the Fund's distributor for
shareholder services from The Dreyfus Corporation's own assets, including
past profits but not including the management fee paid by the Fund. The
Fund's distributor may use part or all of such payments to pay Service Agents
in respect of these services.
EXPENSES -- All expenses incurred in the operation of the Company are borne
by the Company, except to the extent specifically assumed by The Dreyfus
Corporation. The expenses borne by the Company include: organizational costs,
taxes, interest, loan commitment fees, interest and distributions paid on
securities sold short, brokerage fees and commissions, if any, fees of Board
members who are not officers, directors, employees or holders of 5% or more
of the outstanding voting securities of The Dreyfus Corporation or any of its
affiliates, Securities and Exchange Commission fees, state Blue Sky
qualification fees, advisory fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of independent
pricing services, costs of maintaining the Company's existence, costs
attributable to investor services (including, without limitation, telephone
and personnel expenses), costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders, costs of shareholders' reports and
meetings, and any extraordinary expenses. Expenses attributable to the Fund
are charged against the assets of the Fund; other expenses of the Company are
allocated among the Company's portfolios on the basis determined by the
Company's Board, including, but not limited to, proportionately in relation
to the net assets of each portfolio.
DISTRIBUTOR -- The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at 60 State Street, Boston, Massachusetts 02109.
The Distributor's ultimate parent is Boston Institutional Group, Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN -- Dreyfus Transfer,
Inc., a wholly-owned subsidiary of The Dreyfus Corporation, P.O. Box 9671,
Providence, Rhode Island 02940-9671, is the Fund's Transfer and Dividend
Disbursing Agent (the "Transfer Agent"). Mellon Bank, N.A., located at One
Mellon Bank Center, Pittsburgh, Pennsylvania 15258, serves as the Fund's
Custodian.
HOW TO BUY SHARES
Fund shares are sold without a sales charge. You may be charged a
nominal fee if you effect transactions in Fund shares through 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 investment is $2,500, or $1,000 if you are a
client of a Service Agent which has made an aggregate minimum initial
purchase for its customers of $2,500. Subsequent investments must be at least
$100. However, the minimum initial investment for Dreyfus-sponsored Keogh
Plans, IRAs, SEP-IRAs and 403(b)(7) Plans with only one participant is $750,
with no minimum for subsequent purchases. Individuals who open an IRA also
may open a non-working spousal IRA with a minimum initial investment of $250.
Subsequent investments in a spousal IRA must be at least $250. The initial
investment must be accompanied by the Account Application. For full-time or
part-time employees of 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 Company's Board,
or the spouse or minor child of any of the foregoing, the minimum initial
investment
Page 9
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
or non-qualified employee benefit plans or other programs where contributions
or account information can be transmitted in a manner and form acceptable to
the Fund. The Fund reserves the right to vary further the initial and
subsequent investment minimum requirements at any time. Fund shares also are
offered without regard to the minimum initial investment requirements through
Dreyfus-AUTOMATIC Asset BuilderRegistration Mark, Dreyfus Government Direct
Deposit Privilege or Dreyfus Payroll Savings Plan pursuant to the Dreyfus Step
Program described under "Shareholder Services." These services enable you to
make regularly scheduled investments and may provide you with a convenient way
to invest for long-term financial goals. You should be aware, however, that
periodic investment plans do not guarantee a profit and will not protect an
investor against loss in a declining market.
You may purchase Fund shares by check or wire, or through the Dreyfus
TELETRANSFER Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds," or, if for Dreyfus retirement plan accounts, to
"The Dreyfus Trust Company, Custodian" and should specify that you are
investing in the Fund. 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# 8900276428/Dreyfus Income
Funds/Dreyfus High Yield Securities Fund, for purchase of Fund shares in your
name. The wire must include your Fund account number (for new accounts, your
Taxpayer Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable. If your initial purchase of
Fund shares is by wire, please call 1-800-645-6561 after completing your wire
payment to obtain your Fund account number. Please include your Fund account
number on the Account Application and promptly mail the Account Application
to the Fund, as no redemptions will be permitted until the Account
Application is received. You may obtain further information about remitting
funds in this manner from your bank. All payments should be made in U.S.
dollars and, to avoid fees and delays, should be drawn only on U.S. banks. A
charge will be imposed if any check used for investment in your account does
not clear. The Fund makes available to certain large institutions the ability
to issue purchase instructions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member. You must direct the
institution to transmit immediately available funds through the Automated
Clearing
Page 10
House to The Bank of New York with instructions to credit your Fund account.
The instructions must specify your Fund account registration and Fund account
number PRECEDED BY THE DIGITS "1111."
Fund shares are sold on a continuous basis at the net asset value per
share next determined after an order in proper form is received by the
Transfer Agent or other agent. Net asset value per share is determined as of
the close of trading on the floor of the New York Stock Exchange (currently
4:00 p.m., New York time), on each day the New York Stock Exchange is open
for business. For purposes of determining net asset value, options and
futures contracts will be valued 15 minutes after the close of trading on the
floor of the New York Stock Exchange. Net asset value per share is computed
by dividing the value of the Fund's net assets (i.e., the value of its assets
less liabilities) by the total number of Fund shares outstanding. The Fund's
investments are valued generally at market value or, where market quotations
are not readily available, at fair value as determined by or under the
direction of the Company's Board. For further information regarding the
methods employed in valuing the Fund's investments, see "Determination of Net
Asset Value" in the Statement of Additional Information.
For certain institutions that have entered into agreements with the
Distributor, payment for the purchase of Fund shares may be transmitted, and
must be received by the Transfer Agent, within three business days after the
order is placed. If such payment is not received within three business days
after the order is placed, the order may be canceled and the institution
could be held liable for resulting fees and/or losses.
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have
a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the Dreyfus
Family of Funds or certain other products made available by the Distributor
to such plans or programs exceeds $1,000,000 ("Eligible Benefit Plans").
Shares of funds in the Dreyfus Family of Funds then held by Eligible Benefit
Plans will be aggregated to determine the fee payable. The Distributor
reserves the right to cease paying these fees at any time. The Distributor
will pay such fees from its own funds, other than amounts received from the
Fund, including past profits or any other source available to it.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
the Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service (the "IRS").
DREYFUS TELETRANSFER PRIVILEGE -- You may purchase shares (minimum $500,
maximum $150,000 per day) by telephone if you have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds will
be transferred between the bank account designated in one of these documents
and your Fund account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be so designated.
The Fund may modify or terminate this Privilege at any time or charge a
service fee upon notice to shareholders. No such fee currently is
contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of shares by calling 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452.
Page 11
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.
If you desire to use this service, you should consult your Service Agent or
call 1-800-645-6561 to determine if it is available and whether any
conditions are imposed on its use.
To request an exchange, you must give exchange instructions to the
Transfer Agent in writing or by telephone. Before any exchange, you must
obtain and should review a copy of the current prospectus of the fund into
which the exchange is being made. Prospectuses may be obtained by calling
1-800-645-6561. Except in the case of personal retirement plans, the shares
being exchanged must have a current value of at least $500; furthermore, when
establishing a new account by exchange, the shares being exchanged must have
a value of at least the minimum initial investment required for the fund into
which the exchange is being made. The ability to issue exchange instructions
by telephone is given to all Fund shareholders automatically, unless you
check the applicable "No" box on the Account Application, indicating that you
specifically refuse this Privilege. The Telephone Exchange Privilege may be
established for an existing account by written request, signed by all
shareholders on the account, by a separate signed Shareholder Services Form,
available by calling 1-800-645-6561 or, by oral request from any of the
authorized signatories on the account, by calling 1-800-645-6561. If you have
established the Telephone Exchange Privilege, you may telephone exchange
instructions by calling 1-800-645-6561 or, if you are calling from overseas,
call 516-794-5452. See "How to Redeem Shares _ Procedures." Upon an exchange
into a new account, the following shareholder services and privileges, as
applicable and where available, will be automatically carried over to the
fund into which the exchange is made: Telephone Exchange Privilege, Wire
Redemption Privilege, Telephone Redemption Privilege, Dreyfus TELETRANSFER
Privilege and the dividend/capital gain distribution option (except for
Dreyfus Dividend Sweep) selected by the investor.
The Fund will deduct a redemption fee equal to 1.00% of the net asset
value of Fund shares exchanged where the exchange occurs less than six months
following the issuance of such shares. See "How to Redeem Shares." Otherwise,
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 you are exchanging were: (a)
purchased with a sales load, (b) acquired by a previous exchange from shares
purchased with a sales load, or (c) acquired through reinvestment of
dividends or distributions paid with respect to the foregoing categories of
shares. To qualify, at the time of the exchange you must notify the Transfer
Agent or your Service Agent must notify the Distributor. Any such
qualification is subject to confirmation of your holdings through a check of
appropriate records. See "Shareholder Services" in the Statement of
Additional Information. No fees currently are charged shareholders directly
in connection with exchanges, although the Fund reserves the right, upon not
less than 60 days' written notice, to charge shareholders a nominal fee in
accordance with rules promulgated by the Securities and Exchange Commission.
The Fund reserves the right to reject any exchange request in whole or in
part. The availability of Fund Exchanges may be modified or terminated at any
time upon notice to shareholders. See "Dividends, Distributions and Taxes."
Page 12
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 certain other funds in the Dreyfus Family of Funds of
which you are currently a shareholder. The amount you designate, which can be
expressed either in terms of a specific dollar or share amount ($100
minimum), will be exchanged automatically on the first and/or fifteenth day
of the month according to the schedule you have selected. Shares will be
exchanged at the then-current net asset value; however, a sales load may be
charged with respect to exchanges into funds sold with a sales load. See
"Shareholder Services" in the Statement of Additional Information. The right
to exercise this Privilege may be modified or canceled by the Fund or the
Transfer Agent. You may modify or cancel your exercise of this Privilege at
any time by mailing written notification to The Dreyfus Family of Funds, P.O.
Box 9671, Providence, Rhode Island 02940-9671. The Fund may charge a service
fee for the use of this Privilege. No such fee currently is contemplated. For
more information concerning this Privilege and the funds in the Dreyfus
Family of Funds eligible to participate in this Privilege, or to obtain a
Dreyfus Auto-Exchange Authorization Form, please call toll free
1-800-645-6561. See "Dividends, Distributions and Taxes."
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. At your option, the account
designated by you will be debited in the specified amount, and Fund shares
will be purchased, once a month, on either the first or fifteenth day, or
twice a month, on both days. Only an account maintained at a domestic
financial institution which is an Automated Clearing House member may be so
designated. To establish a Dreyfus-AUTOMATIC Asset Builder account, you must
file an authorization form with the Transfer Agent. You may obtain the
necessary authorization form by calling 1-800-645-6561. You may cancel your
participation in this Privilege or change the amount of purchase at any time
by mailing written notification to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus retirement plan
accounts, to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427, and the notification will be effective three
business days following receipt. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Dreyfus Government Direct Deposit Privilege enables you to purchase
Fund shares (minimum of $100 and maximum of $50,000 per transaction) by
having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into your
Fund account. You may deposit as much of such payments as you elect. To
enroll in Dreyfus Government Direct Deposit, you must file with the Transfer
Agent a completed Direct Deposit Sign-Up Form for each type of payment that
you desire to include in this Privilege. The appropriate form may be obtained
by calling 1-800-645-6561. 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. 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
Page 13
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.
DREYFUS STEP PROGRAM
Dreyfus Step Program enables you to purchase Fund shares without
regard to the Fund's minimum initial investment requirements through Dreyfus-
AUTOMATIC Asset BuilderRegistration Mark, Dreyfus Government Direct Deposit
Privilege or Dreyfus Payroll Savings Plan. To establish a Dreyfus Step
Program account, you must supply the necessary information on the Account
Application and file the required authorization form(s) with the Transfer
Agent. For more information concerning this Program, or to request the
necessary authorization form(s), please call toll free 1-800-782-6620. You
may terminate your participation in this Program at any time by discontinuing
your participation in Dreyfus-AUTOMATIC Asset Builder, Dreyfus Government
Direct Deposit Privilege or Dreyfus Payroll Savings Plan, as the case may be,
as provided under the terms of such Privilege(s). The Fund may modify or
terminate this Program at any time. Investors who wish to purchase Fund
shares through the Dreyfus Step Program in conjunction with a
Dreyfus-sponsored retirement plan may do so only for IRAs, SEP-IRAs and IRA
"Rollover Accounts."
DREYFUS DIVIDEND OPTIONS
Dreyfus Dividend Sweep enables you to invest automatically dividends
or dividends and capital gain distributions, if any, paid by the Fund in
shares of another fund in the Dreyfus Family of Funds of which you are a
shareholder. Shares of the other fund will be purchased at the then-current
net asset value; however, a sales load may be charged with respect to
investments in shares of a fund sold with a sales load. If you are investing
in a fund that charges a sales load, you may qualify for share 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
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 existing
accounts and may not be used to open new accounts. Minimum subsequent
investments do not apply for Dreyfus Dividend Sweep. The Fund may modify or
terminate these privileges at any time or charge a service fee. No such fee
currently is contemplated. Shares held under Keogh Plans, IRAs or other
retirement plans are not eligible for Dreyfus Dividend Sweep.
Page 14
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. The Automatic
Withdrawal Plan may be ended at any time by you, the Fund or the Transfer
Agent. Shares for which certificates have been issued may not be redeemed
through the Automatic Withdrawal Plan.
RETIREMENT PLANS
The Fund offers a variety of pension and profit-sharing plans,
including Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover Accounts," 401(k)
Salary Reduction Plans and 403(b)(7) Plans. Plan support services also are
available. You can obtain details on the various plans by calling the
following numbers toll free: for Keogh Plans, please call 1-800-358-5566;
for IRAs and IRA "Rollover Accounts," please call 1-800-645-6561; or for
SEP-IRAs, 401(k) Salary Reduction Plans and 403(b)(7) Plans, please call
1-800-322-7880.
HOW TO REDEEM SHARES
GENERAL
You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined net asset value.
The Fund will deduct a redemption fee equal to 1.00% of the net asset
value of Fund shares redeemed (including redemptions through use of the Fund
Exchanges service) where the redemption or exchange occurs less than six
months following the issuance of such shares. The purpose of the redemption
fee is to discourage short-term trading. The fee will be retained by the Fund
and used primarily to offset the transaction costs that short-term trading
imposes on the Fund and its shareholders. For purposes of computing the
six-month period, any issuance of Fund shares during a month will be deemed
to occur on the first day of such month. No redemption fee will be charged
upon the redemption of shares through the Fund's Automatic Withdrawal Plan or
Dreyfus Auto-Exchange Privilege, or through omnibus accounts for various
retirement plans. Furthermore, no redemption fee will be charged upon the
redemption of Fund shares acquired through reinvestment of dividends or
distributions, nor will the redemption fee be used to pay fees imposed for
various Fund services or shares. The redemption fee may be waived, modified
or discontinued at any time or from time to time. In addition, Service Agents
may charge their clients a nominal fee for effecting redemptions of Fund
shares. Any certificates representing Fund shares being redeemed must be
submitted with the redemption request. The value of the shares redeemed may
be more or less than their original cost, depending upon the Fund's
then-current net asset value.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission. HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY DREYFUS
TELETRANSFER PRIVILEGE OR THROUGH DREYFUS-AUTOMATIC ASSET BUILDERRegistration
Mark AND SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER
AGENT, THE REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK
CLEARANCE OF YOUR PURCHASE CHECK, DREYFUS TELETRANSFER PURCHASE OR DREYFUS-
AUTOMATIC ASSET BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR
MORE. IN ADDITION, THE FUND WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE OR
TELEPHONE OR PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE FOR A PERIOD
Page 15
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, or, if you have checked the appropriate box and
supplied the necessary information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent, through the Wire
Redemption Privilege, the Telephone Redemption Privilege or the Dreyfus
TELETRANSFER Privilege. Other redemption procedures may be in effect for
clients of certain Service Agents. The Fund makes available to certain large
institutions the ability to issue redemption instructions through compatible
computer facilities. The Fund reserves the right to refuse any request made
by wire or telephone, including requests made shortly after a change of
address, and may limit the amount involved or the number of such requests.
The Fund may modify or terminate any redemption Privilege at any time or
charge a service fee upon notice to shareholders. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs or other retirement plans,
and shares for which certificates have been issued, are not eligible for the
Wire Redemption, Telephone Redemption or Dreyfus TELETRANSFER Privilege.
You may redeem shares by telephone if you have checked the
appropriate box on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select a telephone redemption
privilege or telephone exchange privilege (which is granted automatically
unless you refuse it), you authorize the Transfer Agent to act on telephone
instructions from any person representing himself or herself to be you, and
reasonably believed by the Transfer Agent to be genuine. The Fund will require
the Transfer Agent to employ reasonable procedures, such as requiring a form
of personal identification, to confirm that instructions are genuine and, if
it does not follow such procedures, the Fund or the Transfer Agent may be
liable for any losses due to unauthorized or fraudulent instructions. Neither
the Fund nor the Transfer Agent will be liable for following telephone
instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used. During the delay, the Fund's net asset value may fluctuate.
REGULAR REDEMPTION -- Under the regular redemption procedure, you may redeem
shares by written request mailed to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus retirement plan
accounts, to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427. Redemption requests may be delivered in person
Page 16
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. You also may direct that redemption proceeds be paid by
check (maximum $150,000 per day) made out to the owners of record and mailed
to your address. Redemption proceeds of less than $1,000 will be paid
automatically by check. Holders of jointly registered Fund or bank accounts
may have redemption proceeds of not more than $250,000 wired within any
30-day period. You may telephone redemption requests by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452. The
Statement of Additional Information sets forth instructions for transmitting
redemption requests by wire.
TELEPHONE REDEMPTION PRIVILEGE -- You may request by telephone that
redemption proceeds (maximum $150,000 per day) be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452.
DREYFUS TELETRANSFER PRIVILEGE -- You may request by telephone that
redemption proceeds (minimum $500 per day) be transferred between your Fund
account and your bank account. Only a bank account maintained in a domestic
financial institution which is an Automated Clearing House member may be
designated. Redemption proceeds will be on deposit in your account at an
Automated Clearing House member bank ordinarily two days after receipt of the
redemption request or, at your request, paid by check (maximum $150,000 per
day) and mailed to your address. Holders of jointly registered Fund or bank
accounts may redeem through the Dreyfus TELETRANSFER Privilege for transfer
to their bank account not more than $250,000 within any 30-day period.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of shares by calling 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan, pursuant to which
it pays the Distributor for the provision of certain services to Fund
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 17
DIVIDENDS, DISTRIBUTIONS AND TAXES
Under the Internal Revenue Code of 1986, as amended (the "Code"), the
Fund is treated as a separate entity for purposes of qualification and
taxation as a regulated investment company. The Fund ordinarily declares and
pays dividends from its net investment income quarterly, and distributes net
realized securities gains, if any, once a year, but it may make distributions
more regularly to comply with the distribution requirements of the Code, in
all events in a manner consistent with the provisions of the 1940 Act. The
Fund will not make distributions from net realized securities gains unless
capital loss carryovers, if any, have been utilized or have expired. You may
choose whether to receive dividends and distributions in cash or to reinvest
in additional shares at net asset value. All expenses are accrued daily and
deducted before declaration of dividends to investors.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of 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
shares. No dividend paid by the Fund will qualify for the dividends received
deduction allowable to certain U.S. corporations. Distributions from net
realized long-term securities gains of the Fund will be taxable to U.S.
shareholders as long-term capital gains for Federal income tax purposes,
regardless of how long shareholders have held their Fund shares and whether
such distributions are received in cash or reinvested in Fund shares. The
Code provides that the net capital gain of an individual generally will not
be subject to Federal income tax at a rate in excess of 28%. Dividends and
distributions may be subject to state and local taxes.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by the Fund to a foreign investor generally are
subject to U.S. nonresident withholding taxes at the rate of 30%, unless the
foreign investor claims the benefit of a lower rate specified in a tax
treaty. Distributions from net realized long-term securities gains paid by
the Fund to a foreign investor as well as the proceeds of any redemptions
from a foreign investor's account, regardless of the extent to which gain or
loss may be realized, generally will not be subject to U.S. nonresident
withholding tax. However, such distributions may be subject to backup
withholding, as described below, unless the foreign investor certifies his
non-U.S. residency status.
Notice as to the tax status of your dividends and distributions will
be mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions from
securities gains, if any, paid during the year.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends, distributions
from net realized securities gains and the proceeds of any redemption,
regardless of the extent to which gain or loss may be realized, paid to a
shareholder if such shareholder fails to certify either that the TIN
furnished in connection with opening an account is correct or that such
shareholder has not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report taxable dividend or
interest income on a Federal income tax return. Furthermore, the IRS may
notify the Fund to institute backup withholding if the IRS determines a
shareholder's TIN is incorrect or if a shareholder has failed to properly
report taxable dividend and interest income on a Federal income tax return.
Page 18
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.
It is expected that the Fund will qualify as a "regulated investment
company" under the Code so long as such qualification is in the best
interests of its shareholders. Such qualification relieves the Fund of any
liability for Federal income tax to the extent its earnings are distributed
in accordance with applicable provisions of the Code. The Fund is subject to
a non-deductible 4% excise tax, measured with respect to certain
undistributed amounts of taxable investment income and capital gains.
You should consult your tax adviser regarding specific questions as
to Federal, state or local taxes.
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 current
yield may reflect absorbed expenses pursuant to any undertaking that may be
in effect. See "Management of the Fund."
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment 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 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. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., Moody's Bond Survey Bond Index, Bond Buyer's
20-Bond Index, Morningstar, Inc. and other industry publications.
Page 19
GENERAL INFORMATION
The Company 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. Before January 2, 1996, the
Company's name was Dreyfus Strategic Income. The Company 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 a
Massachusetts business trust. However, the Trust Agreement disclaims
shareholder liability for acts or obligations of the Company and requires
that notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by the Company 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 Company
intends to conduct its operations in such a way so as to avoid, as far as
possible, ultimate liability of the shareholders for liabilities of the Fund.
The Company is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for
certain matters under the 1940 Act and for other purposes. A shareholder of
one portfolio is not deemed to be a shareholder of any other portfolio. For
certain matters shareholders vote together as a group; as to others they vote
separately by portfolio. By this Prospectus, shares of the Fund are being
offered. Other portfolios are sold pursuant to other offering documents.
To date, the Board has authorized the creation of four series of
shares. All consideration received by the Company for shares of one of the
series and all assets in which such consideration is invested will belong to
that series (subject only to the rights of creditors of the Company) and will
be subject to the liabilities related thereto. The income attributable to,
and the expenses of, one series are treated separately from those of the
other series. The Company has the ability to create, from time to time, new
series without shareholder approval.
The Transfer Agent maintains a record of your ownership and sends you
confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561. In New York City, call 1-718-895-1206; outside the U.S. and
Canada, call 516-794-5452.
Page 20
APPENDIX
INVESTMENT TECHNIQUES
FOREIGN CURRENCY TRANSACTIONS -- Foreign currency transactions may be entered
into for a variety of purposes, including: to fix in U.S. dollars, between
trade and settlement date, the value of a security the Fund has agreed to buy
or sell; to hedge the U.S. dollar value of securities the Fund already owns,
particularly if it expects a decrease in the value of the currency in which
the foreign security is denominated; or to gain exposure to the foreign
currency in an attempt to realize gains.
Foreign currency transactions may involve, for example, the Fund's
purchase of foreign currencies for U.S. dollars or the maintenance of short
positions in foreign currencies, which would involve the Fund agreeing to
exchange an amount of a currency it did not currently own for another
currency at a future date in anticipation of a decline in the value of the
currency sold relative to the currency the Fund contracted to receive in the
exchange. The Fund's success in these transactions will depend principally on
The Dreyfus Corporation's ability to predict accurately the future exchange
rates between foreign currencies and the U.S. dollar.
SHORT-SELLING -- In these transactions, the Fund sells a security it does not
own in anticipation of a decline in the market value of the security. To
complete the transaction, the Fund must borrow the security to make delivery
to the buyer. The Fund is obligated to replace the security borrowed by
purchasing it subsequently at the market price at the time of replacement.
The price at such time may be more or less than the price at which the
security was sold by the Fund, which would result in a loss or gain,
respectively.
Securities will not be sold short if, after effect is given to any
such short sale, the total market value of all securities sold short would
exceed 25% of the value of the Fund's net assets. The Fund may not sell short
the securities of any single issuer listed on a national securities exchange
to the extent of more than 5% of the value of the Fund's net assets. The Fund
may not make a short sale which results in the Fund having sold short in the
aggregate more than 5% of the outstanding securities of any class of an
issuer.
The Fund also may make short sales "against the box," in which the
Fund enters into a short sale of a security it owns in order to hedge an
unrealized gain on the security. At no time will more than 15% of the value
of the Fund's net assets be in deposits on short sales against the box.
LENDING PORTFOLIO SECURITIES -- The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. The Fund continues to be
entitled to payments in amounts equal to the interest or other distributions
payable on the loaned securities which affords the Fund an opportunity to
earn interest on the amount of the loan and at the same time to earn income
on the loaned securities' collateral. Loans of portfolio securities may not
exceed 331/3% of the value of the Fund's total assets, and the Fund will
receive collateral consisting of cash, U.S. Government securities or
irrevocable letters of credit which will be maintained at all times in an
amount equal to at least 100% of the current market value of the loaned
securities. Such loans are terminable by the Fund at any time upon specified
notice. 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.
LEVERAGE -- 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 limited to 331/3% of the value of the Fund's
total assets. These borrowings will be subject to interest costs which may or
may not be recovered by appreciation of the securities purchased; in certain
cases, interest costs may exceed the return received on the securities
purchased.
Page 21
The Fund may enter into reverse repurchase agreements with banks,
brokers or dealers. This form of borrowing involves the transfer by the Fund
of an underlying debt instrument in return for cash proceeds based on a
percentage of the value of the security. The Fund retains the right to
receive interest and principal payments on the security. At an agreed upon
future date, the Fund repurchases the security at principal plus accrued
interest. Except for these transactions, the Fund's borrowings generally will
be unsecured.
USE OF DERIVATIVES -- The Fund may invest in the types of Derivatives
enumerated under "Description of the Fund -- Investment Considerations and
Risks -- Use of Derivatives." These instruments and certain related risks are
described more specifically under "Investment Objectives and Management
Policies -- Derivatives" in the Statement of Additional Information.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular Derivative and the
portfolio as a whole. Derivatives permit the Fund to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Fund can increase or decrease the level
of risk, or change the character of the risk, of its portfolio by making
investments in specific securities.
Derivatives may entail investment exposures that are greater than
their cost would suggest, meaning that a small investment in Derivatives
could have a large potential impact on the Fund's performance.
If the Fund invests in Derivatives at inappropriate times or judges
market conditions incorrectly, such investments may lower the Fund's return
or result in a loss. The Fund also could experience losses if it were unable
to liquidate its position because of an illiquid secondary market. The market
for many Derivatives is, or suddenly can become, illiquid. Changes in
liquidity may result in significant, rapid and unpredictable changes in the
prices for Derivatives.
Although the Fund will not be a commodity pool, Derivatives subject
the Fund to the rules of the Commodity Futures Trading Commission which limit
the extent to which the Fund can invest in certain Derivatives. The Fund may
invest in futures contracts and options with respect thereto for hedging
purposes without limit. However, the Fund may not invest in such contracts
and options for other purposes if the sum of the amount of initial margin
deposits and premiums paid for unexpired options with respect to such
contracts,other than for bona fide hedging purposes, exceed 5% of the
liquidation value of the Fund's assets, after taking into account unrealized
profits and unrealized losses on such contracts and options; provided,
however, that in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation.
The Fund may invest up to 5% of its assets, represented by the
premium paid, in the purchase of call and put options. The Fund may write
(i.e, sell) covered call and put option contracts to the extent of 20% of the
value of its net assets at the time such option contracts are written. When
required by the Securities and Exchange Commission, the Fund will set aside
permissible liquid assets in a segregated account to cover its obligations
relating to its transactions in Derivatives. To maintain this required cover,
the Fund may have to sell portfolio securities at disadvantageous prices or
times since it may not be possible to liquidate a Derivative position at a
reasonable price.
FORWARD COMMITMENTS -- The Fund may purchase securities on a forward
commitment or when-issued basis, which means that delivery and payment take
place a number of days after the date of the commitment to purchase. The
payment obligation and the interest rate that will be received on a forward
commitment or when-issued security are fixed when the Fund enters into the
commitment, but the Fund does not make a payment until it receives delivery
from the counterparty. The Fund will commit to purchase such securities only
with the intention of actually acquiring the securities, but the Fund
Page 22
may sell these securities before the settlement date if it is deemed
advisable. 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 commitments will
be established and maintained at the Fund's custodian bank.
CERTAIN PORTFOLIO SECURITIES
HIGH YIELD-LOWER RATED 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 S&P, Fitch or Duff 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 inadequate capacity to
meet timely interest and principal payments. Securities rated C by Moody's
are regarded as having extremely poor prospects of ever attaining any real
investment standing. Securities rated D by S&P, Fitch and Duff are in default
and the payment of interest and/or repayment of principal is in arrears. Such
securities, though high yielding, are characterized by great risk. See
"Appendix" in the Statement of Additional Information for a general
description of securities ratings.
These securities may be particularly susceptible to economic
downturns. It is likely that an economic recession could disrupt severely the
market for such securities and may have an adverse impact on the value of
such securities. In addition, it is likely that any such economic downturn
could adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon and increase the incidence of default for
such securities.
The ratings of Moody's, S&P, Fitch or Duff represent their opinions
as to the quality of the obligations which they undertake to rate. Ratings
are relative and subjective and, although ratings may be useful in evaluating
the safety or interest and principal payments, they do not evaluate the
market value risk of such obligations. 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.
CONVERTIBLE SECURITIES -- Convertible securities may be converted at either a
stated price or stated rate into underlying shares of common stock.
Convertible securities have characteristics similar to both fixed-income and
equity securities. Convertible securities generally are subordinated to other
similar but non-convertible securities of the same issuer, although
convertible bonds, as corporate debt obligations, enjoy seniority in right of
payment to all equity securities, and convertible preferred stock is senior
to common stock, of the same issuer. Because of the subordination feature,
however, convertible securities typically have lower ratings than similar
non-convertible securities.
PARTICIPATION INTERESTS. The Fund may invest in corporate obligations,
denominated in U.S. dollars or foreign currencies, that are originated,
negotiated and structured by a syndicate of lenders ("Co-Lenders") consisting
of commercial banks, thrift institutions, insurance companies, finance
companies or other financial institutions one or more of which administers
the security on behalf of the syndicate (the "Agent Bank"). Co-Lenders may
sell such securities to third parties called "Participants." The Fund may
invest in such securities either by participating as a Co-Lender at
origination or by acquiring an interest in the security from a Co-Lender or a
Participant (collectively, "participation interests"). Co-Lenders and
Page 23
Participants interposed between the Fund and the corporate borrower (the
"Borrower"), together with Agent Banks, are referred to herein as
"Intermediate Participants." The Fund also may purchase a participation
interest in a portion of the rights of an Intermediate Participant. The Fund
will not act as an Agent Bank, guarantor, sole negotiator or sole structuror
with respect to securities that are the subject of a participation interest.
A participation interest gives the Fund an undivided interest in the security
in the proportion that the Fund's participation interest bears to the total
principal amount of the security. These instruments may have fixed, floating
or variable rates of interest. For certain participation interests, the Fund
will have the right to demand payment, on not more than seven days' notice,
for all or any part of the Fund's participation interest in the security,
plus accrued interest. As to these instruments, the Fund intends to exercise
its right to demand payment only upon a default under the terms of the
security, as needed to provide liquidity to meet redemptions, or to maintain
or improve the quality of its investment portfolio. The Fund will not invest
more than 15% of the value of its net assets in participation interests
maturing in more than seven days that do not have this demand feature, and in
other securities that are illiquid.
MORTGAGE-RELATED SECURITIES -- Mortgage-related securities are a form of
Derivative collateralized by pools of mortgages. The mortgage-related
securities which may be purchased include those with fixed, floating and
variable interest rates, those with interest rates that change based on
multiples of changes in interest rates and those with interest rates that
change inversely to changes in interest rates, as well as stripped
mortgage-backed securities. Stripped mortgage-backed securities usually are
structured with two classes that receive different proportions of interest
and principal distributions on a pool of mortgage-backed securities or whole
loans. A common type of stripped mortgage-backed security will have one class
receiving some of the interest and most of the principal from the mortgage
collateral, while the other class will receive most of the interest and the
remainder of the principal. Although certain mortgage-related securities are
guaranteed by a third party or otherwise similarly secured, the market value
of the security, which may fluctuate, is not secured. If a mortgage-related
security is purchased at a premium, all or part of the premium may be lost if
there is a decline in the market value of the security, whether resulting
from changes in interest rates or prepayments on the underlying mortgage
collateral.
As with other interest-bearing securities, the prices of certain
mortgage-related securities are inversely affected by changes in interest
rates. However, although the value of a mortgage-related security may decline
when interest rates rise, the converse is not necessarily true, since in
periods of declining interest rates the mortgages underlying the security are
more likely to be prepaid. For this and other reasons, a mortgage-related
security's stated maturity may be shortened by unscheduled prepayments on the
underlying mortgages, and, therefore, it is not possible to predict
accurately the security's return to the Fund. Moreover, with respect to
stripped mortgage-backed securities, if the underlying mortgage securities
experience greater than anticipated prepayments of principal, the Fund may
fail to fully recoup its initial investment even if the securities are rated
in the highest rating category by a nationally recognized statistical rating
organization.
The mortgage-related securities in which the Fund may invest also
include multi-class pass-through certificates secured principally by mortgage
loans on commercial properties. These mortgage-related securities are
structured similarly to mortgage-related securities secured by pools of
residential mortgages. Commercial lending, however, generally is viewed as
exposing the lender to a greater risk of loss than one- to four-family
residential lending. Commercial lending, for example, typically involves
larger loans to single borrowers or groups of related borrowers than
residential one- to four-family mortgage loans. In addition, the repayment of
loans secured by income producing properties typically is dependent upon the
successful operation of the related real estate project and the cash flow
generated there-
Page 24
from. Consequently, adverse changes in economic conditions and
circumstances are more likely to have an adverse impact on mortgage-related
securities secured by loans on commercial properties than on those secured by
loans on residential properties.
During periods of rapidly rising interest rates, prepayments of
mortgage-backed securities may occur at slower than expected rates. Slower
prepayments effectively may change a mortgage-backed security that was
considered short- or intermediate-term at the time of purchase into a
long-term security. The values of long-term securities generally fluctuate
more in response to changes in interest rates than short- or
intermediate-term securities. Were the prepayments on the Fund's
mortgage-backed securities to decrease broadly, the Fund's effective
duration, and thus sensitivity to interest rate fluctuations, would increase.
ASSET-BACKED SECURITIES -- Asset-backed securities are a form of Derivative.
The securitization techniques used for asset-backed securities are similar to
those used for mortgage-related securities. The collateral for these
securities has included home equity loans, automobile and credit card
receivables, boat loans, computer leases, airplane leases, mobile home loans,
recreational vehicle loans and hospital account receivables. The Fund may
invest in these and other types of asset-backed securities that may be
developed in the future.
Asset-backed securities present certain risks that are not presented
by mortgage-backed securities. Primarily, these securities may provide the
Fund with a less effective security interest in the related collateral than
do mortgage-backed securities. Therefore, there is the possibility that
recoveries on the underlying collateral may not, in some cases, be available
to support payments on these securities.
MUNICIPAL OBLIGATIONS -- Municipal obligations are debt obligations issued by
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities, or
multistate agencies or authorities. Municipal obligations bear fixed,
floating or variable rates of interest. Certain municipal obligations are
subject to redemption at a date earlier than their stated maturity pursuant
to call options, which may be separated from the related municipal
obligations and purchased and sold separately. The Fund also may acquire call
options on specific municipal obligations. The Fund generally would purchase
these call options to protect the Fund from the issuer of the related
municipal obligation redeeming, or other holder of the call option from
calling away, the municipal obligation before maturity.
While, in general, municipal obligations are tax exempt securities
having relatively low yields as compared to taxable, non-municipal
obligations of similar quality, certain municipal obligations are taxable
obligations, offering yields comparable to, and in some cases greater than,
the yields available on other permissible Fund investments. Dividends
received by shareholders on Fund shares which are attributable to interest
income received by the Fund from municipal obligations generally will be
subject to Federal income tax. The Fund may invest in municipal obligations,
the ratings of which correspond with the ratings of other permissible Fund
investments. The Fund currently intends to invest no more than 25% of its
assets in municipal obligations. However, this percentage may be varied from
time to time without shareholder approval.
ZERO COUPON SECURITIES -- The Fund may invest in zero coupon U.S. Treasury
securities, which are Treasury Notes and Bonds that have been stripped of
their unmatured interest coupons, the coupons themselves and receipts or
certificates representing interests in such stripped debt obligations and
coupons. Zero coupon securities also are issued by corporations and financial
institutions which constitute a proportionate ownership of the issuer's pool
of underlying U.S. Treasury securities. A zero coupon security pays no
interest to its holder during its life and is sold at a discount to its face
value at
Page 25
maturity. The market prices of zero coupon securities generally are
more volatile than the market prices of securities that pay interest
periodically and are likely to respond to a greater degree to changes in
interest rates than non-zero coupon securities having similar maturities and
credit qualities.
FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL ENTITIES -- The
Fund may invest in obligations issued or guaranteed by one or more foreign
governments or any of their political subdivisions, agencies or
instrumentalities that are determined by The Dreyfus Corporation to be of
comparable quality to the other obligations in which the Fund may invest.
Supranational entities include international organizations designated or
supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Examples include the International Bank for Reconstruction and
Development (the World Bank), the European Coal and Steel Community, the
Asian Development Bank and the InterAmerican Development Bank.
MONEY MARKET INSTRUMENTS -- The Fund may invest in the following types of
money market instruments.
U.S. GOVERNMENT SECURITIES. Securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities include U.S. Treasury
securities that differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government agencies
and instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others by the right of the issuer to borrow from the Treasury;
others by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others only by the credit
of the agency or instrumentality. These securities bear fixed, floating or
variable rates of interest. While the U.S. Government provides financial
support to such U.S. Government-sponsored agencies and instrumentalities, no
assurance can be given that it will always do so since it is not so obligated
by law.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Fund buys, and
the seller agrees to repurchase, a security at a mutually agreed upon time
and price (usually within seven days). The repurchase agreement thereby
determines the yield during the purchaser's holding period, while the
seller's obligation to repurchase is secured by the value of the underlying
security. Repurchase agreements could involve risks in the event of a default
or insolvency of the other party to the agreement, including possible delays
or restrictions upon the Fund's ability to dispose of the underlying
securities. The Fund may enter into repurchase agreements with certain banks
or non-bank dealers.
BANK OBLIGATIONS. The Fund may purchase certificates of deposit, time
deposits, bankers' acceptances and other short-term obligations issued by
domestic banks, foreign subsidiaries or foreign branches of domestic banks,
domestic and foreign branches of foreign banks, domestic savings and loan
associations and other banking institutions. With respect to such securities
issued by foreign subsidiaries or foreign branches of domestic banks, and
domestic and foreign branches of foreign banks, the Fund may be subject to
additional investment risks that are different in some respects from those
incurred by a fund which invests only in debt obligations of U.S. domestic
issuers. See "Description of the Fund -- Investment Considerations and Risks
- -- Foreign Securities."
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period
of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven
days) at a stated interest rate.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments reflect
the obligation both of the bank and the drawer to pay the
Page 26
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,
A-1 by S&P, F-1 by Fitch or Duff-1 by Duff, (b) issued by companies having an
outstanding unsecured debt issue currently rated at least A3 by Moody's or A-
by S&P, Fitch or Duff, 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.
ILLIQUID SECURITIES -- The Fund may invest up to 15% of the value of its net
assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Fund's investment
objective. Such securities may include securities that are not readily
marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, repurchase agreements providing for
settlement in more than seven days after notice, and certain privately
negotiated, non-exchange traded options and securities used to cover such
options. As to these securities, the Fund is subject to a risk that should
the Fund desire to sell them when a ready buyer is not available at a price
the Fund deems representative of their value, the value of the Fund's net
assets could be adversely affected.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 27
High Yield
Securities Fund
Prospectus
Registration Mark
Copy Rights 1996 Dreyfus Service Corporation
043p092096
Page 28
DREYFUS INCOME FUNDS
DREYFUS EQUITY DIVIDEND FUND
DREYFUS HIGH YIELD SECURITIES FUND
DREYFUS SHORT TERM HIGH YIELD FUND
DREYFUS STRATEGIC INCOME FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
SEPTEMBER 20, 1996
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus
of Dreyfus Equity Dividend Fund dated July 1, 1996, Dreyfus High Yield
Securities Fund dated September 20, 1996, Dreyfus Short Term High Yield
Fund dated August 15, 1996, and Dreyfus Strategic Income Fund dated January
2, 1996 (each, a "Fund" and collectively, the "Funds") of Dreyfus Income
Funds (the "Company"), respectively, as each may be revised from time to
time. To obtain a copy of the relevant Fund's Prospectus, please write to
a Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or
call the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. and Canada -- Call 516-794-5452
The Dreyfus Corporation (the "Manager") serves as each Fund's
investment adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of each Fund's shares.
TABLE OF CONTENTS
Page
Investment Objectives and Management Policies. . . . . . . . . . . . B-2
Management of the Company. . . . . . . . . . . . . . . . . . . . . . B-18
Management Agreement . . . . . . . . . . . . . . . . . . . . . . . . B-23
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . B-25
Shareholder Services Plan. . . . . . . . . . . . . . . . . . . . . . B-25
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . B-26
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . B-28
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . B-31
Dividends, Distributions and Taxes . . . . . . . . . . . . . . . . . B-32
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . B-34
Performance Information. . . . . . . . . . . . . . . . . . . . . . . B-36
Information About the Funds. . . . . . . . . . . . . . . . . . . . . B-37
Transfer and Dividend Disbursing Agent,
Custodian, Counsel and Independent Auditors. . . . . . . . . . . . B-38
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-39
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . B-48
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . B-59
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the sections in each Fund's Prospectus entitled
"Description of the Fund" and "Appendix."
Portfolio Securities
American Depository Receipts. (Dreyfus Equity Dividend Fund only)
The Fund may invest in American Depository Receipts, through "sponsored" or
"unsponsored" facilities. A sponsored facility is established jointly by
the issuer of the underlying security and a depositary, whereas a
depositary may establish an unsponsored facility without participation by
the issuer of the deposited security. Holders of unsponsored depositary
receipts generally bear all the costs of such facilities and the depositary
of an unsponsored facility frequently is under no obligation to distribute
shareholder communications received from the issuer of the deposited
security or to pass through voting rights to the holders of such receipts
in respect of the deposited securities.
Repurchase Agreements. (All Funds) The Fund's custodian or sub-
custodian will have custody of, and will hold in a segregated account,
securities acquired by a Fund under a repurchase agreement. Repurchase
agreements are considered by the staff of the Securities and Exchange
Commission to be loans by the Fund. In an attempt to reduce the risk of
incurring a loss on a repurchase agreement, each Fund will enter into
repurchase agreements only with domestic banks with total assets in excess
of $1 billion, or primary government securities dealers reporting to the
Federal Reserve Bank of New York, with respect to securities of the type in
which the Fund may invest, and will require that additional securities be
deposited with it if the value of the securities purchased should decrease
below the resale price.
Commercial Paper and Other Short-Term Corporate Obligations. (All
Funds) These instruments include variable amount master demand notes,
which are obligations that permit a Fund to invest fluctuating amounts at
varying rates of interest pursuant to direct arrangements between the Fund,
as lender, and the borrower. These notes permit daily changes in the
amounts borrowed. Because these obligations are direct lending
arrangements between the lender and borrower, it is not contemplated that
such instruments generally will be traded, and there generally is no
established secondary market for these obligations, although they are
redeemable at face value, plus accrued interest, at any time. Accordingly,
where these obligations are not secured by letters of credit or other
credit support arrangements, the Fund's right to redeem is dependent on the
ability of the borrower to pay principal and interest on demand. Such
obligations frequently are not rated by credit rating agencies, and a Fund
may invest in them only if at the time of an investment the borrower meets
the criteria set forth in the Fund's Prospectus for other commercial paper
issuers.
Convertible Securities. (All Funds) Convertible securities may be
converted at either a stated price or stated rate into underlying shares of
common stock. Convertible securities have characteristics similar to both
fixed-income and equity securities. Convertible securities generally are
subordinated to other similar but non-convertible securities of the same
issuer, although convertible bonds, as corporate debt obligations, enjoy
seniority in right of payment to all equity securities, and convertible
preferred stock is senior to common stock, of the same issuer. Because of
the subordination feature, however, convertible securities typically have
lower ratings than similar non-convertible securities.
Although to a lesser extent than with fixed-income securities, the
market value of convertible securities tends to decline as interest rates
increase and, conversely, tends to increase as interest rates decline. In
addition, because of the conversion feature, the market value of
convertible securities tends to vary with fluctuations in the market value
of the underlying common stock. A unique feature of convertible securities
is that as the market price of the underlying common stock declines,
convertible securities tend to trade increasingly on a yield basis, and so
may not experience market value declines to the same extent as the
underlying common stock. When the market price of the underlying common
stock increases, the prices of the convertible securities tend to rise as a
reflection of the value of the underlying common stock. While no
securities investments are without risk, investments in convertible
securities generally entail less risk than investments in common stock of
the same issuer.
Convertible securities are investments that provide for a stable
stream of income with generally higher yields than common stocks. There
can be no assurance of current income because the issuers of the
convertible securities may default on their obligations. A convertible
security, in addition to providing fixed income, offers the potential for
capital appreciation through the conversion feature, which enables the
holder to benefit from increases in the market price of the underlying
common stock. There can be no assurance of capital appreciation, however,
because securities prices fluctuate. Convertible securities, however,
generally offer lower interest or dividend yields than non-convertible
securities of similar quality because of the potential for capital
appreciation.
Warrants. (Dreyfus High Yield Securities Fund, Dreyfus Short Term
High Yield Fund (collectively, "Dreyfus High Yield Funds"), and Dreyfus
Strategic Income Fund only). A warrant is an instrument issued by a
corporation which gives the holder the right to subscribe to a specified
amount of the corporations's capital stock at a set price for a specified
period of time. The Fund may invest up to 5% of its net assets in
warrants, except that this limitation does not apply to warrants purchased
by the Fund that are sold in units with, or attached to, other securities.
Common Stock. (Dreyfus High Yield Funds and Dreyfus Strategic Income
Fund only). From time to time, the Fund may hold common stock sold in
units with, or attached to, debt securities purchased by the Fund. The
Fund also may hold common stock received upon the conversion of convertible
securities.
Illiquid Securities. (All Funds) When purchasing securities that
have not been registered under the Securities Act of 1933, as amended, and
are not readily marketable, the Fund will endeavor, to the extent
practicable, to obtain the right to registration at the expense of the
issuer. Generally, there will be a lapse of time between the Fund's
decision to sell any such security and the registration of the security
permitting sale. During any such period, the price of the securities will
be subject to market fluctuations. However, where a substantial market of
qualified institutional buyers has developed for certain unregistered
securities purchased by the Fund pursuant to Rule 144A under the Securities
Act of 1933, as amended, the Fund intends to treat such securities as
liquid securities in accordance with procedures approved by the Company's
Board. Because it is not possible to predict with assurance how the market
for specific restricted securities sold pursuant to Rule 144A will develop,
the Company's Board has directed the Manager to monitor carefully the
Fund's investments in such securities with particular regard to trading
activity, availability of reliable price information and other relevant
information. To the extent that, for a period of time, qualified
institutional buyers cease purchasing restricted securities pursuant to
Rule 144A, the Fund's investing in such securities may have the effect of
increasing the level of illiquidity in its investment portfolio during such
period.
Participation Interests. (Dreyfus High Yield Funds only) The Fund
may invest in short-term corporate obligations denominated in U.S. and
foreign currencies that are originated, negotiated and structured by a
syndicate of lenders ("Co-Lenders") consisting of commercial banks, thrift
institutions, insurance companies, financial companies or other financial
institutions one or more of which administers the security on behalf of the
syndicate (the "Agent Bank"). Co-Lenders may sell such securities to third
parties called "Participants." The Fund may invest in such securities
either by participating as a Co-Lender at origination or by acquiring an
interest in the security from a Co-Lender or a Participant (collectively,
"participation interests"). Co-Lenders and Participants interposed between
the Fund and the corporate borrower (the "Borrower"), together with Agent
Banks, are referred herein as "Intermediate Participants." The Fund also
may purchase a participation interest in a portion of the rights of an
Intermediate Participant, which would not establish any direct relationship
between the Fund and the Borrower. In such cases, the Fund would be
required to rely on the Intermediate Participant that sold the
participation interest not only for the enforcement of the Fund's rights
against the Borrower but also for the receipt and processing of payments
due to the Fund under the security. Because it may be necessary to assert
through an Intermediate Participant such rights as may exist against the
Borrower, in the event the Borrower fails to pay principal and interest
when due, the Fund may be subject to delays, expenses and risks that are
greater than those that would be involved if the Fund would enforce its
rights directly against the Borrower. Moreover, under the terms of a
participation interest, the Fund may be regarded as a creditor of the
Intermediate Participant (rather than of the Borrower), so that the Fund
may also be subject to the risk that the Intermediate Participant may
become insolvent. Similar risks may arise with respect to the Agent Bank
if, for example, assets held by the Agent Bank for the benefit of the Fund
were determined by the appropriate regulatory authority or court to be
subject to the claims of the Agent Bank's creditors. In such case, the
Fund might incur certain costs and delays in realizing payment in
connection with the participation interest or suffer a loss of principal
and/or interest. Further, in the event of the bankruptcy or insolvency of
the Borrower, the obligation of the Borrower to repay the loan may be
subject to certain defenses that can be asserted by such Borrower as a
result of improper conduct by the Agent Bank or Intermediate Participant.
Municipal Obligations. (Dreyfus High Yield Funds and Dreyfus
Strategic Income Fund only) Municipal obligations generally include debt
obligations issued to obtain funds for various public purposes as well as
certain industrial development bonds issued by or on behalf of public
authorities. Municipal obligations are classified as general obligation
bonds, revenue bonds and notes. General obligation bonds are secured by
the issuer's pledge of its faith, credit and taxing power for the payment
of principal and interest. Revenue bonds are payable from the revenue
derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise or other specific revenue
source, but not from the general taxing power. Industrial development
bonds, in most cases, are revenue bonds that generally do not carry the
pledge of the credit of the issuing municipality, but generally are
guaranteed by the corporate entity on whose behalf they are issued. Notes
are short-term instruments which are obligations of the issuing
municipalities or agencies and are sold in anticipation of a bond sale,
collection of taxes or receipt of other revenues. Municipal obligations
include municipal lease/purchase agreements which are similar to
installment purchase contracts for property or equipment issued by
municipalities.
Mortgage-Related Securities. (Dreyfus High Yield Funds and Dreyfus
Strategic Income Fund only)
Government-Agency Securities--Mortgage-related securities issued by the
Government National Mortgage Association ("GNMA") include GNMA Mortgage
Pass-Through Certificates (also known as "Ginnie Maes") which are
guaranteed as to the timely payment of principal and interest by GNMA and
such guarantee is backed by the full faith and credit of the United States.
GNMA is a wholly-owned U.S. Government corporation within the Department of
Housing and Urban Development. GNMA certificates also are supported by the
authority of GNMA to borrow funds from the U.S. Treasury to make payments
under its guarantee.
Government-Related Securities--Mortgage-related securities issued by the
Federal National Mortgage Association ("FNMA") include FNMA Guaranteed
Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are
solely the obligations of FNMA and are not backed by or entitled to the
full faith and credit of the United States. FNMA is a government-sponsored
organization owned entirely by private stockholders. Fannie Maes are
guaranteed as to timely payment of principal and interest by FNMA.
Mortgage-related securities issued by the Federal Home Loan Mortgage
Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates
(also known as "Freddie Macs" or "PCs"). FHLMC is a corporate
instrumentality of the United States created pursuant to an Act of
Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs
are not guaranteed by the United States or by any Federal Home Loan Bank
and do not constitute a debt or obligation of the United States or of any
Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment
of interest, which is guaranteed by FHLMC. FHLMC guarantees either
ultimate collection or timely payment of all principal payments on the
underlying mortgage loans. When FHLMC does not guarantee timely payment of
principal, FHLMC may remit the amount due on account of its guarantee of
ultimate payment of principal at any time after default on an underlying
mortgage, but in no event later than one year after it becomes payable.
Private Entity Securities--These mortgage-related securities are issued by
commercial banks, savings and loan institutions, mortgage bankers, private
mortgage insurance companies and other non-governmental issuers. Timely
payment of principal and interest on mortgage-related securities backed by
pools created by non-governmental issuers often is supported partially by
various forms of insurance or guarantees, including individual loan, title,
pool and hazard insurance. The insurance and guarantees are issued by
government entities, private insurers and the mortgage poolers. There can
be no assurance that the private insurers or mortgage poolers can meet
their obligations under the policies, so that if the issuers default on
their obligations the holders of the security could sustain a loss. No
insurance or guarantee covers the Fund or the price of the Fund's shares.
Mortgage-related securities issued by non-governmental issuers generally
offer a higher rate of interest than government-agency and government-
related securities because there are no direct or indirect government
guarantees of payment.
Foreign Government Obligations; Securities of Supranational Entities.
(Dreyfus High Yield Funds and Dreyfus Strategic Income Fund only) The Fund
may invest in obligations issued or guaranteed by one or more foreign
governments or any of their political subdivisions, agencies or
instrumentalities that are determined by the Manager to be of comparable
quality to the other obligations in which the Fund may invest. Such
securities also include debt obligations of supranational entities.
Supranational entities include international organizations designated or
supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Examples include the International Bank for Reconstruction and
Development (the World Bank), the European Coal and Steel Community, the
Asian Development Bank and the InterAmerican Development Bank.
Zero Coupon Securities. (Dreyfus High Yield Funds and Dreyfus
Strategic Income Fund only) The Fund may invest in zero coupon U.S.
Treasury securities, which are Treasury Notes and Bonds that have been
stripped of their unmatured interest coupons, the coupons themselves and
receipts or certificates representing interests in such stripped debt
obligations and coupons. Zero coupon securities also are issued by
corporations and financial institutions which constitute a proportionate
ownership of the issuer's pool of underlying U.S. Treasury securities. A
zero coupon security pays no interest to its holder during its life and is
sold at a discount to its face value at maturity. The market prices of
zero coupon securities generally are more volatile than the market prices
of securities that pay interest periodically and are likely to respond to a
greater degree to changes in interest rates than non-zero coupon securities
having similar maturities and credit qualities.
Management Policies
Portfolio Maturity. (Dreyfus Short Term High Yield Fund only) Under
normal market conditions, the average effective portfolio maturity of the
Fund is expected to be three years to less. For purposes of calculating
average effective portfolio maturity, a security that is subject to
redemption at the option of the issuer on a particular date (the "call
date") which is prior to the security's stated maturity may be deemed to
mature on the call date rather than on its stated maturity date. The call
date of a security will be used to calculate average effective portfolio
maturity when the Manager reasonably anticipates, based upon information
available to it, that the issuer will exercise its right to redeem the
security. The Manager may base its conclusion on such factors as the
interest rate paid on the security compared to prevailing market rates, the
amount of cash available to the issuer of the security, events affecting
the issuer of the security, and other factors that may compel or make it
advantageous for the issuer to redeem a security prior to its stated
maturity.
Leverage. (Dreyfus High Yield Funds and Dreyfus Strategic Income Fund
only) For borrowings for investment purposes, the Investment Company Act
of 1940, as amended (the "1940 Act"), requires the Fund to maintain
continuous asset coverage (that is, total assets including borrowings, less
liabilities exclusive of borrowings) of 300% of the amount borrowed. If
the required coverage should decline as a result of market fluctuations or
other reasons, the Fund may be required to sell some of its portfolio
securities within three days to reduce the amount of its borrowings and
restore the 300% asset coverage, even though it may be disadvantageous from
an investment standpoint to sell securities at that time. The Fund also
may be required to maintain minimum average balances in connection with
such borrowing or pay a commitment or other fee to maintain a line of
credit; either of these requirements would increase the cost of borrowing
over the stated interest rate. To the extent the Fund enters into a
reverse repurchase agreement, the Fund will maintain in a segregated
custodial account cash or U.S. Government securities or other liquid debt
securities at least equal to the aggregate amount of its reverse repurchase
obligations, plus accrued interest, in certain cases, in accordance with
releases promulgated by the Securities and Exchange Commission. The
Securities and Exchange Commission views reverse repurchase transactions as
collateralized borrowings by the Fund.
Short-Selling. (All Funds) In these transactions, the Fund sells a
security it does not own in anticipation of a decline in the market value
of the security. To complete the transaction, the Fund must borrow the
security to make delivery to the buyer. The Fund is obligated to replace
the security borrowed by purchasing it subsequently at the market price at
the time of replacement. The price at such time may be more or less than
the price at which the security was sold by the Fund, which would result in
a loss or gain, respectively.
Securities will not be sold short if, after effect is given to any
such short sale, the total market value of all securities sold short would
exceed 25% of the value of a Fund's net assets. The Fund may not sell
short the securities of any single issuer listed on a national securities
exchange to the extent of more than 5% of the value of the Fund's net
assets. The Fund may not make a short sale which results in the Fund
having sold short in the aggregate more than 5% of the outstanding
securities of any class of an issuer.
The Fund also may make short sales "against the box," in which the
Fund enters into a short sale of a security it owns in order to hedge an
unrealized gain on the security. At no time will more than 15% of the
value of the Fund's net assets be in deposits on short sales against the
box.
Until the Fund closes its short position or replaces the borrowed
security, it will: (a) maintain a segregated account, containing cash or
U.S. Government securities, at such a level that the amount deposited in
the account plus the amount deposited with the broker as collateral always
equals the current value of the security sold short; or (b) otherwise cover
its short position.
Lending Portfolio Securities. (Dreyfus High Yield Funds and Dreyfus
Strategic Income Fund only) The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. The Fund continues to
be entitled to payments in amounts equal to the interest, dividends or
other distributions payable on the loaned securities, which affords the
Fund an opportunity to earn interest on the amount of the loan and on the
loaned securities' collateral. Loans of portfolio securities may not
exceed 33-1/3% of the value of the Fund's total assets, and the Fund will
receive collateral consisting of cash, U.S. Government securities or
irrevocable letters of credit which will be maintained at all times in an
amount equal to at least 100% of the current market value of the loaned
securities. Such loans are terminable by the Fund at any time upon
specified notice. The Fund might experience risk of loss if the
institution with which it has engaged in a portfolio loan transaction
breaches its agreement with the Fund. In connection with its securities
lending transactions, the Fund may return to the borrower or a third party
which is unaffiliated with the Fund, and which is acting as a "placing
broker," a part of the interest earned from the investment of collateral
received for securities loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned:
(1) the Fund must receive at least 100% cash collateral from the borrower;
(2) the borrower must increase such collateral whenever the market value of
the securities rises above the level of such collateral; (3) the Fund must
be able to terminate the loan at any time; (4) the Fund must receive
reasonable interest on the loan, as well as any dividends, interest or
other distributions payable on the loaned securities, and any increase in
market value; (5) the Fund may pay only reasonable custodian fees in
connection with the loan; and (6) while voting rights on the loaned
securities may pass to the borrower, the Company's Board must terminate the
loan and regain the right to vote the securities if a material event
adversely affecting the investment occurs.
Derivatives. (All Funds) A Fund may invest in Derivatives (as
defined in the relevant Fund's Prospectus) for a variety of reasons,
including to hedge certain market risks, to provide a substitute for
purchasing or selling particular securities or to increase potential income
gain. Derivatives may provide a cheaper, quicker or more specifically
focused way for the Fund to invest than "traditional" securities would.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular Derivative and
the portfolio as a whole. Derivatives permit a Fund to increase or
decrease the level of risk, or change the character of the risk, to which
its portfolio is exposed in much the same way as the Fund can increase or
decrease the level of risk, or change the character of the risk, of its
portfolio by making investments in specific securities.
Derivatives may entail investment exposures that are greater than
their cost would suggest, meaning that a small investment in Derivatives
could have a large potential impact on a Fund's performance.
If a Fund invests in Derivatives at inappropriate times or judges
market conditions incorrectly, such investments may lower the Fund's return
or result in a loss. A Fund also could experience losses if its
Derivatives were poorly correlated with its other investments, or if the
Fund were unable to liquidate its position because of an illiquid secondary
market. The market for many Derivatives is, or suddenly can become,
illiquid. Changes in liquidity may result in significant, rapid and
unpredictable changes in the prices for Derivatives.
Derivatives may be purchased on established exchanges or through
privately negotiated transactions referred to as over-the-counter
Derivatives. Exchange-traded Derivatives generally are guaranteed by the
clearing agency which is the issuer or counterparty to such Derivatives.
This guarantee usually is supported by a daily payment system (i.e.,
variation margin requirements) operated by the clearing agency in order to
reduce overall credit risk. As a result, unless the clearing agency
defaults, there is relatively little counterparty credit risk associated
with Derivatives purchased on an exchange. By contrast, no clearing agency
guarantees over-the-counter Derivatives. Therefore, each party to an over-
the-counter Derivative bears the risk that the counterparty will default.
Accordingly, the Manager will consider the creditworthiness of
counterparties to over-the-counter Derivatives in the same manner as it
would review the credit quality of a security to be purchased by the Fund.
Over-the-counter Derivatives are less liquid than exchange-traded
Derivatives since the other party to the transaction may be the only
investor with sufficient understanding of the Derivative to be interested
in bidding for it.
Futures Transactions--In General. (All Funds) A Fund may enter into
futures contracts in U.S. domestic markets, such as the Chicago Board of
Trade and the International Monetary Market of the Chicago Mercantile
Exchange, or, if permitted in its Prospectus, on exchanges located outside
the United States, such as the London International Financial Futures
Exchange and the Sydney Futures Exchange Limited. Foreign markets may
offer advantages such as trading opportunities or arbitrage possibilities
not available in the United States. Foreign markets, however, may have
greater risk potential than domestic markets. For example, some foreign
exchanges are principal markets so that no common clearing facility exists
and an investor may look only to the broker for performance of the
contract. In addition, any profits that a Fund might realize in trading
could be eliminated by adverse changes in the exchange rate, or the Fund
could incur losses as a result of those changes. Transactions on foreign
exchanges may include both commodities which are traded on domestic
exchanges and those which are not. Unlike trading on domestic commodity
exchanges, trading on foreign commodity exchanges is not regulated by the
Commodity Futures Trading Commission.
Engaging in these transactions involves risk of loss to a Fund which
could adversely affect the value of the Fund's net assets. Although each
Fund intends to purchase or sell futures contracts only if there is an
active market for such contracts, no assurance can be given that a liquid
market will exist for any particular contract at any particular time. Many
futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the
daily limit has been reached in a particular contract, no trades may be
made that day at a price beyond that limit or trading may be suspended for
specified periods during the trading day. Futures contract prices could
move to the limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of futures positions and
potentially subjecting the Fund to substantial losses.
Successful use of futures by a Fund also is subject to the ability of
the Manager to predict correctly movements in the direction of the relevant
market and, to the extent the transaction is entered into for hedging
purposes, to ascertain the appropriate correlation between the transaction
being hedged and the price movements of the futures contract. For example,
if a Fund uses futures to hedge against the possibility of a decline in the
market value of securities held in its portfolio and the prices of such
securities instead increase, the Fund will lose part or all of the benefit
of the increased value of securities which it has hedged because it will
have offsetting losses in its futures positions. Furthermore, if in such
circumstances the Fund has insufficient cash, it may have to sell
securities to meet daily variation margin requirements. A Fund may have to
sell such securities at a time when it may be disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities
and Exchange Commission, a Fund may be required to segregate cash or high
quality money market instruments in connection with its commodities
transactions in an amount generally equal to the value of the underlying
commodity. The segregation of such assets will have the effect of limiting
a Fund's ability otherwise to invest those assets.
Specific Futures Transactions. A Fund may purchase and sell interest rate
futures contracts. An interest rate future obligates the Fund to purchase
or sell an amount of a specific debt security at a future date at a
specific price.
A Fund may purchase and sell currency futures. A foreign currency
future obligates the Fund to purchase or sell an amount of a specific
currency at a future date at a specific price.
Dreyfus Equity Dividend Fund may purchase and sell stock index futures
contracts. A stock index future obligates the Fund to pay or receive an
amount of cash equal to a fixed dollar amount specified in the futures
contract multiplied by the difference between the settlement price of the
contract on the contract's last trading day and the value of the index
based on the stock prices of the securities that comprise it at the opening
of trading in such securities on the next business day.
Interest Rate Swaps. (Dreyfus High Yield Funds only) Interest rate swaps
involve the exchange by the Fund with another party of their respective
commitments to pay or receive interest (for example, an exchange of
floating rate payments for fixed-rate payments). The exchange commitments
can involve payments to be made in the same currency or in different
currencies. The use of interest rate swaps is a highly specialized
activity which involves investment techniques and risks different from
those associated with ordinary portfolio security transactions. If the
Manager is incorrect in its forecasts of market values, interest rates and
other applicable factors, the investment performance of the Fund would
diminish compared with what it would have been if these investment
techniques were not used. Moreover, even if the Manager is correct in its
forecasts, there is a risk that the swap position may correlate imperfectly
with the price of the asset or liability being hedged. There is no limit
on the amount of interest rate swap transactions that may be entered into
by the Fund. These transactions do not involve the delivery of securities
or other underlying assets or principal. Accordingly, the risk of loss
with respect to interest rate swaps is limited to the net amount of
interest payments that the Fund is contractually obligated to make. If the
other party to an interest rate swap defaults, the Fund's risk of loss
consists of the net amount of interest payments that the Fund contractually
is entitled to receive.
Credit Derivatives. (Dreyfus High Yield Funds only) The Fund may engage
in credit derivative transactions. There are two broad categories of
credit derivatives: default price risk derivatives and market spread
derivatives. Default price risk derivatives are linked to the price of
reference securities or loans after a default by the issuer or borrower,
respectively. Market spread derivatives are based on the risk that changes
in market factors, such as credit spreads, can cause a decline in the value
of a security, loan or index. There are three basic transactional forms
for credit derivatives: swaps, options and structured instruments. The
use of credit derivatives is a highly specialized activity which involves
strategies and risks different from those associated with ordinary
portfolio security transactions. If the Manager is incorrect in its
forecasts of default risks, market spreads or other applicable factors, the
investment performance of the Fund would diminish compared with what it
would have been if these techniques were not used. Moreover, even if the
Manager is correct in its forecasts, there is a risk that a credit
derivative position may correlate imperfectly with the price of the asset
or liability being hedged. There is no limit on the amount of credit
derivative transactions that may be entered into by the Fund. The Fund's
risk of loss in a credit derivative transaction varies with the form of the
transaction. For example, if the Fund purchases a default option on a
security, and if no default occurs with respect to the security, the Fund's
loss is limited to the premium it paid for the default option. In
contrast, if there is a default by the grantor of a default option, the
Fund's loss will include both the premium that it paid for the option and
the decline in value of the underlying security that the default option
hedged.
Options--In General. (All Funds) A Fund may purchase and write (i.e.,
sell) call or put options with respect to specific securities. A call
option gives the purchaser of the option the right to buy, and obligates
the writer to sell, the underlying security or securities at the exercise
price at any time during the option period, or at a specific date.
Conversely, a put option gives the purchaser of the option the right to
sell, and obligates the writer to buy, the underlying security or
securities at the exercise price at any time during the option period, or
at a specific date.
A covered call option written by a Fund is a call option with respect
to which a Fund owns the underlying security or otherwise covers the
transaction by segregating cash or other securities. A put option written
by a Fund is covered when, among other things, cash or liquid securities
having a value equal to or greater than the exercise price of the option
are placed in a segregated account with the Fund's custodian to fulfill the
obligation undertaken. The principal reason for writing covered call and
put options is to realize, through the receipt of premiums, a greater
return than would be realized on the underlying securities alone. A Fund
receives a premium from writing covered call or put options which it
retains whether or not the option is exercised.
There is no assurance that sufficient trading interest to create a
liquid secondary market on a securities exchange will exist for any
particular option or at any particular time, and for some options no such
secondary market may exist. A liquid secondary market in an option may
cease to exist for a variety of reasons. In the past, for example, higher
than anticipated trading activity or order flow, or other unforeseen
events, at times have rendered certain of the clearing facilities
inadequate and resulted in the institution of special procedures, such as
trading rotations, restrictions on certain types of orders or trading halts
or suspensions in one or more options. There can be no assurance that
similar events, or events that may otherwise interfere with the timely
execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If,
as a covered call option writer, the Fund is unable to effect a closing
purchase transaction in a secondary market, it will not be able to sell the
underlying security until the option expires or it delivers the underlying
security upon exercise or it otherwise covers its position.
Specific Options Transactions. A Fund may purchase and sell call and put
options on foreign currency. These options convey the right to buy or sell
the underlying currency at a price which is expected to be lower or higher
than the spot price of the currency at the time the option is exercised or
expires.
Dreyfus Equity Dividend Fund may purchase and sell call and put
options in respect of specific securities (or groups or "baskets" of
specific securities) or stock indices listed on national securities
exchanges or traded in the over-the-counter market. An option on a stock
index is similar to an option in respect of specific securities, except
that settlement does not occur by delivery of the securities comprising the
index. Instead, the option holder receives an amount of cash if the
closing level of the stock index upon which the option is based is greater
than, in the case of a call, or less than, in the case of a put, the
exercise price of the option. Thus, the effectiveness of purchasing or
writing stock index options will depend upon price movements in the level
of the index rather than the price of a particular stock.
Dreyfus Equity Dividend Fund and Dreyfus High Yield Funds also may
purchase cash-settled options on equity index swaps and interest rate
swaps, respectively, in pursuit of its investment objective. Equity index
swaps involve the exchange by the Fund with another party of cash flows
based upon the performance of an index or a portion of an index of
securities which usually includes dividends. A cash-settled option on a
swap gives the purchaser the right, but not the obligation, in return for
the premium paid, to receive an amount of cash equal to the value of the
underlying swap as of the exercise date. These options typically are
purchased in privately negotiated transactions from financial institutions,
including securities brokerage firms.
Successful use by a Fund of options will be subject to the ability of
the Manager to predict correctly movements in the prices of individual
stocks, the stock market generally, foreign currencies, or interest rates.
To the extent such predictions are incorrect, a Fund may incur losses.
Future Developments. A Fund may take advantage of opportunities in
the area of options and futures contracts and options on futures contracts
and any other Derivatives which are not presently contemplated for use by
the Fund or which are not currently available but which may be developed,
to the extent such opportunities are both consistent with the Fund's
investment objective and legally permissible for the Fund. Before entering
into such transactions or making any such investment, the Fund will provide
appropriate disclosure in its Prospectus or Statement of Additional
Information.
Forward Commitments. (All Funds) A Fund may purchase securities on a
forward commitment or when-issued basis, which means that delivery and
payment take place a number of days after the date of the commitment to
purchase. The payment obligation and the interest rate receivables on a
forward commitment or when-issued security are fixed when the Fund enters
into the commitment, but a Fund does not make payment until it receives
delivery from the counterparty. A Fund will commit to purchase such
securities only with the intention of actually acquiring the securities,
but the Fund may sell these securities before the settlement date if it is
deemed advisable. A segregated account of the Fund consisting of cash,
cash equivalents or U.S. Government securities or other liquid debt
securities at least equal at all times to the amount of the commitments
will be established and maintained at the Fund's custodian bank.
Securities purchased on a forward commitment or when-issued basis are
subject to changes in value (generally changing in the same way, i.e.,
appreciating when interest rates decline and depreciating when interest
rates rise) based upon the public's perception of the creditworthiness of
the issuer and changes, real or anticipated, in the level of interest
rates. Securities purchased on a forward commitment or when-issued basis
may expose a Fund to risks because they may experience such fluctuations
prior to their actual delivery. Purchasing securities on a when-issued
basis can involve the additional risk that the yield available in the
market when the delivery takes place actually may be higher than that
obtained in the transaction itself. Purchasing securities on a forward
commitment or when-issued basis when a Fund is fully or almost fully
invested may result in greater potential fluctuation in the value of the
Fund's net assets and its net asset value per share.
Investment Considerations and Risks
Lower Rated Securities. (Dreyfus High Yield Funds and Dreyfus
Strategic Income Fund only) Each of these Funds is permitted to invest in
securities rated Ba or lower by Moody's Investors Service, Inc. ("Moody's")
or BB or lower by Standard & Poor's Ratings Group ("S&P"), Fitch Investors
Service, L.P. ("Fitch") and Duff & Phelps Credit Rating Co. ("Duff" and
with Moody's, S&P and Fitch, the "Rating Agencies"). Dreyfus Strategic
Income Fund is permitted to invest in securities rated as low as Caa by
Moody's or CCC by S&P. Dreyfus High Yield Funds each are permitted to
invest in securities as low as the lowest rating assigned by the Rating
Agencies. Such securities, though higher yielding, are characterized by
risk. See "Description of the Fund--Investment Considerations and Risks--
High Yield-Lower Rated Securities" in each Prospectus for Dreyfus High
Yield Funds and "Description of the Fund--Risk Factors--Lower Rated
Securities" in the Prospectus for Dreyfus Strategic Income Fund for a
discussion of certain risks and the "Appendix" for a general description of
the Rating Agencies' ratings. Although ratings may be useful in evaluating
the safety of interest and principal payments, they do not evaluate the
market value risk of these securities. The Fund will rely on the Manager's
judgment, analysis and experience in evaluating the creditworthiness of an
issuer.
Investors should be aware that the market values of many of these
securities tend to be more sensitive to economic conditions than are higher
rated securities. These securities generally are considered by the Rating
Agencies to be predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation
and generally will involve more credit risk than securities in the higher
rating categories.
Companies that issue certain of these securities often are highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risk associated with acquiring the securities of
such issuers generally is greater than is the case with the higher rated
securities. For example, during an economic downturn or a sustained period
of rising interest rates, highly leveraged issuers of these securities may
not have sufficient revenues to meet their interest payment obligations.
The issuer's ability to service its debt obligations also may be affected
adversely by specific corporate developments, forecasts, or the
unavailability of additional financing. The risk of loss because of
default by the issuer is significantly greater for the holders of these
securities because such securities generally are unsecured and often are
subordinated to other creditors of the issuer.
Because there is no established retail secondary market for many of
these securities, the Fund anticipates that such securities could be sold
only to a limited number of dealers or institutional investors. To the
extent a secondary trading market for these securities does exist, it
generally is not as liquid as the secondary market for higher rated
securities. The lack of a liquid secondary market may have an adverse
impact on market price and yield and the Fund's ability to dispose of
particular issues when necessary to meet the Fund's liquidity needs or in
response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. The lack of a liquid secondary market for
certain securities also may make it more difficult for the Fund to obtain
accurate market quotations for purposes of valuing the Fund's portfolio and
calculating its net asset value. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of these securities. In such cases, judgment may play
a greater role in valuation because less reliable, objective data may be
available.
These securities may be particularly susceptible to economic
downturns. It is likely that an economic recession could disrupt severely
the market for such securities and may have an adverse impact on the value
of such securities. In addition, it is likely that any such economic
downturn could adversely affect the ability of the issuers of such
securities to repay principal and pay interest thereon and increase the
incidence of default for such securities.
A Fund may acquire these securities during an initial offering. Such
securities may involve special risks because they are new issues. No Fund
has an arrangement with any person concerning the acquisition of such
securities, and the Manager will review carefully the credit and other
characteristics pertinent to such new issues.
Investment Restrictions
Dreyfus Equity Dividend Fund and Dreyfus High Yield Funds only. Each
of these Funds has adopted investment restrictions numbered 1 through 10 as
fundamental policies, which cannot be changed, as to a Fund, without
approval by the holders of a majority (as defined in the 1940 Act) of the
Fund's outstanding voting shares. Investment restrictions numbered 11
through 16 are not fundamental policies and may be changed by vote of a
majority of the Company's Board members at any time. None of these Funds
may:
1. Invest more than 5% of its assets in the obligations of any
single issuer, except that up to 25% of the value of the Fund's total
assets may be invested, and securities issued or guaranteed by the U.S.
Government, or its agencies or instrumentalities may be purchased, without
regard to any such limitation.
2. Hold more than 10% of the outstanding voting securities of any
single issuer. This Investment Restriction applies only with respect to
75% of the Fund's total assets.
3. Invest more than 25% of the value of its total assets in the
securities of issuers in any single industry, provided that there shall be
no limitation on the purchase of obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.
4. Invest in commodities, except that the Fund may purchase and sell
options, forward contracts, futures contracts, including those related to
indices, and options on futures contracts or indices.
5. Purchase, hold or deal in real estate, or oil, gas or other
mineral leases or exploration or development programs, but the Fund may
purchase and sell securities that are secured by real estate or issued by
companies that invest or deal in real estate or real estate investment
trusts.
6. Borrow money, except to the extent permitted under the 1940 Act
(which currently limits borrowing to no more than 33-1/3% of the value of
the Fund's total assets). For purposes of this Investment Restriction, the
entry into options, forward contracts, futures contracts, including those
relating to indices, and options on futures contracts or indices shall not
constitute borrowing.
) Make loans to others, except through the purchase of debt
obligations and the entry into repurchase agreements. However, the Fund
may lend its portfolio securities in an amount not to exceed 33-1/3% of the
value of its total assets. Any loans of portfolio securities will be made
according to guidelines established by the Securities and Exchange
Commission and the Company's Board.
8. Act as an underwriter of securities of other issuers, except to
the extent the Fund may be deemed an underwriter under the Securities Act
of 1933, as amended, by virtue of disposing of portfolio securities.
9. Issue any senior security (as such term is defined in Section
18(f) of the 1940 Act), except to the extent the activities permitted in
Investment Restriction Nos. 4, 6, 13 and 14 may be deemed to give rise to a
senior security.
10. Purchase securities on margin, but the Fund may make margin
deposits in connection with transactions in options, forward contracts,
futures contracts, and options on futures contracts.
11. Purchase securities of any company having less than three years'
continuous operations (including operations of any predecessor) if such
purchase would cause the value of the Fund's investments in all such
companies to exceed 5% of the value of its total assets.
12. Invest in the securities of a company for the purpose of
exercising management or control, but the Fund will vote the securities it
owns in its portfolio as a shareholder in accordance with its views.
13. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
purchase of securities on a when-issued or forward commitment basis and the
deposit of assets in escrow in connection with writing covered put and call
options and collateral and initial or variation margin arrangements with
respect to options, forward contracts, futures contracts, and options on
futures contracts.
14. Purchase, sell or write puts, calls or combinations thereof,
except as described in the relevant Fund's Prospectus and Statement of
Additional Information.
15. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid, if,
in the aggregate, more than 15% of the value of the Fund's net assets would
be so invested.
16. Purchase securities of other investment companies, except to the
extent permitted under the 1940 Act.
* * *
Dreyfus Strategic Income Fund only. The Fund has adopted investment
restrictions numbered 1 through 14 as fundamental policies, which cannot be
changed without approval by the holders of a majority (as defined in the
1940 Act) of the Fund's outstanding voting shares. Investment restriction
number 15 is not a fundamental policy and may be changed by vote of a
majority of the Company's Board members at any time. The Fund may not:
1. Purchase the securities of any issuer (other than a bank) if such
purchase would cause more than 5% of the value of its total assets to be
invested in securities of such issuer, or invest more than 15% of its
assets in the obligations of any one bank, except that up to 25% of the
value of the Fund's total assets may be invested, and securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities may
be purchased, without regard to such limitations. Notwithstanding the
foregoing, based on rules of the Securities and Exchange Commission, the
Fund will not invest more than 5% of its assets in the obligations of any
one bank, except as otherwise provided in such rules.
2. Purchase the securities of any issuer if such purchase would
cause the Fund to hold more than 10% of the outstanding voting securities
of such issuer. This restriction applies only with respect to 75% of the
Fund's assets.
3. Purchase securities of any company having less than three years'
continuous operations (including operations of any predecessors) if such
purchase would cause the value of the Fund's investments in all such
companies to exceed 5% of the value of its total assets.
4. Purchase securities of closed-end investment companies except (a)
in the open market where no commission except the ordinary broker's
commission is paid, which purchases are limited to a maximum of (i) 3% of
the total voting stock of any one closed-end investment company, (ii) 5% of
its net assets with respect to any one closed-end investment company and
(iii) 10% of its net assets in the aggregate, or (b) those received as part
of a merger or consolidation. The Fund may not purchase the securities of
open-end investment companies other than itself.
5. Purchase or retain the securities of any issuer if the officers,
Trustees or Directors of the Fund or the Manager individually own
beneficially more than 1/2 of 1% of the securities of such issuer or
together own beneficially more than 5% of the securities of such issuer.
6. Purchase, hold or deal in real estate, or oil and gas interests,
but the Fund may purchase and sell securities that are secured by real
estate and may purchase and sell securities issued by companies that invest
or deal in real estate.
7. Invest in commodities, except that the Fund may purchase and sell
futures contracts, including those relating to indices, and options on
futures contracts or indices.
8. Borrow money, except to the extent permitted under the 1940 Act
(which currently limits borrowing to no more than 33-1/3% of the value of
the Fund's total assets). For purposes of this investment restriction, the
entry into options, futures contracts, including those relating to indices,
and options on futures contracts or indices shall not constitute borrowing.
9. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
deposit of assets in escrow in connection with writing covered put and call
options and the purchase of securities on a when-issued or delayed-delivery
basis and collateral and initial or variation margin arrangements with
respect to options, futures contracts, including those relating to indices
and options on futures contracts or indices.
10. Make loans to others except through the purchase of debt
obligations or the entry into repurchase agreements. However, the Fund may
lend its portfolio securities in an amount not to exceed 33-1/3% of the
value of its total assets. Any loans of portfolio securities will be made
according to guidelines established by the Securities and Exchange
Commission and the Fund's Board members.
11. Act as an underwriter of securities of other issuers except to
the extent the Fund may be deemed an underwriter under the Securities Act
of 1933, as amended, by virtue of disposing of portfolio securities.
12. Invest in the securities of a company for the purpose of
exercising management or control, but the Fund will vote the securities it
owns in its portfolio as a shareholder in accordance with its views.
13. Purchase, sell or write puts, calls or combinations thereof,
except as described in the Fund's Prospectus and this Statement of
Additional Information.
14. Invest more than 25% of its assets in investments in any
particular industry or industries (including banking), provided that, when
the Fund has adopted a temporary defensive posture, there shall be no
limitation on the purchase of obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
15. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid, if,
in the aggregate, more than 15% of the value of the Fund's net assets would
be so invested.
While not fundamental policies, Dreyfus Strategic Income Fund has
undertaken, so as to permit the sale of Fund shares in certain states, not
to invest in oil, gas and other mineral leases or in real estate limited
partnerships, and to treat securities of foreign issuers which are not
listed on a recognized domestic or foreign exchange and for which a bona
fide market does not exist at the time of purchase or subsequent valuation
as not readily marketable.
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from a change in values or assets will
not constitute a violation of
such restriction.
The Company may make commitments more restrictive than the
restrictions listed above so as to permit the sale of Fund shares in
certain states. Should the Company determine that a commitment is no
longer in the best interest of the Fund and its shareholders, the Company
reserves the right to revoke the commitment by terminating the sale of such
Fund's shares in the state involved.
MANAGEMENT OF THE COMPANY
Board members and officers of the Company, together with information
as to their principal business occupations during at least the last five
years, are shown below. Each Board member who is deemed to be an
"interested person" of the Company, as defined in the 1940 Act, is
indicated by an asterisk.
Board Members of the Company
*JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman
of the Board of various funds in the Dreyfus Family of Funds. He is
also Chairman of the Board of Directors of Noel Group, Inc., a venture
capital company; and a director of The Muscular Dystrophy Association,
HealthPlan Services Corporation, Belding Heminway Company, Inc., a
manufacturer and marketer of industrial threads, specialty yarns, home
furnishings and fabrics, Curtis Industries, Inc., a national
distributor of security products, chemicals, and automotive and other
hardware, and Staffing Resources, Inc. For more than five years
prior, he was President, a director and, until August 1994, Chief
Operating Officer of the Manager and Executive Vice President and a
director of Dreyfus Service Corporation, a wholly-owned subsidiary of
the Manager and, until August 24, 1994, the Company's distributor.
From August 1994 until December 31, 1994, he was a director of Mellon
Bank Corporation. He is 52 years old and his address is 200 Park
Avenue, New York, New York 10166.
*DAVID W. BURKE, Board Member. Chairman of the Broadcasting Board of
Governors, an independent board within the United States Information
Agency, since August 1995. From 1994 to February 1995, Mr. Burke was
a Consultant to the Manager, and from October 1990 to August 1994, he
was a Vice President and Chief Administrative Officer of the Manager.
From 1977 to 1990, Mr. Burke was involved in the management of
national television news, as Vice President and Executive Vice
President of ABC News, and subsequently as President of CBS News. He
is 59 years old and his address is Box 654, Eastham, Massachusetts
02642.
ROSALIND GERSTEN JACOBS, Board Member. Director of Merchandise and
Marketing for Corporate Property Investors, a real estate investment
company. From 1974 to 1976, she was owner and manager of a
merchandise and marketing consulting firm. Prior to 1974, she was a
Vice President of Macy's, New York. She is 70 years old and her
address is c/o Corporate Property Investors, 305 East 47th Street, New
York, New York 10017.
DIANE DUNST, Board Member. Since January 1992, President of Diane Dunst
Promotion, Inc., a full service promotion agency. From January 1989
to January 1992, Director of Promotion Services, Lear's Magazine.
From 1985 to January 1989, she was Sales Promotion Manager of Elle
Magazine. Ms. Dunst is 56 years old and her address is 1172 Park
Avenue, New York, New York 10128.
JAY I. MELTZER, Board Member. Physician engaged in private practice
specializing in internal medicine. He is also a member of the
Advisory Board of the Section of Society and Medicine, College of
Physicians and Surgeons, Columbia University and a Clinical Professor
of Medicine, Department of Medicine, Columbia University College of
Physicians and Surgeons. He is 67 years old and his address is 903
Park Avenue, New York, New York 10021.
DANIEL ROSE, Board Member. President and Chief Executive Officer of Rose
Associates, Inc., a New York based real estate development and
management firm. In July 1994, Mr. Rose received a Presidential
appointment to serve as a Director of the Baltic-American Enterprise
Fund, which will make equity investments and loans and provide
technical business assistance to new business concerns in the Baltic
states. He is also Chairman of the Housing Committee of the Real
Estate Board of New York, Inc., and a Board Member of Corporate
Property Investors, a real estate investment company. He is 66 years
old and his address is c/o Rose Associates, Inc., 200 Madison Avenue,
New York, New York 10016.
WARREN B. RUDMAN, Board Member. Since January 1993, Partner in the law
firm Paul, Weiss, Rifkind, Wharton & Garrison, and since May 1995, a
director of Collins & Aikman Corporation. Also, since January 1993,
Mr. Rudman has served as a director of Chubb Corporation and of the
Raytheon Company, and as Vice Chairman of the President's Foreign
Intelligence Advisory Board. From January 1981 to January 1993, Mr.
Rudman served as a United States Senator from the State of New
Hampshire. From January 1993 to December 1994, Mr. Rudman served as
Chairman of the Federal Reserve Bank of Boston. Since 1988, Mr.
Rudman has served as a trustee of Boston College and since 1986 as a
member of the Senior Advisory Board of the Institute of Politics of
the Kennedy School of Government at Harvard University. He is 65
years old and his address is c/o Paul, Weiss, Rifkind, Wharton &
Garrison, 1615 L Street, N.W., Suite 1300, Washington, D.C. 20036.
SANDER VANOCUR, Board Member. Since January 1994, Mr. Vanocur has served
as Visiting Professional Scholar at the Freedom Forum First Amendment
Center at Vanderbilt University. Since January 1992, Mr. Vanocur has
been the President of Old Owl Communications, a full-service
communications firm and, since November 1989, he has served as a
Director of the Damon Runyon-Walter Winchell Cancer Research Fund.
From June 1986 to December 1991, he was a Senior Correspondent of ABC
News and, from October 1977 to December 1991, he was Anchor of the ABC
News program "Business World," a weekly business program on the ABC
television network. Mr. Vanocur joined ABC News in 1977. He is 68
years old and his address is 2928 P Street, N.W., Washington, D.C.
20007.
Ordinarily, meetings of shareholders for the purpose of electing Board
members will not be held unless and until such time as less than a majority
of the Board members holding office have been elected by shareholders, at
which time the Board members then in office will call a shareholders'
meeting for the election of Board members. Under the 1940 Act,
shareholders of record of not less than two-thirds of the outstanding
shares of the Fund may remove a Board member through a declaration in
writing or by vote cast in person or by proxy at a meeting called for that
purpose. The Board will call a meeting of shareholders for the purpose of
voting upon the question of removal of any Board member when requested in
writing to do so by the shareholders of record of not less than 10% of the
Fund's outstanding shares.
For so long as the Company's plan described in the section captioned
"Shareholder Services Plan" remains in effect, the Board members who are
not "interested persons" of the Company, as defined in the 1940 Act, will
be selected and nominated by the Board members who are not "interested
persons" of the Company.
The Company typically pays its Board members an annual retainer and a
per meeting fee and reimburses them for their expenses. The Chairman of
the Board receives an additional 25% of such compensation. Emeritus Board
members would be entitled to receive an annual retainer and a per meeting
fee of one-half the amount paid to them as Board members. The aggregate
amount of compensation paid to each Board member by the Company for the
fiscal year ended October 31, 1995, and by all other funds in the Dreyfus
Family of Funds for which such person is a Board member (the number of
which is set forth in parenthesis next to each Board member's total
compensation) for the year ended December 31, 1995, were as follows:
Total Compensation
From Company and
Aggregate Fund Complex
Name of Board Compensation Paid to Board
Member From Company* Member
Joseph S. DiMartino $3,528** $ 448,618 (93)
David W. Burke $3,750 $ 253,654 (52)
Rosalind Gersten Jacobs $3,750 $ 92,500 (20)
Diane Dunst $3,750 $ 39,000 (9)
Jay I. Meltzer $3,500 $ 37,500 (9)
Daniel Rose $3,750 $ 80,250 (21)
Warren B. Rudman $3,750 $ 85,500 (17)
Sander Vanocur $3,750 $ 79,750 (21)
* Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $514 for all Board members as a group.
** Elected Chairman of the Board February 8, 1995.
Officers of the Company
MARIE E. CONNOLLY, President and Treasurer. President, Chief Executive
Officer and a director of the Distributor and an officer of other
investment companies advised or administered by the Manager. From
December 1991 to July 1994, she was President and Chief Compliance
Officer of Funds Distributor, Inc., the ultimate parent of which is
Boston Institutional Group, Inc. Prior to December 1991, she served
as Vice President and Controller, and later as Senior Vice President,
of The Boston Company Advisors, Inc. She is 38 years old.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President and
General Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From February 1992
to July 1994, he served as Counsel for The Boston Company Advisors,
Inc. From August 1990 to February 1992, he was employed as an
Associate at Ropes & Gray. He is 31 years old.
ELIZABETH BACHMAN, Vice President and Assistant Secretary. Assistant Vice
President of the Distributor and an officer of other investment
companies advised or administered by the Manager. She is 26 years
old.
JOSEPH F. TOWER, III, Vice President and Assistant Treasurer. Senior Vice
President, Treasurer and Chief Financial Officer of the Distributor
and an officer of other investment companies advised or administered
by the Manager. From July 1988 to August 1994, he was employed by The
Boston Company, Inc. where he held various management positions in the
Corporate Finance and Treasury areas. He is 33 years old.
RICHARD W. INGRAM, Vice President and Assistant Treasurer. Senior Vice
President and Director of Client Services and Treasury Operations of
Funds Distributor, Inc. and an officer of other investment companies
advised or administered by the Manager. From March 1994 to November
1995, Mr. Ingram was Vice President and Division Manager for First
Data Investor Services Group. From 1989 to 1994, Mr. Ingram was Vice
President, Assistant Treasurer and Tax Director - Mutual Funds of The
Boston Company. He is 40 years old.
MARY A. NELSON, Vice President and Assistant Treasurer. Vice President and
Manager of Treasury Services and Administration of Funds Distributor,
Inc. and an officer of other investment companies advised or
administered by the Manager. From September 1989 to July 1994, Ms.
Nelson was an Assistant Vice President and Client Manager for The
Boston Company. She is 32 years old.
DOUGLAS C. CONROY, Vice President and Assistant Treasurer. Supervisor of
Treasury Services and Administration of Funds Distributor, Inc. and an
officer of other investment companies advised or administered by the
Manager. From April 1993 to January 1995, Mr. Conroy was a Senior
Fund Accountant for Investors Bank & Trust Company. From December
1991 to March 1993, Mr. Conroy was employed as a Fund Accountant at
The Boston Company. He is 27 years old.
The address of each officer of the Company is 200 Park Avenue, New
York, New York 10166.
The Company's Board members and officers, as a group, owned less than
1% of each Fund's voting securities outstanding on August 23, 1996.
As of August 23, 1996, the following entity was known by the Company
to own 5% or more of the outstanding voting securities of Dreyfus Equity
Dividend Fund, Dreyfus High Yield Securities Fund and Dreyfus Short Term
High Yield Fund, respectively: Allomon Corporation, One Mellon Bank
Center, Pittsburgh, PA 15258 (80.85%, 45.20% and 96.91%, respectively).
Allomon Corporation is a Pennsylvania corporation and a subsidiary of
Mellon Bank Investments Corporation (the parent company of which is Mellon
Bank Corporation). As of such date, the following person was known by the
Company to own beneficially 5% or more of the outstanding voting securities
of Dreyfus High Yield Securities Fund: Mr. G.F. Knowles, Miami, FL (7.08%).
Also as of such date, the following person was known by the Company to own
beneficially 5% or more of the outstanding voting securities of Dreyfus
Equity Dividend Fund: Mr. M.N. Jacobs, Short Hills, NJ (7.71%). A
shareholder who beneficially owns, directly or indirectly, more than 25% of
a Fund's voting securities may be deemed a "control person" (as defined in
the 1940 Act) of the Fund.
MANAGEMENT AGREEMENT
The following information supplements and should be read in
conjunction with the section in each Fund's Prospectus entitled "Management
of the Fund."
Management Agreement. The Manager provides management services
pursuant to the Management Agreement (the "Agreement") dated August 24,
1994, as revised August 5, 1996, with the Company. As to each Fund, the
Agreement is subject to annual approval by (i) the Company's Board or (ii)
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of such Fund, provided that in either event the continuance also
is approved by a majority of the Board members who are not "interested
persons" (as defined in the 1940 Act) of the Company or the Manager, by
vote cast in person at a meeting called for the purpose of voting on such
approval. The Agreement was approved by shareholders of Dreyfus Strategic
Income Fund on August 3, 1994, and was last approved by the Company's
Board, including a majority of the Board members who are not "interested
persons" of any party to the Agreement, at a meeting held on August 5,
1996. As to each Fund, the Agreement is terminable without penalty, on 60
days notice, by the Company's Board or by vote of the holders of a majority
of such Fund's shares, or, on not less than 90 days notice, by the Manager.
The Agreement will terminate automatically, as to the relevant Fund, in the
event of its assignment (as defined in the 1940 Act).
The following persons are officers and/or directors of the Manager:
W. Keith Smith, Chairman of the Board; Christopher M. Condron, President,
Chief Executive Officer, Chief Operating Officer and a director; Stephen E.
Canter, Vice Chairman, Chief Investment Officer and a director; Lawrence S.
Kash, Vice Chairman--Distribution and a director; Philip L. Toia, Vice
Chairman--Operations and Administration and a director; William T.
Sandalls, Jr., Senior Vice President and Chief Financial Officer; Elie M.
Genadry, Vice President--Institutional Sales; William F. Glavin, Jr., Vice
President--Corporate Development; Mark N. Jacobs, Vice President, General
Counsel and Secretary; Patrice M. Kozlowski, Vice President--Corporate
Communications; Mary Beth Leibig, Vice President--Human Resources; Jeffrey
N. Nachman, Vice President--Mutual Fund Accounting; Andrew S. Wasser, Vice
President--Information Systems; Elvira Oslapas, Assistant Secretary; and
Mandell L. Berman, Frank V. Cahouet, Alvin E. Friedman, Lawrence M. Greene
and Julian M. Smerling, directors.
The Manager manages each Fund's investments in accordance with the
stated policies of such Fund, subject to the approval of the Company's
Board. The Manager is responsible for investment decisions, and provides
the Funds with portfolio managers who are authorized by the Board to
execute purchases and sales of securities. Dreyfus Equity Dividend Fund's
portfolio managers are Timothy Ghriskey and Donald Geogerian. The
portfolio managers for each Dreyfus High Yield Fund are Roger King and
Kevin McClintock. Dreyfus Strategic Income Fund's portfolio managers are
Kevin McClintock, Roger King and Garitt Kono. The Manager also maintains a
research department with a professional staff of portfolio managers and
securities analysts who provide research services for each Fund as well as
for other funds advised by the Manager. All purchases and sales are
reported for the Board's review at the meeting subsequent to such
transactions.
The Manager maintains office facilities on behalf of the Funds, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Funds. The Manager also may make such advertising and
promotional expenditures, using its own resources, as it from time to time
deems appropriate.
Expenses. All expenses incurred in the operation of the Company are
borne by the Company, except to the extent specifically assumed by the
Manager. The expenses borne by the Company include: organizational costs,
taxes, interest, loan commitment fees, interest and distributions paid on
securities sold short, brokerage fees and commissions, if any, fees of
Board members who are not officers, directors, employees or holders of 5%
or more of the outstanding voting securities of the Manager or any of its
affiliates, Securities and Exchange Commission fees, state Blue Sky
qualification fees, advisory fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of maintaining
the Company's existence, costs of independent pricing services, costs
attributable to investor services (including, without limitation, telephone
and personnel expenses), costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders, costs of shareholders' reports and
meetings, and any extraordinary expenses. Expenses attributable to a
particular Fund are charged against the assets of that Fund; other expenses
of the Company are allocated among the Funds on the basis determined by the
Board, including, but not limited to, proportionately in relation to the
net assets of each Fund.
As compensation for the Manager's services to the Company, the Company
has agreed to pay the Manager a monthly management fee at the annual rate
of .75 of 1% of the value of Dreyfus Equity Dividend Fund's average daily
net assets, .65 of 1% of the value of the average daily net assets of each
Dreyfus High Yield Fund, and .60 of 1% of the value of Dreyfus Strategic
Income Fund's average daily net assets. For the fiscal years ended October
31, 1993, 1994 and 1995, the management fees payable by the Company for
Dreyfus Strategic Income Fund amounted to $1,536,141, $2,157,631 and
$1,898,849, respectively; which amount for fiscal 1993 was reduced by
$213,144, pursuant to various undertakings in effect resulting in a net fee
paid for Dreyfus Strategic Income Fund of $1,322,997 in fiscal 1993.
Dreyfus Equity Dividend Fund and Dreyfus High Yield Funds had not commenced
operations as of October 31, 1995.
As to each Fund, the Manager has agreed that if in any fiscal year the
aggregate expenses of the Fund, exclusive of taxes, brokerage, interest on
borrowings and (with the prior written consent of the necessary state
securities commissions) extraordinary expenses, but including the
management fee, exceed the expense limitation of any state having
jurisdiction over the Fund, the Fund may deduct from the payment to be made
to the Manager under the Agreement, or the Manager will bear, such excess
expense. Such deduction or payment, if any, will be estimated daily, and
reconciled and effected or paid, as the case may be, on a monthly basis.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of a Fund's net assets increases.
PURCHASE OF SHARES
The following information supplements and should be read in
conjunction with the section in each Fund's Prospectus entitled "How to Buy
Shares."
The Distributor. The Distributor serves as each Fund's distributor on
a best efforts basis pursuant to an agreement which is renewable annually.
The Distributor also acts as distributor for the other funds in the Dreyfus
Family of Funds and for certain other investment companies. In some
states, certain financial institutions effecting transactions in Fund
shares may be required to register as dealers pursuant to state law.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 p.m., New York
time, on any business day that Dreyfus Transfer, Inc., each Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York
Stock Exchange are open for business will be credited to the shareholder's
Fund account on the next bank business day following such purchase order.
To qualify to use the Dreyfus TeleTransfer Privilege, the initial payment
for purchase of shares must be drawn on, and redemption proceeds paid to,
the same bank and account as are designated on the Account Application or
Shareholder Services Form on file. If the proceeds of a particular
redemption are to be wired to an account at any other bank, the request
must be in writing and signature-guaranteed. See "Redemption of
Shares--Dreyfus TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account with a
minimum investment of $100 without filing a new Account Application during
the calendar year the account is closed or during the following calendar
year, provided the information on the old Account Application is still
applicable.
SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in
conjunction with the section in each Fund's Prospectus entitled
"Shareholder Services Plan."
The Company has adopted a Shareholder Services Plan, pursuant to which
the Company pays the Distributor for the provision of certain services to
each Fund's shareholders. The services provided may include personal
services relating to shareholder accounts, such as answering shareholder
inquiries regarding the Company and providing reports and other
information, and services related to the maintenance of such shareholder
accounts. Under the Shareholder Services Plan, the Distributor may make
payments to certain securities dealers, financial institutions and other
financial industry professionals (collectively, "Service Agents") in
respect of these services.
A quarterly report of the amounts expended under the Shareholder
Services Plan, and the purposes for which such expenditures were incurred,
must be made to the Board for its review. In addition, the Shareholder
Services Plan provides that material amendments must be approved by the
Company's Board, and by the Board members who are not "interested persons"
(as defined in the 1940 Act) of the Company and have no direct or indirect
financial interest in the operation of the Shareholder Services Plan or in
any agreements entered into in connection with the Shareholder Services
Plan, by vote cast in person at a meeting called for the purpose of
considering such amendments. As to each Fund, the Shareholder Services
Plan is subject to annual approval by such vote of the Board members cast
in person at a meeting called for the purpose of voting on the Shareholder
Services Plan. The Shareholder Services Plan was so approved on July 19,
1995. The Shareholder Services Plan is terminable with respect to each
Fund at any time by vote of a majority of the Board members who are not
"interested persons" and who have no direct or indirect financial interest
in the operation of the Shareholder Services Plan or in any agreements
entered into in connection with the Shareholder Services Plan.
For the period from July 19, 1995 (effective date of Shareholder
Services Plan) through October 31, 1995, $217,598 was charged the Company
with respect to Dreyfus Strategic Income Fund pursuant to the Shareholder
Services Plan.
Prior Service Plan. As of July 19, 1995, the Company terminated its
then-existing Service Plan with respect to Dreyfus Strategic Income Fund.
That Service Plan, adopted pursuant to Rule 12b-1 under the 1940 Act,
provided that the Company (a) reimburse the Distributor for payments to
certain Service Agents for distributing Dreyfus Strategic Income Fund
shares and servicing shareholder accounts ("Servicing") and (b) pay the
Manager, Dreyfus Service Corporation and any affiliate of either of them
for advertising or marketing relating to Dreyfus Strategic Income Fund and
for Servicing at the aggregate annual rate of .25% of the value of the
Fund's average daily net assets. For the period from November 1, 1994
through July 19, 1995, $580,600 was charged to the Company with respect to
Dreyfus Strategic Income Fund pursuant to such plan, of which $496,033 was
charged for advertising or marketing, $77,557 was charged for distributing
shares and servicing, and $7,010 was charged for preparing, printing and
distributing prospectuses and statements of additional information.
REDEMPTION OF SHARES
The following information supplements and should be read in
conjunction with the section in each Fund's Prospectus entitled "How to
Redeem Shares."
Redemption Fee. (Dreyfus High Yield Securities Fund only) The Fund
will deduct a redemption fee equal to 1.00% of the net asset value of Fund
shares redeemed (including redemptions through use of the Fund Exchanges
service) where the redemption or exchange occurs less than six months
following the issuance of such shares. For purposes of computing the six-
month period, any issuance of Fund shares during a month will be deemed to
occur on the first day of such month. The redemption fee will be deducted
from redemption proceeds and retained by the respective Fund.
No redemption fee will be charged upon the redemption of shares
through the Fund's Automatic Withdrawal Plan or Dreyfus Auto-Exchange
Privilege or through omnibus accounts for various retirement plans.
Further, no redemption fee will be charged upon the redemption of Fund
shares acquired through reinvestment of dividends or distributions, nor
will a redemption fee be charged to pay fees imposed for various Fund
services. This redemption fee may be waived, modified or discontinued at
any time or from time to time.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor and reasonably believed by the Transfer Agent to be genuine.
Ordinarily, the Company will initiate payment for shares redeemed pursuant
to this Privilege on the next business day after receipt by the Transfer
Agent of the redemption request in proper form. Redemption proceeds
($1,000 minimum) will be transferred by Federal Reserve wire only to the
commercial bank account specified by the investor on the Account
Application or Shareholder Services Form, or to a correspondent bank if the
investor's bank is not a member of the Federal Reserve System. Fees
ordinarily are imposed by such bank and usually are borne by the investor.
Immediate notification by the correspondent bank to the investor's bank is
necessary to avoid a delay in crediting the funds to the investor's bank
account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at
1-800-654-7171, toll free. Investors should advise the operator that the
above transmittal code must be used and should also inform the operator of
the Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Share Certificates; Signatures."
Dreyfus TeleTransfer Privilege. Investors should be aware that if
they have selected the Dreyfus TeleTransfer Privilege, any request for a
wire redemption will be effected as a Dreyfus TeleTransfer transaction
through the Automated Clearing House ("ACH") system unless more prompt
transmittal specifically is requested. Redemption proceeds will be on
deposit in the investor's account at an ACH member bank ordinarily two
business days after receipt of the redemption request. See "Purchase of
Shares--Dreyfus TeleTransfer Privilege."
Share Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the New York
Stock Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP") and the Stock Exchanges Medallion Program.
Guarantees must be signed by an authorized signatory of the guarantor and
"Signature-Guaranteed" must appear with the signature. The Transfer Agent
may request additional documentation from corporations, executors,
administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular
verification. For more information with respect to signature-guarantees,
please call one of the telephone numbers listed on the cover.
Redemption Commitment. The Company has committed itself to pay in
cash all redemption requests by any shareholder of record of a Fund,
limited in amount during any 90-day period to the lesser of $250,000 or 1%
of the value of such Fund's net assets at the beginning of such period.
Such commitment is irrevocable without the prior approval of the Securities
and Exchange Commission. In the case of requests for redemption in excess
of such amount, the Board reserves the right to make payments in whole or
in part in securities (which may include non-marketable securities) or
other assets in case of an emergency or any time a cash distribution would
impair the liquidity of the Fund to the detriment of the existing
shareholders. In such event, the securities would be valued in the same
manner as the Fund's securities are valued. If the recipient sold such
securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be suspended
or the date of payment postponed (a) during any period when the New York
Stock Exchange is closed (other than customary weekend and holiday
closings), (b) when trading in the markets the relevant Fund ordinarily
utilizes is restricted, or when an emergency exists as determined by the
Securities and Exchange Commission so that disposal of the Fund's
investments or determination of its net asset value is not reasonably
practicable, or (c) for such other periods as the Securities and Exchange
Commission by order may permit to protect the Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in
conjunction with the section in each Fund's Prospectus entitled
"Shareholder Services."
Fund Exchanges. Dreyfus High Yield Securities Fund will deduct a
redemption fee equal to 1.00% of the net asset value of Fund shares
exchanged where the exchange occurs less than six months following the
issuance of such shares. Shares of other funds purchased by exchange will
be purchased on the basis of relative net asset value per share as follows:
A. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a
sales load and additional shares acquired through reinvestment of
dividends or distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect
to any reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their
account number.
To request an exchange, shareholders must give exchange instructions
to the Transfer Agent in writing or by telephone. The ability to issue
exchange instructions by telephone is given to all Fund shareholders
automatically, unless the investor checks the applicable "No" box on the
Account Application, indicating that the investor specifically refuses this
Privilege. By using the Telephone Exchange Privilege, the investor
authorizes the Transfer Agent to act on telephonic instructions from any
person representing himself or herself to be the investor, and reasonably
believed by the Transfer Agent to be genuine. Telephone exchanges may be
subject to limitations as to the amount involved or the number of telephone
exchanges permitted. Shares issued in certificate form are not eligible
for telephone exchange.
To establish a personal retirement plan by exchange, shares of the
fund being exchanged must have a value of at least the minimum initial
investment required for the fund into which the exchange is being made.
For Dreyfus-sponsored Keogh Plans, IRAs and IRAs set up under a Simplified
Employee Pension Plan ("SEP-IRAs") with only one participant, the minimum
initial investment is $750. To exchange shares held in corporate plans,
403(b)(7) Plans and SEP-IRAs with more than one participant, the minimum
initial investment is $100 if the plan has at least $2,500 invested among
the funds in the Dreyfus Family of Funds. To exchange shares held in a
personal retirement plan account, the shares exchanged must have a current
value of at least $100.
Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of a Fund, shares
of another fund in the Dreyfus Family of Funds. This Privilege is
available only for existing accounts. Shares will be exchanged on the
basis of relative net asset value as described above under "Fund
Exchanges." Enrollment in or modification or cancellation of this
Privilege is effective three business days following notification by the
investor. An investor will be notified if the investor's account falls
below the amount designated to be exchanged under this Privilege. In this
case, an investor's account will fall to zero unless additional investments
are made in excess of the designated amount prior to the next Auto-Exchange
transaction. Shares held under IRA and other retirement plans are eligible
for this Privilege. Exchanges of IRA shares may be made between IRA
accounts and from regular accounts to IRA accounts, but not from IRA
accounts to regular accounts. With respect to all other retirement
accounts, exchanges may be made only among those accounts.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available
to shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between
accounts having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Company reserves the right to
reject any exchange request in whole or in part. The Fund Exchanges
service or the Dreyfus Auto-Exchange Privilege may be modified or
terminated at any time upon notice to shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends
and distributions, the investor's shares will be reduced and eventually may
be depleted. Automatic Withdrawal may be terminated at any time by the
investor, the Company or the Transfer Agent. Shares for which certificates
have been issued may not be redeemed through the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest automatically their dividends or dividends and capital gain
distributions, if any, from a Fund in shares of another fund in the Dreyfus
Family of Funds of which the investor is a shareholder. Shares of other
funds purchased pursuant to this privilege will be purchased on the basis
of relative net asset value per share as follows:
A. Dividends and distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that
are offered without a sales load.
B. Dividends and distributions paid by a fund which does not charge
a sales load may be invested in shares of other funds sold with a
sales load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges a sales
load may be invested in shares of other funds sold with a sales
load (referred to herein as "Offered Shares"), provided that, if
the sales load applicable to the Offered Shares exceeds the
maximum sales load charged by the fund from which dividends or
distributions are being swept, without giving effect to any
reduced loads, the difference will be deducted.
D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be imposed
upon redemption of such shares.
Corporate Pension/Profit-Sharing and Retirement Plans. The Company
makes available to corporations a variety of prototype pension and profit-
sharing plans including a 401(k) Salary Reduction Plan. In addition, the
Company makes available Keogh Plans, IRAs, including SEP-IRAs and IRA
"Rollover Accounts," and 403(b)(7) Plans. Plan support services also are
available.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or
IRAs may charge a fee, payment of which could require the liquidation of
shares. All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans
may not be made in advance of receipt of funds.
The minimum initial investment for corporate plans, Salary Reduction
Plans, 403(b)(7) Plans and SEP-IRAs with more than one participant, is
$2,500 with no minimum for subsequent purchases. The minimum initial
investment for Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs and 403(b)(7)
Plans with only one participant, is ordinarily $750, with no minimum for
subsequent purchases. Individuals who open an IRA also may open a
non-working spousal IRA with a minimum investment of $250.
Each investor should read the prototype retirement plan and the
appropriate form of custodial agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in
conjunction with the section in each Fund's Prospectus entitled "How to Buy
Shares."
Valuation of Portfolio Securities. Substantially all of each Fund's
fixed-income investments (excluding short-term investments) are valued each
business day by one or more independent pricing services (the "Service")
approved by the Board. Securities valued by the Service for which quoted
bid prices in the judgment of the Service are readily available and are
representative of the bid side of the market are valued at the mean between
the quoted bid prices (as obtained by the Service from dealers in such
securities) and asked prices (as calculated by the Service based upon its
evaluation of the market for such securities). Other investments valued by
the Service are carried at fair value as determined by the Service, based
on methods which include consideration of: yields or prices of securities
of comparable quality, coupon, maturity and type; indications as to values
from dealers; and general market conditions. Short-term investments are
not valued by the Service and are valued at the mean price or yield
equivalent for such securities or for securities of comparable maturity,
quality and type as obtained from market makers. Other investments that
are not valued by the Service (including the Equity Securities (as defined
in the Prospectus) purchased by Dreyfus Equity Dividend Fund) are valued at
the last sales price for securities traded primarily on an exchange or the
national securities market or otherwise at the average of the most recent
bid and asked prices. Bid price is used when no asked price is available.
Any assets or liabilities initially expressed in terms of foreign currency
will be translated into U.S. dollars at the midpoint of the New York
interbank market spot exchange rate as quoted on the day of such
translation by the Federal Reserve Bank of New York or, if no such rate is
quoted on such date, at the exchange rate previously quoted by the Federal
Reserve Bank of New York or at such other quoted market exchange rate as
may be determined to be appropriate by the Manager. Expenses and fees,
including the management fee (reduced by the expense limitation, if any),
are accrued daily and taken into account for the purpose of determining the
net asset value of a Fund's shares.
Restricted securities, as well as securities or other assets for which
recent market quotations are not readily available, or are not valued by
the Service, are valued at fair value as determined in good faith by the
Board. The Board will review the method of valuation on a current basis.
In making their good faith valuation of restricted securities, the Board
members generally will take the following factors into consideration:
restricted securities which are, or are convertible into, securities of the
same class of securities for which a public market exists usually will be
valued at market value less the same percentage discount at which
purchased. This discount will be revised periodically by the Board if it
believes that the discount no longer reflects the value of the restricted
securities. Restricted securities not of the same class as securities for
which a public market exists usually will be valued initially at cost. Any
subsequent adjustment from cost will be based upon considerations deemed
relevant by the Board.
New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in
conjunction with the section in each Fund's Prospectus entitled "Dividends,
Distributions and Taxes."
Management of the Company believes that Dreyfus Strategic Income Fund
has qualified for the fiscal year ended October 31, 1995 as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended
(the "Code"). It is expected that Dreyfus Equity Dividend Fund and Dreyfus
High Yield Funds each will qualify as a regulated investment company under
the Code. Each Fund intends to continue to so qualify if such
qualification is in the best interests of its shareholders. As a regulated
investment company, each Fund will pay no Federal income tax on net
investment income and net realized securities gains to the extent that such
income and gains are distributed to shareholders in accordance with
applicable provisions of the Code. The term "regulated investment company"
does not imply the supervision of management or investment practices or
policies by any government agency.
Any dividend or distribution paid shortly after an investor's purchase
may have the effect of reducing the net asset value of the shares below the
cost of the investment. Such a dividend or distribution would be a return
of investment in an economic sense, although taxable as stated above. In
addition, the Code provides that if a shareholder holds shares of a Fund
for six months or less and has received a capital gain distribution with
respect to such shares, any loss incurred on the sale of such shares will
be treated as long-term capital loss to the extent of the capital gain
distribution received.
Depending upon the composition of a Fund's income, the entire amount
or a portion of the dividends paid by such Fund from net investment income
may qualify for the dividends received deduction allowable to qualifying
U.S. corporate shareholders ("dividends received deduction"). In general,
dividend income of a Fund distributed to qualifying corporate shareholders
will be eligible for the dividends received deduction only to the extent
that such Fund's income consists of dividends paid by U.S. corporations.
However, Section 246(c) of the Code provides that if a qualifying corporate
shareholder has disposed of Fund shares not held for 46 days or more and
has received a dividend from net investment income with respect to such
shares, the portion designated by the Fund as qualifying for the dividends
received deduction will not be eligible for such shareholder's dividends
received deduction. In addition, the Code provides other limitations with
respect to the ability of a qualifying corporate shareholder to claim the
dividends received deduction in connection with holding Fund shares. The
Company anticipates that no dividend paid by the Dreyfus High Yield Funds
or Dreyfus Strategic Income Fund will qualify for the dividends-received
deduction.
A Fund may qualify for and may make an election permitted under
Section 853 of the Code so that shareholders may be eligible to claim a
credit or deduction on their Federal income tax returns for, and will be
required to treat as part of the amounts distributed to them, their pro
rata portion of qualified taxes paid or incurred by the Fund to foreign
countries (which taxes relate primarily to investment income). A Fund may
make an election under Section 853 of the Code, provided that more than 50%
of the value of the Fund's total assets at the close of the taxable year
consists of securities in foreign corporations, and the Fund satisfies the
applicable distribution provisions of the Code. The foreign tax credit
available to shareholders is subject to certain limitations imposed by the
Code.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gains and losses. However, a portion of the gain or
loss realized from the disposition of foreign currencies (including foreign
currency denominated bank deposits) and non-U.S. dollar denominated
securities (including debt instruments and certain forward contracts and
options) may be treated as ordinary income or loss under Section 988 of the
Code. In addition, all or a portion of any gains realized from the sale or
other disposition of certain market discount bonds will be treated as
ordinary income under Section 1276 of the Code. Finally, all or a portion
of the gain realized from engaging in "conversion transactions" may be
treated as ordinary income under Section 1258 of the Code. "Conversion
transactions" are defined to include certain forward, futures, option and
straddle transactions, transactions marketed or sold to produce capital
gains, or transactions described in Treasury regulations to be issued in
the future.
Under Section 1256 of the Code, any gain or loss realized by a Fund
from certain forward contracts and options transactions will be treated as
60% long-term capital gain or loss and 40% short-term capital gain or loss.
Gain or loss will arise upon exercise or lapse of such contracts and
options as well as from closing transactions. In addition, any such
contracts or options remaining unexercised at the end of a Fund's taxable
year will be treated as sold for their then fair market value, resulting in
additional gain or loss to such Fund characterized in the manner described
above.
Offsetting positions held by a Fund involving certain foreign currency
forward contracts or options may constitute "straddles." "Straddles" are
defined to include "offsetting positions" in actively traded personal
property. The tax treatment of "straddles" is governed by Sections 1092
and 1258 of the Code, which, in certain circumstances, overrides or
modifies the provisions of Sections 1256 and 988 of the Code. As such, all
or a portion of any short or long-term capital gain from certain "straddle"
transactions may be recharacterized to ordinary income.
If a Fund were treated as entering into "straddles" by reason of its
engaging in certain forward contracts or options transactions, such
"straddles" would be characterized as "mixed straddles" if the forward
contracts or options transactions comprising a part of such "straddles"
were governed by Section 1256 of the Code. A Fund may make one or more
elections with respect to "mixed straddles." Depending on which election
is made, if any, the results to a Fund may differ. If no election is made,
to the extent the "straddle" and conversion transaction rules apply to
positions established by a Fund, losses realized by a Fund will be deferred
to the extent of unrealized gain in the offsetting position. Moreover, as
a result of the "straddle" and conversion transaction rules, short-term
capital loss on "straddle" positions may be recharacterized as long-term
capital loss, and long-term capital gains may be treated as short-term
capital gains or ordinary income.
Investment by a Fund in securities issued or acquired at a discount,
or providing for deferred interest or for payment of interest in the form
of additional obligations could under special tax rules affect the amount,
timing and character of distributions to shareholders by causing a Fund to
recognize income prior to the receipt of cash payments. For example, a
Fund could be required to accrue a portion of the discount (or deemed
discount) at which the securities were issued each year and to distribute
such income in order to maintain its qualification as a regulated
investment company. In such case, a Fund may have to dispose of securities
which it might otherwise have continued to hold in order to generate cash
to satisfy these distribution requirements.
PORTFOLIO TRANSACTIONS
The Manager assumes general supervision over placing orders on behalf
of the Company for the purchase or sale of portfolio securities.
Allocation of brokerage transactions, including their frequency, is made in
the best judgment of the Manager and in a manner deemed fair and reasonable
to shareholders. The primary consideration is prompt execution of orders
at the most favorable net price. Subject to this consideration, the
brokers selected will include those that supplement the Manager's research
facilities with statistical data, investment information, economic facts
and opinions. Information so received is in addition to and not in lieu of
services required to be performed by the Manager and the Manager's fees are
not reduced as a consequence of the receipt of such supplemental
information. Such information may be useful to the Manager in serving both
the Company and other funds which it advises and, conversely, supplemental
information obtained by the placement of business of other clients may be
useful to the Manager in carrying out its obligations to the Company.
Sales of Fund shares by a broker may be taken into consideration, and
brokers also will be selected because of their ability to handle special
executions such as are involved in large block trades or broad
distributions, provided the primary consideration is met. Large block
trades may, in certain cases, result from two or more funds advised or
administered by the Manager being engaged simultaneously in the purchase or
sale of the same security. Certain of a Fund's transactions in securities
of foreign issuers may not benefit from the negotiated commission rates
available to a Fund for transactions in securities of domestic issuers.
When transactions are executed in the over-the-counter market, each Fund
will deal with the primary market makers unless a more favorable price or
execution otherwise is obtainable. Foreign exchange transactions are made
with banks or institutions in the interbank market at prices reflecting a
mark-up or mark-down and/or commission.
Portfolio turnover may vary from year to year as well as within a
year. It is anticipated that in any fiscal year the turnover rate of
Dreyfus Equity Dividend Fund will be less than 100% and the turnover rate
of each Dreyfus High Yield Fund and Dreyfus Strategic Income Fund may
approach the 200% level, respectively. In periods in which extraordinary
market conditions prevail, the Manager will not be deterred from changing a
Fund's investment strategy as rapidly as needed, in which case higher
turnover rates can be anticipated which would result in greater brokerage
expenses. The overall reasonableness of brokerage commissions paid is
evaluated by the Manager based upon its knowledge of available information
as to the general level of commissions paid by other institutional
investors for comparable services.
For the fiscal years ended October 31, 1993 and 1995, no brokerage
commissions were paid by Dreyfus Strategic Income Fund. For the fiscal
year ended October 31, 1994, Dreyfus Strategic Income Fund paid $25,618 in
brokerage commissions. Gross spreads and concessions on principal
transactions, where determinable, amounted to $629,615, $664,750 and
$633,150 for the fiscal years ended October 31, 1993, 1994 and 1995,
respectively, none of which was paid to the Distributor.
PERFORMANCE INFORMATION
The following information supplements and should be read in
conjunction with the section in each Fund's Prospectus entitled
"Performance Information."
Dreyfus Short Term High Yield Fund has not commenced operations as of
the date of the Company's financial statements. Accordingly, no financial
or performance information is included at this time for such Fund.
Dreyfus Strategic Income Fund's current yield for the 30-day period
ended April 30, 1996 was 5.96%. Dreyfus High Yield Securities Fund's
current yield for the 30-day period ended July 31, 1996 was 11.66%. During
this period, the Manager was waiving receipt of the management fee and
absorbing expenses of the Dreyfus High Yield Securities Fund, without which
the Fund's 30-day yield would have been 10.58%. Current yield for a Fund
is computed pursuant to a formula which operates as follows: the amount of
the Fund's expenses accrued for the 30-day period (net of reimbursements)
is subtracted from the amount of the dividends and interest earned
(computed in accordance with regulatory requirements) by the Fund during
the period. That result is then divided by the product of: (a) the average
daily number of shares outstanding during the period that were entitled to
receive dividends, and (b) the net asset value per share on the last day of
the period less any undistributed earned income per share reasonably
expected to be declared as a dividend shortly thereafter. The quotient is
then added to 1, and that sum is raised to the 6th power, after which 1 is
subtracted. The current yield is then arrived at by multiplying the result
by 2.
Dreyfus Strategic Income Fund's average annual return for the one and
five year periods ended April 30, 1996, and for the period October 1, 1986
(commencement of operations) through April 30, 1996, was 11.51, 9.63% and
9.59%, respectively. Average annual total return is calculated by
determining the ending redeemable value of an investment purchased with a
hypothetical $1,000 payment made at the beginning of the period (assuming
the reinvestment of dividends and distributions), dividing by the amount of
the initial investment, taking the "n"th root of the quotient (where "n" is
the number of years in the period) and subtracting 1 from the result.
Dreyfus Strategic Income Fund's total return for the period October 1,
1986 (commencement of operations) through April 30, 1996 was 140.38%.
Dreyfus Equity Dividend Fund's total return for the period December 29,
1995 (commencement of operations) through April 30, 1996 was 6.21%.
Dreyfus High Yield Securities Fund's total return for the period March 25,
1996 (commencement of operations) through July 31, 1996 was 7.42%
(reflecting the applicable redemption fee). During these periods, receipt
of certain fees were being waived, and operating expenses were borne, by
the Manager, without which total returns for Dreyfus Equity Dividend Fund
and Dreyfus High Yield Securities Fund would have been lower. Total return
for a Fund is calculated by subtracting the amount of the Fund's net asset
value per share at the beginning of a stated period from the net asset
value per share at the end of the period (after giving effect to the
reinvestment of dividends and distributions during the period), and
dividing the result by the net asset value per share at the beginning of
the period.
From time to time, advertising materials for each Fund may include (i)
biographical information relating to its portfolio manager, including
honors or awards received, and may refer to or include commentary by the
Fund's portfolio manager relating to investment strategy, asset growth,
current or past business, political, economic or financial conditions and
other matters of general interest to investors; (ii) information concerning
retirement and investing for retirement, including statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market share,
etc.) and its presence in the defined contribution plan market; (iii) the
approximate number of then-current Fund shareholders; (iv) Lipper or
Morningstar ratings and related analysis supporting the ratings; (v)
discussions of the risk and reward potential of the high yield securities
markets and its comparative performance in the overall securities markets;
and (vi) as to Dreyfus Short Term High Yield Fund, that as of its inception
date the Fund was the first short-term, high yield fund in the mutual fund
industry.
From time to time, the Company may compare a fund's performance
against inflation with the performance of other instruments against
inflation, such as short-term Treasury Bills (which are direct obligations
of the U.S. Government), bonds, stocks, and FDIC-insured bank money market
accounts.
INFORMATION ABOUT THE FUNDS
The following information supplements and should be read in
conjunction with the section in each Fund's Prospectus entitled "General
Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and
non-assessable. Fund shares are of one class and have equal rights as to
dividends and in liquidation. Shares have no preemptive, subscription or
conversion rights and are freely transferable.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an
investment company, such as the Company, will not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each series affected by such matter. Rule 18f-2
further provides that a series shall be deemed to be affected by a matter
unless it is clear that the interests of each series in the matter are
identical or that the matter does not affect any interest of such series.
However, the Rule exempts the selection of independent accountants and the
election of Board members from the separate voting requirements of the
Rule.
Each Fund will send annual and semi-annual financial statements to all
its shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, P.O.
Box 9671, Providence, Rhode Island 02940-9671, is the Company's transfer
and dividend disbursing agent. Under a transfer agency agreement with the
Company, Dreyfus Transfer, Inc. arranges for the maintenance of shareholder
account records for the Fund, the handling of certain communications
between shareholders and the Fund, and the payment of dividends and
distributions payable by the Fund. For these services, Dreyfus Transfer,
Inc. receives a monthly fee computed on the basis of the number of
shareholder accounts it maintains for the Company during the month, and is
reimbursed for certain out-of-pocket expenses.
Mellon Bank, N.A. (the "Custodian"), the Manager's parent, located at
One Mellon Bank Center, Pittsburgh, Pennsylvania 15258, acts as the
custodian of the Fund's investments. Under a custody agreement with the
Company, the Custodian holds each Fund's portfolio securities and keeps all
necessary accounts and records. For its custody services, the Custodian
receives a monthly fee based on the market value of each Fund's assets held
in custody and receives certain securities transaction changes.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York
10004-2696, as counsel for the Company, has rendered its opinion as to
certain legal matters regarding the due authorization and valid issuance of
the shares being sold pursuant to each Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent accountants, have been selected as auditors of the Company.
APPENDIX
Description of S&P, Moody's, Fitch and Duff ratings:
S&P
Bond Ratings
AAA
Bonds rated AAA have the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA
Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A
Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher rated categories.
BBB
Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds in
higher rated categories.
BB
Bonds rated BB have less near-term vulnerability to default than other
speculative grade debt. However, they face major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B
Bonds rated B have a greater vulnerability to default but presently
have the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions would likely impair
capacity or willingness to pay interest and repay principal.
CCC
Bonds rated CCC have a current identifiable vulnerability to default
and are dependent upon favorable business, financial and economic
conditions to meet timely payments of interest and repayment of principal.
In the event of adverse business, financial or economic conditions, they
are not likely to have the capacity to pay interest and repay principal.
CC
The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.
C
The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating.
D
Bonds rated D are in default, and payment of interest and/or repayment
of principal is in arrears.
S&P's letter ratings may be modified by the addition of a plus (+) or
a minus (-) sign designation, which is used to show relative standing
within the major rating categories, except in the AAA (Prime Grade)
category.
Commercial Paper Rating
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days. Issues assigned an A rating are regarded as having the
greatest capacity for timely payment. Issues in this category are
delineated with the numbers 1, 2 and 3 to indicate the relative degree of
safety.
A-1
This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+)
designation.
A-2
Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues
designated A-1.
A-3
Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations.
B
Issues carrying this designation are regarded as having only
speculative capacity for timely payment.
C
This designation is assigned to short-term obligations with doubtful
capacity for payment.
D
Issues carrying this designation are in default, and payment of
interest and/or repayment of principal is in arrears.
Moody's
Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and generally are referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A
Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa
Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and, therefore, not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca
Bonds which are rated Ca present obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and
in the categories below B. The modifier 1 indicates a ranking for the
security in the higher end of a rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates a ranking in the lower end
of a rating category.
Commercial Paper Rating
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Issuers of P-1 paper must have a superior capacity
for repayment of short-term promissory obligations, and ordinarily will be
evidenced by leading market positions in well established industries, high
rates of return on funds employed, conservative capitalization structures
with moderate reliance on debt and ample asset protection, broad margins in
earnings coverage of fixed financial charges and high internal cash
generation, and well established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers (or related supporting institutions) rated Prime-2 (P-2) have
a strong capacity for repayment of short-term promissory obligations. This
ordinarily will be evidenced by many of the characteristics cited above but
to a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
Issuers (or related supporting institutions) rated Prime-3 (P-3) have
an acceptable capacity for repayment of short-term promissory obligations.
The effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and the requirements
for relatively high financial leverage. Adequate alternate liquidity is
maintained.
Issuers (or related supporting institutions) rated Not Prime do not
fall within any of the Prime rating categories.
Fitch
Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability to
meet the obligations of a specific debt issue or class of debt. The
ratings take into consideration special features of the issue, its
relationship to other obligations of the issuer, the current financial
condition and operative performance of the issuer and of any guarantor, as
well as the political and economic environment that might affect the
issuer's future financial strength and credit quality.
AAA
Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated AAA. Because
bonds rated in the AAA and AA categories are not significantly vulnerable
to foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A
Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB
Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have an adverse
impact on these bonds and, therefore, impair timely payment. The
likelihood that the ratings of these bonds will fall below investment grade
is higher than for bonds with higher ratings.
BB
Bonds rated BB are considered speculative. The obligor's ability to
pay interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt service
requirements.
B
Bonds rated B are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC
Bonds rated CCC have certain identifiable characteristics, which, if
not remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
CC
Bonds rated CC are minimally protected. Default in payment of
interest and/or principal seems probable over time.
C
Bonds rated C are in imminent default in payment of interest or
principal.
DDD, DD and D
Bonds rated DDD, DD and D are in actual default of interest and/or
principal payments. Such bonds are extremely speculative and should be
valued on the basis of their ultimate recovery value in liquidation or
reorganization of the obligor. DDD represents the highest potential for
recovery on these bonds and D represents the lowest potential for recovery.
Plus (+) and minus (-) signs are used with a rating symbol to indicate
the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA category covering 12-36
months.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
Although the credit analysis is similar to Fitch's bond rating
analysis, the short-term rating places greater emphasis than bond ratings
on the existence of liquidity necessary to meet the issuer's obligations in
a timely manner.
F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
F-1+.
F-2
Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payments, but the margin of safety is not as
great as the F-1+ and F-1 categories.
F-3
Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate;
however, near-term adverse changes could cause these securities to be rated
below investment grade.
F-S
Weak Credit Quality. Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are
vulnerable to near-term adverse changes in financial and economic
conditions.
D
Default. Issues assigned this rating are in actual or imminent
payment default.
Duff
Bond Ratings
AAA
Bonds rated AAA are considered highest credit quality. The risk
factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
AA
Bonds rated AA are considered high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because
of economic conditions.
A
Bonds rated A have protection factors which are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.
BBB
Bonds rated BBB are considered to have below average protection
factors but still considered sufficient for prudent investment. There may
be considerable variability in risk for bonds in this category during
economic cycles.
BB
Bonds rated BB are below investment grade but are deemed by Duff as
likely to meet obligations when due. Present or prospective financial
protection factors fluctuate according to industry conditions or company
fortunes. Overall quality may move up or down frequently within the
category.
B
Bonds rated B are below investment grade and possess the risk that
obligations will not be met when due. Financial protection factors will
fluctuate widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in quality rating
within this category or into a higher or lower quality rating grade.
CCC
Bonds rated CCC are well below investment grade securities. Such
bonds may be in default or have considerable uncertainty as to timely
payment of interest, preferred dividends and/or principal. Protection
factors are narrow and risk can be substantial with unfavorable economic or
industry conditions and/or with unfavorable company developments.
DD
Defaulted debt obligations. Issuer has failed to meet scheduled
principal and/or interest payments.
Plus (+) and minus (-) signs are used with a rating symbol (except
AAA) to indicate the relative position of a credit within the rating
category.
Commercial Paper Rating
The rating Duff-1 is the highest commercial paper rating assigned by
Duff. Paper rated Duff-1 is regarded as having very high certainty of
timely payment with excellent liquidity factors which are supported by
ample asset protection. Risk factors are minor. Paper rated Duff-2 is
regarded as having good certainty of timely payment, good access to capital
markets and sound liquidity factors and company fundamentals. Risk factors
are small. Paper rated Duff 3 is regarded as having satisfactory liquidity
and other protection factors. Risk factors are larger and subject to more
variation. Nevertheless, timely payment is expected. Paper rated Duff 4
is regarded as having speculative investment characteristics. Liquidity is
not sufficient to insure against disruption in debt service. Operating
factors and market access may be subject to a high degree of variation.
Paper rated Duff 5 is in default. The issuer has failed to meet scheduled
principal and/or interest payments.
<TABLE>
<CAPTION>
Dreyfus Strategic Income
- --------------------------------------------------------------------------------
Statement of Investments October 31, 1995
Principal
Bonds and Notes--97.7% Amount Value
- --------------------- --------- -------
<S> <C> <C>
Banking--19.7% ABN AMRO Bank N.V.,
Sub. Notes, 7 1/4%, 2005........................ $ 4,000,000 $ 4,159,772
Bank of New York,
Sub. Notes, 8 1/2%, 2004........................ 5,000,000 5,627,670
BankAmerica, Sub. Notes:
9.70%, 2000..................................... 5,000,000 5,689,685
6 3/4%, 2005.................................... 5,000,000 4,987,500
Chemical Banking,
Sub. Deb., 7 7/8%, 2006......................... 15,000,000 16,277,100
First Chicago,
Sub. Notes, 11 1/4%, 2001....................... 3,500,000 4,242,774
Fleet Financial Group,
Sub. Notes, 8 1/8%, 2004........................ 6,000,000 6,537,636
Manufacturers and Traders Trust,
Sub. Notes, 7%, 2005............................ 4,000,000 4,052,268
Midland Bank plc,
Sub. Notes, 8 5/8%, 2004........................ 5,000,000 5,604,815
NCNB,
Sub. Notes, 9 3/8%, 2009........................ 5,000,000 6,014,395
----------
63,193,615
----------
Consumer--7.4% News America Holdings (Gtd. by News):
Sr. Deb., 9 1/4%, 2013.......................... 5,000,000 5,812,400
Sr. Notes, 8 1/2%, 2005......................... 5,000,000 5,492,705
Time Warner Entertainment, L.P.,
Sr. Deb., 8 3/8%, 2023.......................... 12,000,000 12,429,768
----------
23,734,873
----------
Finance--24.2% Associates Corp. of North America:
Medium-Term Sr. Notes,
Ser. G, 8 1/4%, 2004.......................... 5,000,000 5,521,820
Sr. Notes, 7 7/8%, 2001......................... 5,000,000 5,366,215
Avco Financial Services,
Sr. Notes, 6.35%, 2000.......................... 3,000,000 3,003,264
Commercial Credit:
Deb., 10%, 2009................................. 1,000,000 1,274,215
Notes, 7 3/4%, 2005............................. 4,000,000 4,293,116
Dean Witter, Discover & Co.,
Floating Rate Notes, 6 1/4% 2000................ 2,000,000(a) 2,023,846
Dresdner Bank AG,
Sub. Notes, 6 5/8%, 2005........................ 4,000,000 4,016,088
Ford Motor Credit:
Medium-Term Notes, 9.03%, 2009.................. 5,000,000 5,717,195
Notes:
6 1/4%, 2000.................................. 5,000,000 4,975,000
7 3/4%, 2005.................................. 6,000,000 6,427,848
General Electric Capital:
Deb., 8 1/2%, 2008.............................. 4,000,000 4,635,560
Global Medium-Term Notes,
Ser. A, 7.84%, 1997........................... 3,000,000 3,071,022
</TABLE>
<PAGE>
Dreyfus Strategic Income
- --------------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Principal
Bonds and Notes (continued) Amount Value
- --------------------------- ----------- -------
<S> <C> <C>
Finance (continued) General Motors Acceptance:
Medium-Term Notes:
7 1/2%, 5/23/2000................................. $ 5,000,000 $ 5,219,750
7 1/2%, 7/24/2000................................. 5,000,000 5,224,795
Notes, 8 3/4%, 1997................................. 3,000,000(b) 3,430,713
Household Finance,
Notes, 7.65%, 2007.................................. 5,000,000 5,350,335
McDonnell Douglas Finance,
Medium-Term Notes, 9.90%, 2000...................... 2,000,000 2,103,390
U.S. Leasing International,
Medium-Term Notes, Ser. A, 9.88%, 2001.............. 5,000,000 5,756,250
------------
77,410,422
------------
Industrial--12.0% Archer-Daniels-Midland,
Deb., 10 1/4%, 2006.................................. 1,400,000 1,779,025
Cincinnati Milacron,
Notes, 8 3/8%, 2004.................................. 5,000,000 5,168,750
du Pont (E.I.) de Nemours and Co.,
Deb., 8 1/4%, 2022................................... 3,000,000 3,266,679
Eli Lilly and Co.,
Notes, 7 1/8%, 2025................................. 4,000,000 4,120,360
Emerson Electric,
Notes, 6.30%, 2005.................................. 1,000,000 992,694
Harnischfeger Industries,
Deb., 8.90%, 2022................................... 1,000,000 1,176,492
Motorola,
Deb., 7 1/2%, 2025.................................. 5,000,000 5,363,740
Phillips Petroleum, Notes:
9 3/8%, 2011........................................ 4,000,000 4,844,852
8.86%, 2022......................................... 5,000,000 5,593,345
Raytheon,
Notes, 6 1/2%, 2005................................. 4,000,000 4,001,460
Union Carbide,
Deb., 8 3/4%, 2022.................................. 2,000,000 2,219,014
------------
38,526,411
------------
Insurance--6.4% NAC Re,
Notes, 8%, 1999..................................... 2,000,000 2,089,324
New York Life Insurance,
Surplus Notes, 7 1/2%, 2023......................... 5,000,000(c) 4,873,500
Orion Capital,
Sr. Notes, 9 1/8%, 2002............................. 3,000,000 3,333,354
Reliastar Financial,
Notes, 6 5/8%, 2003................................. 5,000,000 4,895,760
SunAmerica,
Notes, 9%, 1999..................................... 5,000,000 5,362,345
------------
20,554,283
------------
</TABLE>
<PAGE>
Dreyfus Strategic Income
- --------------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Principal
Bonds and Notes (continued) Amount Value
- --------------------------- --------- -------
<S> <C> <C>
Oil and Gas--.4% Maxus Energy,
Sinking Fund Deb., 11 1/4%, 2013.................. $ 254,000 $ 256,540
Occidental Petroleum,
Sr. Deb., 11 3/4%, 2011........................... 1,000,000 1,067,439
-----------
1,323,979
-----------
Utilities--3.5% AT&T,
Deb., 8.35%, 2025................................. 5,000,000 5,519,730
National Rural Utilities Cooperative Finance,
Collateral Trust Bonds, Ser. V, 9%, 2021.......... 5,000,000 5,688,885
------------
11,208,615
------------
Foreign--.4% Province of Newfoundland,
Sinking Fund Deb., 10%, 2020...................... 1,000,000 1,284,490
------------
Other--5.0% Chemical Master Credit Card Trust I,
Floating Rate Asset Backed Ctfs.,
Ser. 1995-1, Cl. A, 5.995%, 2001.................. 10,000,000(a) 10,000,000
Chevy Chase Master Credit Card Trust,
Floating Rate Asset Backed Ctfs.,
Ser. 1994-5, Cl. A, 6.085%, 2001.................. 5,000,000(a) 5,000,500
Rural Electric Cooperative Grantor Trust Ctfs.
(Soyland), 9.70%, 2017............................ 1,000,000 1,093,905
------------
16,094,405
------------
U.S. Government
and Agencies--18.7% Federal Home Loan Mortgage Corp.,
Multiclass Mortgage Participation Ctfs.,
Ser. 1166, Cl. 1166-PG, 8%, 2020.................. 4,699,313 4,776,100
Government National Mortgage Association 1:
7%, 7/15/2023..................................... 9,495,298 9,444,783
7 1/2%, 10/15/2023................................ 10,484,292 10,638,202
7 1/2%, 5/15/2024................................. 4,858,735 4,930,061
8%, 8/15/2024..................................... 9,778,128 10,077,535
8%, 9/15/2024..................................... 12,416,920 12,797,127
U.S. Treasury Bonds:
8 7/8%, 2/15/2019................................. 3,000,000 3,871,875
6 7/8%, 8/15/2025................................. 3,000,000 3,215,157
------------
59,750,840
------------
TOTAL BONDS AND NOTES
(cost $298,617,777)............................... $313,081,933
============
</TABLE>
<PAGE>
Dreyfus Strategic Income
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Principal
Short-Term Investment--.3% Amount Value
- ------------------------- --------- -----
<S> <C> <C>
Time Deposit; Chemical Bank (London),
5 7/8%, 11/1/1995
(cost $1,043,000).......... $ 1,043,000 $ 1,043,000
============
TOTAL INVESTMENTS (cost $299,660,777).................. 98.0% $314,124,933
====== ============
CASH AND RECEIVABLES (NET)............................. 2.0% $ 6,219,990
====== ============
NET ASSETS............................................. 100.0% $320,344,923
====== ============
</TABLE>
Notes to Statement of Investments:
(a) Variable rate security-interest rate subject to periodic change.
(b) Security is subject to repurchase by the issuer at the option of the
holder. Final maturity is 7/15/2005.
(c) Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At October 31, 1995, this
security amounted to $4,873,500 or 1.5% of net assets.
See notes to financial statements.
<PAGE>
Dreyfus Strategic Income
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $299,660,777)-see statement.............................. $ 314,124,933
Cash........................................................... 320,744
Receivable for investment securities sold...................... 7,317,822
Interest receivable............................................ 5,089,704
Receivable for shares of Beneficial Interest subscribed........ 2,982
Prepaid expenses............................................... 24,106
-------------
326,880,291
LIABILITIES:
Due to The Dreyfus Corporation................................ $ 222,321
Due to Distributor............................................ 8,735
Payable for investment securities purchased................... 5,968,600
Payable for shares of Beneficial Interest redeemed............ 197,082
Accrued expenses.............................................. 138,630 6,535,368
----------- -------------
NET ASSETS......................................................... $ 320,344,923
=============
REPRESENTED BY:
Paid-in capital.................................................. $ 328,172,689
Accumulated net realized (loss) on investments and foreign
currency transactions.......................................... (22,291,922)
Accumulated net unrealized appreciation on investments-Note 4.... 14,464,156
-------------
NET ASSETS at value applicable to 22,520,160 shares outstanding
(unlimited number of $.001 par value shares of Beneficial
Interest authorized)............................................. $ 320,344,923
=============
NET ASSET VALUE, offering and redemption price per share
($320,344,923/22,520,160)........................................ $14.22
=======
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Strategic Income
- --------------------------------------------------------------------------------
Statement of Operations year ended October 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:...............................................
Interest Income $ 25,027,801
Expenses:
Management fee--Note 3(a).................................... $ 1,898,849
Shareholder servicing costs--Note 3(b,c)..................... 1,164,077
Professional fees............................................ 56,492
Custodian fees 52,900
Trustees' fees and expenses--Note 3(d)....................... 41,846
Registration fees............................................ 35,965
Prospectus and shareholders' reports--Note 3(b).............. 25,461
Miscellaneous 16,526
-----------
Total Expenses 3,292,116
-------------
INVESTMENT INCOME--NET.................................... 21,735,685
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized (loss) on investments and foreign currency
transactions--Note 4........................................ $ (8,706,304)
Net unrealized appreciation on investments and foreign
currency transactions....................................... 38,489,861
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 29,783,557
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 51,519,242
=============
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Strategic Income
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------
1994 1995
---- ----
<C> <C>
OPERATIONS:
Investment income--net............................................. $ 24,598,056 $ 21,735,685
Net realized (loss) on investments and foreign currency
transactions..................................................... (13,631,198) (8,706,304)
Net unrealized appreciation (depreciation) on investments and
foreign currency transactions for the year....................... (39,799,142) 38,489,861
-------------- -------------
Net Increase (Decrease) In Net Assets Resulting From Operations... (28,832,284) 51,519,242
-------------- -------------
DIVIDENDS TO SHAREHOLDERS:
From investment income--net........................................ (24,598,056) (21,735,685)
From net realized gain on investments............................. (9,045,367) -
In excess of net realized gain on investments..................... (122,223) -
-------------- -------------
Total Dividends................................................... (33,765,646) (21,735,685)
-------------- -------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold..................................... 90,796,927 17,545,801
Dividends reinvested.............................................. 25,835,418 15,878,061
Cost of shares redeemed........................................... (107,007,060) (65,349,244)
-------------- -------------
Increase (Decrease) In Net Assets From Beneficial Interest
Transactions..................................................... 9,625,285 (31,925,382)
-------------- -------------
Total (Decrease) In Net Assets.................................... (52,972,645) (2,141,825)
NET ASSETS:
Beginning of year................................................. 375,459,393 322,486,748
-------------- -------------
End of year....................................................... $ 322,486,748 $ 320,344,923
============== =============
<CAPTION>
Shares Shares
------ ------
<C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................................... 6,360,200 1,300,295
Shares issued for dividends reinvested............................ 1,842,973 1,172,881
Shares redeemed................................................... (7,743,228) (4,864,735)
-------------- -------------
Net Increase (Decrease) In Shares Outstanding..................... 459,945 (2,391,559)
============== =============
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Strategic Income
- --------------------------------------------------------------------------------
Financial Highlights
Reference is made to Page 4 of the Fund's Prospectus
dated January 2, 1996, as revised February 12, 1996.
<PAGE>
Dreyfus Strategic Income
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
The Fund is registered under the Investment Company Act of 1940 ("Act") as
a diversified open-end management investment company. Premier Mutual Fund
Services, Inc. (the "Distributor") acts as the distributor of the Fund's shares.
The Distributor, located at One Exchange Place, Boston, Massachusetts 02109, is
a wholly-owned subsidiary of FDI Distribution Services, Inc., a provider of
mutual fund administration services, which in turn is a wholly-owned subsidiary,
of FDI Holdings, Inc., the parent company of which is Boston Institutional
Group, Inc. The Dreyfus Corporation ("Manager") serves as the Fund's investment
adviser. The Manager is a direct subsidiary of Mellon Bank, N.A.
Effective July 24, 1995, all Fund shares are being offered at net asset
value without a sales load.
(a) Portfolio valuation: The Fund's investments (excluding short-term
investments and U.S. Government obligations) are valued each business day by an
independent pricing service ("Service") approved by the Board of Trustees.
Investments for which quoted bid prices are readily available and are
representative of the bid side of the market in the judgment of the Service are
valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of securities of comparable quality, coupon, maturity and
type; indications as to values from dealers; and general market conditions.
Securities for which there are no such valuations are valued at fair value as
determined in good faith under the direction of the Board of Trustees.
Investments in U.S. Government obligations are valued at the mean between quoted
bid and asked prices. Short-term investments are carried at amortized cost,
which approximates value. Investments denominated in foreign currencies are
translated to U.S. dollars at the prevailing rates of exchange.
(b) Foreign currency transactions: The Fund does not isolate that portion
of the results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency gains
or losses realized on securities transactions, the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books, and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities, resulting
from changes in exchange rates. Such gains and losses are included with net
realized and unrealized gain or loss on investments.
(c) Securities transactions and investment income: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
including, where applicable, amortization of discount on investments, is
recognized on the accrual basis.
<PAGE>
Dreyfus Strategic Income
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
(d) Dividends to shareholders: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain, if any, are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to comply
with the distribution requirements of the Internal Revenue Code. To the extent
that net realized capital gain can be offset by capital loss carryovers, it is
the policy of the Fund not to distribute such gain.
(e) Federal income taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of
the Internal Revenue Code, and to make distributions of taxable income
sufficient to relieve it from substantially all Federal income and excise taxes.
The Fund has an unused capital loss carryover of approximately $22,352,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to October 31, 1995. If not
applied, $13,753,000 of the carryover expires in fiscal 2002, and $8,599,000
expires in fiscal 2003.
NOTE 2--Bank Line of Credit:
In accordance with an agreement with a bank, the Fund may borrow up to $10
million under a short-term unsecured line of credit. Interest on borrowings is
charged at rates which are related to Federal Funds rates in effect from time to
time.
There were no borrowings during the year ended October 31, 1995.
NOTE 3-Management Fee and Other Transactions With Affiliates:
(a) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .60 of 1% of the average daily
value of the Fund's net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Fund's aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings (which, in the
view of Stroock & Stroock & Lavan, counsel to the Fund, also contemplates
interest on securities sold short) and extraordinary expenses, exceed the
expense limitation of any state having jurisdiction over the Fund. The most
stringent state expense limitation applicable to the Fund presently requires
reimbursement of expenses in any full fiscal year that such expenses (exclusive
of certain expenses as described above) exceed 2 1/2% of the first $30 million,
2% of the next $70 million and 1 1/2% of the excess over $100 million of the
average value of the Fund's net assets in accordance with California "blue sky"
regulations. There was no expense reimbursement for the year ended October 31,
1995.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $542,812 during the period from November 1, 1994 through July 23, 1995
from commissions earned on sales of Fund shares.
(b) Prior to July 24, 1995, the Fund's Service Plan (the "Plan") adopted
pursuant to Rule 12b-1 under
<PAGE>
Dreyfus Strategic Income
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
the Act, provided that the Fund (a) reimburse the Distributor for payments to
certain Service Agents for distributing the Fund's shares and servicing
shareholder accounts ("Servicing") and (b) pay the Manager, Dreyfus Service
Corporation and any affiliate of either of them (collectively "Dreyfus") for
advertising and marketing relating to the Fund and for Servicing at an aggregate
annual rate of .25 of 1% of the value of the Fund's average daily net assets.
Each of the Distributor and Dreyfus paid Service Agents a fee in respect of the
Fund's shares owned by shareholders with whom the Service Agent has a Servicing
relationship or for whom the Service Agent is the dealer or holder of record.
Each of the Distributor and Dreyfus determined the amounts to be paid to Service
Agents to which it made payments and the basis on which such payments were made.
The Plan also separately provided for the Fund to bear the costs of preparing,
printing and distributing certain of the Fund's prospectuses and statements of
additional information and costs associated with implementing and operating the
Plan, not to exceed the greater of $100,000 or .005 of 1% of the Fund's average
daily net assets for any full fiscal year. During the period from November 1,
1994 through July 23, 1995, $580,600 was charged to the Fund pursuant to the
Plan.
(c) Effective July 24, 1995, the Fund has adopted a Shareholder Services
Plan. Under the Shareholder Services Plan, the Fund pays the Distributor at an
annual rate of .25 of 1% of the value of the Fund's average daily net assets for
the provision of certain services. The services provided may include personal
services relating to shareholder accounts, such as answering shareholder
inquiries regarding the Fund and providing reports and other information, and
services related to the maintenance of shareholder accounts. The Distributor may
make payments to Service Agents in respect of these services. The Distributor
determines the amounts to be paid to Service Agents. During the period from July
24, 1995 through October 31, 1995, $217,598 was charged to the Fund by the
Distributor pursuant to the Shareholder Services Plan.
(d) Each trustee who is not an "affiliated person," as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales (including paydowns) of
investment securities, excluding short-term securities, during the year ended
October 31, 1995, amounted to $525,457,173 and $525,623,147, respectively.
At October 31, 1995, accumulated net unrealized appreciation on investments
was $14,464,156, consisting of $15,661,770 gross unrealized appreciation and
$1,197,614 gross unrealized depreciation.
At October 31, 1995, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting purposes
(see the Statement of Investments).
<PAGE>
Dreyfus Strategic Income
- --------------------------------------------------------------------------------
Report of Ernst & Young LLP, Independent Auditors
Shareholders and Board of Trustees
Dreyfus Strategic Income
We have audited the accompanying statement of assets and liabilities of
Dreyfus Strategic Income, including the statement of investments, as of October
31, 1995, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and financial highlights for each of the years indicated therein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Dreyfus Strategic Income at October 31, 1995, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the indicated
years, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
December 4, 1995
Dreyfus Strategic Income Fund
- ------------------------------------------------------------------------------
Statement of Investments April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Principal
Bonds and Notes--91.4% Amount Value
----------- -------------
<S> <C> <C>
Aircraft & Aerospace--1.6% K&F Industries,
Sr. Sub. Deb., 13-3/4%, 2001.................... $ 4,500,000 $ 4,685,625
-------------
Banking--3.2% BankAmerica,
Sub. Notes, 9.70%, 2000......................... 5,000,000(a) 5,518,105
First Chicago,
Sub. Notes, 11-1/4%, 2001....................... 3,500,000 4,122,177
-------------
9,640,282
-------------
Chemicals--1.6% UCC Investors,
Sr. Notes, 10-1/2%, 2002........................ 4,550,000 4,766,125
-------------
Commercial Mortgage
Backed--11.3% G S Mortgage Securities Corp. II,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1996-PL, Cl. A-1, 7.02%, 2027.............. 9,716,649 9,689,321
J.P. Morgan Commercial Mortgage Finance,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1996-C2, Cl. A, 6.47%, 2027................ 10,754,330 10,381,289
Structured Asset Securities,
Multiclass Pass-Through Ctfs., Ser. 1996-CFL:
Cl. B, 6.303%, 2028........................... 7,200,000 6,873,750
Cl. C, 6.525%, 2028........................... 7,192,927 6,852,387
-------------
33,796,747
-------------
Computer--1.3% Unisys,
Sr. Notes, 12%, 2003............................ 4,000,000(b) 4,010,000
-------------
Energy--2.9% Apache,
Notes, 7.95%, 2026.............................. 4,000,000 3,924,720
DeepTech International,
Sr. Secured Notes, 12%, 2000.................... 4,850,000 4,643,875
Maxus Energy,
Sinking Fund Deb., 11-1/4%, 2013................ 254,000 260,985
-------------
8,829,580
-------------
Entertainment/Media--3.1% Chancellor Broadcasting,
Sr. Sub. Notes, 9-3/8%, 2004.................... 4,850,000 4,716,625
Viacom,
Gtd. Sr. Notes, 6-3/4%, 2003.................... 5,000,000 4,722,700
-------------
9,439,325
-------------
Finance--6.0% Associates Corp. of North America,
Sr. Notes, 7-7/8%, 2001......................... 5,000,000 5,220,820
-------------
</TABLE>
<PAGE>
Dreyfus Strategic Income Fund
- ------------------------------------------------------------------------------
Statement of Investments (continued) April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Principal
Bonds and Notes (continued) Amount Value
----------- -------------
<S> <C> <C>
Finance (continued) GMAC,
Medium-Term Notes, 7-1/2%, 2000................. $5,000,000(a) $ 5,113,650
McDonnell Douglas Finance,
Medium-Term Notes, 9.90%, 2000.................. 2,000,000 2,070,614
U.S. Leasing International,
Medium-Term Notes, Ser. A, 9.88%, 2001.......... 5,000,000 5,589,600
-------------
17,994,684
-------------
Healthcare Related--.7% Dynacare,
Sr. Notes, 10-3/4%, 2006........................ 2,000,000 2,005,000
-------------
Industrial--.6% Remington Arms,
Sr. Sub. Notes, 10%, 2003....................... 500,000(b) 452,500
Republic Engineered Steels,
First Mortgage Notes, 9-7/8%, 2001.............. 1,500,000 1,368,750
-------------
1,821,250
-------------
Insurance--5.1% NAC Re,
Notes, 8%, 1999................................. 2,000,000 2,054,366
Orion Capital,
Sr. Notes, 9-1/8%, 2002......................... 3,000,000 3,231,642
Reliastar Financial,
Notes, 6-5/8%, 2003............................. 5,000,000 4,743,620
SunAmerica,
Notes, 9%, 1999................................. 5,000,000(a) 5,268,950
-------------
15,298,578
-------------
Real Estate Related--1.0% HMH Properties,
Sr. Secured Notes, 9-1/2%, 2005................. 3,000,000 2,928,750
-------------
Residential Mortgage
Backed--4.1% General Electric Capital Mortgage Services,
Multiclass Pass-Through Ctfs.:
Ser. 1993-15B, 6%, 11/25/2008................. 486,012(b) 389,393
Ser. 1996-10B, 6-3/4%, 4/30/2011.............. 812,500(b) 664,219
Prudential Home Mortgage Securities,
Mortgage Pass-Through Ctfs.:
Ser. 1996-7, Cl. 7B4, 6-3/4%, 2011............ 775,000(b) 533,000
Ser. 1996-7, Cl. 7B3, 6-3/4%, 2011............ 1,395,000(b) 1,152,008
Residential Funding Mortgage Securities I,
Mortgage Pass-Through Ctfs.,
Ser. 1996-S7, Cl. A-12, 7%, 2026................ 10,089,897 9,446,666
-------------
12,185,286
-------------
Technology--1.1% Shared Technologies Fairchild
Communications,
Sr. Sub. Notes, Zero Coupon, 1999............... 4,750,000(b,c) 3,420,000
------------
</TABLE>
<PAGE>
Dreyfus Strategic Income Fund
- ------------------------------------------------------------------------------
Statement of Investments (continued) April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Principal
Bonds and Notes (continued) Amount Value
----------- ------------
<S> <C> <C>
Transportation--1.8% Moran Transportation,
First Preferred Ship Mortgage Notes,
11-3/4%, 2004................................... $ 800,000 $ 796,000
OMI,
Sr. Notes, 10-1/4%, 2003........................ 4,950,000 4,665,375
-------------
5,461,375
-------------
Foreign--6.6% Corporacion Andina de Fomento,
Bonds, 7.10%, 2003.............................. 3,850,000 3,717,853
Eletson Holdings,
First Preferred Ship Mortgage Notes,
9-1/4%, 2003.................................... 4,500,000 4,342,500
Hydro-Quebec, Medium-Term Notes
(Gtd. by the Province of Quebec),
Ser. B, 8.05%, 2006............................. 6,800,000(d) 7,256,212
Teekay Shipping,
First Preferred Ship Mortgage Notes,
8.32%, 2008..................................... 4,850,000 4,637,813
-------------
19,954,378
-------------
Foreign/Governmental--4.4% Province of Newfoundland,
Sinking Fund Deb., 10%, 2020.................... 1,000,000 1,226,010
Republic of Argentina (BOTE),
Floating Rate Notes, Ser. 10, 5-7/16%, 2000..... 3,030,720(e) 2,849,618
Republic of Colombia, Notes:
7-1/4%, 2/15/2003............................... 5,000,000 4,755,680
7-1/4%, 2/23/2004............................... 4,800,000 4,485,130
-------------
13,316,438
-------------
U.S. Government
and Agencies--35.0% Government National Mortgage Association I:
7%, 6/15/2008................................... 1,944,183 1,936,893
7%, 7/15/2023................................... 9,136,911 8,822,785
7-1/2%, 1/15/2002-1/15/2011..................... 24,013,100 24,313,264
7-1/2%, 10/15/2023-5/15/2024.................... 14,644,197 14,503,915
8%, 8/15/2024-9/15/2024......................... 20,334,199 20,613,795
9%, 11/15/2017.................................. 16,833,062 17,958,689
Tennessee Valley Authority,
Power Bonds 1992, Ser. D, 8-1/4%, 2042.......... 16,000,000(a) 16,907,200
-------------
105,056,541
-------------
TOTAL BONDS AND NOTES
(cost $277,641,587)............................. $274,609,964
-------------
-------------
</TABLE>
<PAGE>
Dreyfus Strategic Income Fund
- ------------------------------------------------------------------------------
Statement of Investments (continued) April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Convertible Securities--7.8% Shares Value
---------- -----------
<S> <C> <C>
Preferred Stocks--3.2%
- -------------------------------------------------------------------------------
Consumer--1.7% Cablevision Systems, Depositary Shares, Ser. L,
Cum., $11.125................................... 50,711(b) $ 5,045,745
-------------
Entertainment/Media--1.5% Time Warner, Ser. K,
Cum., $102.50................................... 4,350(b) 4,350,000
-------------
Total Preferred Stocks............................ 9,395,745
-------------
-------------
Principal
Subordinated Debentures--1.1% Amount
- ------------------------------------------------------------------------------- ----------
Computer--1.0% Storage Technology,
8%, 2015........................................ $ 2,900,000 3,066,750
-------------
Industrial--.1% Outboard Marine,
7%, 2002........................................ 358,000 365,160
-------------
Total Subordinated Debentures..................... 3,431,910
-------------
-------------
Notes--3.5%
- -------------------------------------------------------------------------------
Entertainment/Media--1.3% Thomas Nelson,
Sub. Notes, 5-3/4%, 1999........................ 4,000,000(b) 3,960,000
------------
Industrial--2.2% INAMED,
Notes, 11%, 1999................................ 6,650,000(f) 6,650,000
------------
Total Notes....................................... 10,610,000
------------
TOTAL CONVERTIBLE SECURITIES
(cost $23,359,689).............................. $ 23,437,655
------------
------------
Short-Term Investments--.4%
- -------------------------------------------------------------------------------
Time Deposit--.3% Chemical Bank (London),
5-5/16%, 5/1/1996............................... $ 983,000 $ 983,000
------------
U.S. Treasury Bills--.1% 4.80%, 5/30/1996.................................. 250,000 249,033
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,232,033)............................... $ 1,232,033
------------
------------
TOTAL INVESTMENTS (cost $302,233,309)................................................ 99.6% $299,279,652
------- ------------
------- ------------
CASH AND RECEIVABLES (NET)........................................................... .4% $ 1,161,360
------- ------------
------- ------------
NET ASSETS........................................................................... 100.0% $300,441,012
------- ------------
------- ------------
</TABLE>
<PAGE>
Dreyfus Strategic Income Fund
- ------------------------------------------------------------------------------
Statement of Investments (continued) April 30, 1996 (Unaudited)
Notes to Statement of Investments:
- ------------------------------------------------------------------------------
(a) Held by the custodian in a segregated account as collateral for open
Financial Futures positions.
(b) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At April 30, 1996,
these securities amounted to $23,976,865 or 7.98% of net assets.
(c) Zero coupon until 3/1/99, date on which a stated coupon rate of 12-1/4%
becomes effective, the stated maturity date is 3/1/2006.
(d) Reflects date security can be redeemed at holders' option; the stated
maturity date is 7/7/2024.
(e) Variable rate security - interest rate subject to periodic change.
(f) Security restricted as to public resale. Investment in a restricted
security, with a value of $6,650,000 represents approximately 2.21% of net
assets;
<TABLE>
<CAPTION>
Acquisition Purchase Percentage of
Issue Date Price Net Assets Valuation(1)
- ----------- ----------- --------- -------------- -------------
<S> <C> <C> <C> <C>
INAMED, Conv. Notes, 11%, 3/31/1999 1/23/1996 $100 2.21% cost
<FN>
- -------------------
(1) The valuation of this security has been determined in good faith under
the direction of the Board of Trustees.
</TABLE>
Statement of Financial Futures April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Market Value Unrealized
Covered Appreciation
Financial Futures Sold Short Contracts by Contracts Expiration at 4/30/96
- ---------------- ------ ------- ------- ------
<S> <C> <C> <C> <C>
U.S. Treasury 30yr bond...................... 275 $30,017,969 June '96 $122,656
----------
----------
</TABLE>
See independent accountants' review report and notes to financial statements.
<PAGE>
Dreyfus Strategic Income Fund
- ------------------------------------------------------------------------------
Statement of Assets and Liabilities April 30, 1996 (Unaudited)
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $302,233,309)--see statement.................................. $299,279,652
Cash................................................................. 385,512
Interest receivable.................................................. 4,094,574
Receivable for investment securities sold............................ 3,009,606
----------------
306,769,344
LIABILITIES:
Due to The Dreyfus Corporation and subsidiaries...................... $ 200,900
Due to Distributor................................................... 10,123
Payable for investment securities purchased.......................... 5,270,469
Payable for shares of Beneficial Interest redeemed................... 718,478
Accrued expenses and other liabilities............................... 128,362 6,328,332
---------- ----------------
NET ASSETS............................................................... $300,441,012
----------------
----------------
REPRESENTED BY:
Paid-in capital...................................................... $312,037,454
Accumulated undistributed investment income-net...................... 57,840
Accumulated net realized (loss) on investments....................... (8,823,281)
Accumulated net unrealized (depreciation) on investments (including
$122,656 net unrealized appreciation on financial futures)--Note 4(b) (2,831,001)
----------------
NET ASSETS at value applicable to 21,387,759 outstanding shares of
Beneficial Interest, equivalent to $14.05 per share
(unlimited number of $.001 par value shares authorized).............. $300,441,012
----------------
----------------
</TABLE>
See independent accountants' review report and notes to financial statements.
<PAGE>
Dreyfus Strategic Income Fund
- ------------------------------------------------------------------------------
Statement of Operations six months ended April 30, 1996 (Unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest Income...................................................... $11,814,401
Expenses:
Management fee--Note 3(a)........................................... $ 942,011
Shareholder servicing costs--Note 3(b).............................. 571,112
Trustees' fees and expenses--Note 3(c).............................. 28,676
Professional fees.................................................. 27,959
Custodian fees..................................................... 26,658
Prospectus and shareholders' reports............................... 9,292
Registration fees.................................................. 7,716
Miscellaneous...................................................... 7,681
------------
Total Expenses................................................. 1,621,105
------------
INVESTMENT INCOME--NET.......................................... 10,193,296
------------
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized gain on investments--Note 4(a)........................... $13,249,162
Net realized gain on financial futures--Note 4(a)..................... 219,479
------------
Net Realized Gain.............................................. 13,468,641
Net unrealized (depreciation) on investments (including $122,656 net
unrealized appreciation on financial futures)...................... (17,295,157)
------------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS.............. (3,826,516)
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $ 6,366,780
------------
------------
</TABLE>
See independent accountants' review report and notes to financial statements.
<PAGE>
Dreyfus Strategic Income Fund
- ------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended Six Months Ended
October 31, April 30, 1996
1995 (Unaudited)
------------ ------------
<S> <C> <C>
OPERATIONS:
Investment income--net.................................................. $ 21,735,685 $ 10,193,296
Net realized gain (loss) on investments................................. (8,706,304) 13,468,641
Net unrealized appreciation (depreciation) on investments for the period 38,489,861 (17,295,157)
------------ ------------
Net Increase In Net Assets Resulting From Operations.................. 51,519,242 6,366,780
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income--net.................................................. (21,735,685) (10,135,456)
------------ ------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold........................................... 17,545,801 13,889,633
Dividends reinvested.................................................... 15,878,061 7,494,446
Cost of shares redeemed................................................. (65,349,244) (37,519,314)
------------ ------------
(Decrease) In Net Assets From Beneficial Interest Transactions........ (31,925,382) (16,135,235)
------------ ------------
Total (Decrease) In Net Assets.................................... (2,141,825) (19,903,911)
NET ASSETS:
Beginning of period..................................................... 322,486,748 320,344,923
------------ ------------
End of period (including undistributed investment income-net; $57,840
on April 30, 1996).................................................... $320,344,923 $300,441,012
------------ ------------
------------ ------------
<CAPTION>
Shares Shares
------------ ------------
<S> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................. 1,300,295 968,842
Shares issued for dividends reinvested.................................. 1,172,881 523,712
Shares redeemed......................................................... (4,864,735) (2,624,955)
------------ ------------
------------ ------------
Net (Decrease) In Shares Outstanding.................................. (2,391,559) (1,132,401)
------------ ------------
------------ ------------
</TABLE>
See independent accountants' review report and notes to financial statements.
<PAGE>
Dreyfus Strategic Income Fund
- ------------------------------------------------------------------------------
Financial Highlights
Reference is made to page 4 of the Fund's Prospectus
dated January 2, 1996, as revised February 12, 1996.
See independent accountants' review report and notes to financial statements.
<PAGE>
Dreyfus Strategic Income Fund
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus Income Funds, (the "Company") is registered under the Investment
Company Act of 1940 ("Act") as a diversified open-end management investment
company and operates as a series company currently offering three series,
including the Dreyfus Strategic Income Fund (the "Fund"). The Fund's
investment objective is to maximize current income by investing principally
in debt securities of domestic and foreign issuers. The Dreyfus Corporation
("Manager") serves as the Fund's investment adviser. The Manager is a direct
subsidiary of Mellon Bank, N.A. ("Mellon"). Premier Mutual Fund Services,
Inc. (the "Distributor") acts as the distributor of the Fund's shares which
are sold to the public without a sales load.
The Company accounts separately for the assets, liabilities and
operations of each fund. Expenses directly attributable to each fund are
charged to that fund's operations; expenses which are applicable to all funds
are allocated among them on a pro rata basis.
(a) Portfolio valuation: The Fund's investments (excluding short-term
investments and U.S. Government obligations) are valued each business day by
an independent pricing service ("Service") approved by the Board of Trustees.
Investments for which quoted bid prices are readily available and are
representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the
Service from dealers in such securities) and asked prices (as calculated by
the Service based upon its evaluation of the market for such securities).
Other investments (which constitute a majority of the portfolio securities)
are carried at fair value as determined by the Service, based on methods
which include consideration of: yields or prices of securities of comparable
quality, coupon, maturity and type; indications as to values from dealers;
and general market conditions. Securities for which there are no such
valuations are valued at fair value as determined in good faith under the
direction of the Board of Trustees. Investments in U.S. Government obligations
are valued at the mean between quoted bid and asked prices. Short-term
investments are carried at amortized cost, which approximates value.
Investments denominated in foreign currencies are translated to U.S. dollars
at the prevailing rates of exchange.
(b) Securities transactions and investment income: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, including, where applicable, amortization of discount on investments,
is recognized on the accrual basis.
(c) Dividends to shareholders: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, it is the policy of the Fund not to distribute such gain.
(d) Federal income taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
<PAGE>
Dreyfus Strategic Income Fund
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The Fund has an unused capital loss carryover of approximately
$22,352,000 available for Federal income tax purposes to be applied against
future net securities profits, if any, realized subsequent to October 31,
1995. If not applied, $13,753,000 of the carryover expires in fiscal 2002,
and $8,599,000 expires in fiscal 2003.
NOTE 2--Bank Line of Credit:
In accordance with an agreement with a bank, the Fund may borrow up to
$10 million under a short-term unsecured line of credit. Interest on
borrowings is charged at rates which are related to Federal Funds rates in
effect from time to time.
There were no borrowings during the six months ended April 30, 1996.
NOTE 3--Management Fee and Other Transactions With Affiliates:
(a) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .60 of 1% of the value
of the Fund's average daily net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Fund's
aggregate expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Fund. The most stringent state expense limitation
applicable to the Fund presently requires reimbursement of expenses in any
full fiscal year that such expenses (exclusive of certain expenses as
described above) exceed 2-1/2% of the first $30 million, 2% of the next $70
million and 1-1/2% of the excess over $100 million of the value of the Fund's
average net assets in accordance with California "blue sky" regulations.
There was no expense reimbursement for the six months ended April 30, 1996.
(b) Pursuant to the Fund's Shareholder Services Plan, the Fund pays the
Distributor, at an annual rate of .25 of 1% of the value of the Fund's
average daily net assets for the provision of certain services. The services
provided may include personal services relating to shareholder accounts, such
as answering shareholder inquiries regarding the Fund and providing reports
and other information, and services related to the maintenance of shareholder
accounts. The Distributor may make payments to Service Agents (a securities
dealer, financial institution or other industry professional) in respect of
these services. The Distributor determines the amounts to be paid to Service
Agents. For the six months ended April 30, 1996, $392,505 was charged to the
Fund by the Distributor pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Fund compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a transfer agency agreement
for providing personnel and facilities to perform transfer agency services
for the Fund. Such compensation amounted to $98,812 for the period from
December 1, 1995, through April 30, 1996.
Effective May 10, 1996, the Fund entered into a Custody Agreement with
Mellon to provide custodial services for the Fund.
(c) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $500
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
<PAGE>
Dreyfus Strategic Income Fund
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
NOTE 4--Securities Transactions:
(a) The aggregate amount of purchases and sales (including paydowns) of
investment securities, excluding short-term securities, during the six months
ended April 30, 1996, amounted to $400,059,901 and $411,111,778,
respectively.
The Fund may invest in financial futures contracts in order to gain
exposure to or protect against changes in the market. The Fund is exposed to
market risk as a result of changes in the value of the underlying financial
instruments (see the Statement of Financial Futures). Investments in
financial futures require the Fund to "mark to market" on a daily basis,
which reflects the change in market value of the contracts at the close of
each day's trading. Accordingly, variation margin payments are received or
made to reflect daily unrealized gains or losses. When the contracts are
closed, the Fund recognizes a realized gain or loss. These investments
require initial margin deposits with a custodian, which consist of cash or
cash equivalents, up to approximately 10% of the contract amount. The amount
of these deposits is determined by the exchange or Board of Trade on which
the contract is traded and is subject to change. Contracts open at April 30,
1996 and their related unrealized market appreciation are set forth in the
Statement of Financial Futures.
(b) At April 30, 1996, accumulated net unrealized depreciation on
investments was $2,831,001, consisting of $3,030,167 gross unrealized
appreciation and $5,861,168 gross unrealized depreciation.
At April 30, 1996, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
<TABLE>
<CAPTION>
DREYFUS EQUITY DIVIDEND FUND
STATEMENT OF INVESTMENTS APRIL 30, 1996 (UNAUDITED)
COMMON STOCKS-97.4% SHARES VALUE
______ ______
<S> <C> <C>
COMMERCIAL SERVICES-7.8% Deluxe................................. 1,400 $ 49,000
McGraw-Hill............................ 1,000 44,125
Ogden.................................. 2,300 46,575
Safety-Kleen........................... 3,100 46,500
_____
186,200
_____
CONSUMER DURABLES-9.3% Brunswick.............................. 2,000 44,000
Chrysler............................... 700 43,925
Eastman Kodak.......................... 600 45,900
General Motors......................... 800 43,400
Jostens................................ 2,000 45,000
_____
222,225
_____
CONSUMER
NON-DURABLES-7.6% American Greetings, Cl. A.............. 1,700 46,962
Colgate-Palmolive...................... 600 45,975
Flowers Industries..................... 3,300 44,138
Kimberly-Clark......................... 600 43,575
_____
180,650
_____
ELECTRONIC TECHNOLOGY-7.8% AMP.................................... 1,100 49,225
General Dynamics....................... 700 44,187
Northrop Grumman....................... 800 49,500
United Technologies.................... 400 44,200
_____
187,112
_____
ENERGY MINERALS-10.0% Exxon.................................. 500 42,500
Lyondell Petrochemical................. 1,600 47,000
Mobil.................................. 400 46,000
Phillips Petroleum..................... 1,200 49,800
Sun.................................... 1,700 52,700
_____
238,000
_____
FINANCE-9.1% CIGNA.................................. 400 45,350
Chelsea GCA Realty..................... 1,300 37,050
First Union............................ 800 49,200
Student Loan Marketing Association..... 600 43,950
Willis Corroon Group, A.D.S............ 3,600 41,850
_____
217,400
_____
HEALTH TECHNOLOGY-9.1% American Home Products................. 400 42,200
Baxter International................... 1,000 44,250
Bristol-Myers Squibb................... 500 41,125
Pharmacia & Upjohn..................... 1,200 45,900
Warner-Lambert......................... 400 44,700
_____
218,175
_____
DREYFUS EQUITY DIVIDEND FUND
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996 (UNAUDITED)
COMMON STOCKS (CONTINUED) SHARES VALUE
______ ______
NON-ENERGY MINERALS-2.1% Southern Peru Copper................... 2,700 50,625
_____
PROCESS INDUSTRIES-5.9% Dow Chemical........................... 500 $ 44,438
duPont (E.I.) deNemours................ 600 48,225
Witco.................................. 1,400 47,775
_____
140,438
_____
PRODUCER
MANUFACTURING-7.6% Keystone International.................. 2,200 48,125
National Service Industries............. 1,200 44,400
Olin.................................... 500 44,250
Tenneco................................. 800 43,900
_____
180,675
_____
RETAIL TRADE-4.0% May Department Stores................... 900 45,900
Penney (J.C.)........................... 1,000 49,500
_____
95,400
_____
TRANSPORTATION-4.2% Canadian National Railway.............. 2,700 51,300
Illinois Central....................... 1,600 48,000
_____
99,300
_____
UTILITIES-12.9% Ameritech.............................. 700 40,862
Entergy................................ 1,800 47,700
Frontier............................... 1,400 44,275
GTE.................................... 1,100 47,713
NYNEX.................................. 900 44,213
Telefonos de Mexico, Cl. L, A.D.S...... 1,300 44,200
Texas Utilities........................ 1,000 40,250
_____
309,213
_____
TOTAL COMMON STOCKS
(cost $2,210,158).................... $2,325,413
======
TOTAL INVESTMENTS (cost $2,210,158)......................................... 97.4% $2,325,413
=== ======
CASH AND RECEIVABLES (NET).................................................. 2.6% $ 62,762
=== ======
NET ASSETS.................................................................. 100.0% $2,388,175
=== ======
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS EQUITY DIVIDEND FUND
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996 (UNAUDITED)
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $2,210,158)-see statement....................................... $2,325,413
Cash.................................................................... 39,078
Dividends receivable.................................................... 4,042
Prepaid expenses........................................................ 2,206
Due from The Dreyfus Corporation........................................ 20,687
______
2,391,426
LIABILITIES:
Due to Distributor...................................................... $ 480
Accrued expenses........................................................ 2,771 3,251
____ ______
NET ASSETS.................................................................. $2,388,175
======
REPRESENTED BY:
Paid-in capital......................................................... $2,269,455
Accumulated undistributed investment income-net......................... 1,260
Accumulated undistributed net realized gain on investments.............. 2,205
Accumulated net unrealized appreciation on investments-Note 3........... 115,255
______
NET ASSETS at value applicable to 180,974 outstanding shares of
Beneficial Interest, equivalent to $13.20 per share
(unlimited number of $.001 par value shares authorized) ................ $2,388,175
======
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS EQUITY DIVIDEND FUND
STATEMENT OF OPERATIONS
FROM DECEMBER 29, 1995 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1996 (UNAUDITED)
INVESTMENT INCOME:
<S> <C> <C>
INCOME:
Cash dividends (net of $144 foreign taxes withheld at source)......... $ 22,407
Interest.............................................................. 2,825
____
TOTAL INCOME.................................................... $ 25,232
EXPENSES:
Management fee-Note 2(a).............................................. 5,691
Legal fees............................................................ 21,758
Shareholder servicing costs-Note 2(b)................................. 2,001
Registration fees..................................................... 1,220
Custodian fees........................................................ 857
Prospectus and shareholders' reports.................................. 666
Auditing fees......................................................... 122
Trustees' fees and expenses-Note 2(c)................................. 119
Miscellaneous......................................................... 885
____
TOTAL EXPENSES.................................................. 33,319
Less-expense reimbursement from Manager due to
undertaking-Note 2(a)............................................. 23,059
____
NET EXPENSES.................................................... 10,260
____
INVESTMENT INCOME-NET........................................... 14,972
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 2,205
Net unrealized appreciation on investments.............................. 115,255
____
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 117,460
____
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $132,432
======
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS EQUITY DIVIDEND FUND
STATEMENT OF CHANGES IN NET ASSETS
FROM DECEMBER 29, 1995 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1996 (UNAUDITED)
OPERATIONS:
<S> <C>
Investment income-net................................................................. $ 14,972
Net realized gain on investments...................................................... 2,205
Net unrealized appreciation on investments for the period............................. 115,255
_____
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................ 132,432
_____
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net................................................................. (13,712)
_____
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold......................................................... 2,334,334
Dividends reinvested.................................................................. 13,502
Cost of shares redeemed............................................................... (78,381)
_____
INCREASE IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS........................ 2,269,455
_____
TOTAL INCREASE IN NET ASSETS.................................................... 2,388,175
NET ASSETS:
Beginning of period................................................................... -
_____
End of period (including undistributed investment income-net;
$1,260 on April 30, 1996)........................................................... $2,388,175
=====
SHARES
_____
CAPITAL SHARE TRANSACTIONS:
Shares sold........................................................................... 185,909
Shares issued for dividends reinvested................................................ 1,028
Shares redeemed....................................................................... (5,963)
_____
NET INCREASE IN SHARES OUTSTANDING.................................................. 180,974
=====
See notes to financial statements.
</TABLE>
DREYFUS EQUITY DIVIDEND FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
Reference is made to Page 4 of the Fund's Prospectus dated July 1, 1996.
DREYFUS EQUITY DIVIDEND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Income Funds (the "Company") is registered under the Investment
Company Act of 1940 ("Act") as a diversified open-end management investment
company and operates as a series company currently offering three series,
including the Dreyfus Equity Dividend Fund (the "Fund") which commenced
operations on December 29, 1995. The Fund's primary investment objective is
current income, with capital appreciation as a secondary objective. The
Dreyfus Corporation ("Manager") serves as the Fund's investment adviser. The
Manager is a direct subsidiary of Mellon Bank, N.A. ("Mellon"). Premier
Mutual Fund Services, Inc. (the "Distributor") acts as the distributor of the
Fund's shares, which are sold to the public without a sales charge.
The Company accounts separately for the assets, liabilities and
operations of each fund. Expenses directly attributable to each fund are
charged to that fund's operations; expenses which are applicable to all funds
are allocated among them on a pro rata basis.
As of April 30, 1996, Allomon Corporation, a subsidiary of Mellon Bank
Investments Corporation, the parent company of which is Mellon Bank
Corporation, held 160,928 shares of the Fund.
(A) PORTFOLIO VALUATION: Investments in securities (including options and
financial futures) are valued at the last sales price on the securities
exchange on which such securities are primarily traded or at the last sales
price on the national securities market. Securities not listed on an exchange
or the national securities market, or securities for which there were no
transactions, are valued at the average of the most recent bid and asked
prices, except for open short positions, where the asked price is used for
valuation purposes. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Dividend
income is recognized on the ex-dividend date and interest income, including,
where applicable, amortization of discount on investments, is recognized on
the accrual basis.
(C) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend
date. Dividends from investment income-net are declared and paid on a
quarterly basis. Dividends from net realized capital gain are normally
declared and paid annually, but the Fund may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code. To the extent that net realized capital gain can be offset by
capital loss carryovers, if any, it is the policy of the Fund not to
distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to qualify as a
regulated investment company, if such qualification is in the best interests
of its shareholders, by complying with the applicable provisions of the
Internal Revenue Code, and to make distributions of taxable income sufficient
to relieve it from substantially all Federal income and excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .75 of 1% of the value
of the Fund's average daily net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the
DREYFUS EQUITY DIVIDEND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Fund's aggregate expenses, exclusive of taxes, brokerage, interest on
borrowings and extraordinary expenses, exceed the expense limitation of any
state having jurisdiction over the Fund. The most stringent state expense
limitation applicable to the Fund presently requires reimbursement of
expenses in any full fiscal year that such expenses (exclusive of certain
expenses as described above) exceed 2-1\2% of the first $30 million, 2% of the
next $70 million and 1-1\2% of the excess over $100 million of the average
value of the Fund's net assets in accordance with California "blue sky"
regulations. The Manager has currently undertaken from December 29, 1995
through December 31, 1996 to reduce the management fee paid by, or reimburse
such excess expenses of the Fund, to the extent that the Fund's aggregate
annual expenses (exclusive of certain expenses as described above) exceed an
annual rate of 1.25 of 1% of the value of the Fund's average daily net
assets. The expense reimbursement, pursuant to the undertaking, amounted to
$23,059 for the period ended April 30, 1996.
The undertaking may be extended, modified or terminated by the Manager,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the Agreement.
(B) The Fund has adopted a Shareholder Services Plan, pursuant to which
it pays a fee to the Distributor for the provision of certain services to
Fund shareholders at an 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 (a securities dealer, financial institution or
other industry professional) in respect of these services. The Distributor
determines the amounts to be paid to Service Agents. For the period ended
April 30, 1996, the Fund was charged an aggregate of $1,897 pursuant to the
Shareholder Services Plan.
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
the Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such
compensation amounted to $95 for the period from December 29, 1995 through
April 30, 1996.
Effective May 10, 1996, the Fund entered into a Custody Agreement with
Mellon to provide custodial services for the Fund.
(C) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Company an annual fee of $2,500 and an attendance fee of
$500 per meeting. The Chairman of the Board receives an additional 25% of
such compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the period ended April 30, 1996
amounted to $2,875,886 and $668,676, respectively.
At April 30, 1996, accumulated net unrealized appreciation on investments
was $115,255, consisting of $138,731 gross unrealized appreciation and
$23,476 gross unrealized depreciation.
At April 30, 1996, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
<TABLE>
<CAPTION>
DREYFUS HIGH YIELD SECURITIES FUND
STATEMENT OF INVESTMENTS JULY 31, 1996 (UNAUDITED)
Principal
Bonds and Notes_85.8% Amount. Value
________ _________
<S> <C> <C>
Aircraft & Aerospace_9.7% Aircraft Lease Portfolio Securitisation 96-1
Pass Through Trust, Ctfs.,
Cl. D, 12 3/4%, 2006.............................. $1,000,000 (a) $ 1,007,500
Greenwich Air Services,
Sr. Notes, 10 1/2%, 2006.......................... 600,000 601,500
UNC,
Sr. Sub. Notes, 11%, 2006........................ 500,000 (a) 512,500
___________
2,121,500
___________
Broadcasting_2.3% Spanish Broadcasting System,
Sr. Notes, 7 1/2%, 2002......................... 500,000 (b) 508,750
___________
Building Materials_3.0% Associated Materials,
Sr. Sub. Notes, 11 1/2%, 2003.................... 750,000 663,750
___________
Commercial Mortgage
Backed_1.2% Structured Asset Securities,
Mortgage Pass-Through Ctfs.,
Ser. GreenPoint 1996-A:
Cl.B5, 8.441%, 2027............................. 291,000 (a) 178,874
Cl.B6, 8.441%, 2027............................. 364,312 (a) 83,792
___________
262,666
___________
Computer_2.3% Unisys,
Sr. Notes, 12%, 2003.......................... 500,000 505,625
___________
Consumer_11.7% BPC Holding,
Sr. Secured Notes, 12 1/2%, 2006................. 750,000 (a) 753,750
Hosiery Corp. of America,
Sr. Sub. Exchange Notes, 13 3/4%, 2002 (Units).... 500,000 (c) 565,000
Keebler,
Sr. Sub. Notes, 10 3/4%, 2006.................... 750,000 (a) 781,875
Remington Arms,
Sr. Sub. Notes, 10%, 2003........................ 500,000 (a) 457,500
___________
2,558,125
___________
Energy_7.1% DeepTech International,
Sr. Secured Notes, 12%, 2000................... 500,000 501,250
Mesa Operating,
Sr. Sub. Discount Notes, Zero Coupon, 2001..... 1,750,000 (d) 1,058,750
___________
1,560,000
___________
Entertainment/Media_2.1% Alliance Entertainment,
Sr. Sub. Notes, 11 1/4%, 2005.................. 500,000 465,000
___________
Foreign_3.6% Grupo Televisa, S.A.,
Sr. Notes, Ser. B, 11 7/8%, 2006................ 500,000 (a) 510,000
Net Sat Servicos Ltda.,
Sr. Secured Notes, 12 3/4%,, 2001............... 200,000 (a,e) 201,000
Petersburg Long Distance,
Sr. Notes, Zero Coupon, 1998 (Units)............ 100,000 (a,f,g) 75,000
___________
786,000
___________
Gaming_2.3% Riviera Holdings,
First Mortgage Notes, 11%, 2002................ 500,000 497,500
___________
Healthcare Related_2.3% Dynacare,
Sr. Notes, 10 3/4%, 2006........................ 500,000 503,125
___________
Industrial_4.7% Renco Metals,
Sr. Notes, 11 1/2%, 2003...................... 1,000,000 1,022,500
___________
Office Equipment_7.0% Anacomp,
Sr. Secured Notes, 11 5/8%, 1999.............. 500,000 503,750
Pierce Leahy,
Sr. Sub. Notes, 11 1/8%, 2006.................................... 1,000,000 (a) 1,030,000
___________
1,533,750
___________
Residential Mortgage
Backed_11.1% Chase Mortgage Finance,
Multi-Class Mortgage Pass-Through Ctfs.,
Ser. 1994-E, Cl.B6, 6 1/4%, 2010................. 455,834 (a) 164,100
GE Capital Mortgage Services,
REMIC Multi-Class Pass-Through Ctfs.:
Ser. 1994-21, Cl.B5, 6 1/2%, 2009........... 1,074,102 (a) 386,677
Ser. 1996-10, Cl.B4, 6 3/4%, 2011........... 313,000 (a) 221,252
Ser. 1996-10, Cl.B5, 6 3/4%, 2011........... 375,921 (a) 135,332
Ser. 1996-12, Cl.B4, 7 1/4%, 2011........... 186,000 (a) 135,315
Ser. 1996-12, Cl.B5, 7 1/4%, 2011........... 435,371 (a) 156,734
MorServ,
Multi-Class Mortgage Pass-Through Ctfs.:
Ser. 1996-1, Cl.B4, 7%, 2011................ 365,000 (a) 273,750
Ser. 1996-1, Cl.B5, 7%, 2011................ 548,487 (a) 197,456
Norwest Asset Securities,
Whole Loan Sub. Bond,
Ser. 1996-2, Cl.B4, 7%, 2011 615,406 (h) 441,746
Prudential Home Mortgage Securities,
Mortgage Pass-Through Ctfs.,
Ser. 1996-7, Cl.B5, 6 3/4%, 2011................. 921,703 (a) 331,813
___________
2,444,175
___________
Telecommunications_10.6% American Communications Services,
Sr. Discount Notes, Zero Coupon, 2000........... 200,000 (i) 109,000
Arch Communications Group,
Sr. Discount Notes, Zero Coupon, 2001........... 200,000 (j) 102,500
CS Wireless Systems,
Sr. Discount Notes, Zero Coupon, 2001 (Units).... 200,000 (a,c,k) 101,000
Comunicacion Celular S.A.,
Sr. Deferred Coupon Bonds, Zero Coupon,
2000 (Units) 1,000,000 (f,l) 650,000
Microcell Telecommunications,
Sr. Discount Notes, Zero Coupon, 2001............ 1,500,000 (a,f,m) 712,500
People's Choice TV,
Sr. Discount Notes, Zero Coupon, 2000 (Units).... 200,000 (f,n) 115,500
Shared Technologies Fairchild Communications,
Sr. Sub. Notes, Zero Coupon, 1999................ 700,000 (a,o) 533,750
___________
2,324,250
___________
Transportation_4.8% Moran Transportation,
First Preferred Ship Mortgage Notes,
11 3/4%, 2004 450,000 450,000
TRISM,
Sr. Sub. Notes, 10 3/4%, 2000.................... 650,000 611,000
___________
1,061,000
___________
TOTAL BONDS AND NOTES
(cost $18,297,551) $ 18,817,716
==============
Convertible Securities_5.3%
Notes_4.9%
Aircraft & Aerospace_1.3% Hexcel,
Sub. Notes, 7%, 2003............................ $ 250,000 $ 278,750
___________
Industrial_2.2% MagneTek
Sub. Notes, 8%, 2001............................. 500,000 473,750
___________
Oil & Gas_1.4% Nabors Industries,
Sub. Notes, 5%, 2006............................ 300,000 318,750
___________
Total Notes 1,071,250
==============
Subordinated Debentures_.4%
Consumer; Outboard Marine,
7%, 2002......................................... 100,000 95,125
=============
Total Convertible Securities
(cost $1,138,286) $ 1,166,375
==============
Preferred Stock_5.0% Shares
_______
Cable_2.2% Cablevision Systems, Depositary Shares, Ser. L,
Cum., $11.125.................................. 5,139 (a) $ 481,139
___________
Entertainment/Media_2.3% Time Warner, Ser. K,
Cum., $102.50................................... 511 (a) 509,722
___________
Gaming_.5% Alliance Gaming, Ser. B,
Cum., $15.001,500.............................. 103,875
___________
Total Preferred Stock
(cost $1,130,673) $ 1,094,736
==============
Short-Term Investments_5.2%
Principal
Amount
______
U.S. Government Agency; Federal Home Loan Banks,
5.62%, 8/1/1996
(cost $1,145,000) $1,145,000 $ 1,145,000
==============
TOTAL INVESTMENTS (cost $21,711,510) 101.3% $ 22,223,827
======= ==============
LIABILITIES, LESS CASH AND RECEIVABLES (1.3%) $ (277,611)
======= ==============
NET ASSETS 100.0% $ 21,946,216
======= ==============
Notes to Statement of Investments:
(a) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities
may be resold in transactions exempt from registration, normally to qualified
institutional buyers.
At July 31, 1996, these securities amounted to $9,932,331 or 45.26% of net
assets.
(b) 7 1/2% coupon rate until 6/15/1997, date on which a stated coupon rate of
12 1/2% becomes effective.
(c) With Common Stock attached.
(d) Zero coupon until 7/1/2001, date on which a stated coupon rate of 11 5/8%
becomes effective; the stated maturity date is 7/1/2006.
(e) Reflects date security can be redeemed at holders' option; the stated
maturity date is 8/5/2004.
(f) With warrants to purchase Common Stock.
(g) Zero coupon until 12/1/1998, date on which a stated coupon rate of 14%
becomes effective;the stated maturity is 6/1/2004.
(h) Purchased on a forward commitment basis.
(i) Zero coupon until 11/1/2000, date on which a stated coupon rate of 13%
becomes effective;the stated maturity is 11/1/2005.
(j) Zero coupon until 3/15/2001, date on which a stated coupon rate of 10
7/8% becomes effective; the stated maturity is 3/15/2008.
(k) Zero coupon until 3/1/2001, date on which a stated coupon rate of 11 3/8%
becomes effective; the stated maturity is 3/1/2006.
(l) Zero coupon until 11/15/2000, date on which a stated coupon rate of 13
1/8% becomes effective; the stated maturity is
11/15/2003.
(m) Zero coupon until 12/1/2001, date on which a stated coupon rate of 14%
becomes effective; the stated maturity is 6/1/2006.
(n) Zero coupon until 6/1/2000, date on which a stated coupon rate of 13 1/8%
becomes effective; the stated maturity is 6/1/2004.
(o) Zero coupon until 3/1/1999, date on which a stated coupon rate of 12 1/4%
becomes effective; the stated maturity is 3/1/2006.
See notes to financial statements.
DREYFUS HIGH YIELD SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES JULY 31, 1996 (UNAUDITED)
ASSETS:
Investments in securities, at value
(cost $21,711,510)_see statement...................................... $ 22,223,827
Cash 160,231
Interest receivable..................................................... 297,486
Receivable for investment securities sold............................... 2,979
Prepaid expenses........................................................ 1,849
Due from The Dreyfus Corporation and affiliates......................... 29,202
____________
................................................................ 22,715,574
LIABILITIES:
Due to Distributor...................................................... $ 4,164
Payable for investment securities purchased............................. 749,832
Accrued expenses........................................................ 15,362 769,358
___________ __________
NET ASSETS ................................................................ $ 21,946,216
============
REPRESENTED BY:
Paid-in capital......................................................... $ 21,093,182
Accumulated undistributed investment income-net......................... 212,777
Accumulated undistributed net realized gain on investments.............. 127,940
Accumulated net unrealized appreciation on investments_Note 4.......... 512,317
____________
NET ASSETS at value applicable to 1,651,226 shares outstanding
(unlimited number of $.001 par value shares of Beneficial
Interest authorized).................................................... $ 21,946,216
============
NET ASSET VALUE, offering and redemption price per share
($21,946,216 / 1,651,226).................................................. $13.29
=======
See notes to financial statements.
DREYFUS HIGH YIELD SECURITIES FUND
STATEMENT OF OPERATIONS
from March 25, 1996 (commencement of operations) to July 31, 1996 (Unaudited)
INVESTMENT INCOME:
Interest Income......................................................... $ 531,595
Expenses:
Management fee_Note 3(a)............................................. $ 32,470
Legal fees............................................................ 16,492
Shareholder servicing costs_Note 3(b)................................ 13,363
Auditing fees......................................................... 7,292
Registration fees..................................................... 7,274
Custodian fees_Note 3(b)............................................. 2,729
Trustees' fees and expenses_Note 3(c)................................ 1,015
Prospectus and shareholders' reports.................................. 635
Miscellaneous......................................................... 1,235
___________
Total Expenses........................................................ 82,505
Less_expense reimbursement from the Manager due to undertaking_Note 3(a) 82,505
___________
Net Expenses.......................................................... _
___________
INVESTMENT INCOME_NET................................................ 531,595
REALIZED AND UNREALIZED GAIN ON INVESTMENTS--NOTE 4:
Net realized gain on investments....................................... $127,940
Net unrealized appreciation on investments.............................. 512,317
___________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS....................... 640,257
___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $1,171,852
============
See notes to financial statements.
DREYFUS HIGH YIELD SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
from March 25, 1996 (commencement of operations) to July 31, 1996 (Unaudited)
OPERATIONS:
Investment income_net.................................................. $ 531,595
Net realized gain on investments........................................ 127,940
Net unrealized appreciation on investments for the period............... 512,317
___________
Net Increase In Net Assets Resulting From Operations.................. 1,171,852
___________
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income_net.................................................. (318,818)
___________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold........................................... 20,945,824
Dividends reinvested.................................................... 298,573
Cost of shares redeemed................................................. (151,215)
___________
Increase In Net Assets From Beneficial Interest Transactions.......... 21,093,182
___________
Total Increase In Net Assets.......................................... 21,946,216
NET ASSETS:
Beginning of period..................................................... _
___________
End of period (including undistributed investment income-net of
$212,777 on July 31, 1996)............................................ $21,946,216
============
Shares
___________
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................. 1,640,204
Shares issued for dividends reinvested.................................. 22,809
Shares redeemed......................................................... (11,787)
___________
Net Increase In Shares Outstanding.................................... 1,651,226
============
See notes to financial statements.
DREYFUS HIGH YIELD SECURITIES FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
Reference is made to page 5 of the Fund's Prospectus
dated September 20, 1996.
See notes to financial statements.
</TABLE>
DREYFUS HIGH YIELD SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1_SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Income Funds (the "Company") is registered under the Investment
Company Act of 1940 ("Act") as a diversified open-end management investment
company and operates as a series company currently offering four series,
including the Dreyfus High Yield Securities Fund (the "Fund"). The Fund's
investment objective is to maximize total return, consisting of capital
appreciation and current income. The Dreyfus Corporation ("Manager") serves
as the Fund's investment adviser. The Manager is a direct subsidiary of
Mellon Bank, N.A. ("Mellon"). Premier Mutual Fund Services, Inc. (the
"Distributor") acts as the distributor of the Fund's shares, which are sold
to the public without a sales charge.
The Company accounts separately for the assets, liabilities and
operations of each fund. Expenses directly attributable to each fund are
charged to that fund's operations; expenses which are applicable to all funds
are allocated among them on a pro rata basis.
As of July 31, 1996, Allomon Corporation, a subsidiary of Mellon Bank
Investments Corporation, the parent company of which is Mellon Bank, held
814,362 shares of the Fund.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management
estimates and assumptions. Actual results could differ from those estimates.
(A) PORTFOLIO VALUATION: The Fund's investments (excluding short-term
investments and U.S. Government obligations) are valued each business day by
an independent pricing service ("Service") approved by the Board of Trustees.
Investments for which quoted bid prices are readily available and are
representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the
Service from dealers in such securities) and asked prices (as calculated by
the Service based upon its evaluation of the market for such securities).
Other investments (which constitute a majority of the portfolio securities)
are carried at fair value as determined by the Service, based on methods
which include consideration of: yields or prices of securities of comparable
quality, coupon, maturity and type; indications as to values from dealers;
and general market conditions. Securities for which there are no such
valuations are valued at fair value as determined in good faith under the dire
ction of the Board of Trustees. Investments in U.S. Government obligations
are valued at the mean between quoted bid and asked prices. Short-term
investments are carried at amortized cost, which approximates value.
Investments denominated in foreign currencies are translated to U.S. dollars
at the prevailing rates of exchange.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
including, where applicable, amortization of discount on investments, is
recognized on the accrual basis.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund to declare and
pay dividends quarterly from investment income-net. Dividends from net
realized capital gain are normally declared and paid annually, but the Fund
may make distributions on a more frequent basis to comply with the
distribution requirements of the Internal Revenue Code. To the extent that
net realized capital gain can be offset by capital loss carryovers, if any,
it is the policy of the Fund not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to qualify as a
regulated investment
company, if such qualification is in the best interests of its shareholders,
by complying with the applicable provisions of the Internal Revenue Code, and
to make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes.
Dreyfus High Yield Securities Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
NOTE 2_BANK LINE OF CREDIT:
The Fund participates with other Dreyfus-managed Funds in a $100 million
unsecured line of credit primarily to be utilized for temporary or emergency
purposes, including the financing of redemptions. Interest is charged to the
Fund at rates which are related to the Federal Funds rate in effect at the
time of borrowings. For the period ending July 31, 1996 the Fund did not
borrow under the line of credit.
NOTE 3_MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .65 of 1% of the value of
the Fund's average daily net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Fund's
aggregate expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Fund. The most stringent state expense limitation
applicable to the Fund presently requires reimbursement of expenses in any
full fiscal year that such expenses (exclusive of certain expenses as
described above) exceed 2 1/2% of the first $30 million, 2% of the next $70
million and 1 1/2% of the excess over $100 million of the average value of
the Fund's net assets in accordance with California "blue sky" regulations.
However, the Manager has undertaken from March 25, 1996 (commencement of
operations) through September 30, 1996 to reimburse all fees and expenses of
the Fund (exclusive of certain expenses as described above). The expense
reimbursement, pursuant to the undertaking, amounted to $82,505 for the
period ended July 31, 1996.
The undertaking may be extended, modified or terminated by the Manager,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the Agreement.
(B) Pursuant to the Fund's Shareholder Services Plan, the Fund pays the
Distributor at an annual rate of .25 of 1% of the value of the Fund's average
daily net assets for the provision of certain services. The services provided
may include personal services relating to shareholder accounts, such as
answering shareholder inquiries regarding the Fund and providing reports and
other information, and services related to the maintenance of shareholder
accounts. The Distributor may make payments to Service Agents (a securities
dealer, financial institution or other industry professional) in respect of
these services. The Distributor determines the amounts to be paid to Service
Agents. During the period ended July 31, 1996, $12,489 was charged to the
Fund by the Distributor pursuant to the Shareholder Services Plan.
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
the Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such
compensation amounted to $678 during the period ended July 31, 1996.
The Fund compensates Mellon Bank, an affiliate of the Manager, under a
custody agreement for providing custodial services to the Fund. Such
compensation during the period ended July 31, 1996 amounted to $2,729.
(C) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Company an annual fee of $2,500 and an attendance fee of
$500 per meeting. The Chairman of the Board receives an additional 25% of
such compensation.
(D) A .75 of 1% redemption fee is charged on certain redemptions of Fund
shares (including redemptions through the Exchange Privilege service) where
the redemption or exchange occurs within a nine-month period following the
date of issuance. During the period ended July 31, 1996, no redemption fees
were charged by the Fund.
NOTE 4_SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the period ended July 31, 1996,
amounted to $40,622,183 and $20,264,083, respectively.
At July 31, 1996, accumulated net unrealized appreciation on investments
was $512,317, consisting of $662,810 gross unrealized appreciation and
$150,493 gross unrealized depreciation.
At July 31, 1996, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see
the Statement of Investments).
Dreyfus High Yield Securities Fund
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 043SA967
High Yield
Securities Fund
Semi-Annual Report
July 31, 1996
DREYFUS INCOME FUNDS
PART C. OTHER INFORMATION
_________________________
Item 24. Financial Statements and Exhibits. - List
_______ _________________________________________
(a) Financial Statements:
Included in Part B of the Registration Statement:
Dreyfus Strategic Income Fund.
Statement of Investments--as of October 31, 1995.
Statement of Assets and Liabilities--as of October 31,
1995.
Statement of Operations--for the year ended October 31,
1995.
Statement of Changes in Net Assets--for the two years
ended October 31, 1995 and 1994.
Notes to Financial Statements.
Report of Ernst & Young LLP, Independent Auditors,
dated December 4, 1995.
Statement of Investments--as of April 30, 1996
(Unaudited).
Statement of Assets and Liabilities--as of April 30,
1996 (Unaudited).
Statement of Operations--six months ended April 30,
1996 (Unaudited).
Statement of Changes in Net Assets--year ended October
31, 1995 and six months ended April 30, 1996
(Unaudited).
Financial Highlights--for the years ended October 31,
1991 through 1995, and for the six months ended April
30, 1996.
Notes to Financial Statements (Unaudited).
Dreyfus Equity Dividend Fund.
Statement of Investments--as of April 30, 1996
(Unaudited).
Statement of Assets and Liabilities--as of April 30,
1996 (Unaudited).
Statement of Operations--from December 29, 1995
(commencement of operations) to April 30, 1996
(Unaudited).
Statement of Changes in Net Assets--from December 29,
1995 (commencement of operations) to April 30, 1996
(Unaudited).
Notes to Financial Statements (Unaudited).
Dreyfus High Yield Securities Fund.
Statement of Investments--as of July 31, 1996
(Unaudited).
Statement of Assets and Liabilities--as of July 31,
1996 (Unaudited).
Statement of Operations--for the period March 26, 1996
(commencement of operations) to July 31, 1996
(Unaudited).
Statement of Changes in Net Assets--for the period
March 25, 1996 (commencement of operations) to July 31,
1996 (Unaudited).
Notes to Financial Statements (Unaudited).
Schedules No. I through VII and other financial statement information, for
which provision is made in the applicable accounting regulations of the
Securities and Exchange Commission are either omitted because they are not
required under the related instructions, they are inapplicable, or the
required information is presented in the financial statements or notes
which are included in Part B of the Registration Statement.
Item 24. Financial Statements and Exhibits. - List (continued)
_______ _____________________________________________________
(b) Exhibits:
(1)(a) Registrant's Amended and Restated Agreement and Declaration of
Trust, dated June 25, 1992, is incorporated by reference to
Exhibit (1)(a) of Post-Effective Amendment No. 13 to the
Registration Statement, filed on December 29, 1995.
(2) Registrant's By-Laws, as amended December 6, 1995, are
incorporated by reference to Exhibit (2) of Post-Effective
Amendment No. 13 to the Registration Statement, filed on December
29, 1995.
(4) Specimen certificate for the Registrant's securities is
incorporated by reference to Exhibit (4) of Pre-Effective
Amendment No. 1 to the Registration Statement, filed on
October 2, 1986.
(5) Management Agreement.
(6) Distribution Agreement.
(6)(b) Forms of Service Agreement are incorporated by reference to
Exhibit (6)(b) and (6)(c) of Post-Effective Amendment No. 10 to
the Registration Statement, filed on December 30, 1994.
(8)(a) Registrant's Amended and Restated Custody Agreement.
(9) Shareholder Services Plan.
(10) Opinion and Consent of Stroock & Stroock & Lavan, Registrant's
counsel is incorporated by reference to Exhibit (10) of
Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-1A, filed on October 2, 1986.
(11) Consent of Ernst & Young LLP.
(16) Schedule of Computation of Performance Data as to Dreyfus High
Yield Securities Fund.
(17) Financial Data Schedule for Dreyfus High Yield Securities Fund
(July 31, 1996).
Other Exhibits
______________
(a) Powers of Attorney for Elizabeth Bachman, Richard W.
Ingram and John E. Pelletier.
(b) Certificate of Assistant Secretary is incorporated by
reference to the Other Exhibits (b) of Post-Effective
Amendment No. 10 to the Registration Statement, filed
on December 30, 1994.
Item 25. Persons Controlled by or under Common Control with Registrant.
_______ ______________________________________________________________
Not Applicable
Item 26. Number of Holders of Securities.
_______ ________________________________
(1) (2)
Number of Record Holders
Title of Class (as of August 14, 1996)
______________ _______________________________
Beneficial Interest Dreyfus Strategic Income Fund - 12,505
(Par value $.001)
Dreyfus Equity Dividend Fund - 33
Dreyfus High Yield Securities Fund - 373
Dreyfus Short Term High Yield Fund - 0
Item 27. Indemnification
_______ _______________
Reference is made to Article EIGHTH of the Registrant's Amended
and Restated Agreement and Declaration of Trust, dated June 25,
1992, and the laws of the State of Massachusetts. The
application of these provisions is limited by Article VIII of the
Registrant's By-Laws and by the following undertaking set forth
in the rules promulgated by the Securities and Exchange
Commission:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted Board members, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in such Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
such Act and will be governed by the final adjudication of such
issue.
Reference is also made to the Distribution Agreement incorporated
by reference to Exhibit (6) of Post-Effective Amendment No. 13 to
the Registration Statement on Form N-1A, filed on December 29,
1995.
Item 28. Business and Other Connections of Investment Adviser.
_______ ____________________________________________________
The Dreyfus Corporation ("Dreyfus") and subsidiary companies
comprise a financial service organization whose business
consists primarily of providing investment management
services as the investment adviser and manager for sponsored
investment companies registered under the Investment Company
Act of 1940 and as an investment adviser to institutional
and individual accounts. Dreyfus also serves as sub
investment adviser to and/or administrator of other
investment companies. Dreyfus Service Corporation, a
wholly-owned subsidiary of Dreyfus, is a registered broker
dealer. Dreyfus Investment Advisors, Inc., another wholly
owned subsidiary, provides investment management services to
various pension plans, institutions and individuals.
Item 28. Business and Other Connections of Investment Adviser (continued)
________ ________________________________________________________________
Officers and Directors of Investment Adviser
____________________________________________
Name and Position
with Dreyfus Other Businesses
_________________ ________________
MANDELL L. BERMAN Real estate consultant and private investor
Director 29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034;
Past Chairman of the Board of Trustees:
Skillman Foundation;
Member of The Board of Vintners Intl.
FRANK V. CAHOUET Chairman of the Board, President and
Director Chief Executive Officer:
Mellon Bank Corporation****;
Mellon Bank, N.A.****
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067
ALVIN E. FRIEDMAN Senior Adviser to Dillon, Read & Co. Inc.
Director 535 Madison Avenue
New York, New York 10022;
Director and Member of the Executive
Committee of Avnet, Inc.**
LAWRENCE M. GREENE None
Director
JULIAN M. SMERLING None
Director
W. KEITH SMITH Chairman and Chief Executive Officer:
Chairman of the Board The Boston Company*****;
Vice Chairman of the Board:
Mellon Bank Corporation****;
Mellon Bank, N.A.****;
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
CHRISTOPHER M. CONDRON Vice Chairman:
President, Chief Mellon Bank Corporation****;
Executive Officer, The Boston Company*****;
Chief Operating Deputy Director:
Officer and a Mellon Trust****;
Director Chief Executive Officer:
The Boston Company Asset Management,
Inc.*****;
President:
Boston Safe Deposit and Trust
Company*****
STEPHEN E. CANTER Director:
Vice Chairman and The Dreyfus Trust Company++;
Chief Investment Officer, Formerly, Chairman and Chief Executive
and a Director Officer:
Kleinwort Benson Investment Management
Americas Inc.*
LAWRENCE S. KASH Chairman, President and Chief
Vice Chairman-Distribution Executive Officer:
and a Director The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109
Executive Vice President and Director:
Dreyfus Service Organization, Inc.***;
Director:
Dreyfus America Fund
The Dreyfus Consumer Credit
Corporation*;
The Dreyfus Trust Company++;
Dreyfus Service Corporation*;
President:
The Boston Company*****;
Laurel Capital Advisors****;
Boston Group Holdings, Inc.;
Executive Vice President:
Mellon Bank, N.A.****;
Boston Safe Deposit and Trust
Company*****;
PHILIP L. TOIA Chairman of the Board and Trust Investment
Vice Chairman-Operations Officer:
and Administration The Dreyfus Trust Company++;
and a Director Chairman of the Board and Chief Operating
Officer:
Major Trading Corporation*;
Chairman and Director:
Dreyfus Transfer, Inc.
One American Express Plaza
Providence, Rhode Island 02903
Director:
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Corporation*;
Seven Six Seven Agency, Inc.*;
President and Director:
Dreyfus Acquisition Corporation*;
The Dreyfus Consumer Credit
Corporation*;
Dreyfus-Lincoln, Inc.*;
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Partnership Management, Inc.+;
Dreyfus Service Organization, Inc.***;
The Truepenny Corporation*;
Formerly, Senior Vice President:
The Chase Manhattan Bank, N.A. and
The Chase Manhattan Capital Markets
Corporation
One Chase Manhattan Plaza
New York, New York 10081
WILLIAM T. SANDALLS, JR. Director:
Senior Vice President and Dreyfus Partnership Management, Inc.*;
Chief Financial Officer Seven Six Seven Agency, Inc.*;
President and Director:
Lion Management, Inc.*;
Executive Vice President and Director:
Dreyfus Service Organization, Inc.*;
Vice President, Chief Financial Officer and
Director:
Dreyfus Acquisition Corporation*;
Dreyfus America Fund
Vice President and Director:
The Dreyfus Consumer Credit
Corporation*;
The Truepenny Corporation*;
Treasurer, Financial Officer and Director:
The Dreyfus Trust Company++;
Treasurer and Director:
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Service Corporation*;
Major Trading Corporation*;
Formerly, President and Director:
Sandalls & Co., Inc.
ELIE M. GENADRY President:
Vice President- Institutional Services Division of
Institutional Sales Dreyfus Service Corporation*;
Broker-Dealer Division of Dreyfus
Service Corporation*;
Group Retirement Plans Division of
Dreyfus Service Corporation;
Executive Vice President:
Dreyfus Service Corporation*;
Dreyfus Service Organization, Inc.***;
Vice President:
The Dreyfus Trust Company++
WILLIAM F. GLAVIN, JR. Executive Vice President:
Vice President-Corporate Dreyfus Service Corporation*;
Development Senior Vice President:
The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109
MARK N. JACOBS Vice President, Secretary and Director:
Vice President- Lion Management, Inc.*;
General Counsel Secretary:
and Secretary The Dreyfus Consumer Credit
Corporation*;
Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization, Inc.***;
Major Trading Corporation*;
The Truepenny Corporation*
PATRICE M. KOZLOWSKI None
Vice President-
Corporate Communications
MARY BETH LEIBIG None
Vice President-
Human Resources
JEFFREY N. NACHMAN President and Director:
Vice President-Mutual Fund Dreyfus Transfer, Inc.
Accounting One American Express Plaza
Providence, Rhode Island 02903
ANDREW S. WASSER Vice President:
Vice President-Information Mellon Bank Corporation****
Services
ELVIRA OSLAPAS Assistant Secretary:
Assistant Secretary Dreyfus Service Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Acquisition Corporation, Inc.*;
The Truepenny Corporation+
______________________________________
* The address of the business so indicated is 200 Park Avenue, New
York, New York 10166.
** The address of the business so indicated is 80 Cutter Mill Road,
Great Neck, New York 11021.
*** The address of the business so indicated is 131 Second Street,
Lewes, Delaware 19958.
**** The address of the business so indicated is One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258.
***** The address of the business so indicated is One Boston Place,
Boston, Massachusetts 02108.
+ The address of the business so indicated is Atrium Building,
80 Route 4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144.
+++ The address of the business so indicated is One Rockefeller Plaza,
New York, New York 10020.
++++ The address of the business so indicated is 2 Boulevard Royal,
Luxembourg.
+++++ The address of the business so indicated is Nassau, Bahama Islands.
Item 29. Principal Underwriters
________ ______________________
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or
exclusive distributor:
1) Comstock Partners Strategy Fund, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC GNMA Fund
7) Dreyfus BASIC Money Market Fund, Inc.
8) Dreyfus BASIC Municipal Fund, Inc.
9) Dreyfus BASIC U.S. Government Money Market Fund
10) Dreyfus California Intermediate Municipal Bond Fund
11) Dreyfus California Tax Exempt Bond Fund, Inc.
12) Dreyfus California Tax Exempt Money Market Fund
13) Dreyfus Capital Value Fund, Inc.
14) Dreyfus Cash Management
15) Dreyfus Cash Management Plus, Inc.
16) Dreyfus Connecticut Intermediate Municipal Bond Fund
17) Dreyfus Connecticut Municipal Money Market Fund, Inc.
18) Dreyfus Florida Intermediate Municipal Bond Fund
19) Dreyfus Florida Municipal Money Market Fund
20) The Dreyfus Fund Incorporated
21) Dreyfus Global Bond Fund, Inc.
22) Dreyfus Global Growth Fund
23) Dreyfus GNMA Fund, Inc.
24) Dreyfus Government Cash Management
25) Dreyfus Growth and Income Fund, Inc.
26) Dreyfus Growth and Value Funds, Inc.
27) Dreyfus Growth Opportunity Fund, Inc.
28) Dreyfus Income Funds
29) Dreyfus Institutional Money Market Fund
30) Dreyfus Institutional Short Term Treasury Fund
31) Dreyfus Insured Municipal Bond Fund, Inc.
32) Dreyfus Intermediate Municipal Bond Fund, Inc.
33) Dreyfus International Equity Fund, Inc.
34) The Dreyfus/Laurel Funds, Inc.
35) The Dreyfus/Laurel Funds Trust
36) The Dreyfus/Laurel Tax-Free Municipal Funds
37) Dreyfus Stock Index Fund, Inc.
38) Dreyfus LifeTime Portfolios, Inc.
39) Dreyfus Liquid Assets, Inc.
40) Dreyfus Massachusetts Intermediate Municipal Bond Fund
41) Dreyfus Massachusetts Municipal Money Market Fund
42) Dreyfus Massachusetts Tax Exempt Bond Fund
43) Dreyfus Michigan Municipal Money Market Fund, Inc.
44) Dreyfus MidCap Index Fund
45) Dreyfus Money Market Instruments, Inc.
46) Dreyfus Municipal Bond Fund, Inc.
47) Dreyfus Municipal Cash Management Plus
48) Dreyfus Municipal Money Market Fund, Inc.
49) Dreyfus New Jersey Intermediate Municipal Bond Fund
50) Dreyfus New Jersey Municipal Bond Fund, Inc.
51) Dreyfus New Jersey Municipal Money Market Fund, Inc.
52) Dreyfus New Leaders Fund, Inc.
53) Dreyfus New York Insured Tax Exempt Bond Fund
54) Dreyfus New York Municipal Cash Management
55) Dreyfus New York Tax Exempt Bond Fund, Inc.
56) Dreyfus New York Tax Exempt Intermediate Bond Fund
57) Dreyfus New York Tax Exempt Money Market Fund
58) Dreyfus Ohio Municipal Money Market Fund, Inc.
59) Dreyfus 100% U.S. Treasury Intermediate Term Fund
60) Dreyfus 100% U.S. Treasury Long Term Fund
61) Dreyfus 100% U.S. Treasury Money Market Fund
62) Dreyfus 100% U.S. Treasury Short Term Fund
63) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
64) Dreyfus Pennsylvania Municipal Money Market Fund
65) Dreyfus Short-Intermediate Government Fund
66) Dreyfus Short-Intermediate Municipal Bond Fund
67) Dreyfus Investment Grade Bond Funds, Inc.
68) The Dreyfus Socially Responsible Growth Fund, Inc.
69) Dreyfus Tax Exempt Cash Management
70) The Dreyfus Third Century Fund, Inc.
71) Dreyfus Treasury Cash Management
72) Dreyfus Treasury Prime Cash Management
73) Dreyfus Variable Investment Fund
74) Dreyfus Worldwide Dollar Money Market Fund, Inc.
75) General California Municipal Bond Fund, Inc.
76) General California Municipal Money Market Fund
77) General Government Securities Money Market Fund, Inc.
78) General Money Market Fund, Inc.
79) General Municipal Bond Fund, Inc.
80) General Municipal Money Market Fund, Inc.
81) General New York Municipal Bond Fund, Inc.
82) General New York Municipal Money Market Fund
83) Dreyfus S&P 500 Index Fund
84) Premier Insured Municipal Bond Fund
85) Premier California Municipal Bond Fund
86) Premier Equity Funds, Inc.
87) Premier Global Investing, Inc.
88) Premier GNMA Fund
89) Premier Growth Fund, Inc.
90) Premier Municipal Bond Fund
91) Premier New York Municipal Bond Fund
92) Premier State Municipal Bond Fund
93) Premier Strategic Growth Fund
94) Premier Value Fund
(b)
Positions and
Name and principal Positions and offices with offices with
business address the Distributor Registrant
__________________ ___________________________ _____________
Marie E. Connolly+ Director, President, Chief President and
Executive Officer and Compliance Treasurer
Officer
Joseph F. Tower, III+ Senior Vice President, Treasurer Assistant
and Chief Financial Officer Treasurer
John E. Pelletier+ Senior Vice President, General Vice President
Counsel, Secretary and Clerk and Secretary
Frederick C. Dey++ Senior Vice President Vice President
and Assistant
Treasurer
Paul Prescott+ Vice President None
Elizabeth Bachman++ Assistant Vice President Vice President
and Assistant
Secretary
Mary Nelson+ Assistant Treasurer None
Jean M. O'Leary+ Assistant Secretary and None
Assistant Clerk
John W. Gomez+ Director None
William J. Nutt+ Director None
Richard W. Ingram+ _________ Vice President
and Assistant Treasurer
Douglas C. Conroy+ _________ Vice President
and Assistant Secretary
________________________________
+ Principal business address is 60 State Street, Boston, Massachusetts
02109.
++ Principal business address is 200 Park Avenue, New York, New York 10166.
Item 30. Location of Accounts and Records
________________________________
1. First Data Investor Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671
2. Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
3. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02940-9671
4. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 31. Management Services
_______ ___________________
Not Applicable
Item 32. Undertakings
________ ____________
(1) To call a meeting of shareholders for the purpose of voting upon
the question of removal of a Board member or Board member when
requested in writing to do so by the holders of at least 10% of
the Registrant's outstanding shares and in connection with such
meeting to comply with the provisions of Section 16(c) of the
Investment Company Act of 1940 relating to shareholder
communications.
(2) To furnish each person to whom a prospectus is delivered with a
copy of the Fund's latest Annual Report to Shareholders, upon
request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amendment to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
New York, and State of New York on the 30th day of August, 1996.
DREYFUS INCOME FUNDS
BY: /s/Marie Connolly*
__________________________________________
Marie Connolly, PRESIDENT
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Amendment to the Registration
Statement has been signed below by the following persons in the capacities
and on the dates indicated.
Signatures Title Date
________________________ ____________________________ _________
/s/Marie Connolly* President (Principal Executive 8/30/96
______________________________ Financial and Accounting
Marie Connolly Officer) and Trustee
/s/Joseph S. DiMartino* Chairman of the Board 8/30/96
_____________________________
Joseph S. DiMartino
/s/David W. Burke* Trustee 8/30/96
_____________________________
David W. Burke
/s/Diane Dunst* Trustee 8/30/96
_____________________________
Diane Dunst
/s/Rosalind Gersten Jacobs* Trustee 8/30/96
_____________________________
Rosalind Gersten Jacobs
/s/Jay I. Meltzer* Trustee 8/30/96
_____________________________
Jay I. Meltzer
/s/Daniel Rose* Trustee 8/30/96
_____________________________
Daniel Rose
/s/Warren B. Rudman* Trustee 8/30/96
_____________________________
Warren B. Rudman
/s/Sander Vanocur* Trustee 8/30/96
_____________________________
Sander Vanocur
*BY: Elizabeth Bachman
__________________________
Elizabeth Bachman,
Attorney-in-Fact
DREYFUS INCOME FUNDS
EXHIBIT INDEX
Exhibit No.
(5) Management Agreement.
(6) Distribution Agreement.
(8)(a) Registrant's Amended and Restated Custody
Agreement.
(9) Shareholder Services Plan.
(11) Consent of Ernst & Young LLP.
(16) Schedule of Computation of Performance Data as to
Dreyfus High Yield Securities Fund.
(17) Financial Data Schedule for Dreyfus High Yield
Securities Fund (July 31, 1996).
Other Exhibit No.
(a) Powers of Attorney for Elizabeth Bachman, Richard
W. Ingram and John E. Pelletier.
MANAGEMENT AGREEMENT
DREYFUS INCOME FUNDS
200 Park Avenue
New York, New York 10166
August 24, 1994
As Amended, December 6, 1995
The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Dear Sirs:
The above-named investment company (the "Fund")
consisting of the series named on Schedule 1 hereto, as such
Schedule may be revised from time to time (each, a "Series"),
herewith confirms its agreement with you as follows:
The Fund desires to employ its capital by investing and
reinvesting the same in investments of the type and in accordance
with the limitations specified in its charter documents and in
its Prospectus and Statement of Additional Information as from
time to time in effect, copies of which have been or will be
submitted to you, and in such manner and to such extent as from
time to time may be approved by the Fund's Board. The Fund
desires to employ you to act as its investment adviser.
In this connection it is understood that from time to
time you will employ or associate with yourself such person or
persons as you may believe to be particularly fitted to assist
you in the performance of this Agreement. Such person or persons
may be officers or employees who are employed by both you and the
Fund. The compensation of such person or persons shall be paid
by you and no obligation may be incurred on the Fund's behalf in
any such respect.
Subject to the supervision and approval of the Fund's
Board, you will provide investment management of each Series'
portfolio in accordance with such Series' investment objectives
and policies as stated in the Fund's Prospectus and Statement of
Additional Information as from time to time in effect. In
connection therewith, you will obtain and provide investment
research and will supervise each Series' investments and conduct
a continuous program of investment, evaluation and, if
appropriate, sale and reinvestment of such Series' assets. You
will furnish to the Fund such statistical information, with
respect to the investments which a Series may hold or contemplate
purchasing, as the Fund may reasonably request. The Fund wishes
to be informed of important developments materially affecting any
Series' portfolio and shall expect you, on your own initiative,
to furnish to the Fund from time to time such information as you
may believe appropriate for this purpose.
In addition, you will supply office facilities (which
may be in your own offices), data processing services, clerical,
accounting and bookkeeping services, internal auditing and legal
services, internal executive and administrative services, and
stationery and office supplies; prepare reports to each Series'
stockholders, tax returns, reports to and filings with the
Securities and Exchange Commission and state Blue Sky
authorities; calculate the net asset value of each Series'
shares; and generally assist in all aspects of the Fund's
operations. You shall have the right, at your expense, to engage
other entities to assist you in performing some or all of the
obligations set forth in this paragraph, provided each such
entity enters into an agreement with you in form and substance
reasonably satisfactory to the Fund. You agree to be liable for
the acts or omissions of each such entity to the same extent as
if you had acted or failed to act under the circumstances.
You shall exercise your best judgment in rendering the
services to be provided to the Fund hereunder and the Fund agrees
as an inducement to your undertaking the same that you shall not
be liable hereunder for any error of judgment or mistake of law
or for any loss suffered by one or more Series, provided that
nothing herein shall be deemed to protect or purport to protect
you against any liability to the Fund or a Series or to its
security holders to which you would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in
the performance of your duties hereunder, or by reason of your
reckless disregard of your obligations and duties hereunder.
In consideration of services rendered pursuant to this
Agreement, the Fund will pay you on the first business day of
each month a fee at the rate set forth opposite each Series' name
on Schedule 1 hereto. Net asset value shall be computed on such
days and at such time or times as described in the Fund's then-
current Prospectus and Statement of Additional Information. The
fee for the period from the date of the commencement of the
public sale of a Series' shares to the end of the month during
which such sale shall have been commenced shall be pro-rated
according to the proportion which such period bears to the full
monthly period, and upon any termination of this Agreement before
the end of any month, the fee for such part of a month shall be
pro-rated according to the proportion which such period bears to
the full monthly period and shall be payable upon the date of
termination of this Agreement.
For the purpose of determining fees payable to you, the
value of each Series' net assets shall be computed in the manner
specified in the Fund's charter documents for the computation of
the value of each Series' net assets.
You will bear all expenses in connection with the
performance of your services under this Agreement. All other
expenses to be incurred in the operation of the Fund will be
borne by the Fund, except to the extent specifically assumed by
you. The expenses to be borne by the Fund include, without
limitation, the following: organizational costs, taxes,
interest, loan commitment fees, interest and distributions paid
on securities sold short, brokerage fees and commissions, if any,
fees of Board members who are not your officers, directors or
employees or holders of 5% or more of your outstanding voting
securities, Securities and Exchange Commission fees and state
Blue Sky qualification fees, advisory fees, charges of
custodians, transfer and dividend disbursing agents' fees,
certain insurance premiums, industry association fees, outside
auditing and legal expenses, costs of independent pricing
services, costs of maintaining the Fund's existence, costs
attributable to investor services (including, without limitation,
telephone and personnel expenses), costs of preparing and
printing prospectuses and statements of additional information
for regulatory purposes and for distribution to existing
stockholders, costs of stockholders' reports and meetings, and
any extraordinary expenses.
As to each Series, if in any fiscal year the aggregate
expenses of the Fund (including fees pursuant to this Agreement,
but excluding interest, taxes, brokerage and, with the prior
written consent of the necessary state securities commissions,
extraordinary expenses) exceed the expense limitation of any
state having jurisdiction over the Series, the Fund may deduct
from the fees to be paid hereunder, or you will bear, such excess
expense to the extent required by state law. Your obligation
pursuant hereto will be limited to the amount of your fees here-
under. Such deduction or payment, if any, will be estimated
daily, and reconciled and effected or paid, as the case may be,
on a monthly basis.
The Fund understands that you now act, and that from
time to time hereafter you may act, as investment adviser to one
or more other investment companies and fiduciary or other managed
accounts, and the Fund has no objection to your so acting,
provided that when the purchase or sale of securities of the same
issuer is suitable for the investment objectives of two or more
companies or accounts managed by you which have available funds
for investment, the available securities will be allocated in a
manner believed by you to be equitable to each company or
account. It is recognized that in some cases this procedure may
adversely affect the price paid or received by one or more Series
or the size of the position obtainable for or disposed of by one
or more Series.
In addition, it is understood that the persons employed
by you to assist in the performance of your duties hereunder will
not devote their full time to such service and nothing contained
herein shall be deemed to limit or restrict your right or the
right of any of your affiliates to engage in and devote time and
attention to other businesses or to render services of whatever
kind or nature.
You shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates, except for a
loss resulting from willful misfeasance, bad faith or gross
negligence on your part in the performance of your duties or from
reckless disregard by you of your obligations and duties under
this Agreement. Any person, even though also your officer,
director, partner, employee or agent, who may be or become an
officer, Board member, employee or agent of the Fund, shall be
deemed, when rendering services to the Fund or acting on any
business of the Fund, to be rendering such services to or acting
solely for the Fund and not as your officer, director, partner,
employee or agent or one under your control or direction even
though paid by you.
As to each Series, this Agreement shall continue until
the date set forth opposite such Series' name on Schedule 1
hereto (the "Reapproval Date") and thereafter shall continue
automatically for successive annual periods ending on the day of
each year set forth opposite the Series' name on Schedule 1
hereto (the "Reapproval Day"), provided such continuance is
specifically approved at least annually by (i) the Fund's Board
or (ii) vote of a majority (as defined in the Investment Company
Act of 1940) of such Series' outstanding voting securities,
provided that in either event its continuance also is approved by
a majority of the Fund's Board members who are not "interested
persons" (as defined in said Act) of any party to this Agreement,
by vote cast in person at a meeting called for the purpose of
voting on such approval. As to each Series, this Agreement is
terminable without penalty, on 60 days' notice, by the Fund's
Board or by vote of holders of a majority of such Series' shares
or, upon not less than 90 days' notice, by you. This Agreement
also will terminate automatically, as to the relevant Series, in
the event of its assignment (as defined in said Act).
The Fund recognizes that from time to time your
directors, officers and employees may serve as directors,
trustees, partners, officers and employees of other corporations,
business trusts, partnerships or other entities (including other
investment companies) and that such other entities may include
the name "Dreyfus" as part of their name, and that your
corporation or its affiliates may enter into investment advisory
or other agreements with such other entities. If you cease to
act as the Fund's investment adviser, the Fund agrees that, at
your request, the Fund will take all necessary action to change
the name of the Fund to a name not including "Dreyfus" in any
form or combination of words.
This Agreement has been executed on behalf of the Fund
by the undersigned officer of the Fund in his capacity as an
officer of the Fund. The obligations of this Agreement shall
only be binding upon the assets and property of the Fund and
shall not be binding upon any Board member, officer or
shareholder of the Fund individually.
If the foregoing is in accordance with your
understanding, will you kindly so indicate by signing and
returning to us the enclosed copy hereof.
Very truly yours,
DREYFUS INCOME FUNDS
By:___________________________
Accepted:
THE DREYFUS CORPORATION
By:_______________________________
SCHEDULE 1
Annual Fee as
a Percentage
of Average
Daily Net
Name of Series Assets Reapproval Date Reapproval Day
Dreyfus Equity
Dividend Fund .75% September 11, 1997 September 11th
Dreyfus High Yield
Securities Fund .65% September 11, 1997 September 11th
Dreyfus Short Term
High Yield Fund .65% September 11, 1997 September 11th
Dreyfus Strategic
Income Fund .60% September 11, 1996 September 11th
As Revised, August 5, 1996
DISTRIBUTION AGREEMENT
DREYFUS INCOME FUNDS
200 Park Avenue
New York, New York 10166
August 24, 1994
As Amended, December 6, 1995
Premier Mutual Fund Services, Inc.
60 State Street
Boston, Massachusetts 02109
Dear Sirs:
This is to confirm that, in consideration of the agree-
ments hereinafter contained, the above-named investment company
(the "Fund") has agreed that you shall be, for the period of
this agreement, the distributor of (a) shares of each Series of
the Fund set forth on Exhibit A hereto, as such Exhibit may be
revised from time to time (each, a "Series") or (b) if no Series
are set forth on such Exhibit, shares of the Fund. For purposes
of this agreement the term "Shares" shall mean the authorized
shares of the relevant Series, if any, and otherwise shall mean
the Fund's authorized shares.
1. Services as Distributor
1.1 You will act as agent for the distribution of
Shares covered by, and in accordance with, the registration
statement and prospectus then in effect under the Securities Act
of 1933, as amended, and will transmit promptly any orders
received by you for purchase or redemption of Shares to the
Transfer and Dividend Disbursing Agent for the Fund of which the
Fund has notified you in writing.
1.2 You agree to use your best efforts to solicit
orders for the sale of Shares. It is contemplated that you will
enter into sales or servicing agreements with securities
dealers, financial institutions and other industry
professionals, such as investment advisers, accountants and
estate planning firms, and in so doing you will act only on your
own behalf as principal.
1.3 You shall act as distributor of Shares in
compliance with all applicable laws, rules and regulations,
including, without limitation, all rules and regulations made or
adopted pursuant to the Investment Company Act of 1940, as
amended, by the Securities and Exchange Commission or any
securities association registered under the Securities Exchange
Act of 1934, as amended.
1.4 Whenever in their judgment such action is
warranted by market, economic or political conditions, or by
abnormal circumstances of any kind, the Fund's officers may
decline to accept any orders for, or make any sales of, any
Shares until such time as they deem it advisable to accept such
orders and to make such sales and the Fund shall advise you
promptly of such determination.
1.5 The Fund agrees to pay all costs and expenses in
connection with the registration of Shares under the Securities
Act of 1933, as amended, and all expenses in connection with
maintaining facilities for the issue and transfer of Shares and
for supplying information, prices and other data to be furnished
by the Fund hereunder, and all expenses in connection with the
preparation and printing of the Fund's prospectuses and
statements of additional information for regulatory purposes and
for distribution to shareholders; provided, however, that
nothing contained herein shall be deemed to require the Fund to
pay any of the costs of advertising the sale of Shares.
1.6 The Fund agrees to execute any and all documents
and to furnish any and all information and otherwise to take all
actions which may be reasonably necessary in the discretion of
the Fund's officers in connection with the qualification of
Shares for sale in such states as you may designate to the Fund
and the Fund may approve, and the Fund agrees to pay all
expenses which may be incurred in connection with such
qualification. You shall pay all expenses connected with your
own qualification as a dealer under state or Federal laws and,
except as otherwise specifically provided in this agreement, all
other expenses incurred by you in connection with the sale of
Shares as contemplated in this agreement.
1.7 The Fund shall furnish you from time to time, for
use in connection with the sale of Shares, such information with
respect to the Fund or any relevant Series and the Shares as you
may reasonably request, all of which shall be signed by one or
more of the Fund's duly authorized officers; and the Fund
warrants that the statements contained in any such information,
when so signed by the Fund's officers, shall be true and
correct. The Fund also shall furnish you upon request with:
(a) semi-annual reports and annual audited reports of the Fund's
books and accounts made by independent public accountants
regularly retained by the Fund, (b) quarterly earnings
statements prepared by the Fund, (c) a monthly itemized list of
the securities in the Fund's or, if applicable, each Series'
portfolio, (d) monthly balance sheets as soon as practicable
after the end of each month, and (e) from time to time such
additional information regarding the Fund's financial condition
as you may reasonably request.
1.8 The Fund represents to you that all registration
statements and prospectuses filed by the Fund with the Securi-
ties and Exchange Commission under the Securities Act of 1933,
as amended, and under the Investment Company Act of 1940, as
amended, with respect to the Shares have been carefully prepared
in conformity with the requirements of said Acts and rules and
regulations of the Securities and Exchange Commission there-
under. As used in this agreement the terms "registration state-
ment" and "prospectus" shall mean any registration statement and
prospectus, including the statement of additional information
incorporated by reference therein, filed with the Securities and
Exchange Commission and any amendments and supplements thereto
which at any time shall have been filed with said Commission.
The Fund represents and warrants to you that any registration
statement and prospectus, when such registration statement
becomes effective, will contain all statements required to be
stated therein in conformity with said Acts and the rules and
regulations of said Commission; that all statements of fact
contained in any such registration statement and prospectus will
be true and correct when such registration statement becomes
effective; and that neither any registration statement nor any
prospectus when such registration statement becomes effective
will include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary
to make the statements therein not misleading. The Fund may but
shall not be obligated to propose from time to time such amend-
ment or amendments to any registration statement and such
supplement or supplements to any prospectus as, in the light of
future developments, may, in the opinion of the Fund's counsel,
be necessary or advisable. If the Fund shall not propose such
amendment or amendments and/or supplement or supplements within
fifteen days after receipt by the Fund of a written request from
you to do so, you may, at your option, terminate this agreement
or decline to make offers of the Fund's securities until such
amendments are made. The Fund shall not file any amendment to
any registration statement or supplement to any prospectus
without giving you reasonable notice thereof in advance;
provided, however, that nothing contained in this agreement
shall in any way limit the Fund's right to file at any time such
amendments to any registration statement and/or supplements to
any prospectus, of whatever character, as the Fund may deem
advisable, such right being in all respects absolute and
unconditional.
1.9 The Fund authorizes you to use any prospectus in
the form furnished to you from time to time, in connection with
the sale of Shares. The Fund agrees to indemnify, defend and
hold you, your several officers and directors, and any person
who controls you within the meaning of Section 15 of the Securi-
ties Act of 1933, as amended, free and harmless from and against
any and all claims, demands, liabilities and expenses (including
the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection there-
with) which you, your officers and directors, or any such con-
trolling person, may incur under the Securities Act of 1933, as
amended, or under common law or otherwise, arising out of or
based upon any untrue statement, or alleged untrue statement, of
a material fact contained in any registration statement or any
prospectus or arising out of or based upon any omission, or
alleged omission, to state a material fact required to be stated
in either any registration statement or any prospectus or
necessary to make the statements in either thereof not
misleading; provided, however, that the Fund's agreement to
indemnify you, your officers or directors, and any such control-
ling person shall not be deemed to cover any claims, demands,
liabilities or expenses arising out of any untrue statement or
alleged untrue statement or omission or alleged omission made in
any registration statement or prospectus in reliance upon and in
conformity with written information furnished to the Fund by you
specifically for use in the preparation thereof. The Fund's
agreement to indemnify you, your officers and directors, and any
such controlling person, as aforesaid, is expressly conditioned
upon the Fund's being notified of any action brought against
you, your officers or directors, or any such controlling person,
such notification to be given by letter or by telegram addressed
to the Fund at its address set forth above within ten days after
the summons or other first legal process shall have been served.
The failure so to notify the Fund of any such action shall not
relieve the Fund from any liability which the Fund may have to
the person against whom such action is brought by reason of any
such untrue, or alleged untrue, statement or omission, or
alleged omission, otherwise than on account of the Fund's
indemnity agreement contained in this paragraph 1.9. The Fund
will be entitled to assume the defense of any suit brought to
enforce any such claim, demand or liability, but, in such case,
such defense shall be conducted by counsel of good standing
chosen by the Fund and approved by you. In the event the Fund
elects to assume the defense of any such suit and retain counsel
of good standing approved by you, the defendant or defendants in
such suit shall bear the fees and expenses of any additional
counsel retained by any of them; but in case the Fund does not
elect to assume the defense of any such suit, or in case you do
not approve of counsel chosen by the Fund, the Fund will
reimburse you, your officers and directors, or the controlling
person or persons named as defendant or defendants in such suit,
for the fees and expenses of any counsel retained by you or
them. The Fund's indemnification agreement contained in this
paragraph 1.9 and the Fund's representations and warranties in
this agreement shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of
you, your officers and directors, or any controlling person, and
shall survive the delivery of any Shares. This agreement of
indemnity will inure exclusively to your benefit, to the benefit
of your several officers and directors, and their respective
estates, and to the benefit of any controlling persons and their
successors. The Fund agrees promptly to notify you of the
commencement of any litigation or proceedings against the Fund
or any of its officers or Board members in connection with the
issue and sale of Shares.
1.10 You agree to indemnify, defend and hold the Fund,
its several officers and Board members, and any person who con-
trols the Fund within the meaning of Section 15 of the Securi-
ties Act of 1933, as amended, free and harmless from and against
any and all claims, demands, liabilities and expenses (including
the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection there-
with) which the Fund, its officers or Board members, or any such
controlling person, may incur under the Securities Act of 1933,
as amended, or under common law or otherwise, but only to the
extent that such liability or expense incurred by the Fund, its
officers or Board members, or such controlling person resulting
from such claims or demands, shall arise out of or be based upon
any untrue, or alleged untrue, statement of a material fact
contained in information furnished in writing by you to the Fund
specifically for use in the Fund's registration statement and
used in the answers to any of the items of the registration
statement or in the corresponding statements made in the pro-
spectus, or shall arise out of or be based upon any omission, or
alleged omission, to state a material fact in connection with
such information furnished in writing by you to the Fund and
required to be stated in such answers or necessary to make such
information not misleading. Your agreement to indemnify the
Fund, its officers and Board members, and any such controlling
person, as aforesaid, is expressly conditioned upon your being
notified of any action brought against the Fund, its officers or
Board members, or any such controlling person, such notification
to be given by letter or telegram addressed to you at your
address set forth above within ten days after the summons or
other first legal process shall have been served. You shall
have the right to control the defense of such action, with
counsel of your own choosing, satisfactory to the Fund, if such
action is based solely upon such alleged misstatement or
omission on your part, and in any other event the Fund, its
officers or Board members, or such controlling person shall each
have the right to participate in the defense or preparation of
the defense of any such action. The failure so to notify you of
any such action shall not relieve you from any liability which
you may have to the Fund, its officers or Board members, or to
such controlling person by reason of any such untrue, or alleged
untrue, statement or omission, or alleged omission, otherwise
than on account of your indemnity agreement contained in this
paragraph 1.10. This agreement of indemnity will inure
exclusively to the Fund's benefit, to the benefit of the Fund's
officers and Board members, and their respective estates, and to
the benefit of any controlling persons and their successors.
You agree promptly to notify the Fund of the commencement of any
litigation or proceedings against you or any of your officers or
directors in connection with the issue and sale of Shares.
1.11 No Shares shall be offered by either you or the
Fund under any of the provisions of this agreement and no orders
for the purchase or sale of such Shares hereunder shall be
accepted by the Fund if and so long as the effectiveness of the
registration statement then in effect or any necessary amend-
ments thereto shall be suspended under any of the provisions of
the Securities Act of 1933, as amended, or if and so long as a
current prospectus as required by Section 10 of said Act, as
amended, is not on file with the Securities and Exchange
Commission; provided, however, that nothing contained in this
paragraph 1.11 shall in any way restrict or have an application
to or bearing upon the Fund's obligation to repurchase any
Shares from any shareholder in accordance with the provisions of
the Fund's prospectus or charter documents.
1.12 The Fund agrees to advise you immediately in
writing:
(a) of any request by the Securities and Exchange
Commission for amendments to the registration statement
or prospectus then in effect or for additional
information;
(b) in the event of the issuance by the Securities
and Exchange Commission of any stop order suspending
the effectiveness of the registration statement or pro-
spectus then in effect or the initiation of any
proceeding for that purpose;
(c) of the happening of any event which makes
untrue any statement of a material fact made in the
registration statement or prospectus then in effect or
which requires the making of a change in such registra-
tion statement or prospectus in order to make the
statements therein not misleading; and
(d) of all actions of the Securities and
Exchange Commission with respect to any amendments to
any registration statement or prospectus which may from
time to time be filed with the Securities and Exchange
Commission.
2. Offering Price
Shares of any class of the Fund offered for sale by you
shall be offered for sale at a price per share (the "offering
price") approximately equal to (a) their net asset value
(determined in the manner set forth in the Fund's charter
documents) plus (b) a sales charge, if any and except to those
persons set forth in the then-current prospectus, which shall be
the percentage of the offering price of such Shares as set forth
in the Fund's then-current prospectus. The offering price, if
not an exact multiple of one cent, shall be adjusted to the
nearest cent. In addition, Shares of any class of the Fund
offered for sale by you may be subject to a contingent deferred
sales charge as set forth in the Fund's then-current prospectus.
You shall be entitled to receive any sales charge or contingent
deferred sales charge in respect of the Shares. Any payments to
dealers shall be governed by a separate agreement between you
and such dealer and the Fund's then-current prospectus.
3. Term
This agreement shall continue until the date (the
"Reapproval Date") set forth on Exhibit A hereto (and, if the
Fund has Series, a separate Reapproval Date shall be specified
on Exhibit A for each Series), and thereafter shall continue
automatically for successive annual periods ending on the day
(the "Reapproval Day") of each year set forth on Exhibit A
hereto, provided such continuance is specifically approved at
least annually by (i) the Fund's Board or (ii) vote of a
majority (as defined in the Investment Company Act of 1940) of
the Shares of the Fund or the relevant Series, as the case may
be, provided that in either event its continuance also is
approved by a majority of the Board members who are not
"interested persons" (as defined in said Act) of any party to
this agreement, by vote cast in person at a meeting called for
the purpose of voting on such approval. This agreement is
terminable without penalty, on 60 days' notice, by vote of
holders of a majority of the Fund's or, as to any relevant
Series, such Series' outstanding voting securities or by the
Fund's Board as to the Fund or the relevant Series, as the case
may be. This agreement is terminable by you, upon 270 days'
notice, effective on or after the fifth anniversary of the date
hereof. This agreement also will terminate automatically, as to
the Fund or relevant Series, as the case may be, in the event of
its assignment (as defined in said Act).
4. Exclusivity
So long as you act as the distributor of Shares, you
shall not perform any services for any entity other than
investment companies advised or administered by The Dreyfus
Corporation. The Fund acknowledges that the persons employed by
you to assist in the performance of your duties under this
agreement may not devote their full time to such service and
nothing contained in this agreement shall be deemed to limit or
restrict your or any of your affiliates right to engage in and
devote time and attention to other businesses or to render
services of whatever kind or nature.
5. Miscellaneous
This agreement has been executed on behalf of the Fund
by the undersigned officer of the Fund in his capacity as an
officer of the Fund. The obligations of this agreement shall
only be binding upon the assets and property of the Fund and
shall not be binding upon any Board member, officer or
shareholder of the Fund individually.
Please confirm that the foregoing is in accordance with
your understanding and indicate your acceptance hereof by
signing below, whereupon it shall become a binding agreement
between us.
Very truly yours,
DREYFUS INCOME FUNDS
By:
Accepted:
PREMIER MUTUAL FUND SERVICES, INC.
By:________________________
EXHIBIT A
Name of Series Reapproval Date Reapproval Day
Dreyfus Equity Dividend Fund September 11, 1997 September 11th
Dreyfus High Yield Securities
Fund September 11, 1997 September 11th
Dreyfus Short Term High
Yield Fund September 11, 1997 September 11th
Dreyfus Strategic Income Fund September 11, 1996 September 11th
As Revised, August 5, 1996
CUSTODY AGREEMENT
Custody Agreement made as of February 8, 1990, as
amended and restated December 6, 1995 between DREYFUS INCOME
FUNDS, a business trust organized and existing under the laws of
the Commonwealth of Massachusetts, having its principal office and
place of business at 200 Park Avenue, New York, New York 10166
(hereinafter called the "Fund"), and THE BANK OF NEW YORK, a New
York corporation authorized to do a banking business, having its
principal office and place of business at 90 Washington Street,
New York, New York 10286 (hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter
set forth the Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the
following meanings:
1. "Authorized Person" shall be deemed to include the
Treasurer, the Controller or any other person, whether or not any
such person is an Officer or employee of the Fund, duly authorized
by the Fund's Board to give Oral Instructions and Written
Instructions on behalf of the Fund and listed in the Certificate
annexed hereto as Appendix A or such other Certificate as may be
received by the Custodian from time to time.
2. "Available Balance" shall mean for any given day
during a calendar year the aggregate amount of Federal Funds held
in the Fund's custody account(s) at The Bank of New York, or its
successors, as of the close of such day or, if such day is not a
business day, the close of the preceding business day.
3. "Bankruptcy" shall mean with respect to a party such
party's making a general assignment, arrangement or composition
with or for the benefit of its creditors, or instituting or having
instituted against it a proceeding seeking a judgment of
insolvency or bankruptcy or the entry of an order for relief under
the Federal bankruptcy law or any other relief under any
bankruptcy or insolvency law or other similar law affecting
creditors' rights, or if a petition is presented for the winding
up or liquidation of the party or a resolution is passed for its
winding up or liquidation, or it seeks, or becomes subject to, the
appointment of an administrator, receiver, trustee, custodian or
other similar official for it or for all or substantially all of
its assets or its taking any action in furtherance of, or
indicating its consent to approval of, or acquiescence in, any of
the foregoing.
4. "Book-Entry System" shall mean the Federal Reserve/
Treasury book-entry system for United States and Federal agency
securities, its successor or successors and its nominee or
nominees.
5. "Call Option" shall mean an exchange traded option
with respect to Securities other than Stock Index Options, Futures
Contracts and Futures Contract Options entitling the holder, upon
timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified
underlying Securities.
6. "Certificate" shall mean any notice, instruction, or
other instrument in writing, authorized or required by this
Agreement to be given to the Custodian, which is actually received
by the Custodian and signed on behalf of the Fund by any two
Officers of the Fund.
7. "Clearing Member" shall mean a registered broker-
dealer which is a clearing member under the rules of O.C.C. and a
member of a national securities exchange qualified to act as a
custodian for an investment company, or any broker-dealer
reasonably believed by the Custodian to be such a clearing member.
8. "Collateral Account" shall mean a segregated account
so denominated and pledged to the Custodian as security for, and
in consideration of, the Custodian's issuance of (a) any Put
Option guarantee letter or similar document described in para-
graph 8 of Article V herein, or (b) any receipt described in
Article V or VIII herein.
9. "Consumer Price Index" shall mean the U.S. Consumer
Price Index, all items and all urban consumers, U.S. city average
1982-84 equals 100, as first published without seasonal adjustment
by the Bureau of Labor Statistics, the Department of Labor,
without regard to subsequent revisions or corrections by such
Bureau.
10. "Covered Call Option" shall mean an exchange traded
option entitling the holder, upon timely exercise and payment of
the exercise price, as specified therein, to purchase from the
writer thereof the specified Securities (excluding Futures
Contracts) which are owned by the writer thereof and subject to
appropriate restrictions.
11. "Depository" shall mean The Depository Trust
Company ("DTC"), a clearing agency registered with the Securities
and Exchange Commission, its successor or successors and its
nominee or nominees, provided the Custodian has received a
certified copy of a resolution of the Fund's Board specifically
approving deposits in DTC. The term "Depository" shall further
mean and include any other person authorized to act as a
depository under the Investment Company Act of 1940, as amended,
its successor or successors and its nominee or nominees,
specifically identified in a certified copy of a resolution of the
Fund's Board specifically approving deposits therein by the
Custodian.
12. "Earnings Credit" shall mean for any given day
during a calendar year the product of (a) the Federal Funds Rate
for such date minus .25%, and (b) 82% of the Available Balance.
13. "Federal Funds" shall mean immediately available
same day funds.
14. "Federal Funds Rate" shall mean, for any day, the
Federal Funds (Effective) interest rate so denominated as
published in Federal Reserve Statistical Release H.15 (519) and
applicable to such day and each succeeding day which is not a
business day.
15. "Financial Futures Contract" shall mean the firm
commitment to buy or sell fixed income securities, including,
without limitation, U.S. Treasury Bills, U.S. Treasury Notes, U.S.
Treasury Bonds, domestic bank certificates of deposit, and
Eurodollar certificates of deposit, during a specified month at an
agreed upon price.
16. "Futures Contract" shall mean a Financial Futures
Contract and/or Stock Index Futures Contracts.
17. "Futures Contract Option" shall mean an option with
respect to a Futures Contract.
18. "Margin Account" shall mean a segregated account in
the name of a broker, dealer, futures commission merchant or
Clearing Member, or in the name of the Fund for the benefit of a
broker, dealer, futures commission merchant or Clearing Member, or
otherwise, in accordance with an agreement between the Fund, the
Custodian and a broker, dealer, futures commission merchant or
Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities
and/or money of the Fund shall be deposited and withdrawn from
time to time in connection with such transactions as the Fund may
from time to time determine. Securities held in the Book-Entry
System or the Depository shall be deemed to have been deposited
in, or withdrawn from, a Margin Account upon the Custodian's
effecting an appropriate entry on its books and records.
19. "Merger" shall mean with respect to a party, the
consolidation or amalgamation with, merger into, or transfer of
all or substantially all of such party's assets to, another
entity, where such party is not the surviving entity.
20. "Money Market Security" shall be deemed to include,
without limitation, debt obligations issued or guaranteed as to
principal and interest by the government of the United States or
agencies or instrumentalities thereof, commercial paper,
certificates of deposit and bankers' acceptances, repurchase and
reverse repurchase agreements with respect to the same and bank
time deposits, where the purchase and sale of such securities
ordinarily requires settlement in Federal funds on the same date
as such purchase or sale.
21. "O.C.C." shall mean Options Clearing Corporation, a
clearing agency registered under Section 17A of the Securities
Exchange Act of 1934, its successor or successors, and its nominee
or nominees.
22. "Officers" shall be deemed to include the
President, any Vice President, the Secretary, the Treasurer, the
Controller, any Assistant Secretary, any Assistant Treasurer or
any other person or persons duly authorized by the Fund's Board to
execute any Certificate, instruction, notice or other instrument
on behalf of the Fund and listed in the Certificate annexed hereto
as Appendix B or such other Certificate as may be received by the
Custodian from time to time.
23. "Option" shall mean a Call Option, Covered Call
Option, Stock Index Option and/or a Put Option.
24. "Oral Instructions" shall mean verbal instructions
actually received by the Custodian from an Authorized Person or
from a person reasonably believed by the Custodian to be an
Authorized Person.
25. "Put Option" shall mean an exchange traded option
with respect to Securities other than Stock Index Options, Futures
Contracts, and Futures Contract Options entitling the holder, upon
timely exercise and tender of the specified underlying Securities,
to sell such Securities to the writer thereof for the exercise
price.
26. "Reverse Repurchase Agreement" shall mean an
agreement pursuant to which the Fund sells Securities and agrees
to repurchase such Securities at a described or specified date and
price.
27. "Security" shall be deemed to include, without
limitation, Money Market Securities, Call Options, Put Options,
Stock Index Options, Stock Index Futures Contracts, Stock Index
Futures Contract Options, Financial Futures Contracts, Financial
Futures Contract Options, Reverse Repurchase Agreements, common
stock and other instruments or rights having characteristics
similar to common stocks, preferred stocks, debt obligations
issued by state or municipal governments and by public authorities
(including, without limitation, general obligation bonds, revenue
bonds and industrial bonds and industrial development bonds),
bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing
rights to receive, purchase, sell or subscribe for the same, or
evidencing or representing any other rights or interest therein,
or any property or assets.
28. "Segregated Security Account" shall mean an account
maintained under the terms of this Agreement as a segregated
account, by recordation or otherwise, within the custody account
in which certain Securities and/or other assets of the Fund shall
be deposited and withdrawn from time to time in accordance with
Certificates received by the Custodian in connection with such
transactions as the Fund may from time to time determine.
29. "Series" shall mean (i) the Series of the Fund
specified on Appendix D hereto, or, where the context requires
each such Series, or (ii) if no Series are set forth on such
Appendix, the Fund.
30. "Shares" shall mean the shares of beneficial
interest of the Fund, each of which, in the case of a Fund having
Series, is allocated to a particular Series.
31. "Stock Index Futures Contract" shall mean a
bilateral agreement pursuant to which the parties agree to take or
make delivery of an amount of cash equal to a specified dollar
amount times the difference between the value of a particular
stock index at the close of the last business day of the contract
and the price at which the futures contract is originally struck.
32. "Stock Index Option" shall mean an exchange traded
option entitling the holder, upon timely exercise, to receive an
amount of cash determined by reference to the difference between
the exercise price and the value of the index on the date of
exercise.
33. "Written Instructions" shall mean written
communications actually received by the Custodian from an
Authorized Person or from a person reasonably believed by the
Custodian to be an Authorized Person by telex or any other such
system whereby the receiver of such communications is able to
verify by codes or otherwise with a reasonable degree of certainty
the authenticity of the sender of such communication.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the
Custodian as custodian of all the Securities and moneys at any
time owned by the Fund during the period of this Agreement, except
that (a) if the Custodian fails to provide for the custody of any
of the Fund's Securities and moneys located or to be located
outside the United States in a manner satisfactory to the Fund,
the Fund shall be permitted to arrange for the custody of such
Securities and moneys located or to be located outside the United
States other than through the Custodian at rates to be negotiated
and borne by the Fund and (b) if the Custodian fails to continue
any existing sub-custodial or similar arrangements on
substantially the same terms as exist on the date of this
Agreement, the Fund shall be permitted to arrange for such or
similar services other than through the Custodian at rates to be
negotiated and borne by the Fund. The Custodian shall not charge
the Fund for any such terminated services after the date of such
termination.
2. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as hereinafter
set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, the Fund will deliver or cause to be
delivered to the Custodian all Securities and all moneys owned by
any Series, including cash received for the issuance of such
Series' shares, at any time during the period of this Agreement
and shall specify the Series, if any, to which the same are to be
specifically allocated. The Custodian will not be responsible for
such Securities and such moneys until actually received by it.
The Custodian will be entitled to reverse any credits made on a
Series' behalf where such credits have been previously made and
moneys are not finally collected. The Fund shall deliver to the
Custodian a certified resolution of the Fund's Board approving,
authorizing and instructing the Custodian on a continuous and on-
going basis to deposit in the Book-Entry System all Securities
eligible for deposit therein and to utilize the Book-Entry System
to the extent possible in connection with its performance
hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of
Securities, and deliveries and returns of Securities collateral.
Prior to a deposit of Securities of a Series in the Depository,
the Fund shall deliver to the Custodian a certified resolution of
the Fund's Board approving, authorizing and instructing the
Custodian on a continuous and on-going basis until instructed to
the contrary by a Certificate actually received by the Custodian
to deposit in the Depository all Securities eligible for deposit
therein and to utilize the Depository to the extent possible in
connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales
of Securities, loans of Securities, and deliveries and returns of
Securities collateral. Securities and moneys of such Series
deposited in either the Book-Entry System or the Depository will
be represented in accounts which include only assets held by the
Custodian for customers, including, but not limited to, accounts
in which the Custodian acts in a fiduciary or representative
capacity. Prior to the Custodian's accepting, utilizing and
acting with respect to Clearing Member confirmations for Options
and transactions in Options as provided in this Agreement, the
Custodian shall have received a certified resolution of the Fund's
Board approving, authorizing and instructing the Custodian on a
continuous and on-going basis, until instructed to the contrary by
a Certificate actually received by the Custodian, to accept,
utilize and act in accordance with such confirmations as provided
in this Agreement.
2. The Custodian shall credit to a separate account in
the name of the Fund for each Series all moneys received by it for
the account of the Fund, with respect to such Series. Money
credited to the separate account for a Series shall be disbursed
by the Custodian only:
(a) In payment for Securities purchased, as provided in
Article IV hereof;
(b) In payment of dividends or distributions, as
provided in Article XI hereof;
(c) In payment of original issue or other taxes, as
provided in Article XII hereof;
(d) In payment for Shares redeemed by it, as provided
in Article XII hereof;
(e) Pursuant to Certificates setting forth the name and
address of the person to whom the payment is to be made, the
Series account from which payment is to be made and the purpose
for which payment is to be made; or
(f) In payment of the fees and in reimbursement of the
expenses and liabilities of the Custodian, as provided in Article
XV hereof.
3. Promptly after the close of business on each day,
the Custodian shall furnish the Fund with confirmations and a
summary of all transfers to or from the account of each Series
during said day. Where Securities are transferred to the account
of a Series, the Custodian shall also by book-entry or otherwise
identify as belonging to such Series a quantity of Securities in a
fungible bulk of Securities registered in the name of the
Custodian (or its nominee) or shown on the Custodian's account on
the books of the Book-Entry System or the Depository. At least
monthly and from time to time, the Custodian shall furnish the
Fund with a detailed statement of the Securities and moneys held
for each Series under this Agreement.
4. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, all Securities held for a Series,
which are issued or issuable only in bearer form, except such
Securities as are held in the Book-Entry System, shall be held by
the Custodian in that form; all other Securities held for a Series
may be registered in the name of such Series, in the name of any
duly appointed registered nominee of the Custodian as the
Custodian may from time to time determine, or in the name of the
Book-Entry System or the Depository or their successor or
successors, or their nominee or nominees. The Fund agrees to
furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee or in the name of
the Book-Entry System or the Depository, any Securities which it
may hold for the account of a Series and which may from time to
time be registered in the name of such Series. The Custodian
shall hold all such Securities which are not held in the Book-
Entry System or in the Depository in a separate account in the
name of such Series physically segregated at all times from those
of any other person or persons.
5. Except as otherwise provided in this Agreement and
unless otherwise instructed to the contrary by a Certificate, the
Custodian by itself, or through the use of the Book-Entry System
or the Depository with respect to Securities therein deposited,
shall with respect to all Securities held for each Series in
accordance with this Agreement:
(a) Collect all income due or payable and, in any
event, if the Custodian receives a written notice from the Fund
specifying that an amount of income should have been received by
the Custodian within the last 90 days, the Custodian will provide
a conditional payment of income within 60 days from the date the
Custodian received such notice, unless the Custodian reasonably
concludes that such income was not due or payable to the Fund,
provided that the Custodian may reverse any such conditional
payment upon its reasonably concluding that all or any portion of
such income was not due or payable, and provided further that the
Custodian shall not be liable for failing to collect on a timely
basis the full amount of income due or payable in respect of a
"floating rate instrument" or "variable rate instrument" (as such
terms are defined under Rule 2a-7 under the Investment Company Act
of l940, as amended) if it has acted in good faith, without
negligence or willful misconduct.
(b) Present for payment and collect the amount payable
upon such Securities which are called, but only if either (i) the
Custodian receives a written notice of such call, or (ii) notice
of such call appears in one or more of the publications listed in
Appendix C annexed hereto, which may be amended at any time by the
Custodian upon five business days' prior notification to the Fund;
(c) Present for payment and collect the amount payable
upon all Securities which may mature;
(d) Surrender Securities in temporary form for
definitive Securities;
(e) Execute, as Custodian, any necessary declarations
or certificates of ownership under the Federal Income Tax Laws or
the laws or regulations of any other taxing authority now or
hereafter in effect; and
(f) Hold directly, or through the Book-Entry System or
the Depository with respect to Securities therein deposited, for
the account of each Series all rights and similar securities
issued with respect to any Securities held by the Custodian
hereunder.
6. Upon receipt of a Certificate and not otherwise, the
Custodian, directly or through the use of the Book-Entry System or
the Depository, shall:
(a) Execute and deliver to such persons as may be
designated in such Certificate proxies, consents, authorizations,
and any other instruments whereby the authority of the Fund as
owner of any Securities may be exercised;
(b) Deliver any Securities held for the Series in
exchange for other Securities or cash issued or paid in connection
with the liquidation, reorganization, refinancing, merger,
consolidation or recapitalization of any corporation, or the
exercise of any conversion privilege;
(c) Deliver any Securities held for the Series to any
protective committee, reorganization committee or other person in
connection with the reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets of any
corporation, and receive and hold under the terms of this
Agreement such certificates of deposit, interim receipts or other
instruments or documents as may be issued to it to evidence such
delivery;
(d) Make such transfers or exchanges of the assets of
the Series and take such other steps as shall be stated in said
order to be for the purpose of effectuating any duly authorized
plan of liquidation, reorganization, merger, consolidation or
recapitalization of the Fund; and
(e) Present for payment and collect the amount payable
upon Securities not described in preceding paragraph 5(b) of this
Article which may be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained
herein, the Custodian shall not be required to obtain possession
of any instrument or certificate representing any Futures
Contract, Option or Futures Contract Option until after it shall
have determined, or shall have received a Certificate from the
Fund stating, that any such instruments or certificates are
available. The Fund shall deliver to the Custodian such a
Certificate no later than the business day preceding the
availability of any such instrument or certificate. Prior to such
availability, the Custodian shall comply with Section 17(f) of the
Investment Company Act of 1940, as amended, in connection with the
purchase, sale, settlement, closing out or writing of Futures
Contracts, Options or Futures Contract Options by making payments
or deliveries specified in Certificates received by the Custodian
in connection with any such purchase, sale, writing, settlement or
closing out upon its receipt from a broker, dealer or futures
commission merchant of a statement or confirmation reasonably
believed by the Custodian to be in the form customarily used by
brokers, dealers, or futures commission merchants with respect to
such Futures Contracts, Options or Futures Contract Options, as
the case may be, confirming that such Security is held by such
broker, dealer or futures commission merchant, in book-entry form
or otherwise, in the name of the Custodian (or any nominee of the
Custodian) as custodian for the Fund, provided, however, that
payments to or deliveries from the Margin Account shall be made in
accordance with the terms and conditions of the Margin Account
Agreement. Whenever any such instruments or certificates are
available, the Custodian shall, notwithstanding any provision in
this Agreement to the contrary, make payment for any Futures
Contract, Option or Futures Contract Option for which such
instruments or such certificates are available only against the
delivery to the Custodian of such instrument or such certificate,
and deliver any Futures Contract, Option or Futures Contract
Option for which such instruments or such certificates are
available only against receipt by the Custodian of payment
therefor. Any such instrument or certificate delivered to the
Custodian shall be held by the Custodian hereunder in accordance
with, and subject to, the provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND OTHER THAN OPTIONS,
FUTURES CONTRACTS, FUTURES CONTRACT OPTIONS AND REVERSE
REPURCHASE AGREEMENTS
1. Promptly after each purchase of Securities by the
Fund, other than a purchase of any Option, Futures Contract,
Futures Contract Option or Reverse Repurchase Agreement, the Fund
shall deliver to the Custodian (i) with respect to each purchase
of Securities which are not Money Market Securities, a
Certificate, and (ii) with respect to each purchase of Money
Market Securities, a Certificate, Oral Instructions or Written
Instructions, specifying with respect to each such purchase: (a)
the Series to which the Securities purchased are to be
specifically allocated; (b) the name of the issuer and the title
of the Securities; (c) the number of shares or the principal
amount purchased and accrued interest, if any; (d) the date of
purchase and settlement; (e) the purchase price per unit; (f) the
total amount payable upon such purchase; (g) the name of the
person from whom or the broker through whom the purchase was made,
and the name of the clearing broker, if any; and (h) the name of
the broker to which payment is to be made. The Custodian shall,
upon receipt of Securities purchased by or for such Series, pay
out of the moneys held for the account of such Series the total
amount payable to the person from whom, or the broker through
whom, the purchase was made, provided that the same conforms to
the total amount payable as set forth in such Certificate, Oral
Instructions or Written Instructions.
2. Promptly after each sale of Securities by the Fund,
other than a sale of any Option, Futures Contract, Futures
Contract Option or Reverse Repurchase Agreement, the Fund shall
deliver to the Custodian (i) with respect to each sale of
Securities which are not Money Market Securities, a Certificate,
and (ii) with respect to each sale of Money Market Securities, a
Certificate, Oral Instructions or Written Instructions, specifying
with respect to each such sale: (a) the Series to which such
Securities sold were specifically allocated; (b) the name of the
issuer and the title of the Security; (c) the number of shares or
principal amount sold, and accrued interest, if any; (d) the date
of sale; (e) the sale price per unit; (f) the total amount payable
to such Series upon such sale; (g) the name of the broker through
whom or the person to whom the sale was made, and the name of the
clearing broker, if any; and (h) the name of the broker to whom
the Securities are to be delivered. The Custodian shall deliver
the Securities upon receipt of the total amount payable to the
Fund for the account of such Series upon such sale, provided that
the same conforms to the total amount payable as set forth in such
Certificate, Oral Instructions or Written Instructions. Subject
to the foregoing, the Custodian may accept payment in such form as
shall be satisfactory to it, and may deliver Securities and
arrange for payment in accordance with the customs prevailing
among dealers in Securities.
ARTICLE V
OPTIONS
1. Promptly after the purchase of any Option by the
Fund, the Fund shall deliver to the Custodian a Certificate
specifying with respect to each Option purchased: (a) the Series
to which the Option purchased is to be specifically allocated;
(b) the type of Option (put or call); (c) the name of the issuer
and the title and number of shares subject to such Option or, in
the case of a Stock Index Option, the stock index to which such
Option relates and the number of Stock Index Options purchased;
(d) the expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the total amount payable by the Fund
for the account of such Series in connection with such purchase;
(h) the name of the Clearing Member through which such Option was
purchased; and (i) the name of the broker to whom payment is to be
made. The Custodian shall pay, upon receipt of a Clearing
Member's statement confirming the purchase of such Option held by
such Clearing Member for the account of the Custodian (or any duly
appointed and registered nominee of the Custodian) as custodian
for the Fund, out of moneys held for the account of such Series,
the total amount payable upon such purchase to the Clearing Member
through whom the purchase was made, provided that the same
conforms to the total amount payable as set forth in such
Certificate.
2. Promptly after the sale of any Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to each such
sale: (a) the Series to which the Option sold was specifically
allocated; (b) the type of Option (put or call); (c) the name of
the issuer and the title and number of shares subject to such
Option or, in the case of a Stock Index Option, the stock index to
which such Option relates and the number of Stock Index Options
sold; (d) the date of sale; (e) the sale price; (f) the date of
settlement; (g) the total amount payable to the Fund for the
account of such Series upon such sale; and (h) the name of the
Clearing Member through which the sale was made. The Custodian
shall consent to the delivery of the Option sold by the Clearing
Member which previously supplied the confirmation described in
preceding paragraph 1 of this Article with respect to such Option
against payment to the Custodian of the total amount payable to
the Fund for the account of such Series, provided that the same
conforms to the total amount payable as set forth in such
Certificate.
3. Promptly after the exercise by the Fund of any Call
Option purchased by the Fund pursuant to paragraph 1 hereof, the
Fund shall deliver to the Custodian a Certificate specifying with
respect to such Call Option: (a) the Series to which the Call
Option exercised was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Call
Option; (c) the expiration date; (d) the date of exercise and
settlement; (e) the exercise price per share; (f) the total amount
to be paid by the Fund for the account of such Series upon such
exercise; and (g) the name of the Clearing Member through which
such Call Option was exercised. The Custodian shall, upon receipt
of the Securities underlying the Call Option which was exercised,
pay out of the moneys held for the account of such Series the
total amount payable to the Clearing Member through whom the Call
Option was exercised, provided that the same conforms to the total
amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put
Option purchased by the Fund pursuant to paragraph 1 hereof, the
Fund shall deliver to the Custodian a Certificate specifying with
respect to such Put Option: (a) the Series to which the Put
Option exercised was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Put
Option; (c) the expiration date; (d) the date of exercise and
settlement; (e) the exercise price per share; (f) the total amount
to be paid to the Fund for the account of such Series upon such
exercise; and (g) the name of the Clearing Member through which
such Put Option was exercised. The Custodian shall, upon receipt
of the amount payable upon the exercise of the Put Option, deliver
or direct the Depository to deliver the Securities, provided the
same conforms to the amount payable to the Fund for the account of
such Series as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock
Index Option purchased by the Fund pursuant to paragraph 1 hereof,
the Fund shall deliver to the Custodian a Certificate specifying
with respect to such Stock Index Option: (a) the Series to which
the Stock Index Option exercised was specifically allocated;
(b) the type of Stock Index Option (put or call); (c) the number
of Options being exercised; (d) the stock index to which such
Option relates; (e) the expiration date; (f) the exercise price;
(g) the total amount to be received by the Fund for the account of
such Series in connection with such exercise; and (h) the Clearing
Member from which such payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the
Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Covered Call Option: (a) the
Series to which the Covered Call Option written is to be
specifically allocated; (b) the name of the issuer and the title
and number of shares for which the Covered Call Option was written
and which underlie the same; (c) the expiration date; (d) the
exercise price; (e) the premium to be received by the Fund for the
account of such Series; (f) the date such Covered Call Option was
written; and (g) the name of the Clearing Member through which the
premium is to be received. The Custodian shall deliver or cause
to be delivered, in exchange for receipt of the premium specified
in the Certificate with respect to such Covered Call Option, such
receipts as are required in accordance with the customs prevailing
among Clearing Members dealing in Covered Call Options and shall
impose, or direct the Depository to impose, upon the underlying
Securities specified in the Certificate such restrictions as may
be required by such receipts. Notwithstanding the foregoing, the
Custodian has the right, upon prior written notification to the
Fund, at any time to refuse to issue any receipts for Securities
in the possession of the Custodian and not deposited with the
Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund
and described in the preceding paragraph of this Article is
exercised, the Fund shall promptly deliver to the Custodian a
Certificate instructing the Custodian to deliver, or to direct the
Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the Series to which the Covered Call
Option exercised was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Covered
Call Option; (c) the Clearing Member to whom the underlying
Securities are to be delivered; and (d) the total amount payable
to the Fund for the account of such Series upon such delivery.
Upon the return and/or cancellation of any receipts delivered
pursuant to paragraph 6 of this Article, the Custodian shall
deliver, or direct the Depository to deliver, the underlying
Securities as specified in the Certificate for the amount to be
received as set forth in such Certificate.
8. Whenever the Fund writes a Put Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying
with respect to such Put Option: (a) the Series to which the Put
Option written is to be specifically allocated; (b) the name of
the issuer and the title and number of shares for which the Put
Option is written and which underlie the same; (c) the expiration
date; (d) the exercise price; (e) the premium to be received by
the Fund for the account of such Series; (f) the date such Put
Option is written; (g) the name of the Clearing Member through
which the premium is to be received and to whom a Put Option
guarantee letter is to be delivered; (h) the amount of cash,
and/or the amount and kind of Securities, if any, to be deposited
in the Segregated Security Account; and (i) the amount of cash
and/or the amount and kind of Securities to be deposited into the
Collateral Account. The Custodian shall, after making the
deposits into the Collateral Account specified in the Certificate,
issue a Put Option guarantee letter substantially in the form
utilized by the Custodian on the date hereof, and deliver the same
to the Clearing Member specified in the Certificate against
receipt of the premium specified in said Certificate.
Notwithstanding the foregoing, the Custodian shall be under no
obligation to issue any Put Option guarantee letter or similar
document if it is unable to make any of the representations
contained therein.
9. Whenever a Put Option written by the Fund and
described in the preceding paragraph is exercised, the Fund shall
promptly deliver to the Custodian a Certificate specifying: (a)
the Series to which the Put Option exercised was specifically
allocated; (b) the name of the issuer and title and number of
shares subject to the Put Option; (c) the Clearing Member from
which the underlying Securities are to be received; (d) the total
amount payable by the Fund upon such delivery; (e) the amount of
cash and/or the amount and kind of Securities to be withdrawn from
the Collateral Account; and (f) the amount of cash and/or the
amount and kind of Securities, if any, to be withdrawn from the
Segregated Security Account. Upon the return and/or cancellation
of any Put Option guarantee letter or similar document issued by
the Custodian in connection with such Put Option, the Custodian
shall pay out of the moneys held for the account of such Series
the total amount payable to the Clearing Member specified in the
Certificate as set forth in such Certificate, and shall make the
withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the
Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Stock Index Option: (a) the
Series to which the Stock Index Option written is to be
specifically allocated; (b) whether such Stock Index Option is a
put or a call; (c) the number of Options written; (d) the stock
index to which such Option relates; (e) the expiration date;
(f) the exercise price; (g) the Clearing Member through which such
Option was written; (h) the premium to be received by the Fund for
the account of such Series; (i) the amount of cash and/or the
amount and kind of Securities, if any, to be deposited in the
Segregated Security Account; (j) the amount of cash and/or the
amount and kind of Securities, if any, to be deposited in the
Collateral Account; and (k) the amount of cash and/or the amount
and kind of Securities, if any, to be deposited in a Margin
Account, and the name in which such account is to be or has been
established. The Custodian shall, upon receipt of the premium
specified in the Certificate, make the deposits, if any, into the
Segregated Security Account specified in the Certificate, and
either (1) deliver such receipts, if any, which the Custodian has
specifically agreed to issue, which are in accordance with the
customs prevailing among Clearing Members in Stock Index Options
and make the deposits into the Collateral Account specified in the
Certificate, or (2) make the deposits into the Margin Account
specified in the Certificate.
11. Whenever a Stock Index Option written by the Fund
and described in the preceding paragraph of this Article is
exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to such Stock Index Option:
(a) the Series to which the Stock Index Option exercised was
specifically allocated; (b) such information as may be necessary
to identify the Stock Index Option being exercised; (c) the
Clearing Member through which such Stock Index Option is being
exercised; (d) the total amount payable upon such exercise, and
whether such amount is to be paid by or to the Fund for the
account of such Series; (e) the amount of cash and/or amount and
kind of Securities, if any, to be withdrawn from the Margin
Account; and (f) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Segregated Security
Account and the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Collateral Account.
Upon the return and/or cancellation of the receipt, if any,
delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay to the Clearing Member specified in the
Certificate the total amount payable, if any, as specified
therein.
12. Whenever the Fund purchases any Option identical to
a previously written Option described in paragraphs 6, 8 or 10 of
this Article in a transaction expressly designated as a "Closing
Purchase Transaction" in order to liquidate its position as a
writer of an Option, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to the Option
being purchased: (a) the Series to which the Option purchased is
to be specifically allocated; (b) that the transaction is a
Closing Purchase Transaction; (c) the name of the issuer and the
title and number of shares subject to the Option, or, in the case
of a Stock Index Option, the stock index to which such Option
relates and the number of Options held; (d) the exercise price;
(e) the premium to be paid by the Fund for the account of such
Series; (f) the expiration date; (g) the type of Option (put or
call); (h) the date of such purchase; (i) the name of the Clearing
Member to which the premium is to be paid; and (j) the amount of
cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Collateral Account, a specified Margin Account
or the Segregated Security Account. Upon the Custodian's payment
of the premium and the return and/or cancellation of any receipt
issued pursuant to paragraphs 6, 8 or 10 of this Article with
respect to the Option being liquidated through the Closing
Purchase Transaction, the Custodian shall remove, or direct the
Depository to remove, the previously imposed restrictions on the
Securities underlying the Call Option.
13. Upon the expiration or exercise of, or consummation
of a Closing Purchase Transaction with respect to, any Option
purchased or written by the Fund and described in this Article,
the Custodian shall delete such Option from the statements
delivered to the Fund for the account of a Series pursuant to
paragraph 3 of Article III herein, and upon the return and/or
cancellation of any receipts issued by the Custodian, shall make
such withdrawals from the Collateral Account, the Margin Account
and/or the Segregated Security Account as may be specified in a
Certificate received in connection with such expiration, exercise,
or consummation.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures
Contract, the Fund shall deliver to the Custodian a Certificate
specifying with respect to such Futures Contract (or with respect
to any number of identical Futures Contract(s)): (a) the Series
to which the Futures Contract entered into is to be specifically
allocated; (b) the category of Futures Contract (the name of the
underlying stock index or financial instrument); (c) the number of
identical Futures Contracts entered into; (d) the delivery or
settlement date of the Futures Contract(s); (e) the date the
Futures Contract(s) was (were) entered into and the maturity date;
(f) whether the Fund is buying (going long) or selling (going
short) on such Futures Contract(s); (g) the amount of cash and/or
the amount and kind of Securities, if any, to be deposited in the
Segregated Security Account; (h) the name of the broker, dealer or
futures commission merchant through which the Futures Contract was
entered into; and (i) the amount of fee or commission, if any, to
be paid and the name of the broker, dealer or futures commission
merchant to whom such amount is to be paid. The Custodian shall
make the deposits, if any, to the Margin Account in accordance
with the terms and conditions of the Margin Account Agreement.
The Custodian shall make payment of the fee or commission, if any,
specified in the Certificate and deposit in the Segregated
Security Account the amount of cash and/or the amount and kind of
Securities specified in said Certificate.
2. Any variation margin payment or similar payment
required to be made by the Fund for the account of a Series to a
broker, dealer or futures commission merchant with respect to an
outstanding Futures Contract shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account
Agreement.
(b) Any variation margin payment or similar payment
from a broker, dealer or futures commission merchant to the Fund
with respect to an outstanding Futures Contract shall be received
and dealt with by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian
hereunder is retained by the Fund until delivery or settlement is
made on such Futures Contract, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the Series to which the
Futures Contract retained is to be specifically allocated; (b) the
Futures Contract; (c) with respect to a Stock Index Futures
Contract, the total cash settlement amount to be paid or received,
and with respect to a Financial Futures Contract, the Securities
and/or amount of cash to be delivered or received; (d) the broker,
dealer or futures commission merchant to or from which payment or
delivery is to be made or received; and (e) the amount of cash
and/or Securities to be withdrawn from the Segregated Security
Account. The Custodian shall make the payment or delivery
specified in the Certificate and delete such Futures Contract from
the statements delivered to the Fund pursuant to paragraph 3 of
Article III herein.
4. Whenever the Fund shall enter into a Futures
Contract to offset a Futures Contract held by the Custodian
hereunder, the Fund shall deliver to the Custodian a Certificate
specifying: (a) the Series to which the offsetting Futures
Contract is to be specifically allocated; (b) the items of
information required in a Certificate described in paragraph 1 of
this Article, and (c) the Futures Contract being offset. The
Custodian shall make payment of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being
offset from the statements delivered to the Fund for the account
of such Series pursuant to paragraph 3 of Article III herein, and
make such withdrawals from the Segregated Security Account as may
be specified in such Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account
Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract
Option by the Fund, the Fund shall deliver to the Custodian a
Certificate specifying with respect to such Futures Contract
Option: (a) the Series to which the Futures Contract Option
purchased is to be specifically allocated; (b) the type of Futures
Contract Option (put or call); (c) the type of Futures Contract
and such other information as may be necessary to identify the
Futures Contract underlying the Futures Contract Option purchased;
(d) the expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the amount of premium to be paid by
the Fund for the account of such Series upon such purchase; (h)
the name of the broker or futures commission merchant through
which such option was purchased; and (i) the name of the broker or
futures commission merchant to whom payment is to be made. The
Custodian shall pay the total amount to be paid upon such purchase
to the broker or futures commission merchant through whom the
purchase was made, provided that the same conforms to the amount
set forth in such Certificate.
2. Promptly after the sale of any Futures Contract
Option purchased by the Fund pursuant to paragraph 1 hereof, the
Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to each such sale: (a) the Series to
which the Futures Contract Option sold was specifically allocated;
(b) the type of Futures Contract Option (put or call); (c) the
type of Futures Contract and such other information as may be
necessary to identify the Futures Contract underlying the Futures
Contract Option; (d) the date of sale; (e) the sale price; (f) the
date of settlement; (g) the total amount payable to the Fund for
the account of such Series upon such sale; and (h) the name of the
broker or futures commission merchant through which the sale was
made. The Custodian shall consent to the cancellation of the
Futures Contract Option being closed against payment to the
Custodian of the total amount payable to the Fund for the account
of such Series, provided the same conforms to the total amount
payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the
Fund pursuant to paragraph 1 is exercised by the Fund, the Fund
shall promptly deliver to the Custodian a Certificate specifying:
(a) the Series to which the Futures Contract Option exercised was
specifically allocated; (b) the particular Futures Contract Option
(put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise;
(e) the name of the broker or futures commission merchant through
which the Futures Contract Option is exercised; (f) the net total
amount, if any, payable by the Fund; (g) the amount, if any, to be
received by the Fund for the account of such Series; and (h) the
amount of cash and/or the amount and kind of Securities to be
deposited in the Segregated Security Account. The Custodian shall
make the payments, if any, and the deposits, if any, into the
Segregated Security Account as specified in the Certificate. The
deposits, if any, to be made to the Margin Account shall be made
by the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option,
the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a) the
Series to which the Futures Contract Option written is to be
specifically allocated; (b) the type of Futures Contract Option
(put or call); (c) the type of Futures Contract and such other
information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the expiration date;
(e) the exercise price; (f) the premium to be received by the Fund
for the account of such Series; (g) the name of the broker or
futures commission merchant through which the premium is to be
received; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Segregated Security
Account. The Custodian shall, upon receipt of the premium
specified in the Certificate, make the deposits into the
Segregated Security Account, if any, as specified in the
Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
5. Whenever a Futures Contract Option written by the
Fund which is a call is exercised, the Fund shall promptly deliver
to the Custodian a Certificate specifying: (a) the Series to
which the Futures Contract Option exercised was specifically
allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract
Option; (d) the name of the broker or futures commission merchant
through which such Futures Contract Option was exercised; (e) the
net total amount, if any, payable to the Fund for the account of
such Series upon such exercise; (f) the net total amount, if any,
payable by the Fund for the account of such Series upon such
exercise; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Segregated Security Account.
The Custodian shall, upon its receipt of the net total amount
payable to the Fund for the account of such Series, if any,
specified in such Certificate make the payments, if any, and the
deposits, if any, into the Segregated Security Account as
specified in the Certificate. The deposits, if any, to be made to
the Margin Account shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is written
by the Fund and which is a Put Option is exercised, the Fund shall
promptly deliver to the Custodian a Certificate specifying: (a)
the Series to which the Futures Contract Option exercised was
specifically allocated; (b) the particular Futures Contract Option
exercised; (c) the type of Futures Contract underlying such
Futures Contract Option; (d) the name of the broker or futures
commission merchant through which such Futures Contract Option is
exercised; (e) the net total amount, if any, payable to the Fund
for the account of such Series upon such exercise; (f) the net
total amount, if any, payable by the Fund for the account of such
Series upon such exercise; and (g) the amount and kind of
Securities and/or cash to be withdrawn from or deposited in the
Segregated Security Account, if any. The Custodian shall, upon
its receipt of the net total amount payable to the Fund for the
account of such Series, if any, specified in the Certificate, make
the payments, if any, and the deposits, if any, into the
Segregated Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any,
shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
7. Whenever the Fund purchases any Futures Contract
Option identical to a previously written Futures Contract Option
described in this Article in order to liquidate its position as a
writer of such Futures Contract Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to
the Futures Contract Option being purchased: (a) the Series to
which the Futures Contract Option purchased is to be specifically
allocated; (b) that the transaction is a closing transaction; (c)
the type of Futures Contract and such other information as may be
necessary to identify the Futures Contract underlying the Futures
Contract Option; (d) the exercise price; (e) the premium to be
paid by the Fund for the account of such Series; (f) the
expiration date; (g) the name of the broker or futures commission
merchant to which the premium is to be paid; and (h) the amount of
cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Segregated Security Account. The Custodian
shall effect the withdrawals from the Segregated Security Account
specified in the Certificate. The withdrawals, if any, to be made
from the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account
Agreement.
8. Upon the expiration or exercise of, or consummation
of a closing transaction with respect to, any Futures Contract
Option written or purchased by the Fund and described in this
Article, the Custodian shall (a) delete such Futures Contract
Option from the statements delivered to the Fund pursuant to para-
graph 3 of Article III herein, and (b) make such withdrawals from,
and/or, in the case of an exercise, such deposits into, the
Segregated Security Account as may be specified in a Certificate.
The deposits to and/or withdrawals from the Margin Account, if
any, shall be made by the Custodian in accordance with the terms
and conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the
exercise of a Futures Contract Option described in this Article
shall be subject to Article VI hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after any short sale, the Fund shall
deliver to the Custodian a Certificate specifying: (a) the Series
to which the short sale is to be specifically allocated; (b) the
name of the issuer and the title of the Security; (c) the number
of shares or principal amount sold, and accrued interest or
dividends, if any; (d) the dates of the sale and settlement; (e)
the sale price per unit; (f) the total amount credited to the Fund
for the account of such Series upon such sales, if any; (g) the
amount of cash and/or the amount and kind of Securities, if any,
which are to be deposited in a Margin Account and the name in
which such Margin Account has been or is to be established; (h)
the amount of cash and/or the amount and kind of Securities, if
any, to be deposited in a Segregated Security Account; and (i) the
name of the broker through which such short sale was made. The
Custodian shall upon its receipt of a statement from such broker
confirming such sale and that the total amount credited to the
Fund upon such sale, if any, as specified in the Certificate is
held by such broker for the account of the Custodian (or any
nominee of the Custodian) as custodian of the Fund, issue a
receipt or make the deposits into the Margin Account and the
Segregated Security Account specified in the Certificate.
2. In connection with the closing-out of any short
sale, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to each such closing-out: (a)
the Series to which the short sale being closed-out was
specifically allocated; (b) the name of the issuer and the title
of the Security; (c) the number of shares or the principal amount,
and accrued interest or dividends, if any, required to effect such
closing-out to be delivered to the broker; (d) the dates of the
closing-out and settlement; (e) the purchase price per unit; (f)
the net total amount payable to the Fund for the account of such
Series upon such closing-out; (g) the net total amount payable to
the broker upon such closing-out; (h) the amount of cash and the
amount and kind of Securities to be withdrawn, if any, from the
Margin Account; (i) the amount of cash and/or the amount and kind
of Securities, if any, to be withdrawn from the Segregated
Security Account; and (j) the name of the broker through which the
Fund is effecting such closing-out. The Custodian shall, upon
receipt of the net total amount payable to the Fund for the
account of such Series upon such closing-out and the return and/or
cancellation of the receipts, if any, issued by the custodian with
respect to the short sale being closed-out, pay out of the moneys
held for the account of the Series to the broker the net total
amount payable to the broker, and make the withdrawals from the
Margin Account and the Segregated Security Account, as the same
are specified in the Certificate.
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund, on behalf of a Series,
enters into a Reverse Repurchase Agreement with respect to
Securities and money held by the Custodian hereunder, the Fund
shall deliver to the Custodian a Certificate or in the event such
Reverse Repurchase Agreement is a Money Market Security, a
Certificate, Oral Instructions or Written Instructions specifying:
(a) the Series to which the Reverse Repurchase Agreement is to be
specifically allocated; (b) the total amount payable to the Fund
for the account of such Series in connection with such Reverse
Repurchase Agreement; (c) the broker or dealer through or with
which the Reverse Repurchase Agreement is entered; (d) the amount
and kind of Securities to be delivered by the Fund to such broker
or dealer; (e) the date of such Reverse Repurchase Agreement; and
(f) the amount of cash and/or the amount and kind of Securities,
if any, to be deposited in a Segregated Security Account in
connection with such Reverse Repurchase Agreement. The Custodian
shall, upon receipt of the total amount payable to the Fund
specified in the Certificate, Oral Instructions or Written
Instructions make the delivery to the broker or dealer, and the
deposits, if any, to the Segregated Security Account, specified in
such Certificate, Oral Instructions or Written Instructions.
2. Upon the termination of a Reverse Repurchase
Agreement described in paragraph 1 of this Article, the Fund shall
promptly deliver a Certificate or, in the event such Reverse
Repurchase Agreement is a Money Market Security, a Certificate,
Oral Instructions or Written Instructions to the Custodian
specifying: (a) the Series to which the Reverse Repurchase
Agreement terminated was specifically allocated; (b) the Reverse
Repurchase Agreement being terminated; (c) the total amount
payable by the Fund for the account of such Series in connection
with such termination; (d) the amount and kind of Securities to be
received by the Fund for the account of such Series in connection
with such termination; (e) the date of termination; (f) the name
of the broker or dealer with or through which the Reverse
Repurchase Agreement is to be terminated; and (g) the amount of
cash and/or the amount and kind of Securities to be withdrawn from
the Segregated Security Account. The Custodian shall, upon
receipt of the amount and kind of Securities to be received by the
Fund specified in the Certificate, Oral Instructions or Written
Instructions, make the payment to the broker or dealer, and the
withdrawals, if any, from the Segregated Security Account,
specified in such Certificate, Oral Instructions or Written
Instructions.
ARTICLE X
CONCERNING MARGIN ACCOUNTS, SEGREGATED SECURITY
ACCOUNTS AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such
deposits to, or withdrawals from, a Segregated Security Account as
specified in a Certificate received by the Custodian. Such
Certificate shall specify the amount of cash and/or the amount and
kind of Securities to be deposited in, or withdrawn from, the
Segregated Security Account. In the event that the Fund fails to
specify in a Certificate the designated Series, the name of the
issuer, the title and the number of shares or the principal amount
of any particular Securities to be deposited by the Custodian
into, or withdrawn from, a Segregated Securities Account, the
Custodian shall be under no obligation to make any such deposit or
withdrawal and shall so notify the Fund.
2. The Custodian shall make deliveries or payments from
a Margin Account to the broker, dealer, futures commission
merchant or Clearing Member in whose name, or for whose benefit,
the account was established as specified in the Margin Account
Agreement.
3. Amounts received by the Custodian as payments or
distributions with respect to Securities deposited in any Margin
Account shall be dealt with in accordance with the terms and
conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and
security interest in and to any property at any time held by the
Custodian in any Collateral Account described herein. In
accordance with applicable law, the Custodian may enforce its lien
and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or
similar document or any receipt issued hereunder by the Custodian.
In the event the Custodian should realize on any such property net
proceeds which are less than the Custodian's obligations under any
Put Option guarantee letter or similar document or any receipt,
such deficiency shall be a debt owed the Custodian by the Fund
within the scope of Article XIII herein.
5. On each business day, the Custodian shall furnish
the Fund with respect to each Series a statement with respect to
each Margin Account in which money or Securities are held
specifying as of the close of business on the previous business
day: (a) the name of the Margin Account; (b) the amount and kind
of Securities held therein; and (c) the amount of money held
therein. The Custodian shall make available upon request to any
broker, dealer or futures commission merchant specified in the
name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.
6. Promptly after the close of business on each
business day in which cash and/or Securities are maintained in a
Collateral Account, the Custodian shall furnish the Fund with a
Statement with respect to such Collateral Account specifying the
amount of cash and/or the amount and kind of Securities held
therein. No later than the close of business next succeeding the
delivery to the Fund of such statement, the Fund shall furnish to
the Custodian a Certificate or Written Instructions specifying the
then market value of the securities described in such statement.
In the event such then market value is indicated to be less than
the Custodian's obligation with respect to any outstanding Put
Option, guarantee letter or similar document, the Fund shall
promptly specify in a Certificate the additional cash and/or
Securities to be deposited in such Collateral Account to eliminate
such deficiency.
ARTICLE XI
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. For each Series, the Fund shall furnish to the
Custodian a copy of the resolution of the Fund's Board, certified
by the Secretary or any Assistant Secretary, either (i) setting
forth the date of the declaration of a dividend or distribution,
the date of payment thereof, the record date as of which
shareholders entitled to payment shall be determined, the amount
payable per share to the shareholders of record as of that date
and the total amount payable to the Dividend Agent of the Fund on
the payment date, or (ii) authorizing the declaration of dividends
and distributions on a daily basis and authorizing the Custodian
to rely on Oral Instructions, Written Instructions or a
Certificate setting forth the date of the declaration of such
dividend or distribution, the date of payment thereof, the record
date as of which shareholders entitled to payment shall be
determined, the amount payable per share to the shareholders of
record as of that date and the total amount payable to the
Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution,
Oral Instructions, Written Instructions or Certificate, as the
case may be, the Custodian shall pay out of the moneys held for
the account of the Series the total amount payable to the Dividend
Agent of the Fund.
ARTICLE XII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Series' Shares, the
Fund shall deliver to the Custodian a Certificate duly specifying:
(a) The number of Shares sold, trade date, and price;
and
(b) The amount of money to be received by the Custodian
for the sale of such Shares.
2. Upon receipt of such money from the Transfer Agent,
the Custodian shall credit such money to the account of such
Series.
3. Upon issuance of any Series' Shares in accordance
with the foregoing provisions of this Article, the Custodian shall
pay, out of the money held for the account of such Series, all
original issue or other taxes required to be paid by the Fund for
the account of such Series in connection with such issuance upon
the receipt of a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund
shall hereafter redeem any Series' Shares, the Fund shall furnish
to the Custodian a Certificate specifying:
(a) The number of Shares redeemed; and
(b) The amount to be paid for the Shares redeemed.
5. Upon receipt from the Transfer Agent of an advice
setting forth the number of a Series' Shares received by the
Transfer Agent for redemption and that such Shares are valid and
in good form for redemption, the Custodian shall make payment to
the Transfer Agent out of the moneys held for the account of such
Series of the total amount specified in the Certificate issued
pursuant to the foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the
redemption of any of Series' Shares, whenever a Series' Shares are
redeemed pursuant to any check redemption privilege which may from
time to time be offered by the Fund, the Custodian, unless
otherwise instructed by a Certificate, shall, upon receipt of an
advice from the Fund or its agent setting forth that the
redemption is in good form for redemption in accordance with the
check redemption procedure, honor the check presented as part of
such check redemption privilege out of the money held in the
account of the Fund for such purposes.
ARTICLE XIII
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion
advance funds on behalf of a Series which results in an overdraft
because the moneys held by the Custodian for the account of such
Series shall be insufficient to pay the total amount payable upon
a purchase of Securities as set forth in a Certificate or Oral
Instructions issued pursuant to Article IV, or which results in an
overdraft in the account for such Series for some other reason, or
if a Series is for any other reason indebted to the Custodian
(except a borrowing for investment or for temporary or emergency
purposes using Securities as collateral pursuant to a separate
agreement and subject to the provisions of paragraph 2 of this
Article XIII), such overdraft or indebtedness shall be deemed to
be a loan made by the Custodian to such Series payable on demand
and shall bear interest from the date incurred at a rate per annum
(based on a 360-day year for the actual number of days involved)
equal to the Federal Funds Rate plus l/2%, such rate to be
adjusted on the effective date of any change in such Federal Funds
Rate but in no event to be less than 6% per annum, except that any
overdraft resulting from an error by the Custodian shall bear no
interest. Any such overdraft or indebtedness shall be reduced by
an amount equal to the total of all amounts due such Series which
have not been collected by the Custodian on behalf of such Series
when due because of the failure of the Custodian to make timely
demand or presentment for payment. In addition, the Fund hereby
agrees that the Custodian shall have a continuing lien and
security interest in and to any property at any time held by it
for the benefit of such Series or in which such Series may have an
interest which is then in the Custodian's possession or control or
in possession or control of any third party acting in the
Custodian's behalf. The Fund authorizes the Custodian, in its
sole discretion, at any time to charge any such overdraft or
indebtedness together with interest due thereon against any
balance of account standing to such Series' credit on the
Custodian's books. For purposes of this Section 1 of
Article XIII, "overdraft" shall mean a negative Available Balance.
2. The Fund will cause to be delivered to the Custodian
by any bank (including, if the borrowing is pursuant to a separate
agreement, the Custodian) from which it borrows money for
investment or for temporary or emergency purposes using Securities
in a Series' portfolio as collateral for such borrowings, a notice
or undertaking in the form currently employed by any such bank
setting forth the amount which such bank will loan to the Fund
against delivery of a stated amount of collateral. The Fund shall
promptly deliver to the Custodian a Certificate specifying with
respect to each such borrowing: (a) the Series to which the
borrowing relates; (b) the name of the bank; (c) the amount and
terms of the borrowing, which may be set forth by incorporating by
reference an attached promissory note, duly endorsed by the Fund,
or other loan agreement; (d) the time and date, if known, on which
the loan is to be entered into; (e) the date on which the loan
becomes due and payable; (f) the total amount payable to the Fund
for the account of such Series on the borrowing date; (g) the
market value of Securities to be delivered as collateral for such
loan, including the name of the issuer, the title and the number
of shares or the principal amount of any particular Securities;
and (h) a statement specifying whether such loan is for investment
purposes or for temporary or emergency purposes and that such loan
is in conformance with the Investment Company Act of 1940, as
amended, and the Fund's prospectus. The Custodian shall deliver
on the borrowing date specified in a Certificate the specified
collateral and the executed promissory note, if any, against
delivery by the lending bank of the total amount of the loan
payable, provided that the same conforms to the total amount
payable as set forth in the Certificate. The Custodian may, at
the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory note or
loan agreement. The Custodian shall deliver such Securities as
additional collateral as may be specified in a Certificate to
collateralize further any transaction described in this paragraph.
The Fund shall cause all Securities released from collateral
status to be returned directly to the Custodian, and the Custodian
shall receive from time to time such return of collateral as may
be tendered to it. In the event that the Fund fails to specify in
a Certificate the Series, the name of the issuer, the title and
number of shares or the principal amount of any particular
Securities to be delivered as collateral by the Custodian, the
Custodian shall not be under any obligation to deliver any
Securities.
ARTICLE XIV
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. If the Fund is permitted by the terms of its
organization documents and as disclosed in its most recent and
currently effective prospectus to lend the portfolio Securities of
a Series, within 24 hours after each loan of portfolio Securities
the Fund shall deliver or cause to be delivered to the Custodian a
Certificate specifying with respect to each such loan: (a) the
Series to which the Securities to be loaned are specifically
allocated; (b) the name of the issuer and the title of the
Securities; (c) the number of shares or the principal amount
loaned; (d) the date of loan and delivery; (e) the total amount to
be delivered to the Custodian against the loan of the Securities,
including the amount of cash collateral and the premium, if any,
separately identified; and (f) the name of the broker, dealer or
financial institution to which the loan was made. The Custodian
shall deliver the Securities thus designated to the broker, dealer
or financial institution to which the loan was made upon receipt
of the total amount designated as to be delivered against the loan
of Securities. The Custodian may accept payment in connection
with a delivery otherwise than through the Book-Entry System or
Depository only in the form of a certified or bank cashier's check
payable to the order of the Fund or the Custodian drawn on New
York Clearing House funds and may deliver Securities in accordance
with the customs prevailing among dealers in securities.
2. Promptly after each termination of the loan of
Securities by the Fund, the Fund shall deliver or cause to be
delivered to the Custodian a Certificate specifying with respect
to each such loan termination and return of Securities: (a) the
Series to which the Securities to be returned are specifically
allocated; (b) the name of the issuer and the title of the
Securities to be returned; (c) the number of shares or the
principal amount to be returned; (d) the date of termination; (e)
the total amount to be delivered by the Custodian (including the
cash collateral for such Securities minus any offsetting credits
as described in said Certificate); and (f) the name of the broker,
dealer or financial institution from which the Securities will be
returned. The Custodian shall receive all Securities returned
from the broker, dealer, or financial institution to which such
Securities were loaned and upon receipt thereof shall pay, out of
the moneys held for the account of the Series specified in the
Certificate, the total amount payable upon such return of
Securities as set forth in the Certificate.
ARTICLE XV
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, neither the
Custodian nor its nominee shall be liable for any loss or damage,
including counsel fees, resulting from its action or omission to
act or otherwise, either hereunder or under any Margin Account
Agreement, except for any such loss or damage arising out of its
own negligence or willful misconduct. The Custodian may, with
respect to questions of law arising hereunder or under any Margin
Account Agreement, apply for and obtain the advice and opinion of
counsel to the Fund or of its own counsel, at the expense of the
Fund, and shall be fully protected with respect to anything done
or omitted by it in good faith in conformity with such advice or
opinion. The Custodian shall be liable to the Fund for any loss
or damage resulting from the use of the Book-Entry System or any
Depository arising by reason of any negligence, misfeasance or
willful misconduct on the part of the Custodian or any of its
employees or agents.
2. Without limiting the generality of the foregoing,
the Custodian shall be under no obligation to inquire into, and
shall not be liable for:
(a) The validity of the issue of any Securities
purchased, sold or written by or for the Fund, the legality of the
purchase, sale or writing thereof, or the propriety of the amount
paid or received therefor;
(b) The legality of the issue or sale of any of the
Fund's Shares, or the sufficiency of the amount to be received
therefor;
(c) The legality of the redemption of any of the Fund's
Shares, or the propriety of the amount to be paid therefor;
(d) The legality of the declaration or payment of any
dividend by the Fund;
(e) The legality of any borrowing by the Fund using
Securities as collateral;
(f) The legality of any loan of portfolio Securities
pursuant to Article XIV of this Agreement, nor shall the Custodian
be under any duty or obligation to see to it that any cash
collateral delivered to it by a broker, dealer or financial
institution or held by it at any time as a result of such loan of
portfolio Securities of the Fund is adequate collateral for the
Fund against any loss it might sustain as a result of such loan.
The Custodian specifically, but not by way of limitation, shall
not be under any duty or obligation periodically to check or
notify the Fund that the amount of such cash collateral held by it
for the Fund is sufficient collateral for the Fund, but such duty
or obligation shall be the sole responsibility of the Fund. In
addition, the Custodian shall be under no duty or obligation to
see that any broker, dealer or financial institution to which
portfolio Securities of the Fund are lent pursuant to Article XIV
of this Agreement makes payment to it of any dividends or interest
which are payable to or for the account of the applicable Series
of the Fund during the period of such loan or at the termination
of such loan, provided, however, that the Custodian shall promptly
notify the Fund in the event that such dividends or interest are
not paid and received when due; or
(g) The sufficiency or value of any amounts of money
and/or Securities held in any Margin Account, Segregated Security
Account or Collateral Account in connection with transactions by
the Fund. In addition, the Custodian shall be under no duty or
obligation to see that any broker, dealer, futures commission
merchant or Clearing Member makes payment to the Fund of any
variation margin payment or similar payment which the Fund may be
entitled to receive from such broker, dealer, futures commission
merchant or Clearing Member, to see that any payment received by
the Custodian from any broker, dealer, futures commission merchant
or Clearing Member is the amount the Fund is entitled to receive,
or to notify the Fund of the Custodian's receipt or non-receipt of
any such payment; provided however that the Custodian, upon the
Fund's written request, shall, as Custodian, demand from any
broker, dealer, futures commission merchant or Clearing Member
identified by the Fund the payment of any variation margin payment
or similar payment that the Fund asserts it is entitled to receive
pursuant to the terms of a Margin Account Agreement or otherwise
from such broker, dealer, futures commission merchant or Clearing
Member.
3. The Custodian shall not be liable for, or considered
to be the Custodian of, any money, whether or not represented by
any check, draft or other instrument for the payment of money,
received by it on behalf of the Fund until the Custodian actually
receives and collects such money directly or by the final
crediting of the account representing the Fund's interest at the
Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and shall
not be liable for ascertaining or acting upon any calls,
conversions, exchange, offers, tenders, interest rate changes or
similar matters relating to Securities held in the Depository,
unless the Custodian shall have actually received timely notice
from the Depository. In no event shall the Custodian have any
responsibility or liability for the failure of the Depository to
collect, or for the late collection or late crediting by the
Depository of any amount payable upon Securities deposited in the
Depository which may mature or be redeemed, retired, called or
otherwise become payable. However, upon receipt of a Certificate
from the Fund of an overdue amount on Securities held in the
Depository, the Custodian shall make a claim against the
Depository on behalf of the Fund, except that the Custodian shall
not be under any obligation to appear in, prosecute or defend any
action, suit or proceeding in respect to any Securities held by
the Depository which in its opinion may involve it in expense or
liability, unless indemnity satisfactory to it against all expense
and liability be furnished as often as may be required.
5. The Custodian shall not be under any duty or
obligation to take action to effect collection of any amount due
to the Fund from the Transfer Agent of the Fund nor to take any
action to effect payment or distribution by the Transfer Agent of
the Fund of any amount paid by the Custodian to the Transfer Agent
of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or
obligation to take action to effect collection of any amount, if
the Securities upon which such amount is payable are in default,
or if payment is refused after due demand or presentation, unless
and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of
reimbursement of its costs and expenses in connection with any
such action.
7. The Custodian may appoint one or more banking
institutions as Depository or Depositories or as Sub-Custodian or
Sub-Custodians, including, but not limited to, banking
institutions located in foreign countries, of Securities and
moneys at any time owned by the Fund, upon terms and conditions
approved in the Certificate, which shall, if requested by the
Custodian, be accompanied by an approving resolution of the Fund's
Board adopted in accordance with Rule 17f-5 under the Investment
Company Act of 1940, as amended. Notwithstanding anything to the
contrary contained in this Agreement, the Custodian shall hold
harmless and indemnify the Fund from and against any losses,
actions, claims, demands, expenses and proceedings, including
counsel fees, that occur as a result of any act or omission of any
Foreign Sub-Custodian or Depository with respect to the
safekeeping of moneys and securities of the Fund.
8. The Custodian shall not be under any duty or
obligation to ascertain whether any Securities at any time
delivered to or held by it for the account of the Fund are such as
properly may be held by the Fund under the provisions of its
organization documents.
9. (a) The Custodian shall be entitled to receive and
the Fund agrees to pay to the Custodian all reasonable out-of-
pocket expenses and such compensation and fees as are specified on
Schedule A hereto. The Custodian shall not deem amounts payable
in respect of foreign custodial services to be out-of-pocket
expenses, it being the parties' intention that all fees for such
services shall be as set forth on Schedule B hereto and shall be
provided for the term of this Agreement without any automatic or
unilateral increase. The Custodian shall have the right to
unilaterally increase the figures on Schedule A on or after
March 1, 1996 and on or after each succeeding March 1 thereafter
by an amount equal to 50% of the increase in the Consumer Price
Index for the calendar year ending on the December 31 immediately
preceding the calendar year in which such March 1 occurs,
provided, however, that during each such annual period commencing
on a March 1, the aggregate increase during such period shall not
be in excess of 10%. Any increase by the Custodian shall be
specified in a written notice delivered to the Fund at least
thirty days prior to the effective date of the increase. The
Custodian may charge such compensation and any expenses incurred
by the Custodian in the performance of its duties pursuant to such
agreement against any money held by it for the account of the
Fund. The Custodian shall also be entitled to charge against any
money held by it for the account of the Fund the amount of any
loss, damage, liability or expense, including counsel fees, for
which it shall be entitled to reimbursement under the provisions
of this Agreement. The expenses which the Custodian may charge
against the account of the Fund include, but are not limited to,
the expenses of Sub-Custodians and foreign branches of the
Custodian incurred in settling outside of New York City
transactions involving the purchase and sale of Securities of the
Fund.
(b) The Fund shall receive a credit for each
calendar month against such compensation and fees of the Custodian
as may be payable by the Fund with respect to such calendar month
in an amount equal to the aggregate of its Earnings Credit for
such calendar month. In no event may any Earnings Credits be
carried forward to any fiscal year other than the fiscal year in
which it was earned, or, unless permitted by applicable law,
transferred to, or utilized by, any other person or entity,
provided that any such transferred Earnings Credit can be used
only to offset compensation and fees of the Custodian for services
rendered to such transferee and cannot be used to pay the
Custodian's out-of-pocket expenses. For purposes of this sub-
section (b), the Fund is permitted to transfer Earnings Credits
only to The Dreyfus Corporation, its affiliates and/or any
investment company now or in the future for which The Dreyfus
Corporation or any of its affiliates acts as the sole investment
adviser. For purposes of this sub-section (b), a fiscal year
shall mean the twelve-month period commencing on the effective
date of this Agreement and on each anniversary thereof.
10. The Custodian shall be entitled to rely upon any
Certificate, notice or other instrument in writing received by the
Custodian and reasonably believed by the Custodian to be a
Certificate. The Custodian shall be entitled to rely upon any
Oral Instructions and any Written Instructions actually received
by the Custodian pursuant to Article IV or XI hereof. The Fund
agrees to forward to the Custodian a Certificate or facsimile
thereof, confirming such Oral Instructions or Written Instructions
in such manner so that such Certificate or facsimile thereof is
received by the Custodian, whether by hand delivery, telex or
otherwise, by the close of business of the same day that such Oral
Instructions or Written Instructions are given to the Custodian.
The Fund agrees that the fact that such confirming instructions
are not received by the Custodian shall in no way affect the
validity of the transactions or enforceability of the transactions
hereby authorized by the Fund. The Fund agrees that the Custodian
shall incur no liability to the Fund in acting upon Oral
Instructions given to the Custodian hereunder concerning such
transactions, provided such instructions reasonably appear to have
been received from an Authorized Person.
11. The Custodian shall be entitled to rely upon any
instrument, instruction or notice received by the Custodian and
reasonably believed by the Custodian to be given in accordance
with the terms and conditions of any Margin Account Agreement.
Without limiting the generality of the foregoing, the Custodian
shall be under no duty to inquire into, and shall not be liable
for, the accuracy of any statements or representations contained
in any such instrument or other notice including, without
limitation, any specification of any amount to be paid to a
broker, dealer, futures commission merchant or Clearing Member.
12. The books and records pertaining to the Fund which
are in the possession of the Custodian shall be the property of
the Fund. Such books and records shall be prepared and maintained
as required by the Investment Company Act of 1940, as amended, and
other applicable securities laws and rules and regulations. The
Fund, or the Fund's authorized representatives, shall have access
to such books and records during the Custodian's normal business
hours. Upon the reasonable request of the Fund, copies of any
such books and records shall be provided by the Custodian to the
Fund or the Fund's authorized representative at the Fund's
expense.
13. The Custodian shall provide the Fund with any
report obtained by the Custodian on the system of internal
accounting control of the Book-Entry System or the Depository, or
O.C.C., and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time to
time.
14. The Fund agrees to indemnify the Custodian against
and save the Custodian harmless from all liability, claims, losses
and demands whatsoever, including attorney's fees, howsoever
arising or incurred because of or in connection with the
Custodian's payment or non-payment of checks pursuant to paragraph
6 of Article XII as part of any check redemption privilege program
of the Fund, except for any such liability, claim, loss and demand
arising out of the Custodian's own negligence or willful
misconduct.
15. Subject to the foregoing provisions of this
Agreement, the Custodian may deliver and receive Securities, and
receipts with respect to such Securities, and arrange for payments
to be made and received by the Custodian in accordance with the
customs prevailing from time to time among brokers or dealers in
such Securities.
16. The Custodian shall have no duties or responsi-
bilities whatsoever except such duties and responsibilities as are
specifically set forth in this Agreement, and no covenant or
obligation shall be implied in this Agreement against the
Custodian.
ARTICLE XVI
TERMINATION
1. (a) Any termination may be effected only by the
terminating party giving to the other party a notice in writing
specifying the date of such termination, which shall be not less
than two hundred seventy (270) days after the date of giving of
such notice.
(b) The Fund may at any time terminate this
Agreement if the Custodian has materially breached its obligations
under this Agreement and such breach has remained uncured for a
period of thirty days after the Custodian's receipt from the Fund
of written notice specifying such breach.
(c) Either party, immediately upon written notice
to the other party, may terminate this Agreement upon the Merger
or Bankruptcy of the other party.
(d) The Fund may at any time terminate this
Agreement if the Custodian has materially breached its obligations
under the "Amendment to Transfer Agency Agreements" dated August
18, 1989 and has not cured such breach as promptly as practicable
and in any event within seven days of its receipt of written
notice of such breach, provided that the Custodian shall not be
permitted to cure any such material breach arising from the
willful misconduct of the Custodian.
In the event notice of termination is given by the Fund,
it shall be accompanied by a copy of a resolution of the Fund's
Board, certified by the Secretary or any Assistant Secretary,
electing to terminate this Agreement and designating a successor
custodian or custodians, each of which shall be a bank or trust
company having not less than $2,000,000 aggregate capital, surplus
and undivided profits. In the event notice of termination is
given by the Custodian, the Fund shall, on or before the
termination date, deliver to the Custodian a copy of a resolution
of its Board, certified by the Secretary or any Assistant
Secretary, designating a successor custodian or custodians. In
the absence of such designation by the Fund, the Custodian may
designate a successor custodian which shall be a bank or trust
company having not less than $2,000,000 aggregate capital, surplus
and undivided profits. Upon the date set forth in such notice,
this Agreement shall terminate and the Custodian shall, upon
receipt of a notice of acceptance by the successor custodian, on
that date deliver directly to the successor custodian all
Securities and moneys then owned by the Fund and held by it as
Custodian, after deducting all fees, expenses and other amounts
for the payment or reimbursement of which it shall then be
entitled.
2. If a successor custodian is not designated by the
Fund or the Custodian in accordance with the preceding paragraph,
the Fund shall, upon the date specified in the notice of
termination of this Agreement and upon the delivery by the
Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and
moneys then owned by the Fund, be deemed to be its own custodian,
and the Custodian shall thereby be relieved of all duties and
responsibilities pursuant to this Agreement, other than the duty
with respect to Securities held in the Book-Entry System, in any
Depository or by a Clearing Member which cannot be delivered to
the Fund, to hold such Securities hereunder in accordance with
this Agreement.
ARTICLE XVII
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate
setting forth the names of the present Authorized Persons. The
Fund agrees to furnish to the Custodian a new Certificate in
similar form in the event that any such present Authorized Person
ceases to be an Authorized Person or in the event that other or
additional Authorized Persons are elected or appointed. Until
such new Certificate shall be received, the Custodian shall be
fully protected in acting under the provisions of this Agreement
upon Oral Instructions or signatures of the present Authorized
Persons as set forth in the last delivered Certificate.
2. Annexed hereto as Appendix B is a Certificate signed
by two of the present Officers of the Fund setting forth the names
of the present Officers of the Fund. The Fund agrees to furnish
to the Custodian a new Certificate in similar form in the event
any such present Officer ceases to be an Officer of the Fund, or
in the event that other or additional Officers are elected or
appointed. Until such new Certificate shall be received, the
Custodian shall be fully protected in acting under the provisions
of this Agreement upon the signatures of the Officers as set forth
in the last delivered Certificate.
3. Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the
Custodian, shall be sufficiently given if addressed to the
Custodian and mailed or delivered to it at its offices at 90
Washington Street, 13th Floor, New York, New York 10286, or at
such other place as the Custodian may from time to time designate
in writing.
4. Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the Fund,
shall be sufficiently given if addressed to the Fund and mailed or
delivered to it at its offices at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, or at such other place as the Fund
may from time to time designate in writing.
5. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties with
the same formality as this Agreement and approved by a resolution
of the Fund's Board.
6. This Agreement shall extend to and shall be binding
upon the parties hereto, and their respective successors and
assigns; provided, however, that this Agreement shall not be
assignable by the Fund without the written consent of the
Custodian, or by the Custodian without the written consent of the
Fund, authorized or approved by a resolution of its Board.
7. This Agreement shall be construed in accordance with
the laws of the State of New York.
8. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but
such counterparts shall, together, constitute only one instrument.
9. This Agreement has been executed on behalf of the
Fund by the undersigned officer of the Fund. The obligations of
this Agreement shall only be binding upon the assets and property
of the Fund and shall not be binding upon any trustee, officer or
shareholder of the Fund individually.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers, thereunto
duly authorized, as of the day and year first above written.
DREYFUS INCOME FUNDS
By:
Attest:
THE BANK OF NEW YORK
By:
Attest:
Appendix A
DREYFUS INCOME FUNDS
AUTHORIZED SIGNATORIES:
CASH ACCOUNT AND/OR CUSTODIAN ACCOUNT
FOR PORTFOLIO SECURITIES TRANSACTIONS
Group I Group II
Frank Greene, Phyllis Paul R. Casti, Jr.
Meiner, Paul R. Casti, Jr., Jeffrey N. Nachman Thomas J. Durante
Thomas J. Durante, Jean Philip Toia James M. Windels
Farley, Gregory S. Gruber, Lawrence Kash Paul T. Molloy
Paul T. Molloy, Jeffrey N. Joseph I. Connolly Jean Farley
Nachman, James M. Windels, Gregory S. Gruber
Anna Mancini and Mary
Kate Macchia
Cash Account
1. Fees payable to The Bank of New York pursuant to written
agreement with the Fund for services rendered in its capacity
as Custodian or agent of the Fund, or to The Shareholder
Services Group, Inc. in its capacity as Transfer Agent or agent
of the Fund:
Two (2) signatures required, one of which must be from
Group II, except that no individual shall be authorized to
sign more than once.
2. Other expenses of the Fund, $5,000 and under:
Any combination of two (2) signatures from either Group I
or Group II, or both such Groups, except that no
individual shall be authorized to sign more than once.
3. Other expenses of the Fund, over $5,000 but not over $25,000:
Two (2) signatures required, one of which must be from
Group II, except that no individual shall be authorized to
sign more than once.
4. Other expenses of the Fund, over $25,000:
Two (2) signatures required, one from Group I or Group II,
including any one of the following: Paul R. Casti, Jr.,
James M. Windels, Jeffrey N. Nachman, Joseph I. Connolly
or Philip Toia, except that no individual shall be
authorized to sign more than once.
Custodian Account for Portfolio Securities Transactions
Two (2) signatures required from any of the following:
Joseph I. Connolly, Philip Toia, Paul R. Casti, Jr.,
Thomas J. Durante, Jean Farley, Gregory S. Gruber,
Paul T. Molloy, Jeffrey N. Nachman, James M. Windels,
Mary Kate Macchia, Robert Salviolo, Katya Jiminez,
Paul Goerke, Christine O'Hara and Anna Mancini.
Appendix B
DREYFUS INCOME FUNDS
The undersigned Officers of the Fund do hereby certify
that the following individuals, whose specimen signatures are on
file with The Bank of New York, have been duly elected or appointed
by the Fund's Board to the position set forth opposite their names
and have qualified therefor:
Name Position
Marie E. Connolly President and Treasurer
John E. Pelletier Vice President and Secretary
Frederick C. Dey Vice President and Assistant
Treasurer
Eric B. Fischman Vice President and Assistant
Secretary
Elizabeth Bachman Vice President and Assistant
Secretary
Joseph S. Tower, III Assistant Treasurer
John J. Pyburn Assistant Treasurer
Margaret Pardo Assistant Secretary
Timiothy M. Ghriskey Portfolio Manager
Garrit Kono Portfolio Manager
Kevin McClintock Portfolio Manager
Gerald Thunelius Portfolio Manager
Wolodymyr Wronskyj Portfolio Manager
Eric B. Fischman, Margaret Pardo,
Vice President Assistant Secretary
Appendix C
The following are designated publications for purposes of
paragraph 5(b) of Article III:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
The New York Times
Standard & Poor's Called Bond Record
The Wall Street Journal
Appendix D
Name of Series
Dreyfus Equity Dividend Fund
Dreyfus High Yield Bond Fund
Dreyfus Strategic Income Fund
Schedule A
The fees payable to the Custodian with respect to securities
held in domestic custody are annexed hereto.
DREYFUS INCOME FUNDS
Domestic Custody Fees
Basic Fee: 1/100 of 1% per annum of the
first $500,000,000, and 1/200 of
1% of the excess over
$500,000,000 per annum of the
total market value of domestic
securities held.
Custodial Transactions:
$8.00 per transaction for each receipt and delivery of
book entry securities through DTC/FRB.
$20.00 per transaction for physical settlements, municipal
sub-custodian settlements, writing options (preparation of
depository or escrow receipts) and initial futures
transactions.
$5.00 for futures variation margin maintenance.
$7.00 for P&I paydowns.
$10.00 for GNMA PTC settlements.
$200.00 for the collection of interest on securities held
in "street name".
Schedule B
The fees payable to the Custodian with respect to securities
held in foreign custody are as set forth in a letter dated January
13, 1995 from Jerome P. Isoldi of The Bank of New York to Frederick
C. Dey, a copy of which is attached hereto.
THE BANK OF NEW YORK
90 Washington Street
New York, New York 10286
January 13, 1995
Mr. Frederick C. Dey
Assistant Treasurer
200 Park Avenue
New York, New York 10166
Re: Global Custody Fees
Dear Fred:
This letter is an update of my September 21, 1993 global
custody fee schedule letter addressed to Mr. Jeffrey Nachman for the
Dreyfus Family of Funds.
Safekeeping charges and transaction fees will be applied per
country, as indicated in the attached schedule.
Warmest regards.
Sincerely,
Jerome P. Isoldi
Senior Vice President
JPI/nd
Enclosure
GLOBAL CUSTODY FEE PROPOSAL
THE DREYFUS FAMILY OF FUNDS
AUSTRALIA MEXICO (BONDS)
CANADA NETHERLANDS
FRANCE NEW ZEALAND
GERMANY SWEDEN
IRELAND SWITZERLAND
JAPAN
SAFEKEEPING FEE
12 b.p. PER ANNUM ON FIRST 250MM MARKET VALUE OF ASSETS
10 b.p. PER ANNUM ON NEXT 500MM
8 b.p. PER ANNUM ON EXCESS
TRANSACTION FEE
$50 FOR EACH TRANSACTION
CEDEL
SAFEKEEPING FEE
5 b.p. PER ANNUM ON MARKET VALUE OF ASSETS HELD
TRANSACTION FEE
$25 FOR EACH TRANSACTION
GLOBAL CUSTODY FEE PROPOSAL
THE DREYFUS FAMILY OF FUNDS
SAFEKEEPING TRANSACTIONS
ARGENTINA 30 b.p. $ 75
AUSTRIA 8 b.p. 60
BANGLADESH 40 b.p. 170
BELGIUM 8 b.p. 75
BRAZIL * 45 b.p. 75
CHILE 35 b.p. 90
CHINA 25 b.p. 50
COLUMBIA 45 b.p. 125
CZECH REPUBLIC 50 b.p. 55
DENMARK 15 b.p. 75
FINLAND 10 b.p. 75
GREECE
Bond 25 b.p. 30
Equity 50 b.p. 450
HONG KONG 15 b.p. 100
HUNGARY 5 b.p. 75
INDIA 45 b.p. 125
INDONESIA 15 b.p. 75
ISRAEL 65 b.p. 45
ITALY 18 b.p. 75
KOREA 12.5 b.p. 25
LUXEMBOURG 6.5 b.p. 75
MALAYSIA 15 b.p. 100
MEXICO (EQUITIES) 25 b.p. 60
NORWAY 25 b.p. 125
PAKISTAN 40 b.p. 150
PERU 65 b.p. 175
PHILIPPINES 12.5 b.p. 150
POLAND 50 b.p. 150
PORTUGAL 25 b.p. 220
SINGAPORE 15 b.p. 150
SOUTH AFRICA 12.5 b.p. 150
SPAIN 8 b.p. 50
SRI LANKA 20 b.p. 60
TAIWAN 15 b.p. 150
THAILAND 18 b.p. 95
TURKEY 25 b.p. 60
UNITED KINGDOM 8 b.p. 50
URUGUAY ** 55 b.p. 75
VENEZUELA 45 b.p. 75
* Includes Local Administrator.
** $4,000 Per Year, Per Account.
OUT-OF-POCKET EXPENSES
TELEX, TELEPHONE, SECURITIES REGISTRATION, ETC., ARE IN ADDITION TO
THE ABOVE.
DREYFUS INCOME FUNDS
SHAREHOLDER SERVICES PLAN
Introduction: It has been proposed that the above-
captioned investment company (the "Fund") adopt a Shareholder
Services Plan under which the Fund would pay the Fund's
distributor (the "Distributor") for providing services to (a)
shareholders of each series of the Fund or class of Fund shares
set forth on Exhibit A hereto, as such Exhibit may be revised
from time to time, or (b) if no series or classes are set forth
on such Exhibit, shareholders of the Fund. The Distributor
would be permitted to pay certain financial institutions,
securities dealers and other industry professionals
(collectively, "Service Agents") in respect of these services.
The Plan is not to be adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "Act"), and the
fee under the Plan is intended to be a "service fee" as defined
in Article III, Section 26, of the NASD Rules of Fair Practice.
The Fund's Board, in considering whether the Fund
should implement a written plan, has requested and evaluated
such information as it deemed necessary to an informed
determination as to whether a written plan should be implemented
and has considered such pertinent factors as it deemed necessary
to form the basis for a decision to use Fund assets for such
purposes.
In voting to approve the implementation of such a
plan, the Board has concluded, in the exercise of its reasonable
business judgment and in light of applicable fiduciary duties,
that there is a reasonable likelihood that the plan set forth
below will benefit the Fund and its shareholders.
The Plan: The material aspects of this Plan are as
follows:
1. The Fund shall pay to the Distributor a fee at
the annual rate set forth on Exhibit A in respect of the
provision of personal services to shareholders and/or the
maintenance of shareholder accounts. The Distributor shall
determine the amounts to be paid to Service Agents and the basis
on which such payments will be made. Payments to a Service
Agent are subject to compliance by the Service Agent with the
terms of any related Plan agreement between the Service Agent
and the Distributor.
2. For the purpose of determining the fees payable
under this Plan, the value of the net assets of the Fund or the
net assets attributable to each series or class of Fund shares
identified on Exhibit A, as applicable, shall be computed in the
manner specified in the Fund's charter documents for the
computation of net asset value.
3. The Board shall be provided, at least quarterly,
with a written report of all amounts expended pursuant to this
Plan. The report shall state the purpose for which the amounts
were expended.
4. This Plan will become effective immediately upon
approval by a majority of the Board members, including a
majority of the Board members who are not "interested persons" (as
defined in the Act) of the Fund and have no direct or indirect
financial interest in the operation of this Plan or in any agreements
entered into in connection with this Plan, pursuant to a vote cast in
person at a meeting called for the purpose of voting on the approval
of this Plan.
5. This Plan shall continue for a period of one year from
its effective date, unless earlier terminated in accordance with its
terms, and thereafter shall continue automatically for successive
annual periods, provided such continuance is approved at least
annually in the manner provided in paragraph 4 hereof.
6. This Plan may be amended at any time by the Board,
provided that any material amendments of the terms of this Plan shall
become effective only upon approval as provided in paragraph 4
hereof.
7. This Plan is terminable without penalty at any time by
vote of a majority of the Board members who are not "interested
persons" (as defined in the Act) of the Fund and have no direct or
indirect financial interest in the operation of this Plan or in any
agreements entered into in connection with this Plan.
8. The obligations hereunder and under any related Plan
agreement shall only be binding upon the assets and property of the
Fund or the affected series or class, as the case may be, and shall
not be binding upon any Board member, officer or shareholder of the
Fund individually.
Dated: July 19, 1995
EXHIBIT A
Name of Series Fee as a Percentage of
Average Daily Net Assets
Dreyfus Equity Dividend Fund .25%
Dreyfus High Yield Securities Fund .25%
Dreyfus Short Term High Yield Fund .25%
Dreyfus Strategic Income Fund .25%
Revised: August 5, 1996
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Transfer and
Dividend Disbursing Agent, Custodian, Counsel and Independent Auditors"
and to the use of our report dated December 4, 1995 with respect to the
financial statements of Dreyfus Strategic Income for the year ended October
31, 1995, in this Registration Statement (Form N-1A 33-7172) of Dreyfus
Income Funds (formerly, Dreyfus Strategic Income).
ERNST & YOUNG LLP
New York, New York
August 29, 1996
DREYFUS HIGH YIELD SECURITIES FUND
AVERAGE ANNUAL TOTAL RETURN COMPUTATION
Average annual total return computation from inception through 7/31/96
based upon the following formula:
n
P( 1 + T ) = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value as of 7/31/96 of a $1,000
hypothetical investment made on 3/25/96 (inception)
0.353
1000( 1 + T ) = 1,074.16
T = 22.48%
==========
DREYFUS HIGH YIELD SECURITIES FUND
TOTAL RETURN COMPUTATION
Total return computation from inception through 7/31/96
based upon the following formula:
[ [ C + ( C x B ) ] - A ] - [ D x C x E ]
-------------------------------------------
T = A
where: A = NAV at beginning of period
B = Additional shares purchased through dividend reinvestment
C = NAV at end of period
D = Ending Shares
E = Applicable Redemption Fee
T = Total return
<TABLE>
<CAPTION>
<S> <C>
T = [[ 13.29 + ( 13.29 x 0.01795 ) ] - 12.50 ] - [ 1.01795 x 13.29 x 0.0075 ]
----------------------------------------------------------------------------
12.50
</TABLE>
T = 7.42%
======
DREYFUS HIGH YIELD SECURITIES FUND
SEC 30 DAY YIELD CALCULATION
INCOME 7/2/96 - 7/31/96 $188,028.63
EXPENSES 7/2/96 - 7/31/96 $0.00
Average Shares Entitled to Dividend
7/2/96 - 7/31/96 1,504,605.855
NAV per share 7/31/96
($13.29 net of .122763 undistributed
income per share) $13.167237
x = 188,028.63 - 0.00
----------------------------------------
1,504,605.855 x 13.167237
x = 0.009491
6
30 Day yield = 2 [( 1 + x) -1]
6
30 Day yield = 2 [ ( 1 + 0.009491 ) -1]
30 Day yield = 11.66%
=================
DREYFUS HIGH YIELD SECURITIES FUND
AVERAGE ANNUAL TOTAL RETURN COMPUTATION
Average annual total return computation from inception through 7/31/96
based upon the following formula:
n
P( 1 + T ) = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value as of 7/31/96 of a $1,000
hypothetical investment made on 3/25/96 (inception)
0.353
1000( 1 + T ) = 1,074.16
T = 22.48%
==========
DREYFUS HIGH YIELD SECURITIES FUND
TOTAL RETURN COMPUTATION
Total return computation from inception through 7/31/96
based upon the following formula:
[ [ C + ( C x B ) ] - A ] - [ D x C x E ]
-------------------------------------------
T = A
where: A = NAV at beginning of period
B = Additional shares purchased through dividend reinvestment
C = NAV at end of period
D = Ending Shares
E = Applicable Redemption Fee
T = Total return
<TABLE>
<CAPTION>
<S> <C>
T = [[ 13.29 + ( 13.29 x 0.01795 ) ] - 12.50 ] - [ 1.01795 x 13.29 x 0.0075 ]
----------------------------------------------------------------------------
12.50
</TABLE>
T = 7.42%
======
DREYFUS HIGH YIELD SECURITIES FUND
SEC 30 DAY YIELD CALCULATION
INCOME 7/2/96 - 7/31/96 $188,028.63
EXPENSES 7/2/96 - 7/31/96 $0.00
Average Shares Entitled to Dividend
7/2/96 - 7/31/96 1,504,605.855
NAV per share 7/31/96
($13.29 net of .122763 undistributed
income per share) $13.167237
x = 188,028.63 - 0.00
----------------------------------------
1,504,605.855 x 13.167237
x = 0.009491
6
30 Day yield = 2 [( 1 + x) -1]
6
30 Day yield = 2 [ ( 1 + 0.009491 ) -1]
30 Day yield = 11.66%
=================
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<NAME> DREYFUS INCOME FUNDS
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<NUMBER> 01
<NAME> DREYFUS STRATEGIC INCOME FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> APR-30-1996
<INVESTMENTS-AT-COST> 302233
<INVESTMENTS-AT-VALUE> 299280
<RECEIVABLES> 7104
<ASSETS-OTHER> 385
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 306769
<PAYABLE-FOR-SECURITIES> 5270
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1058
<TOTAL-LIABILITIES> 6328
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<PAID-IN-CAPITAL-COMMON> 312037
<SHARES-COMMON-STOCK> 21388
<SHARES-COMMON-PRIOR> 22520
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<ACCUMULATED-NET-GAINS> (8823)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2831)
<NET-ASSETS> 300441
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11814
<OTHER-INCOME> 0
<EXPENSES-NET> 1621
<NET-INVESTMENT-INCOME> 10193
<REALIZED-GAINS-CURRENT> 13469
<APPREC-INCREASE-CURRENT> (17295)
<NET-CHANGE-FROM-OPS> 6367
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (10135)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 969
<NUMBER-OF-SHARES-REDEEMED> (2625)
<SHARES-REINVESTED> 524
<NET-CHANGE-IN-ASSETS> (19904)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (22292)
<OVERDISTRIB-NII-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1621
<AVERAGE-NET-ASSETS> 315729
<PER-SHARE-NAV-BEGIN> 14.22
<PER-SHARE-NII> .46
<PER-SHARE-GAIN-APPREC> (.17)
<PER-SHARE-DIVIDEND> (.46)
<PER-SHARE-DISTRIBUTIONS> 0
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<SERIES>
<NUMBER> 2
<NAME> DREYFUS EQUITY DIVIDEND FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> APR-30-1996
<INVESTMENTS-AT-COST> 2210
<INVESTMENTS-AT-VALUE> 2325
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<PAID-IN-CAPITAL-COMMON> 2270
<SHARES-COMMON-STOCK> 181
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<ACCUMULATED-NET-GAINS> 2
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 115
<NET-ASSETS> 2388
<DIVIDEND-INCOME> 22
<INTEREST-INCOME> 3
<OTHER-INCOME> 0
<EXPENSES-NET> 10
<NET-INVESTMENT-INCOME> 15
<REALIZED-GAINS-CURRENT> 2
<APPREC-INCREASE-CURRENT> 115
<NET-CHANGE-FROM-OPS> 132
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (14)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 186
<NUMBER-OF-SHARES-REDEEMED> (6)
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 2388
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 33
<AVERAGE-NET-ASSETS> 2240
<PER-SHARE-NAV-BEGIN> 12.50
<PER-SHARE-NII> .08
<PER-SHARE-GAIN-APPREC> .70
<PER-SHARE-DIVIDEND> (.08)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.20
<EXPENSE-RATIO> .005
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
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<NAME> DREYFUS HIGH YIELD SECURITIES FUND
<MULTIPLIER> 1000
<S> <C>
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<PERIOD-END> APR-30-1996
<INVESTMENTS-AT-COST> 11220
<INVESTMENTS-AT-VALUE> 11224
<RECEIVABLES> 1243
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<OTHER-ITEMS-LIABILITIES> 4
<TOTAL-LIABILITIES> 1746
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10745
<SHARES-COMMON-STOCK> 859
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 89
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (6)
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<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 89
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 89
<REALIZED-GAINS-CURRENT> 3
<APPREC-INCREASE-CURRENT> (6)
<NET-CHANGE-FROM-OPS> 86
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
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<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 10831
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<ACCUMULATED-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 11
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<PER-SHARE-NII> .10
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</TABLE>
