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PROSPECTUS JUNE 29, 1998
DREYFUS PREMIER HIGH YIELD DEBT PLUS EQUITY FUND
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DREYFUS PREMIER HIGH YIELD DEBT PLUS EQUITY FUND (THE "FUND") IS A
SEPARATE NON-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.
BY THIS PROSPECTUS, THE FUND IS OFFERING FOUR CLASSES OF SHARES _
CLASS A, CLASS B, CLASS C, AND CLASS T _ WHICH ARE DESCRIBED HEREIN. SEE
"ALTERNATIVE PURCHASE METHODS."
THE FUND INVESTS IN A PORTFOLIO OF FIXED-INCOME SECURITIES RATED
BELOW INVESTMENT GRADE, AND IN COMMON STOCKS. THE FUND EXPECTS TO FOCUS ON
COMMON STOCKS OF COMPANIES WHICH ISSUE BELOW INVESTMENT GRADE DEBT, WHICH
GENERALLY ARE NOT HIGH DIVIDEND YIELDING STOCKS. INVESTMENTS IN LOWER RATED
FIXED-INCOME SECURITIES 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.
YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING THE TELETRANSFER
PRIVILEGE.
THE DREYFUS CORPORATION WILL PROFESSIONALLY MANAGE 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 JUNE 29, 1998, 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 1-800-554-4611. 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.
MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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Table of Contents
Page
Fee Table......................................................... 4
Alternative Purchase Methods...................................... 5
Description of the Fund........................................... 6
Management of the Fund............................................ 8
How to Buy Shares................................................. 9
Shareholder Services.............................................. 13
How to Redeem Shares.............................................. 16
Distribution Plan and Shareholder Services Plan................... 18
Dividends, Distributions and Taxes................................ 19
Performance Information........................................... 20
General Information............................................... 21
Appendix.......................................................... 22
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<TABLE>
Fee Table
Shareholder Transaction Expenses CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)......... 5.75% None None 4.50%
Maximum Deferred Sales Charge Imposed on
Redemptions (as a percentage of the amount
subject to charge).......................... None* 4.00% 1.00% None*
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
Management Fees............................. .75% .75% .75% .75%
12b-1 Fees.................................. None .75% .75% .25%
Other Expenses.............................. .75% .75% .75% .75%
Total Fund Operating Expenses............... 1.50% 2.25% 2.25% 1.75%
EXAMPLE:
You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) except where noted,
redemption at the end of each time period: CLASS A CLASS B CLASS C CLASS T
1 Year...................................... $ 73 $ 63/23** $33/23** $ 63
3 Years..................................... $ 103 $100/70** $70** $ 99
- ------------------------------
* A contingent deferred sales charge of 1.00% may be assessed
on certain redemptions of Class A and Class T shares purchased
without an initial sales charge as part of an investment of $1
million or more.
** Assuming no redemption of shares.
</TABLE>
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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%.
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The purpose of the foregoing table is to assist you in understanding
the costs and expenses to be borne by the Fund and investors, the payment of
which will reduce investors' annual return. Long-term investors in Class B,
Class C, and Class T shares could pay more in 12b-1 fees than the economic
equivalent of paying a front-end sales charge. Other expenses are based on
estimated amounts for the current fiscal year. 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. See "Management
of the Fund," "How to Buy Shares," "How to Redeem Shares" and "Distribution
Plan and Shareholder Services Plan."
[Page 4]
Alternative Purchase Methods
The Fund offers you four methods of purchasing Fund shares. You may
choose the Class of shares that best suits your needs, given the amount of
your purchase, the length of time you expect to hold your shares and any
other relevant circumstances. Each Fund share represents an identical pro
rata interest in the Fund's investment portfolio.
Class A shares are sold at net asset value per share plus a maximum
initial sales charge of 5.75% of the public offering price imposed at the
time of purchase. The initial sales charge may be reduced or waived for
certain purchases. See "How to Buy Shares _ Class A Shares." These shares are
subject to an annual service fee at the rate of .25 of 1% of the value of the
average daily net assets of Class A. See "Distribution Plan and Shareholder
Services Plan _ Shareholder Services Plan."
Class B shares are sold at net asset value per share with no initial
sales charge at the time of purchase; as a result, the entire purchase price
is immediately invested in the Fund. Class B shares are subject to a maximum
4% contingent deferred sales charge ("CDSC"), which is assessed only if you
redeem Class B shares within the first six years of their purchase. See "How
to Buy Shares _ Class B Shares" and "How to Redeem Shares _ Contingent
Deferred Sales Charge _ Class B Shares." These shares are subject to an
annual distribution fee at the rate of .75 of 1%, and an annual service fee
at the rate of .25 of 1%, of the value of the average daily net assets of
Class B. See "Distribution Plan and Shareholder Services Plan." The
distribution fee paid by Class B will cause such Class to have a higher
expense ratio and to pay lower dividends than Class A. Approximately six
years after the date of purchase, Class B shares automatically will convert
to Class A shares, based on the relative net asset values for shares of each
such Class, and will no longer be subject to the distribution fee. Class B
shares that have been acquired through the reinvestment of dividends and
other distributions will be converted on a pro rata basis together with other
Class B shares, in the proportion that a shareholder's Class B shares
converting to Class A shares bears to the total Class B shares not acquired
through the reinvestment of dividends and distributions.
Class C shares are sold at net asset value per share with no initial
sales charge at the time of purchase; as a result, the entire purchase price
is immediately invested in the Fund. Class C shares are subject to a 1% CDSC,
which is assessed only if you redeem Class C shares within one year of their
purchase. See `How to Buy Shares _ Class C Shares" and "How to Redeem Shares
_ Contingent Deferred Sales Charge _ Class C Shares." These shares are
subject to an annual distribution fee at the rate of .75 of 1%, and an annual
service fee at the rate of .25 of 1%, of the value of the average daily net
assets of Class C. See "Distribution Plan and Shareholder Services Plan." The
distribution fee paid by Class C will cause such Class to have a higher
expense ratio and to pay lower dividends than Class A.
Class T shares are sold at net asset value per share plus a maximum
initial sales charge of 4.50% of the public offering price imposed at the
time of purchase. The initial sales charge may be reduced or waived for
certain purchases. See "How to Buy Shares _ Class T Shares." These shares are
subject to an annual distribution fee and an annual service fee each at the
rate of .25 of 1% of the value of the average daily net assets of Class T.
See "Distribution Plan and Shareholder Services Plan." The distribution fee
paid by Class T will cause such Class to have a higher expense ratio and to
pay lower dividends than Class A.
The decision as to which Class of shares is more beneficial to you
depends on the amount and the intended length of your investment. You should
consider whether, during the anticipated life of your investment in the Fund,
the accumulated distribution fee and CDSC, if any, on Class B or Class C
shares would be less than the initial sales charge on Class A shares, or the
accumulated distribution fee and initial sales charge on Class T shares,
purchased at the same time, and to what extent, if any, such differential
would be offset by the return of Class A or Class T shares, respectively. You
may also want to consider whether, during the anticipated life of your
investment in the Fund, the accumulated distribution fee and initial sales
charge on Class T shares would be less than the higher initial sales charge
on Class A shares purchased at the same time, and to what extent, if any,
such differential could be offset by the return of Class A shares.
Additionally, investors qualifying for reduced initial sales charges who
expect to maintain their investment for an extended period of time might
consider purchasing Class A shares because the accumulated continuing
distribution fee on Class B or Class C shares, and the accumulated
distribution fee and initial sales charge on Class T shares may exceed the
initial sales charge on Class A shares during the life of the investment.
Finally, you should consider the effect of the CDSC period and any conversion
rights of the Classes in the context of your own investment time frame. For
example, while Class C shares have a shorter CDSC period than Class B shares,
Class C shares do not have a conversion feature and, therefore, are subject
to an ongoing distribution fee. Thus, Class A and Class B shares may be more
attractive than Class C shares to investors with longer term investment
outlooks. Generally, Class A shares will be most appropriate for investors
who invest $1,000,000 or more in Fund shares, and Class A and Class T shares
will not be appropriate for investors who invest less than $50,000 in Fund
shares.
[Page 5]
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
The Fund will pursue its investment objective by investing
principally in debt instruments rated below investment grade, and in common
stocks, particularly those of companies which issue below investment grade
debt. The Fund has not established any asset allocation strategy; fixed
income and equity securities will be selected based on The Dreyfus
Corporation's assessment of current market conditions and investment
opportunities.
Debt instruments in which the Fund will invest (collectively, "Fixed
Income Securities") principally will be rated below investment grade, or, if
unrated, determined by The Dreyfus Corporation to be of comparable quality.
Fixed-Income Securities include bonds, notes, and debentures, as well as
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, 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 also may invest in Fixed-Income Securities
which are issued as "units" with warrants or common stock attached. The fixed
income portion of the Fund's portfolio will be unrestricted as to maturity
and duration.
Management expects that substantially all of the Fixed Income
Securities in which the Fund will invest will be rated below investment
grade, or determined to be of comparable quality if unrated. Management also
expects that at least 50% of the Fund's total assets typically will be
invested in below investment grade Fixed Income Securities.
The Fund also invests in the common stocks of domestic and foreign
issuers. The Fund may invest in common stocks directly, or in the form of
American Depositary Receipts or warrants to purchase common stocks. There are
no limitations on the type, size, operating history, or dividend paying
record of companies or industries in which the Fund may invest, the principal
criteria for investment being that the securities provide the opportunity for
capital growth. Particular attention will be paid, though, to the common
stocks of companies which issue below investment grade Fixed Income
Securities. The Fund may be invested in the Fixed Income Securities and in
the common stock of the same issuer.
Fixed Income 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 ("S&P"), Fitch IBCA, Inc. ("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 Fixed Income
Securities" and "Appendix _ Certain Portfolio Securities _ High Yield-Lower
Rated Fixed Income 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 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 can be expected to exceed
200%. A turnover rate of 100% is equivalent to the Fund buying and selling
all of the securities in its portfolio once in the course of a year. Higher
portfolio turnover rates usually generate additional brokerage commissions
and transaction costs and the short-term gains realized from these
transactions are taxable to shareholders as ordinary income. The Fund may
engage in various investment techniques, such as transactions in foreign
currency, options, futures and swaps, lending portfolio securities and
short-selling. 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.
[Page 6]
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL _ The Fund's net asset value per share should be expected to
fluctuate. The Fund's investment in below investment grade Fixed Income
Securities and in common stocks, particularly the stocks of issuers of lower
rated debt, may cause the Fund's share price to be highly volatile at times.
The Fund's success will depend on The Dreyfus Corporation's financial
analyses and research and its ability to identify undervalued investments in
the high yield market. Particular emphasis will be paid to seeking out
potential catalysts for triggering a revaluation of the issuer, focusing on
asset values to measure potential improvement to valuations, and focusing on
cash flows to measure the potential for maintaining current valuation and the
time frame for improvement. 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" in the Statement of Additional Information for a further discussion
of certain risks.
EQUITY SECURITIES _ Equity securities fluctuate in value, often based on
factors unrelated to the value of the issuer of the securities, and such
fluctuations can be pronounced. Changes in the value of the Fund's
investments will result in changes in the value of its shares and thus the
Fund's total return to investors.
The Fund may invest in the common stock of companies in troubled or
uncertain financial condition, such as companies which have no earnings or
which have experienced losses, or in companies which have a highly leveraged
capital structure. The securities of these companies may decline sharply in
price and be less liquid, particularly when a downturn in the economy occurs.
The Fund may purchase securities in all available securities trading markets,
including initial public offerings and the aftermarket.
The Fund may purchase the securities of smaller capitalization
companies the prices of which may be subject to more abrupt or erratic market
movements than larger, more established companies, because these securities
typically are traded in lower volume and the issuers typically are more
subject to changes in earnings and prospects.
HIGH YIELD-LOWER RATED FIXED INCOME SECURITIES _ The Fund 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. 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 difficult at times for the
Fund to sell certain securities or could result in lower prices than those
used in calculating the Fund's net asset value.
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 risk associated with below investment grade Fixed Income
Securities potentially can have a greater effect on the value of such
securities than may be the case with higher quality issues of comparable
maturity, and will be a substantial factor in the Fund's relative share price
volatility. See "Appendix _ Certain Portfolio Securities _ High Yield-Lower
Rated Fixed Income Securities" below and "Appendix" in the Statement of
Additional Information.
MORTGAGE-RELATED SECURITIES _ Mortgage-related securities in which the Fund
may invest are complex derivative instruments, subject to both credit and
prepayment risk, and may be more volatile and less liquid than more
traditional debt securities. Some mortgage-related securities have structures
that make their reactions to interest rate changes and other factors
difficult to predict, making their value highly volatile. See
"Appendix_Certain Portfolio Securities _ Mortgage-Related Securities."
Zero Coupon Securities _ Zero coupon securities are debt instruments that
generally do not make cash interest payments prior to maturity. Instead, they
are sold at a discount to par value, and this discount can be substantial.
Zero coupon securities can be rated above or below investment grade, or of
comparable quality if unrated. When interest rates change, the market price
of zero coupon securities generally will be subject to greater volatility
than "coupon" bonds, which pay regular interest. In addition, lower-rated
zero coupon securities are subject to greater credit risk. See "Appendix _
Certain Portfolio Securities _ Zero Coupon Bonds."
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 or restrict the pay
[Page 7]
ment of principal and interest on the foreign securities 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.
USE OF DERIVATIVES _ The Fund may invest in, or enter into, 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, decrease the liquidity of the
Fund's portfolio and make more difficult the accurate pricing of the Fund's
portfolio. See "Appendix _ Investment Techniques_Use of Derivatives" below
and "Investment Objectives and Management Policies _ Management Policies _
Derivatives" in the Statement of Additional Information.
Non-Diversified Status _ The classification of the Fund as a
"non-diversified" investment company means that the proportion of the Fund's
assets that may be invested in the securities of a single issuer is not
limited by the 1940 Act. A "diversified" investment company is required by
the 1940 Act generally, with respect to 75% of its total assets, to invest
not more than 5% of such assets in the securities of a single issuer. Since a
relatively high percentage of the Fund's assets may be invested in the
securities of a limited number of issuers, the Fund's portfolio securities
may be more sensitive to changes in the market value of a single issuer.
However, to meet Federal tax requirements, at the close of each quarter the
Fund may not have more than 25% of its total assets invested in any one
issuer and, with respect to 50% of total assets, not more than 5% of its
total assets invested in any one issuer. These limitations do not apply to
U.S. Government securities.
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.
Year 2000 Risks _ Like other mutual funds, financial and business
organizations and individuals around the world, the Fund could be adversely
affected if the computer systems used by The Dreyfus Corporation and the
Fund's other service providers do not properly process and calculate
date-related information and data from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." The Dreyfus Corporation is taking
steps to address the Year 2000 Problem with respect to the computer systems
that it uses and to obtain assurances that comparable steps are being taken
by the Fund's other major service providers. At this time, however, there can
be no assurance that these steps will be sufficient to avoid any adverse
impact on 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 May 31, 1998, The Dreyfus Corporation managed
or administered approximately $109 billion in assets for approximately 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 managers are Roger King and
John Koerber. Each has held that position since the Fund's inception. Mr.
King 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. Mr.
Koerber has been employed byThe Dreyfus Corporation since May 1996. Prior
thereto, Mr. Koerber served as a distressed securities analyst at R.D. Smith
(Europe), Ltd., and as a Vice President at Smith Barney, Inc., specializing
in the real estate, oil and gas, and equipment leasing areas. The Fund's
other portfolio managers are identified in the Statement of Additional
Information. The Dreyfus Corporation also
[Page 8]
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
$328 billion in assets as of March 31, 1998, including approximately $113
billion in proprietary mutual fund assets. As of March 31, 1998, Mellon,
through various subsidiaries, provided non-investment services, such as
custodial or administration services, for more than $1.666 trillion in
assets, including approximately $67 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 .75 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, TheDreyfus Corporation seeks to
obtain the best execution of orders at the most favorable net price. Subject
to this determination, TheDreyfus 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 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.
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
GENERAL _ Class A shares, Class B shares, Class C shares, and Class T shares
may be purchased only by clients of certain financial institutions (which may
include banks), securities dealers ("Selected Dealers") and other industry
professionals (collectively, "Service Agents"), except that full-time or
part-time employees of The Dreyfus Corporation or any of its affiliates or
subsidiaries, directors of The Dreyfus Corporation, Board members of a fund
advised by The Dreyfus Corporation, including members of the Fund's Board, or
the spouse or minor child of any of the foregoing may purchase Class A shares
directly through the Distributor. Subsequent purchase orders may be sent
directly to the Transfer Agent or your Service Agent.
When purchasing Fund shares, you must specify which Class is being
purchased. 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. See "Appendix_Additional Information About
Purchases, Exchanges and Redemptions."
Service Agents may receive different levels of compensation for
selling different Classes of shares. Management understands that some Service
Agents may impose certain conditions on their clients which are different
from those described in this Prospectus, and, to the extent permitted by
applicable regulatory authority, may charge their clients direct fees. You
should consult your Service Agent in this regard.
The minimum initial investment is $1,000. Subsequent investments must
be at least $100. However, the minimum initial investment is $750 for
Dreyfus-sponsored Keogh Plans, IRAs (including regular IRAs, spousal IRAs for
a non-working spouse, Roth IRAs, SEP-IRAs and rollover IRAs) and 403(b)(7)
Plans with only one participant and $500 for Dreyfus-sponsored Education
IRAs, with no minimum for subsequent purchases. The initial investment must
be accompanied by the Account Application. The Fund reserves the right to
offer Fund shares without regard to minimum purchase requirements to
employees participating in certain qualified and non-qualified employee
benefit plans or other programs where contributions or account information
can be transmitted in a manner and form
[Page 9]
acceptable to the Fund. The Fund reserves the right to vary further
the initial and subsequent investment minimum requirements at any time.
You may purchase Fund shares by check or wire, or through the
TELETRANSFER Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds," or, if for Dreyfus retirement plan accounts, to "The
Dreyfus Trust Company, Custodian." Payments which are mailed should be sent
to Dreyfus Premier High Yield Debt Plus Equity Fund, P.O. Box 6587,
Providence, Rhode Island 02940-6587. If you are opening a new account, please
enclose your Account Application indicating which Class of shares is being
purchased. For subsequent investments, your Fund account number should appear
on the check and an investment slip should be enclosed. For Dreyfus
retirement plan accounts, payments which are mailed 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.
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# 8900337567/Dreyfus Premier
High Yield Debt Plus Equity Fund. 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,
and must indicate the Class of shares being purchased. If your initial
purchase of Fund shares is by wire, please call your Service Agent, or
1-800-554-4611, 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.
Fund shares also may be purchased through Dreyfus-AUTOMATIC Asset
BuilderRegistration Mark, the Government Direct Deposit Privilege and the
Payroll Savings Plan described under "Shareholder Services." These services
enable you to make regularly scheduled investments and may provide you with a
convenient way to invest for long-term financial goals. You should be aware,
however, that periodic investment plans do not guarantee a profit and will
not protect an investor against loss in a declining market.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member. You must direct the
institution to transmit immediately available funds through the Automated
Clearing House to The Bank of New York with instructions to credit your Fund
account. The instructions must specify your Fund account registration and
your Fund account number PRECEDED BY THE DIGITS "1111."
Fund shares are sold on a continuous basis. Net asset value per share
is determined as of the close of trading on 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 New York Stock Exchange. Net asset value per share of each Class is
computed by dividing the value of the Fund's net assets represented by such
Class (i.e., the value of its assets less liabilities) by the total number of
shares of such Class outstanding. The Fund's investments are valued based on
market value or, where market quotations are not readily available, based on
fair value as determined in good faith by the Fund's Board. For further
information regarding the methods employed in valuing Fund investments, see
"Determination of Net Asset Value" in the Statement of Additional
Information.
If an order is received in proper form by the Transfer Agent or
other entity authorized to receive orders on behalf of the Fund by the close
of trading on the New York Stock Exchange (currently 4:00 p.m., New York
time) on a business day, Fund shares will be purchased at the public offering
price determined as of the close of trading on the New York Stock Exchange on
that day. Otherwise, Fund shares will be purchased at the public offering
price determined as of the close of trading on the New York Stock Exchange on
the next business day, except where shares are purchased through a dealer as
provided below.
Orders for the purchase of Fund shares received by the close of
trading on the floor of the New York Stock Exchange on a business day and
transmitted to the Distributor or its designee by the close of its business
day (normally 5:15 p.m., New York time) will be based on the public offering
price per share determined as of the close of trading on the New York Stock
Exchange on that day. Otherwise, the orders will be based on the next
determined public offering price. It is the dealer's responsibility to
transmit orders so that they will be received by the Distributor or its
designee before the close of its business day. For certain institutions that
have entered into agreements with the Distributor, payment for the purchase of
Fund shares may be transmitted, and must be received
[Page 10]
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 ("IRS").
CLASS A SHARES _ The public offering price for Class A shares is the net
asset value per share of that Class plus a sales load as shown below:
<TABLE>
Total Sales Load
__________________________________
As a % of As a % of Dealers' Reallowance
Offering Price Net Asset Value as a % of
Amount of Transaction Per Share Per Share Offering Price
_______________________ __________ __________ __________________
<S> <C> <C> <C>
Less than $50,000............................ 5.75 6.10 5.00
$50,000 to less than $100,000................ 4.50 4.70 3.75
$100,000 to less than $250,000............... 3.50 3.60 2.75
$250,000 to less than $500,000............... 2.50 2.60 2.25
$500,000 to less than $1,000,000............. 2.00 2.00 1.75
$1,000,000 or more........................... -0- -0- -0-
</TABLE>
A CDSC of 1% will be assessed at the time of redemption of Class A
shares purchased without an initial sales charge as part of an investment of
at least $1,000,000 and redeemed within one year of purchase. The Distributor
may pay Service Agents an amount up to 1% of the net asset value of Class A
shares purchased by their clients that are subject to a CDSC. The terms
contained in the section of the Fund's Prospectus entitled "How to Redeem
Shares _ Contingent Deferred Sales Charge" (other than the amount of the CDSC
and time periods) are applicable to the Class A shares subject to a CDSC.
Letter of Intent and Right of Accumulation apply to such purchases of Class A
shares.
Full-time employees of NASD member firms and full-time employees of
other financial institutions which have entered into an agreement with the
Distributor pertaining to the sale of Fund shares (or which otherwise have a
brokerage related or clearing arrangement with an NASD member firm or
financial institution with respect to the sale of Fund shares) may purchase
Class A shares for themselves, directly or pursuant to an employee benefit
plan or other program, or for their spouses and minor children at net asset
value, provided that they have furnished the Distributor with such
information that it may request from time to time in order to verify
eligibility for this privilege. This privilege also applies to full-time
employees of financial institutions affiliated with NASD member firms whose
full-time employees are eligible to purchase Class A shares at net asset
value. In addition, Class A shares are offered at net asset value to
full-time or part-time employees of The Dreyfus Corporation or any of its
affiliates or subsidiaries, directors of The Dreyfus Corporation, Board
members of a fund advised by The Dreyfus Corporation, including members of
the Fund's Board, or the spouse or minor child of any of the foregoing.
Class A shares are offered at net asset value without a sales load to
employees participating in Eligible Benefit Plans. Class A shares also may be
purchased (including by exchange) at net asset value without a sales load for
Dreyfus-sponsored IRA "Rollover Accounts" with the distribution proceeds from
a qualified retirement plan or a Dreyfus-sponsored 403(b)(7) plan, provided
that, at the time of such distribution, such qualified retirement plan or
Dreyfus-sponsored 403(b)(7) plan (a) met the requirements of an Eligible
Benefit Plan and all or a portion of such plan's assets were invested in
funds in the Dreyfus Premier Family of Funds or the Dreyfus Family of Funds
or certain other products made available by the Distributor to such plans, or
(b) invested all of its assets in certain funds in the Dreyfus Premier Family
of Funds or the Dreyfus Family of Funds or certain other products made
available by the Distributor to such plans.
[Page 11]
Class A shares may be purchased at net asset value through certain
broker-dealers and other financial institutions which have entered into an
agreement with the Distributor, which includes a requirement that such shares
be sold for the benefit of clients participating in a "wrap-account" or a
similar program under which such clients pay a fee to such broker-dealer or
other financial institution.
Class A shares also may be purchased at net asset value, subject to
appropriate documentation, through a broker-dealer or other financial
institution with the proceeds from the redemption of shares of a registered
open-end management investment company not managed by The Dreyfus Corporation
or its affiliates. The purchase of Class A shares of the Fund must be made
within 60 days of such redemption and the shareholder must have been subject
to an initial sales charge or a contingent deferred sales charge with respect
to such redeemed shares.
Class A shares also may be purchased at net asset value, subject to
appropriate documentation, by (i) qualified separate accounts maintained by
an insurance company pursuant to the laws of any State or territory of the
United States, (ii) a State, county or city or instrumentality thereof, (iii)
a charitable organization (as defined in Section 501 (c)(3) of the Internal
Revenue Code of 1986, as amended (the "Code") investing $50,000 or more in
Fund shares, and (iv) a charitable remainder trust (as defined in Section
501(c)(3) of the Code).
The dealer reallowance may be changed from time to time but will
remain the same for all dealers. The Distributor, at its expense, may provide
additional promotional incentives to dealers that sell shares of funds
advised by The Dreyfus Corporation which are sold with a sales load, such as
the Fund. In some instances, these incentives may be offered only to certain
dealers who have sold or may sell significant amounts of shares.
CLASS B SHARES _ The public offering price for Class B shares is the net
asset value per share of that Class. No initial sales charge is imposed at
the time of purchase. A CDSC is imposed, however, on certain redemptions of
Class B shares as described under "How to Redeem Shares." The Distributor
compensates certain Service Agents for selling Class B and Class C shares at
the time of purchase from the Distributor's own assets. The proceeds of the
CDSC and the distribution fee, in part, are used to defray these expenses.
CLASS C SHARES _ The public offering price for Class C shares is the net
asset value per share of that Class. No initial sales charge is imposed at
the time of purchase. A CDSC is imposed, however, on redemptions of Class C
shares made within the first year of purchase. See "Class B Shares"above and
"How to Redeem Shares."
CLASS T SHARES_The public offering price for Class T shares is the net asset
value of that Class plus a sales load as shown below:
<TABLE>
Total Sales Load
______________________________
As a % of As a % of Dealers' Reallowance
Offering Price Net Asset Value as a % of
Amount of Transaction Per Share Per Share Offering Price
_____________________ ___________ _________ ________________
<S> <C> <C> <C>
Less than $50,000................................ 4.50 4.70 4.00
$50,000 to less than $100,000.................... 4.00 4.20 3.50
$100,000 to less than $250,000................... 3.00 3.10 2.50
$250,000 to less than $500,000................... 2.00 2.00 1.75
$500,000 to less than $1,000,000................. 1.50 1.50 1.25
$1,000,000 or more............................... -0- -0- -0-
</TABLE>
There is no initial sales charge on purchases of $1,000,000 or more
of Class T shares. However, if you purchase Class T shares without an initial
sales charge as part of an investment of at least $1,000,000 and redeem all or
a portion of those shares within one year of purchase, a CDSC of 1.00% will be
assessed at the time of redemption. The Distributor may pay Service Agents an
amount up to 1% of the net asset value of Class T shares purchased by their
clients that are subject to a CDSC. The terms contained in the section of the
Prospectus entitled "How to Redeem Shares-Contingent Deferred Sales Charge-
Class B Shares" (other than the amount of the CDSC and time periods) and "How
to Redeem Shares_Waiver of CDSC" are applicable to the Class T shares subject
to a CDSC. Letter of Intent and Right of Accumulation apply to such purchases
of Class T shares. Because the expenses associated with Class A shares will
be lower than those associated with Class T shares, purchasers investing
$1,000,000 or more in the Fund generally will find it beneficial to purchase
Class A shares rather than Class T shares.
RIGHT OF ACCUMULATION _ CLASS A AND CLASS T SHARES _ Reduced sales loads
may apply to any purchase of Class A and Class T shares, shares of other
funds in the Dreyfus Premier Family of Funds, shares of certain other funds
advised by The Dreyfus Corporation which are sold with a sales load and
shares acquired by a previous exchange of such shares (hereinafter referred
to as "Eligible Funds"), by you and any related "purchaser" as defined in the
Statement of Additional Information, where the aggregate investment,
including such purchase, is $50,000 or more. If, for example, you previously
purchased and still hold Class A and Class T shares of the Fund, or of any
other Eligible Fund, or combination thereof, with an aggregate current market
value of $40,000 and subsequently
[Page 12]
purchase Class A or Class T shares of the Fund having a current value of
$20,000, the sales load applicable to the subsequent purchase would be
reduced to 4.50% of the offering price in the case of Class A shares, or
4.00% of the offering price in the case of Class T shares. All present
holdings of Eligible Funds may be combined to determine the current offering
price of the aggregate investment in ascertaining the sales load applicable
to each subsequent purchase.
To qualify for reduced sales loads, at the time of a purchase you
or your Service Agent must notify theDistributor if orders are made by wire,
or the Transfer Agent if orders are made by mail. The reduced sales load is
subject to confirmation of your holdings through a check of appropriate
records.
TELETRANSFER PRIVILEGE _ You may purchase 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 such 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 TELETRANSFER Privilege, you may request a
TELETRANSFER purchase of shares by calling your Service Agent, or
1-800-221-4060 or, if you are calling from overseas, call 401-455-3306.
Shareholder Services
The services and privileges described under this heading may not be
available to clients of certain Service Agents and some Service Agents may
impose certain conditions on their clients which are different from those
described in this Prospectus. You should consult your Service Agent in this
regard.
FUND EXCHANGES _ You may purchase, in exchange for shares of a Class, shares
of the same Class (or Class A in the case of Class T) 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 may have
different investment objectives which may be of interest to you. You also may
exchange your Fund shares that are subject to a CDSC for shares of Dreyfus
Worldwide Dollar Money Market Fund, Inc. The shares so purchased will be held
in a special account created solely for this purpose ("Exchange Account").
Exchanges of shares from an Exchange Account only can be made into certain
other funds managed or administered by The Dreyfus Corporation. No CDSC is
charged when an investor exchanges into an Exchange Account; however, the
applicable CDSC will be imposed when shares are redeemed from an Exchange
Account or other applicable fund account. Upon redemption, the applicable
CDSC will be calculated without regard to the time such shares were held in
an Exchange Account. See "How to Redeem Shares." Redemption proceeds for
Exchange Account shares are paid by Federal wire or check only. Exchange
Account shares also are eligible for the Auto-Exchange Privilege, Dividend
Sweep and the Automatic Withdrawal Plan. To use this service, you should
consult your Service Agent or call 1-800-554-4611 to determine if it is
available and whether any conditions are imposed on its use.
To request an exchange, your Service Agent acting on your behalf 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 your Service Agent, or 1-800-554-4611. Except in
cases of personal retirement plans, 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
your Service Agent or 1-800-554-4611, or by oral request from any of the
authorized signatories on the account by calling your Service Agent or
1-800-554-4611. If you have established the Telephone Exchange Privilege, you
may telephone exchange instructions (including over The Dreyfus
TouchRegistration Mark automated telephone system) by calling 1-800-645-6561.
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, TELETRANSFER Privilege, and the
dividend/capital gain distribution option (except for Dividend Sweep)selected
by the investor.
Shares will be exchanged at the next determined net asset value;
however, a sales load may be charged with respect to exchanges of Class A or
Class T shares into funds sold with a sales load. No CDSC will be imposed on
Class B or Class C shares at the time of an exchange; however, Class B or
Class C shares acquired through an
[Page 13]
exchange will be subject on redemption to the higher CDSC
applicable to the exchanged or acquired shares. The CDSC applicable on
redemption of the acquired Class B or Class C shares will be calculated from
the date of the initial purchase of the Class B or Class C shares exchanged.
If you are exchanging Class A or Class T shares 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
reinvestments of dividends or distributions paid with respect to the
foregoing categories of shares. To qualify, at the time of the exchange 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 administrative 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. See
"Appendix_Additional Information About Purchases, Exchanges and Redemptions."
The availability of Fund Exchanges may be modified or terminated at any time
upon notice to shareholders. See "Dividends, Distributions and Taxes."
AUTO-EXCHANGE PRIVILEGE _ Auto-Exchange Privilege permits you to invest
regularly (on a semi-monthly, monthly, quarterly or annual basis), in
exchange for shares of the Fund, in shares of the same Class (or Class A in
the case of Class T) of other funds in the Dreyfus Premier Family of Funds or
certain other funds in the Dreyfus Family of Funds of which you are a
shareholder. The amount you designate, which can be expressed either in terms
of a specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and or fifteenth 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
of Class A or Class T shares into funds sold with a sales load. No CDSC will
be imposed on Class B or Class C shares at the time of an exchange; however,
Class B or Class C shares acquired through an exchange will be subject on
redemption to the higher CDSC applicable to the exchanged or acquired shares.
The CDSC applicable on redemption of the acquired Class B or Class C shares
will be calculated from the date of the initial purchase of the Class B or
Class C shares exchanged. See "Shareholder Services" in the Statement of
Additional Information. This Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to Dreyfus Premier High
Yield Debt Plus Equity Fund, P.O. Box 6587, Providence, Rhode Island
02940-6587. The Fund may charge a service fee for 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 Auto-Exchange Authorization Form, please contact
your Service Agent or call 1-800-554-4611. 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. 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 from your Service Agent or by calling
1-800-554-4611. You may cancel your participation in this Privilege or change
the amount of purchase at any time by mailing written notification to Dreyfus
Premier High Yield Debt Plus Equity Fund, P.O. Box 6587, Providence, Rhode
Island 02940-6587, 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.
GOVERNMENT DIRECT DEPOSIT PRIVILEGE
The 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
Government Direct Deposit, you must file with the Transfer Agent a completed
Direct Deposit Sign-Up Form for each type of payment that you desire to
include in this Privilege. The appropriate form may be obtained from your
Service Agent or by calling 1-800-554-4611. Death or legal incapacity will
terminate your participation in this Privilege. You may elect at any time to
terminate your participation by notifying in writing the appropriate Federal
agency. The Fund may terminate your participation upon 30 days' notice to
you.
PAYROLL SAVINGS PLAN
The Payroll Savings Plan permits you to purchase Fund shares (minimum
of $100 per transaction) automatically on a regular basis. Depending upon
your employer's direct deposit program, you may have part or all of your
[Page 14]
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 Dreyfus Premier High Yield Debt and
Equity Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. You may
obtain the necessary authorization form from your Service Agent or by calling
1-800-554-4611. 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 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 CDSC, the shares purchased will be
subject on redemption to the CDSC, 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 your Service Agent or 1-800-554-4611. You
may cancel these privileges by mailing written notification to Dreyfus
Premier High Yield Debt Plus Equity Fund, P.O. Box 6587, Providence, Rhode
Island 02940-6587. To select a new fund after cancellation, you must submit a
new Dividend Options Form. Enrollment in or cancellation of these privileges
is effective three business days following receipt. These privileges are
available only for existing accounts and may not be used to open new
accounts. Minimum subsequent investments do not apply for 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 Dividend Sweep.
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. Particular
retirement plans, including Dreyfus sponsored retirement plans, may permit
certain participants to establish an automatic withdrawal plan from such
retirement plans. Participants should consult their retirement plan sponsor
and tax adviser for details. Such a withdrawal plan is different than the
Automatic Withdrawal Plan. An application for the Automatic Withdrawal Plan
can be obtained by calling your Service Agent or 1-800-554-4611. 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.
No CDSC with respect to Class B shares will be imposed on withdrawals
made under the Automatic Withdrawal Plan, provided that the amounts withdrawn
under the plan do not exceed on an annual basis 12% of the account value at
the time the shareholder elects to participate in the Automatic Withdrawal
Plan. Withdrawals with respect to Class B shares under the Automatic
Withdrawal Plan that exceed on an annual basis 12% of the value of the
shareholder's account will be subject to a CDSC on the amounts exceeding 12%
of the initial account value. Withdrawals with respect to Class A or Class T
shares subject to a CDSC, and of Class C shares, under the Automatic
Withdrawal Plan will be subject to any applicable CDSC. Purchases of
additional Class A and Class T shares where the sales load is imposed
concurrently with withdrawals of Class A and Class T shares generally are
undesirable.
RETIREMENT PLANS
The Fund offers a variety of pension and profit-sharing plans,
including Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a
non-working spouse, Roth IRAs, SEP-IRAs, rollover IRAs and Education IRAs),
401(k) Salary Reduction Plans and 403(b)(7) Plans. Plan support services also
are available. You can obtain details on the various plans by calling the
following numbers toll free: for Keogh Plans, please call 1-800-358-5566; for
IRAs (except SEP-IRAs), please call 1-800-645-6561; for SEP-IRAs, 401(k)
Salary Reduction Plans, and 403(b)(7) Plans, please call 1-800-322-7880.
LETTER OF INTENT _ CLASS A AND CLASS T SHARES _ By signing a Letter of
Intent form, available by calling your Service Agent, or 1-800-554-4611, you
become eligible for the reduced sales load applicable to the total number of
Eligible Fund shares purchased in a 13-month period pursuant to the terms and
under the conditions set forth in the Letter of Intent. A minimum initial
purchase of $5,000 is required. To compute the applicable sales load, the
offering price of shares you hold (on the date of submission of the Letter of
Intent) in any Eligible Fund that may be used
[Page 15]
toward "Right of Accumulation" benefits described above may be used as a
credit toward completion of the Letter of Intent. However, the reduced sales
load will be applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in
the Letter of Intent for payment of a higher sales load if you do not
purchase the full amount indicated in the Letter of Intent. The escrow will
be released when you fulfill the terms of the Letter of Intent by purchasing
the specified amount. If your purchases qualify for a further sales load
reduction, the sales load will be adjusted to reflect your total purchase at
the end of 13 months. If total purchases are less than the amount specified,
you will be requested to remit an amount equal to the difference between the
sales load actually paid and the sales load applicable to the aggregate
purchases actually made. If such remittance is not received within 20 days,
the Transfer Agent, as attorney-in-fact pursuant to the terms of the Letter
of Intent, will redeem an appropriate number of Class A or Class T shares
held in escrow to realize the difference. Signing a Letter of Intent does not
bind you to purchase, or the Fund to sell, the full amount indicated at the
sales load in effect at the time of signing, but you must complete the
intended purchase to obtain the reduced sales load. At the time you purchase
Class A or Class T shares, you must indicate your intention to do so under a
Letter of Intent. Purchases made pursuant to a Letter of Intent will be made
at the then-current net asset value plus the applicable sales load in effect
at the time such Letter of Intent was executed.
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 by the Transfer Agent or other entity
authorized to receive orders on behalf of the Fund, the Fund will redeem the
shares at the next determined net asset value as described below. See
"Appendix_Additional Information About Purchases, Exchanges and Redemptions."
If you hold Fund shares of more than one Class, any request for redemption
must specify the Class of shares being redeemed. If you fail to specify the
Class of shares to be redeemed or if you own fewer shares of the Class than
specified to be redeemed, the redemption request may be delayed until the
Transfer Agent receives further instructions from you or your Service Agent.
The Fund imposes no charges (other than any applicable CDSC) when
shares are redeemed. Service Agents may charge their clients a fee for
effecting redemptions of Fund shares. Any certificates representing Fund
shares being redeemed must be submitted with the redemption request. The
value of the shares redeemed may be more or less than their original cost,
depending on the Fund's then-current net asset value.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission. HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY
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, 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 TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS DAYS
AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE 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.
Contingent Deferred Sales Charge
CLASS B SHARES _ A CDSC payable to the Distributor is imposed on any
redemption by a shareholder of Class B shares which reduces the current net
asset value of your Class B shares to an amount which is lower than the
dollar amount of all payments by you for the purchase of Class B shares of
the Fund held by you at the time of redemption. No CDSC will be imposed to
the extent that the net asset value of the Class B shares redeemed does not
exceed (i) the current net asset value of Class B shares acquired through
reinvestment of dividends or capital gain distributions, plus (ii) increases
in the net asset value of your Class B shares above the dollar amount of all
your payments for the purchase of Class B shares of the Fund held by you at
the time of redemption.
If the aggregate value of the Class B shares redeemed has declined
below their original cost as a result of the Fund's performance, a CDSC may
be applied to the then-current net asset value rather than the purchase
price.
[Page 16]
In circumstances where the CDSC is imposed, the amount of the charge
will depend on the number of years from the time you purchased the Class B
shares until the time of redemption of such shares. Solely for purposes of
determining the number of years from the time of any payment for the purchase
of Class B shares, all payments during a month will be aggregated and deemed
to have been made on the first day of the month.
The following table sets forth the rates of the CDSC for Class B
shares:
YEAR SINCE CDSC AS A % OF AMOUNT
PURCHASE PAYMENT INVESTED OR REDEMPTION
WAS MADE PROCEEDS
__________ ____________
First..................... 4.00
Second.................... 4.00
Third..................... 3.00
Fourth.................... 3.00
Fifth..................... 2.00
Sixth..................... 1.00
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible rate.
It will be assumed that the redemption is made first of amounts representing
shares acquired pursuant to the reinvestment of dividends and distributions;
then of amounts representing the increase in net asset value of Class B shares
above the total amount of payments for the purchase of Class B shares made
during the preceding six years; then of amounts representing the cost of
shares held for the longest period of time within the applicable six-year
period.
For example, assume an investor purchased 100 shares at $10 per share
for a cost of $1,000. Subsequently, the shareholder acquired 5 additional
shares through dividend reinvestment. During the second year after the
purchase the investor decided to redeem $500 of his or her investment.
Assuming at the time of the redemption the net asset value had appreciated to
$12 per share, the value of the investor's shares would be $1,260 (105 shares
at $12 per share). The CDSC would not be applied to the value of the
reinvested dividend shares and the amount which represents appreciation
($260). Therefore, $240 of the $500 redemption proceeds ($500 minus $260)
would be charged at a rate of 4% for a total CDSC of $9.60.
CLASS C SHARES _ A CDSC of 1% payable to the Distributor is imposed on any
redemption of Class C shares within one year of the date of purchase. The
basis for calculating the payment of any such CDSC will be the method used in
calculating the CDSC for Class B shares. See "Contingent Deferred Sales
Charge _ Class B Shares" above.
WAIVER OF CDSC _ The CDSC applicable to Class B and Class C shares may be
waived in connection with (a) redemptions made within one year after the
death or disability, as defined in Section 72(m)(7) of the Code, of the
shareholder, (b) redemptions by employees participating in Eligible Benefit
Plans, (c) redemptions as a result of a combination of any investment company
with the Fund by merger, acquisition of assets or otherwise, (d) a
distribution following retirement under a tax-deferred retirement plan or
upon attaining age 701\2 in the case of an IRA or Keogh plan or custodial
account pursuant to Section 403(b) of the Code, and (e) redemptions pursuant
to the Automatic Withdrawal Plan, as described in the Fund's Prospectus. If
the Fund's Board determines to discontinue the waiver of the CDSC, the
disclosure in the Fund's Prospectus will be appropriately revised. Any Fund
shares subject to a CDSC which were purchased prior to the termination of
such waiver will have the CDSC waived as provided in the Fund's Prospectus at
the time of the purchase of such shares.
To qualify for a waiver of the CDSC, at the time of redemption you
must notify the Transfer Agent or your Service Agent must notify the
Distributor. Any such qualification is subject to confirmation of your
entitlement.
PROCEDURES
You may redeem shares by using the regular redemption procedure
through the Transfer Agent. You also may redeem shares through the
TELETRANSFER Privilege, if you have checked the appropriate box and supplied
the necessary information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent. 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 TELETRANSFER Privilege.
The Telephone Exchange Privilege authorizes the Transfer Agent to act
on telephone instructions (including over The Dreyfus TouchRegistration Mark
automated telephone system) from any person representing himself or herself to
be you, and
[Page 17]
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 Dreyfus Premier High Yield Debt and
Equity Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587, or, if for
Dreyfus retirement plan accounts, to TheDreyfus Trust Company, Custodian,
P.O. Box 6427, Providence, Rhode Island 02940-6427. Written redemption
requests must specify the Class of shares being redeemed. 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.
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. 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 TELETRANSFER Privilege, you may request a
TELETRANSFER redemption of shares by calling 1-800-554-4611 or, if you are
calling from overseas, call 516-794-5452.
REDEMPTION THROUGH A SELECTED DEALER _ If you are a customer of a Selected
Dealer, you may make redemption requests to your Selected Dealer. If the
Selected Dealer transmits the redemption request so that it is received by
the Transfer Agent prior to the close of trading on the floor of the New York
Stock Exchange (currently 4:00 p.m., New York time), the redemption request
will be effective on that day. If a redemption request is received by the
Transfer Agent after the close of trading on the floor of the New York Stock
Exchange, the redemption request will be effective on the next business day.
It is the responsibility of the Selected Dealer to transmit a request so that
it is received in a timely manner. The proceeds of the redemption are
credited to your account with the Selected Dealer. See "How to Buy Shares"
for a discussion of additional conditions or fees that may be imposed upon
redemption.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of shares held by shareholders. Repurchase orders received by
dealers by the close of trading on the floor of the New York Stock Exchange
on any business day and transmitted to the Distributor or its designee prior
to the close of its business day (normally 5:15 p.m., New York time) are
effected at the price determined as of the close of trading on the floor of
the New York Stock Exchange on that day. Otherwise, the shares will be
redeemed at the next determined net asset value. It is the responsibility of
the Selected Dealer to transmit orders on a timely basis. The Selected Dealer
may charge the shareholder a fee for executing the order. This repurchase
arrangement is discretionary and may be withdrawn at any time.
REINVESTMENT PRIVILEGE _ Upon written request, you may reinvest up to the
number of Class A, Class B, or Class T shares you have redeemed, within 45
days of redemption, at the then-prevailing net asset value without a sales
load, or reinstate your account for the purpose of exercising Fund Exchanges.
Upon reinstatement, with respect to Class B shares, or Class A or Class T
shares if such shares were subject to a CDSC, the shareholder's account will
be credited with an amount equal to the CDSC previously paid upon redemption
of the shares reinvested. The Reinvestment Privilege may be exercised only
once.
Distribution Plan and Shareholder Services Plan
Class B, Class C, and Class T shares are subject to a Distribution
Plan, and each Class of shares of the Fund is subject to a Shareholder
Services Plan.
[Page 18]
DISTRIBUTION PLAN _ Under the Distribution Plan, adopted pursuant to Rule
12b-1 under the 1940 Act, the Fund pays the Distributor for distributing the
Fund's Class B, Class C, and Class T shares, at an annual rate of .75 of 1%
of the value of the average daily net assets of Class B and Class C shares,
and .25 of 1% of the value of the average daily net assets of Class T shares.
SHAREHOLDER SERVICES PLAN _ Under the Shareholder Services Plan, the Fund
pays the Distributor for the provision of certain services to the holders of
Class A, Class B, Class C, and Class T shares a fee at the annual rate of .25
of 1% of the value of the average daily net assets of the Class. 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.
Dividends, Distributions and Taxes
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. If you elect to receive dividends and
distributions in cash, and your dividend or distribution check is returned to
the Fund as undeliverable or remains uncashed for six months, the Fund
reserves the right to reinvest such dividend or distribution and all future
dividends and distributions payable to you in additional Fund shares at net
asset value. No interest will accrue on amounts represented by uncashed
distribution or redemption checks. All expenses are accrued daily and
deducted before declaration of dividends to investors. Dividends paid by each
Class will be calculated at the same time and in the same manner and will be
of the same amount, except that the expenses attributable solely to a
particular Class will be borne exclusively by such Class. Class B and Class C
shares will receive lower per share dividends than Class T shares, which will
receive lower per share dividends than Class A shares, because of the higher
expenses borne by the relevant Class. See "Fee Table."
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 an individual generally will be taxed on his or her net
capital gain at a maximum rate of 28% with respect to capital gains from
securities held for more than one year but not more than 18 months and at a
maximum rate of 20% with respect to capital gains from securities held for
more than 18 months. 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 Code provides for the "carryover" of some or all of the initial
sales charge imposed on Class A and Class T shares, if you exchange your
Class A or Class T shares for shares of another fund advised by The Dreyfus
Corporation within 91 days of purchase and such other fund reduces or
eliminates its otherwise applicable sales charge for the purpose of the
exchange. In this case, the amount of your sales charge for Class A or Class
T shares, up to the amount of the reduction of the sales charge on the
exchange, is not included in the basis of your Class A or Class T shares for
purposes of computing gain or loss on the exchange, and instead is added to
the basis of the fund shares received on the exchange.
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.
[Page 19]
With respect to individual investors and certain non-qualified
Retirement Plans, Federal regulations generally require
the Fund to withhold ("backup withholding") and remit to the U.S. Treasury
31% of dividends, distributions from net realized securities gains and the
proceeds of any redemption, regardless of the extent to which gain or loss
may be realized, paid to a shareholder if such shareholder fails to certify
either that the TIN furnished in connection with opening an account is
correct or that such shareholder has not received notice from the IRS of
being subject to backup withholding as a result of a failure to properly
report taxable dividend or interest income on a Federal income tax return.
Furthermore, the IRS may notify the Fund to institute backup withholding if
the IRS determines a shareholder's TIN is incorrect or if a shareholder has
failed to properly report taxable dividend and interest income on a Federal
income tax return.
A TIN is either the Social Security number, IRS individual taxpayer
identification number, or employer identification number of the record owner
of the account. Any tax withheld as a result of backup withholding does not
constitute an additional tax imposed on the record owner of the account, and
may be claimed as a credit on the record owner's Federal income tax return.
Management of the Company expects 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. These total return figures reflect changes in the price of the shares
and assume that any income dividends and/or capital gains distributions made
by the Fund during the measuring period were reinvested in shares of the same
Class. These figures also take into account any applicable service and
distribution fees. As a result, at any given time, the performance of Class B
and Class C shares should be expected to be lower than that of Class T
shares, and the performance of Class B, Class C, and Class T shares should be
expected to be lower than Class A shares. Performance for each Class will be
calculated separately.
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 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 (or maximum offering price for Class A and Class T shares) 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. Total return also may be calculated by using the net asset
value per share at the beginning of the period instead of the maximum
offering price per share at the beginning of the period for Class A and Class
T shares or without giving effect to any applicable CDSC at the end of the
period for Class B and Class C shares. Calculations based on the net asset
value per share do not reflect the deduction of the applicable sales charge
which, if reflected, would reduce the performance quoted.
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.
[Page 20]
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., Ibbotson
Associates, Inc., Value Line, Inc., and other industry publications.
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 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. The Fund's shares are
classified into four classes _ Class A, Class B, Class C, and Class T. Each
share has one vote and shareholders will vote in the aggregate and not by
class except as otherwise required by law or when class voting is permitted
by the Fund's Board. However, only holders of Class B, Class C, and Class T
shares will be entitled to vote on matters submitted to shareholders
pertaining to the Distribution Plan. The Fund ordinarily will not hold
shareholder meetings; however, shareholders under certain circumstances may
have the right to call a meeting of shareholders for the purpose of voting to
remove Trustees.
The 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 six 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 writing to or
calling your Service Agent.
[Page 21]
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.
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.
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 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. At no time will more
than 15% of the value of the Fund's net assets be in deposits on short sales
against the box.
LENDING PORTFOLIO SECURITIES _ The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. The Fund continues to be
entitled to payments in amounts equal to the interest or other distributions
payable on the loaned securities which affords the Fund an opportunity to
earn interest on the amount of the loan and on the loaned securities'
collateral. Loans of portfolio securities may not exceed 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 exaggerates 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.
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, or enter into, 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.
[Page 22]
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 inopportune 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 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.
Although the Fund will not be a commodity pool, certain Derivatives
subject the Fund to the rules of the Commodity Futures Trading Commission
which limit the extent to which the Fund can invest in such Derivatives. The
Fund may invest in futures contracts and options with respect thereto 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, exceeds 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 or sell securities on a forward
commitment, when-issued or delayed delivery basis, which means delivery and
payment take place a number of days after the date of the commitment to
purchase or sell the securities at a predetermined price and/or yield.
Typically, no interest accrues to the purchaser until the security is
delivered. When purchasing a security on a forward commitment basis, the Fund
assumes the rights and risks of ownership of the security, including the risk
of price and yield fluctuations, and takes such fluctuations into account
when determining its net asset value. Because the Fund is not required to pay
for these securities until the delivery date, these risks are in addition to
the risks associated with the Fund's other investments. If the Fund is fully
or almost fully invested when forward commitment purchases are outstanding,
such purchases may result in a form of leverage. The Fund intends to engage
in forward commitments to increase its portfolio's financial exposure to the
types of securities in which it invests. Leveraging the portfolio in this
manner will increase the Fund's exposure to changes in interest rates and
will increase the volatility of its returns. The Fund will set aside in a
segregated account permissible liquid assets at least equal at all times to
the amount of the Fund's purchase commitments. At no time will the Fund have
more than 33 1\3% of its assets committed to purchase securities on a forward
commitment basis.
CERTAIN PORTFOLIO SECURITIES
HIGH YIELD-LOWER RATED FIXED INCOME SECURITIES _ Securities rated Ba by
Moody's are judged to have speculative elements; their future cannot be
considered as well assured and often the protection of interest and principal
payments may be very moderate. Securities rated BB by 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 and 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 of 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
[Page 23]
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.
AMERICAN DEPOSITARY RECEIPTS _ The Fund may invest in the securities of
foreign issuers in the form of American Depositary Receipts ("ADRs"). These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are receipts typically
issued by a United States bank or trust company which evidence ownership of
underlying securities issued by a foreign corporation.
WARRANTS _ A warrant is an instrument issued by a corporation which gives
the holder the right to subscribe to a specified amount of the corporation's
capital stock at a set price for a specified period of time. The Fund may
invest up to 5% of its net assets in warrants, except that this limitation
does not apply to warrants purchased by the Fund that are sold in units with,
or attached to, other securities.
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
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 commercial or residential mortgages.
Pools of mortgage loans are assembled as securities for sale to investors by
various governmental, government-related and private organizations. These
securities may include complex instruments such as collateralized mortgage
obligations, stripped mortgage-backed securities, mortgage pass-through
securities, interests in real estate mortgage investment conduits ("REMICs"),
adjustable rate mortgages, real estate investment trusts ("REITs"), including
debt and preferred stock issued by REITs, as well as other real
estate-related securities. The mortgage-related securities in which the Fund
may invest include those with fixed, floating or variable interest rates,
those with interest rates that change based on multiples of changes in a
specified index of interest rates and those with interest rates that change
inversely to changes in interest rates, as well as those that do not bear
interest.
Mortgage-related securities are subject to credit risks associated
with the performance of the underlying mortgage properties. Adverse changes
in economic conditions and circumstances are more likely to have an adverse
impact on mortgage-related securities secured by loans on certain types of
commercial properties than on those secured by loans on residential
properties. In addition, these securities are subject to prepayment risk,
although commercial mortgages typically have shorter maturities than
residential mortgages and prepayment protection features. In certain
instances, the credit risk associated with mortgage-related securities can be
reduced by third party guarantees or other forms of credit support. Improved
credit risk does not reduce prepayment risk which is unrelated to the rating
assigned to the mortgage-related security. Prepayment risk can lead to
fluctuations in value of the mortgage-related security which may be
pronounced. 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. Certain mortgage-related securities
that may be purchased by the Fund, such as inverse floating rate
collateralized mortgage obligations, have coupons that move inversely to a
multiple of a specific index which may result in a form of leverage. As with
other interest-bearing securities,
[Page 24]
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 certain 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. During periods of
rapidly rising interest rates, prepayments of mortgage-related securities may
occur at slower than expected rates. Slower prepayments effectively may
lengthen a mortgage-related security's expected maturity which generally
would cause the value of such security to fluctuate more widely in response
to changes in interest rates. Were the prepayments on the Fund's
mortgage-related 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 securities
issued by private entities or by the U.S. Treasury. A zero coupon security
pays no interest to its holder during its life and is sold at a discount to
its par 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.
Zero coupon securities issued by private entities include bonds,
notes, and debentures that do not pay current interest and are issued at
substantial discounts from par value or, in some cases, that pay no current
interest until a stated date one or more years in the future, after which the
issuer is obligated to pay interest until maturity (in which case the
interest rate is usually higher than if interest were payable from the
issuance date). Zero coupon securities issued by private entities are subject
to the risk of the issuer's failure to pay interest and repay the principal
value of the security, which risk is enhanced in the case of below investment
grade rated (or of comparable quality, if unrated) zero coupon securities.
Private entities also may issue zero coupon securities which constitute a
proportionate interest of the issuer's pool of underlying U.S. Treasury
securities. Zero coupon securities issued directly by the U.S. Treasury
include notes and bonds which have been stripped of their interest coupons
and receipts. While U.S. Treasury-related zero coupon securities are not
subject to the same credit risk as a security issued directly by a private
entity, they are subject to interest rate risk to the same extent.
The Fund is required to accrue taxable income on zero coupon
securities and is required to distribute it to shareholders. Such
distributions may require the Fund to sell other securities and incur a gain
or loss at a time it may otherwise not want to in order to obtain the cash
needed for these distributions.
[Page 25]
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 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, certain mortgage-backed
securities, 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.
ADDITIONAL INFORMATION ABOUT PURCHASES, EXCHANGES AND REDEMPTIONS
The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculation on short-term
market movements. A pattern of frequent purchases and exchanges can be
disruptive to efficient portfolio management and, consequently, can be
detrimental to the Fund's performance and its shareholders.
[Page 26]
Accordingly, if the Fund's management determines that an investor is
engaged in excessive trading, the Fund, with or without prior notice, may
temporarily or permanently terminate the availability of Fund Exchanges, or
reject in whole or part any purchase or exchange request, with respect to
such investor's account. Such investors also may be barred from purchasing
other funds in the Dreyfus Family of Funds. Generally, an investor who makes
more than four exchanges out of the Fund during any calendar year or who
makes exchanges that appear to coincide with an active market-timing strategy
may be deemed to be engaged in excessive trading. Accounts under common
ownership or control will be considered as one account for purposes of
determining a pattern of excessive trading. In addition, the Fund may refuse
or restrict purchase or exchange requests by any person or group if, in the
judgment of the Fund's management, the Fund would be unable to invest the
money effectively in accordance with its investment objective and policies or
could otherwise be adversely affected or if the Fund receives or anticipates
receiving simultaneous orders that may significantly affect the Fund (e.g.,
amounts equal to 1% or more of the Fund's total assets). If an exchange
request is refused, the Fund will take no other action with respect to the
shares until it receives further instructions from the investor. The Fund may
delay forwarding redemption proceeds for up to seven days if the investor
redeeming shares is engaged in excessive trading or if the amount of the
redemption request otherwise would be disruptive to efficient portfolio
management or would adversely affect the Fund. The Fund's policy on excessive
trading applies to investors who invest in the Fund directly or through
financial intermediaries, but does not apply to the Auto-Exchange Privilege,
to any automatic investment or withdrawal privilege described herein, or to
participants in employer-sponsored retirement plans.
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange requests
based on their separate components _ redemption orders with a simultaneous
request to purchase the other fund's shares. In such a case, the redemption
request would be processed at the Fund's next determined net asset value but
the purchase order would be effective only at the net asset value next
determined after the fund being purchased receives the proceeds of the
redemption, which may result in the purchase being delayed.
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]
[Application p1 here]
[Page 28]
[Application p2 here]
[Page 29]
[This Page Intentionally Left Blank]
[Page 30]
Copy Rights 1998 Dreyfus Service Corporation 046p0698
DREYFUS PREMIER
HIGH YIELD DEBT AND EQUITY FUND
FPO
PROSPECTUS
June 29, 1998
DREYFUS INCOME FUNDS
DREYFUS EQUITY DIVIDEND FUND
DREYFUS HIGH YIELD SECURITIES FUND
DREYFUS PREMIER HIGH YIELD DEBT PLUS EQUITY FUND
(Class A, Class B, Class C, and Class T Shares)
DREYFUS REAL ESTATE MORTGAGE FUND
DREYFUS SHORT TERM HIGH YIELD FUND
DREYFUS STRATEGIC INCOME FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
June 29, 1998
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, Dreyfus High Yield Securities Fund, Dreyfus
Real Estate Mortgage Fund, Dreyfus Short Term High Yield Fund, and Dreyfus
Strategic Income Fund, each dated March 1, 1998, and Dreyfus Premier High
Yield Debt Plus Equity Fund, dated June 29, 1998 (each, a "Fund" and
collectively, the "Funds") of Dreyfus Income Funds (the "Company"), as each
may be revised from time to time. To obtain a copy of the relevant Fund's
Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, or call the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. -- 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-24
Management Agreement B-29
Purchase of Shares B-32
Distribution Plan and Shareholder Services Plan B-34
Redemption of Shares B-35
Shareholder Services B-38
Determination of Net Asset Value B-41
Dividends, Distributions and Taxes B-43
Portfolio Transactions B-45
Performance Information B-46
Information About the Funds B-49
Transfer and Dividend Disbursing Agent,
Custodian, Counsel and Independent Auditors B-49
Financial Statements and Report of Independent Auditors B-50
Appendix B-51
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 Depositary Receipts. (Dreyfus Equity Dividend Fund and
Dreyfus Premier High Yield Debt Plus Equity Fund only) The Fund may invest
in American Depositary 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 that enters into them. 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 Premier High
Yield Debt Plus Equity Fund, Dreyfus Short Term High Yield Fund 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 corporation's capital stock at a set price for a specified
period of time. The Fund may invest up to 5% of its net assets in warrants,
except that this limitation does not apply to warrants purchased by the Fund
that are sold in units with, or attached to, other securities.
Common Stock. (Dreyfus High Yield Securities Fund, Dreyfus Premier
High Yield Debt Plus Equity Fund, Dreyfus Real Estate Mortgage Fund, Dreyfus
Short Term High Yield Fund, 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. Dreyfus Real
Estate Mortgage Fund also may invest in equity securities, such as common
stocks and securities convertible into common stocks, which are issued by
companies that primarily invest or deal in real estate. Dreyfus Premier
High Yield Debt Plus Equity Fund is not restricted in the kinds of common
stock it may purchase.
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 Securities Fund, Dreyfus
Premier High Yield Debt Plus Equity Fund, Dreyfus Real Estate Mortgage, and
Dreyfus Short Term High Yield Fund 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 Securities Fund, Dreyfus
Premier High Yield Debt Plus Equity Fund, Dreyfus Short Term High Yield
Fund, 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.
Variable and Floating Rate Securities. (All Funds) Variable and
floating rate securities provide for a periodic adjustment in the interest
rate paid on the obligations. The terms of such obligations must provide
that interest rates are adjusted periodically based upon an interest rate
adjustment index as provided in the respective obligations. The adjustment
intervals may be regular, and range from daily up to annually, or may be
event based, such as based on a change in the prime rate.
The Fund may invest in floating rate debt instruments ("floaters").
The interest rate on a floater is a variable rate which is tied to another
interest rate, such as a money-market index or Treasury bill rate. The
interest rate on a floater resets periodically, typically every six months.
Because of the interest rate reset feature, floaters provide the Fund with a
certain degree of protection against rises in interest rates, although the
Fund will participate in any declines in interest rates as well.
The Fund also may invest in inverse floating rate debt instruments
("inverse floaters"). The interest rate on an inverse floater resets in the
opposite direction from the market rate of interest to which the inverse
floater is indexed or inversely to a multiple of the applicable index. An
inverse floating rate security may exhibit greater price volatility than a
fixed rate obligation of similar credit quality.
Mortgage-Related Securities. (Dreyfus High Yield Securities Fund,
Dreyfus Premier High Yield Debt Plus Equity Fund, Dreyfus Real Estate
Mortgage Fund, Dreyfus Short Term High Yield Fund, and Dreyfus Strategic
Income Fund only) Mortgage-related securities are a form of Derivative
collateralized by pools of commercial or residential mortgages. Pools of
mortgage loans are assembled as securities for sale to investors by various
governmental, government-related and private organizations. These
securities may include complex instruments such as collateralized mortgage
obligations and stripped mortgage-backed securities, mortgage pass-through
securities, interests in Real Estate Mortgage Investment Conduits ("REMICs")
or other kinds of mortgage-backed securities, including those with fixed,
floating and variable interest rates, those with interest rates that change
based on multiples of changes in a specified index of interest rates and
those with interest rates that change inversely to changes in interest
rates.
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.
Commercial Mortgage-Related Securities--Commercial mortgage-related
securities generally are multi-class debt or pass-through certificates
secured by mortgage loans on commercial properties. These mortgage-related
securities generally are structured to provide protection to the senior
classes investors against potential losses on the underlying mortgage loans.
This protection generally is provided by having the holders of subordinated
classes of securities ("Subordinated Securities") take the first loss if
there are defaults on the underlying commercial mortgage loans. Other
protection, which may benefit all of the classes or particular classes, may
include issuer guarantees, reserve funds, additional Subordinated
Securities, cross-collateralization and over-collateralization.
The Fund may invest in Subordinated Securities issued or sponsored by
commercial banks, savings and loan institutions, mortgage bankers, private
mortgage insurance companies and other non-governmental issuers.
Subordinated Securities have no governmental guarantee, and are subordinated
in some manner as to the payment of principal and/or interest to the holders
of more senior mortgage-related securities arising out of the same pool of
mortgages. The holders of Subordinated Securities typically are compensated
with a higher stated yield than are the holders of more senior mortgage-
related securities. On the other hand, Subordinated Securities typically
subject the holder to greater risk than senior mortgage-related securities
and tend to be rated in a lower rating category, and frequently a
substantially lower rating category, than the senior mortgage-related
securities issued in respect of the same pool of mortgage. Subordinated
Securities generally are likely to be more sensitive to changes in
prepayment and interest rates and the market for such securities may be less
liquid than is the case for traditional fixed-income securities and senior
mortgage-related securities.
The market for commercial mortgage-related securities developed more
recently and in terms of total outstanding principal amount of issues is
relatively small compared to the market for residential single-family
mortgage-related securities. In addition, commercial lending generally is
viewed as exposing the lender to a greater risk of loss than one- to four-
family residential lending. Commercial lending, for example, typically
involves larger loans to single borrowers or groups of related borrowers
than residential one- to four-family mortgage loans. In addition, the
repayment of loans secured by income producing properties typically is
dependent upon the successful operation of the related real estate project
and the cash flow generated therefrom. Consequently, adverse changes in
economic conditions and circumstances are more likely to have an adverse
impact on mortgage-related securities secured by loans on commercial
properties than on those secured by loans on residential properties.
Collateralized Mortgage Obligations ("CMOs")--A CMO is a multiclass bond
backed by a pool of mortgage pass-through certificates or mortgage loans.
CMOs may be collateralized by (a) Ginnie Mae, Fannie Mae, or Freddie Mac
pass-through certificates, (b) unsecuritized mortgage loans insured by the
Federal Housing Administration or guaranteed by the Department of Veterans'
Affairs, (c) unsecuritized conventional mortgages, (d) other mortgage-
related securities, or (e) any combination thereof. Each class of CMOs,
often referred to as a "tranche," is issued at a specific coupon rate and
has a stated maturity or final distribution date. Principal prepayments on
collateral underlying a CMO may cause it to be retired substantially earlier
than the stated maturities or final distribution dates. The principal and
interest on the underlying mortgages may be allocated among the several
classes of a series of a CMO in many ways. One or more tranches of a CMO
may have coupon rates which reset periodically at a specified increment over
an index, such as the London Interbank Offered Rate ("LIBOR") (or sometimes
more than one index). These floating rate CMOs typically are issued with
lifetime caps on the coupon rate thereon. The Fund also may invest in
inverse floating rate CMOs. Inverse floating rate CMOs constitute a tranche
of a CMO with a coupon rate that moves in the reverse direction to an
applicable index such a LIBOR. Accordingly, the coupon rate thereon will
increase as interest rates decrease. Inverse floating rate CMOs are
typically more volatile than fixed or floating rate tranches of CMOs.
Many inverse floating rate CMOs have coupons that move inversely to a
multiple of the applicable indexes. The effect of the coupon varying
inversely to a multiple of an applicable index creates a leverage factor.
Inverse floaters based on multiples of a stated index are designed to be
highly sensitive to changes in interest rates and can subject the holders
thereof to extreme reductions of yield and loss of principal. The markets
for inverse floating rate CMOs with highly leveraged characteristics at
times may be very thin. The Fund's ability to dispose of its positions in
such securities will depend on the degree of liquidity in the markets for
such securities. It is impossible to predict the amount of trading interest
that may exist in such securities, and therefore the future degree of
liquidity.
Stripped Mortgage-Backed Securities--The Fund also may invest in stripped
mortgage-backed securities. Stripped mortgage-backed securities are created
by segregating the cash flows from underlying mortgage loans or mortgage
securities to create two or more new securities, each with a specified
percentage of the underlying security's principal or interest payments.
Mortgage securities may be partially stripped so that each investor class
receives some interest and some principal. When securities are completely
stripped, however, all of the interest is distributed to holders of one type
of security, known as an interest-only security, or IO, and all of the
principal is distributed to holders of another type of security known as a
principal-only security, or PO. Strips can be created in a pass-through
structure or as tranches of a CMO. The yields to maturity on IOs and POs
are very sensitive to the rate of principal payments (including prepayments)
on the related underlying mortgage assets. If the underlying mortgage
assets experience greater than anticipated prepayments of principal, the
Fund may not fully recoup its initial investment in IOs. Conversely, if the
underlying mortgage assets experience less than anticipated prepayments of
principal, the yield on POs could be materially and adversely affected.
Real Estate Investment Trusts--A REIT is a corporation, or a business trust
that would otherwise be taxed as a corporation, which meets the definitional
requirements of the Internal Revenue Code of 1986, as amended (the "Code").
The Code permits a qualifying REIT to deduct dividends paid, thereby
effectively eliminating corporate level Federal income tax and making the
REIT a pass-through vehicle for Federal income tax purposes. To meet the
definitional requirements of the Code, a REIT must, among other things,
invest substantially all of its assets in interests in real estate
(including mortgages and other REITs) or cash and government securities,
derive most of its income from rents from real property or interest on loans
secured by mortgages on real property, and distribute to shareholders
annually a substantial portion of its otherwise taxable income.
REITs are characterized as equity REITs, mortgage REITs and hybrid
REITs. Equity REITs, which may include operating or finance companies, own
real estate directly and the value of, and income earned by, the REITs
depends upon the income of the underlying properties and the rental income
they earn. Equity REITs also can realize capital gains (or losses) by
selling properties that have appreciated (or depreciated) in value.
Mortgage REITs can make construction, development or long-term mortgage
loans and are sensitive to the credit quality of the borrower. Mortgage
REITs derive their income from interest payments on such loans. Hybrid
REITs combine the characteristics of both equity and mortgage REITs,
generally by holding both ownership interests and mortgage interests in real
estate. The value of securities issued by REITs are affected by tax and
regulatory requirements and by perceptions of management skill. They also
are subject to heavy cash flow dependency, defaults by borrowers or tenants,
self-liquidation and the possibility of failing to qualify for tax-free
status under the Code or to maintain exemption from the Investment Company
Act of 1940, as amended (the "1940 Act").
Adjustable-Rate Mortgage Loans ("ARMs")--ARMs eligible for inclusion in a
mortgage pool will generally provide for a fixed initial mortgage interest
rate for a specified period of time, generally for either the first three,
six, twelve, thirteen, thirty-six, or sixty scheduled monthly payments.
Thereafter, the interest rates are subject to periodic adjustment based on
changes in an index. ARMs typically have minimum and maximum rates beyond
which the mortgage interest rate may not vary over the lifetime of the
loans. Certain ARMs provide for additional limitations on the maximum
amount by which the mortgage interest rate may adjust for any single
adjustment period. Negatively amortizing ARMs may provide limitations on
changes in the required monthly payment. Limitations on monthly payments
can result in monthly payments that are greater or less than the amount
necessary to amortize a negatively amortizing ARM by its maturity at the
interest rate in effect during any particular month.
Other Mortgage-Related Securities--Other mortgage-related securities include
securities other than those described above that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage
loans on real property, including CMO residuals. Other mortgage-related
securities may be equity or debt securities issued by agencies or
instrumentalities of the U.S. Government or by private originators of, or
investors in, mortgage loans, including savings and loan associations,
homebuilders, mortgage banks, commercial banks, investment banks,
partnerships, trusts and special purpose entities of the foregoing.
Foreign Government Obligations; Securities of Supranational Entities.
(Dreyfus High Yield Securities Fund, Dreyfus Premier High Yield Debt Plus
Equity Fund, Dreyfus Real Estate Mortgage Fund, Dreyfus Short Term High
Yield Fund, 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 Securities Fund, Dreyfus
Premier High Yield Debt Plus Equity Fund, Dreyfus Real Estate Mortgage
Fund, Dreyfus Short Term High Yield Fund, and Dreyfus Strategic Income Fund
only). Zero coupon securities are debt instruments that generally do not
make cash interest payments prior to maturity. Instead, they are sold at a
discount to par value, and this discount can be substantial. Zero coupon
securities can be rated above or below investment grade. In either case,
when interest rates change the market price of zero coupon securities
generally will be subject to greater volatility than "coupon" bonds, which
pay regular interest. In addition, lower rated zero coupon securities are
subject to enhanced credit risk.
Zero coupon securities issued by private entities include bonds, notes,
and debentures that do not pay current interest and are issued at
substantial discounts from par value or, in some cases, that pay no current
interest until a stated date one or more years in the future, after which
the issuer is obligated to pay interest until maturity (in which case the
interest rate is usually higher than if interest were payable from the
issuance date). Zero coupon securities issued by private entities are
subject to the risk of the issuer's failure to pay interest and repay the
principal value of the security, which risk is enhanced in the case of below
investment grade (or of comparable quality, if unrated) zero coupon
securities. Private entities also may issue zero coupon securities which
constitute a proportionate interest of the private issuer's pool of
underlying U.S. Treasury securities. Zero coupon securities issued directly
by the U.S. Treasury notes and bonds which have been stripped of their
interest coupons and receipts. While U.S. Treasury-related zero coupon
securities are not subject to the same credit risk as a security issued
directly by a private entity, they are subject to the same level of interest
rate risk.
While the Fund generally will not receive cash payments of interest on
zero coupon securities, the Fund does accrue taxable income on these
securities and is required to distribute it to shareholders. Such
distributions may require the Fund to sell other securities and incur a gain
or loss at a time it may otherwise not want to in order to obtain the cash
needed for these distributions.
Management Policies
Duration. (Dreyfus High Yield Securities Fund, Dreyfus Premier High
Yield Debt Plus Equity Fund, Dreyfus Real Estate Mortgage Fund, Dreyfus
Short Term High Yield Fund, and Dreyfus Strategic Income Fund only). As a
measure of a fixed-income security's cash flow, duration is an alternative
to the concept of "term to maturity" in assessing the price volatility
associated with changes in interest rates. Generally, the longer the
duration, the more volatility an investor should expect. For example, the
market price of a bond with a duration of three years would be expected to
decline 3% if interest rates rose 1%. Conversely, the market price of the
same bond would be expected to increase 3% if interest rates fell 1%. The
market price of a bond with a duration of six years would be expected to
increase or decline twice as much as the market price of a bond with a three-
year duration. Duration is a way of measuring a security's maturity in
terms of the average time required to receive the present value of all
interest and principal payments as opposed to its term to maturity. The
maturity of a security measures only the time until final payment is due; it
does not take account of the pattern of a security's cash flows over time,
which would include how cash flow is affected by prepayments and by changes
in interest rates. Incorporating a security's yield, coupon interest
payments, final maturity and option features into one measure, duration is
computed by determining the weighted average maturity of a bond's cash
flows, where the present values of the cash flows serve as weights. In
computing the duration of the Fund, the Manager will estimate the duration
of obligations that are subject to features such as prepayment or redemption
by the issuer, put options retained by the investor or other imbedded
options, taking into account the influence of interest rates on prepayments
and coupon flows.
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 Securities Fund, Dreyfus Premier High
Yield Debt Plus Equity Fund, Dreyfus Real Estate Mortgage Fund, Dreyfus
Short Term High Yield Fund, and Dreyfus Strategic Income Fund only) For
borrowings for investment purposes, the 1940 Act requires the Fund to
maintain continuous asset coverage (that is, total assets including
borrowings, less liabilities exclusive of borrowings) of 300% of the amount
borrowed. If the required coverage should decline as a result of market
fluctuations or other reasons, the Fund may be required to sell some of its
portfolio securities within three days to reduce the amount of its
borrowings and restore the 300% asset coverage, even though it may be
disadvantageous from an investment standpoint to sell securities at that
time. The Fund also may be required to maintain minimum average balances in
connection with such borrowing or pay a commitment or other fee to maintain
a line of credit; either of these requirements would increase the cost of
borrowing over the stated interest rate. To the extent the Fund enters into
a reverse repurchase agreement, the Fund will maintain in a segregated
account permissible liquid assets at least equal to the aggregate amount of
its reverse repurchase obligations, plus accrued interest, in certain cases,
in accordance with releases promulgated by the 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, a 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. In the case of Dreyfus Equity
Dividend Fund, Dreyfus High Yield Securities Fund, Dreyfus Short Term High
Yield Fund, and Dreyfus Strategic Income Fund, 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.
Until the Fund closes its short position or replaces the borrowed
security, it will: (a) maintain a segregated account, containing
permissible liquid assets, 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 Securities Fund,
Dreyfus Premier High Yield Debt Plus Equity Fund, Dreyfus Real Estate
Mortgage Fund, Dreyfus Short Term High Yield Fund, 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, or enter into,
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 inopportune 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 permissible
liquid assets 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 (other than Dreyfus Real Estate Mortgage 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 and Dreyfus Premier High Yield Debt Plus
Equity 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 Securities Fund, Dreyfus Premier
High Yield Debt Plus Equity Fund, Dreyfus Real Estate Mortgage Fund, and
Dreyfus Short Term High Yield Fund 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 Securities Fund, Dreyfus Premier
High Yield Debt Plus Equity Fund, and Dreyfus Short Term High Yield Fund
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 and Dreyfus Premier High Yield Debt Plus
Equity 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, Dreyfus High Yield Securities Fund,
Dreyfus Premier High Yield Debt Plus Equity Fund, Dreyfus Real Estate
Mortgage Fund, and Dreyfus Short Term Yield Fund may purchase cash-settled
options on swaps in pursuit of their respective investment objective.
Equity index swaps in which Dreyfus Equity Dividend Fund and Dreyfus Premier
High Yield Debt Plus Equity Fund may invest 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. (All Funds) 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 receivable 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. The Fund will set aside in a segregated account of the
Fund permissible liquid assets at least equal at all times to the amount of
the commitments.
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 Securities Fund, Dreyfus
Premier High Yield Debt Plus Equity Fund, Dreyfus Real Estate Mortgage Fund,
Dreyfus Short Term High Yield Fund, 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 IBCA, Inc. ("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
Securities Fund, Dreyfus Premier High Yield Debt Plus Equity Fund, Dreyfus
Real Estate Mortgage Fund, and Dreyfus Short Term High Yield, 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" in the Fund's Prospectus 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, Dreyfus High Yield Securities Fund, and
Dreyfus Short Term High Yield Fund 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.
7. Make loans to others, except through the purchase of debt
obligations and the entry into repurchase agreements. However, the Fund may
lend its portfolio securities in an amount not to exceed 33-1/3% of the
value of its total assets. Any loans of portfolio securities will be made
according to guidelines established by the Securities and Exchange
Commission and the 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.
* * *
Dreyfus Premier High Yield Debt Plus Equity Fund and Dreyfus Real
Estate Mortgage Fund only. Each of these Funds has adopted investment
restrictions numbered 1 through 8 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 9 through 11 are not fundamental policies
and may be changed by vote of a majority of the Company's Board members at
any time. Neither of these Funds may:
1. 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. As to Dreyfus Real
Estate Mortgage Fund, for purposes of this Investment Restriction,
securities and instruments backed directly or indirectly by real estate and
real estate mortgages and securities of companies engaged in the real estate
business, including interests in real estate investment trusts, are not
considered an industry.
2. 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.
3. Purchase, hold or deal in real estate, 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 or, as
to Dreyfus Real Estate Mortgage Fund only, acquire and sell real estate as a
result of ownership of such securities or instruments.
4. 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.
5. 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.
6. 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.
7. 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. 2, 4, 8 and 9 may be deemed to give rise to a
senior security.
8. Purchase securities on margin, but the Fund may make margin
deposits in connection with transactions in options, forward contracts,
futures contracts, including those related to indices, and options on
futures contracts or indices.
9. 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, including those
related to indices, and options on futures contracts or indices.
10. 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.
11. Purchase securities of other investment companies, except to the
extent permitted under the 1940 Act.
* * *
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.
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
a director of Career Blazers Inc. (formerly, Staffing Resources, Inc.),
a temporary placement firm, The Muscular Dystrophy Association,
HealthPlan Services Corporation, a provider of marketing,
administrative and risk management services to health and other benefit
programs, The Noel Group, Inc., a venture capital company, Carlyle
Industries, Inc. (formerly, Belding Heminway Company, Inc.), a button
packager and distributor, and Century Business Services, Inc.,
(formerly, International Alliance Services, Inc.), a provider of
various outsourcing functions for small to medium size businesses. For
more than five years prior to January 1995, he was President, a
director and, until August 1994, Chief Operating Officer of the Manager
and Executive Vice President and a director of 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 54 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 August 1994 to December 31, 1994, Mr.
Burke was a Consultant to the Manager, and from October 1990 to August
1994, he was 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 61 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 72 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 58 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 69 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. Pursuant to a Presidential appointment received in
July 1994, Mr. Rose serves as a Director of the Baltic-American
Enterprise Fund, which makes equity investments and loans and provides
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 68 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. He is also a director of
Collins & Aikman Corporation, Chubb Corporation and the Raytheon
Company, and a trustee of Boston College. He also serves as Chairman
of the President's Foreign Intelligence Advisory Board (from January
1994 to February 1998, as Vice Chairman) 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. 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. He is 67
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 1992, Mr. Vanocur has been the
President of Old Owl Communications, a full-service communications
firm. From May 1995 to June 1996, he was a Professional in Residence
at the Freedom Forum in Arlington, VA, and, from January 1994 to May
1997, he served as a Visiting Professional Scholar at the Freedom Forum
First Amendment Center at Vanderbilt University. From November 1989 to
November 1995, he was 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 70 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 plans described in the section captioned
"Distribution Plan and 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 are entitled to receive an annual retainer and a per meeting fee of
one-half the amount paid to them as Board members. The aggregate amount of
compensation paid by the Company to each Board member for the fiscal year
ended October 31, 1997, 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, 1997, 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 $6,250 $597,128 (94)
David W. Burke $5,000 $239,000 (51)
Rosalind Gersten Jacobs $5,000 $ 95,250 (20)
Diane Dunst $5,000 $ 37,750 (10)
Jay I. Meltzer $5,000 $ 37,750 (10)
Daniel Rose $4,500 $ 76,375 (21)
Warren B. Rudman $5,000 $ 89,500 (18)
Sander Vanocur $5,000 $ 87,125 (21)
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $191 (Dreyfus Equity Dividend Fund), $199
(Dreyfus High Yield Securities Fund), $0 (Dreyfus Real Estate Mortgage
Fund), $187 (Dreyfus Short Term High Yield Fund) and $1,098 (Dreyfus
Strategic Income Fund) for all Board members as a group.
Officers of the Company
MARIE E. CONNOLLY, President and Treasurer. President, Chief Executive
Officer, Chief Compliance Officer and a director of the Distributor and
Funds Distributor, Inc., the ultimate parent of which is Boston
Institutional Group, Inc., and an officer of other investment companies
advised or administered by the Manager. She is 40 years old.
MARGARET W. CHAMBERS, Vice President and Secretary. Senior Vice President
and General Counsel of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
August 1996 to March 1998, Ms. Chambers was Vice President and
Assistant General Counsel for Loomis, Sayles & Company, L.P. From
January 1986 to July 1996, she was an associate with the law firm of
Ropes & Gray. She is 38 years old.
JOSEPH F. TOWER, III, Vice President and Assistant Treasurer. Senior Vice
President, Treasurer, Chief Financial Officer and a director of the
Distributor and Funds Distributor, Inc., 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 35 years old.
RICHARD W. INGRAM, Vice President and Assistant Treasurer. Executive Vice
President of the Distributor and Funds Distributor, Inc., and an
officer of other investment companies advised or administered by the
Manager. From March 1994 to November 1995, he was Vice President and
Division Manager for First Data Investor Services Group. From 1989 to
1994, he was Vice President, Assistant Treasurer and Tax Director -
Mutual Funds of The Boston Company, Inc. He is 42 years old.
MARY A. NELSON, Vice President and Assistant Treasurer. Vice President of
the Distributor and Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
September 1989 to July 1994, she was an Assistant Vice President and
Client Manager for The Boston Company, Inc. She is 33 years old.
MICHAEL S. PETRUCELLI, Vice President, Assistant Treasurer and Assistant
Secretary. Senior Vice President of Funds Distributor, Inc., and an
officer of other investment companies advised or administered by the
Manager. From December 1989 through November 1996, he was employed by
GE Investments where he held various financial, business development
and compliance positions. He also served as Treasurer of the GE Funds
and as a director of GE Investments Services. He is 36 years old.
GEORGE A. RIO, Vice President and Assistant Treasurer. Executive Vice
President and Client Service Director of Funds Distributor, Inc., and
an officer of other investment companies advised or administered by the
Manager. From June 1995 to March 1998, he was Senior Vice President
and Senior Key Account Manager for Putnam Mutual Funds. From May 1994
to June 1995, he was Director of Business Development for First Data
Corporation. From September 1983 to May 1994, he was Senior Vice
President & Manager of Client Services and Director of Internal Audit
at The Boston Company. He is 43 years old.
STEPHANIE D. PIERCE, Vice President, Assistant Secretary and Assistant
Treasurer. Vice President and Client Development Manager of Funds
Distributor, Inc., and an officer of other investment companies advised
or administered by the Manager. From April 1997 to March 1998, she was
employed as a Relationship Manager with Citibank, N.A. She is 29 years
old.
DOUGLAS C. CONROY, Vice President and Assistant Secretary. Assistant Vice
President of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
April 1993 to January 1995, he was a Senior Fund Accountant for
Investors Bank & Trust Company. From December 1991 to March 1993, he
was employed as a Fund Accountant at The Boston Company, Inc. He is 28
years old.
ELBA VASQUEZ, Vice President and Assistant Secretary. Assistant Vice
President of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
March 1990 to May 1996, she was employed by U.S. Trust Company of New
York, where she held various sales and marketing positions. She is 36
years old.
KATHLEEN K. MORRISEY, Vice President and Assistant Secretary. Manager of
Treasury Services Administration of Funds Distributor, Inc., and an
officer of other investment companies advised or administered by the
Manager. From July 1994 to November 1995, she was a Fund Accountant
for Investors Bank & Trust Company. She is 25 years old.
CHRISTOPHER J. KELLY, Vice President and Assistant Secretary. Vice
President and Senior Associate General Counsel of Funds Distributor,
Inc., and an officer of other investment companies advised or
administered by the Manager. From April 1994 to July 1996, he was
Assistant Counsel at Forum Financial Group. From October 1992 to March
1994, he was employed by Putnam Investments in legal and compliance
capacities. He is 33 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 March 30, 1998.
As of March 30, 1998, the following shareholders were known by the
Company to own 5% or more of the outstanding voting securities of the
indicated Fund: Dreyfus Equity Dividend Fund: APT Holdings Corporation,
Wilmington, DE (66.20%); M. N. Jacobs and S. R. Jacobs, Short Hills, NJ
(6.31%); Dreyfus High Yield Securities Fund: Charles Schwab & Co. Inc.
Reinvest Account, San Francisco CA (19.52%); Charles Schwab & Co. Inc. Cash
Account, San Francisco CA (9.59%); Richard Family Trust, Calabasas CA
(6.63%); Dreyfus Short Term High Yield Fund: Charles Schwab & Co. Inc.
Reinvest Account, San Francisco, CA (8.40%); Dreyfus Real Estate Mortgage
Fund: MBCIC, c/o Mellon Bank, Wilmington, DE (84.4%). 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 amended May 6, 1998, 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
as to each Fund except Dreyfus Real Estate Mortgage Fund and Dreyfus Premier
High Yield Debt Plus Equity Fund, including a majority of the Board members
who are not "interested persons" of any party to the Agreement, at a meeting
held on August 6, 1997. With respect to Dreyfus Real Estate Mortgage Fund,
the Agreement was approved initially by the Company's Board at a meeting
held on August 6, 1997, and by the Fund's initial shareholder on September
30, 1997. With respect to Dreyfus Premier High Yield Debt Plus Equity Fund,
the Agreement was approved initially by the Company's Board at a meeting
held on May 6, 1998, and by the Fund's initial shareholder on June 29, 1998.
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; Ronald P. O'Hanley, Vice
Chairman; J. David Officer, Vice Chairman and a director; William T.
Sandalls, Jr., Senior Vice President and Chief Financial Officer; Mark N.
Jacobs, Vice President, General Counsel and Secretary; Patrice M. Kozlowski,
Vice President--Corporate Communications; Mary Beth Leibig, Vice President--
Human Resources; Andrew S. Wasser, Vice President--Information Systems;
William V. Healey, Assistant Secretary; and Mandell L. Berman, Burton
Borgelt, Frank V. Cahouet and Richard F. Syron, 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. The portfolio managers for Dreyfus
Equity Dividend Fund are Timothy Ghriskey and Douglas Ramos. Michael Hoeh,
Kevin M. McClintock, Roger King, C. Matthew Olson, and Gerald E. Thunelius
each are portfolio managers for Dreyfus High Yield Securities Fund, Dreyfus
Premier High Yield Debt Plus Equity Fund, Dreyfus Real Estate Mortgage Fund,
Dreyfus Short Term High Yield Fund, and Dreyfus Strategic Income Fund. John
Koerber also is a portfolio manager for Dreyfus Premier High Yield Debt Plus
Equity Fund. 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.
Mellon Bank, N.A., the Manager's parent, and its affiliates may have
deposit, loan and commercial banking or other relationships with the issuers
of securities purchased by a Fund. The Manager has informed the Company
that in making its investment decisions it does not obtain or use material
inside information that Mellon Bank, N.A. or its affiliates may possess with
respect to such issuers.
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. Also, Dreyfus Premier High Yield
Debt Plus Equity Fund's Class B, Class C, and Class T shares are subject to
an annual distribution fee, and Class A, Class B, Class C, and Class T
shares are subject to an annual service fee. See "Distribution Plan and
Shareholder Services Plan". 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 the average daily net assets of Dreyfus Equity
Dividend Fund and Dreyfus Premier High Yield Debt Plus Equity Fund, .65 of
1% of the value of the average daily net assets of each of Dreyfus Real
Estate Mortgage Fund, Dreyfus High Yield Securities Fund, and Dreyfus Short
Term High Yield Fund, and .60 of 1% of the value of Dreyfus Strategic Income
Fund's average daily net assets. For the fiscal years and/or periods ended
October 31, 1995, 1996 and 1997, as applicable, the management fees payable
by each indicated Fund, and the amounts waived by the Manager, were as
follows:
<TABLE>
Name of Fund Management Fee Payable Reduction in Fee Net Fee Paid
1995 1996 1997 1995 1996 1997 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dreyfus Equity NA $15,722(1) $ 27,673 -- $15,722 $ 27,673 - $ 0 $ 0
Dividend Fund
Dreyfus High Yield NA $72,715(2) $425,180 - $72,715 $279,698 - $ 0 $ 145,492
Securities Fund
Dreyfus Real Estate NA - $ 5,784(3) - - $ 5,784 - - $ 0
Mortgage Fund
Dreyfus Short Term NA $18,501(4) $527,73 - $18,501 $ 15,583 - $ 0 $ 511,886
High Yield Fund
Dreyfus Strategic $1,898,849 $1,829,326 $1,670,431 - - - $1,898,849 $1,829,326 $1,670,431
Income Fund
(1) For the period December 29, 1995 (commencement of operations) through
October 31, 1996.
(2) For the period March 25, 1996 (commencement of operations) through
October 31, 1996.
(3) For the period September 30, 1997 (commencement of operations) through
October 31, 1997.
(4) For the period August 16, 1996 (commencement of operations) through
October 31, 1996.
</TABLE>
Dreyfus Premier High Yield Debt Plus Equity Fund has not completed its
first fiscal year.
As to Dreyfus Equity Dividend Fund, the Dreyfus High Yield Securities
Fund, Dreyfus Short Term High Yield Fund, and Dreyfus Strategic Income 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 (except as indicated) 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.
Sales Loads--Class A and Class T. (Dreyfus Premier High Yield Debt
Plus Equity Fund only). The scale of sales loads applies to purchases of
Class A and Class T shares of Dreyfus Premier High Yield Debt Plus Equity
Fund made by any "purchaser," which term includes an individual and/or
spouse purchasing securities for his, her or their own account or for the
account of any minor children, or a trustee or other fiduciary purchasing
securities for a single trust estate or a single fiduciary account trust
estate or a single fiduciary account (including a pension, profit-sharing or
other employee benefit trust created pursuant to a plan qualified under
Section 401 of the Internal Revenue Code of 1986, as amended (the "Code")
although more than one beneficiary is involved; or a group of accounts
established by or on behalf of the employees of an employer or affiliated
employers pursuant to an employee benefit plan or other program (including
accounts established pursuant to Sections 403(b), 408(k), and 457 of the
Code); or an organized group which has been in existence for more than six
months, provided that it is not organized for the purpose of buying
redeemable securities of a registered investment company and provided that
the purchases are made through a central administration or a single dealer,
or by other means which result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering
price of Dreyfus Premier High Yield Debt Plus Equity Fund's Class A and
Class T shares. The example assumes a purchase of Class A and Class T
shares of the Fund aggregating less than $50,000 each, subject to the
schedule of sales charges set forth in the Fund's Prospectus at a price
based upon the net asset value of the Fund's Class A and Class T shares,
respectively, as of its initial offering date:
Dreyfus Premier High Yield
Debt Plus Equity Fund
Class A Class T
Net Asset Value Per Share $12.50 $12.50
Per Share Sales Charge:
Class A - 5.75% of offering $0.76 -
price (6.10% of net asset
value per share)
Class T - 4.50% of offering - $0.59
price (4.70% of net asset value _______ _______
per share)
Per Share Offering Price to the $13.26 $13.09
Public
TeleTransfer Privilege. The 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. Purchase orders made
after 4:00 p.m., New York time, on any business day the Transfer Agent and
the New York Stock Exchange are open for business, or orders made on
Saturday, Sunday or any Fund holiday (e.g., when the New York Stock
Exchange is not open for business), will be credited to the shareholder's
Fund account on the second bank business day following such purchase order.
To qualify to use the 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.
DISTRIBUTION PLAN AND
SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus (except as indicated) entitled
"Distribution Plan and Shareholder Services Plan" or "Shareholder Services
Plan", as applicable.
Class B, Class C, and Class T shares of Dreyfus Premier High Yield Debt
Plus Equity Fund are subject to a Distribution Plan, and Class A, Class B,
Class C, and Class T shares of the Dreyfus Premier High Yield Debt Plus
Equity Fund are subject to a Shareholder Services Plan. As to each other
Fund, such Fund's shares are subject to a Shareholder Services Plan only.
Distribution Plan. (Dreyfus Premier High Yield Debt Plus Equity Fund
only). Rule 12b-1 (the "Rule") adopted by the Securities and Exchange
Commission under the 1940 Act, provides, among other things, that an
investment company may bear expenses of distributing its shares only
pursuant to a plan adopted in accordance with the Rule. The Company's Board
has adopted such a plan (the "Distribution Plan") with respect to Class B,
Class C, and Class T shares of Dreyfus Premier High Yield Debt Plus Equity
Fund pursuant to which the Fund pays the Distributor for distributing its
Class B, Class C, and Class T shares. The Company's Board believes that
there is a reasonable likelihood that the Distribution Plan will benefit the
Fund and the holders of its Class B, Class C, and Class T shares.
A quarterly report of the amounts expended under the Distribution Plan,
and the purposes for which such expenditures were incurred, must be made to
the Board for its review. In addition, the Distribution Plan provides that
it may not be amended to increase materially the costs which holders of
Class B, Class C, or Class T shares may bear pursuant to the Distribution
Plan without the approval of the holders of such shares and that other
material amendments of the Distribution Plan must be approved by the Board,
and by the Board members who are not "interested persons" (as defined in the
1940 Act) of the Company and have no direct or indirect financial interest
in the operation of the Distribution Plan or in any agreements entered into
in connection with the Distribution Plan, by vote cast in person at a
meeting called for the purpose of considering such amendments. The
Distribution Plan is subject to annual approval by such vote of the Board
cast in person at a meeting called for the purpose of voting on the
Distribution Plan. The Distribution Plan was approved by the Board, as to
Dreyfus Premier High Yield Debt Plus Equity Fund, at a meeting held on May
6, 1998. As to the relevant Class of shares of the Fund, the Distribution
Plan may be terminated at any time by vote of a majority of the Board
members who are not "interested persons" and have no direct or indirect
financial interest in the operation of the Distribution Plan or in any
agreements entered into in connection with the Distribution Plan or by vote
of the holders of a majority of such Class of shares.
Shareholder Services Plan. (All Funds) The Company has adopted a
Shareholder Services Plan, as to each Class of shares of Dreyfus Premier
High Yield Debt Plus Equity Fund, and as to the shares of each other Fund.
Under the Plan, the Company pays the Distributor for the provision of
certain services to the holders of each Fund's shares. 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 (including as to each Class of Dreyfus Premier High Yield Debt
Plus Equity Fund), 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 last so approved on
November 5, 1997, as to each Fund except Dreyfus Premier High Yield Debt
Plus Equity Fund. As to Dreyfus Premier High Yield Debt Plus Equity Fund,
the Shareholder Services Plan was approved by the Board at a meeting held on
May 6, 1998. 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 fiscal year ended October 31, 1997, $696,013, $9,224, $163,531,
and $202,976 was charged the Company as to Dreyfus Strategic Income Fund,
Dreyfus Equity Dividend Fund, Dreyfus High Yield Securities Fund, and
Dreyfus Short Term High Yield Fund, respectively, pursuant to the
Shareholder Services Plan. As to Dreyfus Real Estate Mortgage Fund, for the
period September 30, 1997 (commencement of operations) to October 31, 1997,
$2,225 was charged to the Company pursuant to the Shareholder Services Plan.
Dreyfus Premier High Yield Debt Plus Equity Fund has not completed its first
fiscal year.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus (except as indicated) entitled
"How to Redeem Shares."
Redemption Fee. (Dreyfus High Yield Securities Fund and Dreyfus Real
Estate Mortgage Fund only) Each of these Funds 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. For the fiscal year ended October 31,
1997, redemption fees retained by Dreyfus High Yield Securities Fund
amounted to $397,609. No redemption fees were charged by Dreyfus Real
Estate Mortgage Fund for the period September 30, 1997 (commencement of
operations) through the fiscal year ended October 31, 1997.
No redemption fee will be charged on the redemption or exchange of
shares (1) through the Fund's Automatic Withdrawal Plan or Dreyfus Auto-
Exchange Privilege, (2) through accounts that are reflected on the records
of the Transfer Agent as omnibus accounts approved by Dreyfus Service
Corporation, (3) through accounts established by Service Agents approved by
Dreyfus Service Corporation that utilize the National Securities Clearing
Corporation's networking system, or (4) acquired through the reinvestment of
dividends or capital gains distributions.
Wire Redemption Privilege (Dreyfus Equity Dividend Fund, Dreyfus High
Yield Securities Fund, Dreyfus Premier High Yield Debt Plus Equity Fund,
Dreyfus Real Estate Mortgage Fund, Dreyfus Short Term High Yield Fund, and
Dreyfus Strategic Income Fund only). By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone or letter 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 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."
TeleTransfer Privilege. Investors should be aware that if they have
selected the TeleTransfer Privilege, any request for a wire redemption will
be effected as a TeleTransfer transaction through the 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 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 and Dreyfus Real
Estate Mortgage Fund each 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 any Class of
Dreyfus Premier High Yield Debt Plus Equity Fund may be exchanged for shares
of the respective Class of certain other funds advised or administered by
the Manager, except that Class T shares of the Fund may be exchanged for
Class A shares of such other funds. Shares of other funds (including the
same Class of other funds) purchased by exchange (or of Class A shares of
such funds in the case of Class T shares of the Fund) 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.
E. Shares of funds subject to a contingent deferred sales charge
("CDSC") that are exchanged for shares of another fund will be
subject to the higher applicable CDSC of the two funds and, for
purposes of calculating CDSC rates and conversion periods, if
any, will be deemed to have been held since the date the shares
being exchanged initially purchased.
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, instructions must be given to the Transfer
Agent in writing or by telephone. Investors who have purchased Fund shares
through a Service Asset should have their Service Agent give such
instructions. Other investors may give such instructions directly. 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. See "Appendix--Additional
Information About Purchases, Exchanges and Redemptions" in the Prospectus.
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.
Auto-Exchange Privilege. The Auto-Exchange Privilege permits an
investor to purchase, in exchange for shares of a Fund, shares of another
fund in the (including the same Class of another fund) Dreyfus Premier
Family of Funds, or the Dreyfus Family of Funds, except that Class T shares
of the Fund may be exchanged for Class A shares of such other 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 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.
If you are a shareholder of Dreyfus Premier High Yield Debt Plus Equity
Fund, Shareholder Services Forms and prospectuses of other funds can be
obtained by calling your Service Agent or 1-800-554-4611. If you are a
shareholder of any other Fund, 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.
Dividend Sweep. Dividend Sweep allows investors to invest
automatically their dividends or dividends and capital gain distributions,
if any, from the Fund in shares of the same Class of certain other funds in
the Dreyfus Premier Family of Funds, or the Dreyfus Family of Funds, of
which the investor is a shareholder, except that dividends and capital gain
distributions, if any, on Class T shares of the Dreyfus Premier High Yield
Debt Plus Equity Fund may be invested in Class A shares (or the equivalent)
of such other funds. 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 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 regular IRAs, spousal
IRAs for a non-working spouse, Roth IRAs, IRAs set up under a Simplified
Employee Pension Plan ("SEP-IRAs"), Education 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
$1,000, with no minimum for subsequent investments. The minimum initial
investment is $750 for Dreyfus-sponsored Keogh Plans, IRAs (including
regular IRAs, spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs,
and rollover IRAs) and 403(b)(7) Plans with only one participant, and $500
for Dreyfus-sponsored Education IRAs, with for minimum for subsequent
purchases.
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. The Fund's investments are valued
each business day using available market quotations or at fair value.
Substantially all of each Fund's fixed-income investments (excluding short-
term investments) are valued 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 and Dreyfus Premier
High Yield Debt Plus Equity 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. Forward currency contracts will be valued at the current cost of
offsetting the contract. Because of the need to obtain prices as of the
close of trading on various exchanges throughout the world, the calculation
of net asset value does not take place contemporaneously with the
determination of prices of a majority of each Fund's portfolio securities.
Short-term investments are carried at amortized cost, which approximates
value. Expenses and fees, including the management fee paid by each Fund
and the distribution and shareholder services fees, as applicable (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, or
Class of shares, as the case may be. Because of the differences in
operating expenses incurred by each Class of shares of Dreyfus Premier High
Yield Debt Plus Equity Fund, the per share net asset value of each Class of
shares of the Fund will differ.
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, Martin
Luther King Jr. 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 each Fund, except Dreyfus
Premier High Yield Debt Plus Equity Fund, qualified for the fiscal year
ended October 31, 1997 as a "regulated investment company" under the Code,
and expects that Dreyfus Premier High Yield Debt Plus Equity Fund 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. To
qualify as a regulated investment company, the Fund must distribute at least
90% of its net income (consisting of net investment income and net short-
term capital gain) to its shareholders and meet certain asset
diversification and other requirements. The term "regulated investment
company" does not imply the supervision of management or investment
practices or policies by any government agency.
Any dividend or distribution paid shortly after an investor's purchase
may have the effect of reducing the aggregate 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 held for less than 46 days, which 46
days generally must be during the 90-day period commencing 45 days before
the shares become ex-dividend, 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 a 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 futures or
forward contracts or options transactions may be considered, for tax
purposes, to constitute "straddles." Straddles are defined to include
"offsetting positions" in actively traded personal property. The tax
treatment of straddles is governed by Sections 1092 and 1258 of the Code,
which, in certain circumstances, override or modify 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 financial futures or forward contracts or options transactions,
such straddles would be characterized as "mixed straddles" if the futures or
forward contracts or options transactions comprising a part of such
straddles were governed by Section 1256 of the Code. The Fund may make one
or more elections with respect to "mixed straddles." Depending upon which
election is made, if any, the results to the Fund may differ. If no
election is made, to the extent the straddle and conversion transaction
rules apply to positions established by a Fund, losses realized by the Fund
will be deferred to the extent of unrealized gain in the offsetting
position. Moreover, as a result of the straddle and conversion transaction
rules, short-term capital loss on "straddle" positions may be
recharacterized as long-term capital loss, and long-term capital gains or
straddle positions may be treated as short-term capital gains or ordinary
income.
The Taxpayer Relief Act of 1997 included constructive sale provisions
that generally apply if the Fund either (1) holds an appreciated financial
position with respect to stock, certain debt obligations, or partnership
interests ("appreciated financial position") and then enters into a short
sale, futures, forward, or offsetting notional principal contract
(collectively, a "Contract") respecting the same or substantially identical
property or (2) holds an appreciated financial position that is a Contract
and then acquires property that is the same as, or substantially identical
to, the underlying property. In each instance, with certain exceptions, the
Fund generally will be taxed as if the appreciated financial position were
sold at its fair market value on the date the Fund enters into the financial
position or acquires the property, respectively. Transactions that are
identified hedging or straddle transactions under other provisions of the
Code can be subject to the constructive sale provisions.
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 will be less
than 100% for Dreyfus Equity Dividend Fund, less than 200% for Dreyfus Real
Estate Mortgage Fund and Dreyfus Short Term High Yield Fund, and 200% or
more for Dreyfus High Yield Securities Fund, Dreyfus Premier High Yield Debt
Plus Equity Fund, and Dreyfus Strategic Income Fund. 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 year ended October 31, 1995, Dreyfus Strategic Income
Fund paid no brokerage commissions. For fiscal years ended October 31, 1996
and 1997, Dreyfus Strategic Income Fund paid brokerage commissions of
$28,188 and $41,764, respectively. Gross spreads and concessions on
principal transactions, where determinable, amounted to $633,150, $1,421,838
and $217,238 for the fiscal years ended October 31, 1995, 1996 and 1997,
respectively, for Dreyfus Strategic Income Fund, none of which was paid to
the Distributor. For the period from commencement of operations of each
Fund through October 31, 1996, and for the fiscal year ended October 31,
1997, Dreyfus Equity Dividend, Dreyfus High Yield Securities Fund, and
Dreyfus Short Term High Yield Fund paid brokerage commissions of $10,205,
$11,048, $5,740, $17,136, $250 and $80, respectively. Gross spreads and
concessions on principal transactions, where determinable, amounted to
$2,875 and $1,637, $133,243 and $266,750, and $18,500 and $52,200, for the
period from commencement of operations of each Fund through October 31, 1996
and for the fiscal year ended October 31, 1997 for Dreyfus Equity Dividend,
Dreyfus High Yield Securities Fund and Dreyfus Short Term High Yield Fund,
respectively, none of which was paid to the Distributor. For the period
from September 30, 1997 (commencement of operations) through October 31,
1997, Dreyfus Real Estate Mortgage Fund paid $3,000 in brokerage
commissions. Gross spreads and concessions on principal transactions, where
determinable, amounted to $0, for the period from September 30, 1997 through
October 31, 1997. Dreyfus Premier High Yield Debt Plus Equity Fund has not
completed its first fiscal year.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Performance
Information."
Dreyfus Premier High Yield Debt Plus Equity Fund has not competed its
first fiscal year end, so no performance data has been provided for such
Fund.
Dreyfus Strategic Income Fund's current yield for the 30-day period
ended April 30, 1998 was 6.46%. Dreyfus High Yield Securities Fund's
current yield for the 30-day period ended April 30, 1998 was 9.63%. Dreyfus
Short Term High Yield Fund's current yield for the 30-day period ended April
30, 1998 was 8.45%. Dreyfus Real Estate Mortgage Fund's current yield for
the 30-day period ended April 30, 1998 was 8.70%. The yields for Dreyfus
High Yield Securities Fund and Dreyfus Real Estate Mortgage Fund reflect the
absorption of certain expenses by the Manager, without which the Fund's 30-
day yield as of April 30, 1998 would have been 9.62% and 8.01%,
respectively. 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-,
five- and ten-year periods ended April 30, 1998, was 14.32%, 8.49% and
10.32%, respectively. Dreyfus Equity Dividend Fund's average annual total
return for the one-year period ended April 30, 1998 and for the period
December 29, 1995 (commencement of operations) through April 30, 1998, was
30.41% and 23.93%, respectively. Dreyfus High Yield Securities Fund's
average annual total return for the one-year period ended April 30, 1998,
and for the period March 25, 1996 (commencement of operations) through April
30, 1998, was 28.89% and 23.49%, respectively. Dreyfus Short Term High
Yield Fund's average annual total return for the one-year period ended April
30, 1998, and for the period August 15, 1996 (commencement of operations)
through April 30, 1998, was 13.39% and 13.36%, 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. A Class's
average annual total return figures calculated in accordance with such
formula assume that in the case of Class A or Class T the maximum applicable
sales load has been deducted from the hypothetical initial investment at the
time of purchase or, in the case of Class B or Class C, the maximum
applicable CDSC has been paid upon redemption at the end of the period.
Dreyfus Strategic Income Fund's total return for the period October 3,
1986 (commencement of operations) through April 30, 1998 was 200.68%.
Dreyfus Equity Dividend Fund's total return for the period December 29, 1995
(commencement of operations) through April 30, 1998 was 65.22%. Dreyfus
High Yield Securities Fund's total return for the period March 25, 1996
(commencement of operations) through April 30, 1998 was 55.76%. Dreyfus
Short Term High Yield Fund's total return for the period August 16, 1996
(commencement of operations) through April 30, 1998 was 23.92%. Dreyfus
Real Estate Mortgage Fund's total return for the period September 30, 1997
(commencement of operations) through April 30, 1998 was 8.85%. During these
periods, receipt of certain fees was being waived, and/or certain expenses
were borne, by the Manager, without which the returns for Dreyfus Equity
Dividend Fund, Dreyfus High Yield Securities Fund, Dreyfus Real Estate
Mortgage Fund, and Dreyfus Short Term High Yield Fund would have been lower.
Total return is calculated by subtracting the amount of the Fund's net
asset value (maximum offering price in the case of Class A or Class T shares
of Dreyfus Premier High Yield Debt Plus Equity Fund) per share at the
beginning of a stated period from the net asset value (maximum offering
price in the case of Class A or Class T) per share at the end of the period
(after giving effect to the reinvestment of dividends and distributions
during the period and, as to Dreyfus High Yield Securities Fund and Dreyfus
Real Estate Mortgage Fund, any applicable redemption fee, or, as to Dreyfus
Premier High Yield Debt Plus Equity Fund, any applicable CDSC), and dividing
the result by the net asset value (maximum offering price in the case of
Class A or Class T) per share at the beginning of the period. Total return
also may be calculated based on the net asset value per share at the
beginning of the period instead of the maximum offering price per share at
the beginning of the period for Class A or Class T shares or without giving
effect to any applicable CDSC at the end of the period for Class B or Class
C shares of Dreyfus Premier High Yield Debt Plus Equity Fund. In such
cases, the calculation would not reflect the deduction of the sales charge
with respect to Class A or Class T shares, or any applicable CDSC with
respect to Class B or Class C shares, which, if reflected, would reduce the
performance quoted.
Advertising materials for each Fund may include reference to the role
played by the Manager or Jack J. Dreyfus, Jr. in popularizing the concept of
mutual funds as an investment vehicle and may refer to the role The Dreyfus
Corporation and the Dreyfus Family of Funds play or have played in the
mutual fund industry, and the fact that the mutual fund industry, which
includes Dreyfus and the Dreyfus funds, has, through the wide variety of
innovative and democratic mutual fund products it has made available,
brought to the public investment opportunities once reserved for the few.
Advertising materials for each Fund also 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, Morningstar and Value Line
rankings or ratings and related analysis supporting the rankings or ratings;
(v) discussions of the risk and reward potential of the high yield
securities markets, and the mortgage- and real estate-related markets, and
the comparative performance of each against other securities markets and
relevant indices; (vi) comparative performance of a Fund with a relevant
broad-based securities market index, or with a "customized index" created by
the Manger, or against inflation, short-term Treasury Bills (which are
direct obligations of the U.S. Government), bonds, stocks, or FDIC-insured
bank money market accounts; and (vii) as to Dreyfus Short Term High Yield
Fund, that at its inception the Fund was the first short-term, high yield
fund in the mutual fund industry.
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, except in the case of Dreyfus Premier High
Yield Debt Plus Equity Fund, and have equal rights as to dividends and in
liquidation. Shares have no preemptive, subscription or conversion rights,
except in the case of Dreyfus Premier High Yield Debt Plus Equity Fund, 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.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of a
Massachusetts business trust. However, the Company's
Agreement and Declaration of Trust 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 Agreement and Declaration of Trust
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.
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 each 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. For the fiscal year ended
October 31, 1997, Dreyfus Strategic Income Fund, Dreyfus Equity Dividend
Fund, Dreyfus High Yield Securities Fund and Dreyfus Short Term High Yield
Fund paid the Transfer Agent $226,107, $576, $22,269 and $33,512
respectively. For the period September 30, 1997 (commencement of
operations) through October 31, 1997, Dreyfus Real Estate Mortgage Fund paid
the Transfer Agent $14. Dreyfus Premier High Yield Debt Plus Equity Fund
has not competed its first fiscal year.
Mellon Bank, N.A. (the "Custodian"), the Manager's parent, located at
One Mellon Bank Center, Pittsburgh, Pennsylvania 15258, acts as the
custodian of each 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. For the
fiscal year ended October 31, 1997, Dreyfus Strategic Income Fund, Dreyfus
Equity Dividend Fund, Dreyfus High Yield Securities Fund and Dreyfus Short
Term High Yield Fund paid the Custodian $34,350, $2,477, $10,516 and
$10,991, respectively. For the period September 30, 1997 (commencement of
operations) through October 31, 1997, Dreyfus Real Estate Mortgage Fund paid
the Custodian $767. Dreyfus Premier High Yield Debt Plus Equity Fund has
not competed its first fiscal year.
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York
10038-4982, 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 auditors, have been selected as auditors of the Company.
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT AUDITORS
The Company's Annual and Semi-Annual Reports to Shareholders, for the
fiscal year ended October 31, 1997 and for the six-month period ended April
30, 1998, respectively, for each Fund except Dreyfus Premier High Yield Debt
Plus Equity Fund, are separate documents supplied with this Statement of
Additional Information, and the financial statements, accompanying notes
and, report of independent auditors appearing therein, are incorporated by
reference in this Statement of Additional Information. Dreyfus Premier High
Yield Debt Plus Equity Fund has not competed its first fiscal year.
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.
