Dreyfus
Equity Income
Fund
Investing in dividend-paying equity securities for current income and capital
appreciation
PROSPECTUS March 1, 1999
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
Contents
THE FUND
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2 Goal/Approach
3 Main Risks
4 Past Performance
5 Expenses
6 Management
7 Financial Highlights
YOUR INVESTMENT
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8 Account Policies
11 Distributions and Taxes
12 Services for Fund Investors
14 Instructions for Regular Accounts
16 Instructions for IRAs
FOR MORE INFORMATION
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Back Cover
What every investor should know about the fund
Information for managing your fund account
Where to learn more about this and other Dreyfus funds
<PAGE>
The Fund
Dreyfus Equity Income Fund
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Ticker Symbol: DREDX
GOAL/APPROACH
The fund seeks to maximize current income. Its secondary goal is capital
appreciation. To pursue these goals, the fund invests at least 65% of its assets
in stocks, including dividend-paying common stocks, preferred stocks and
convertible securities of both U.S. and foreign issuers. The fund may invest up
to 35% of its assets in non-dividend-paying stocks and in debt securities of
U.S. and foreign issuers which, when purchased, are rated investment grade or
are the unrated equivalent as determined by Dreyfus.
In choosing stocks, the portfolio manager mainly looks for companies that pay
above-average stock dividends relative to the S&P 500((reg.tm)), as well as
those stocks that score above average on a proprietary portfolio management
model. The manager then reviews these stocks for factors that could signal a
rise in price, such as:
(pound) new products or markets
(pound) opportunities for greater market share
(pound) more effective management
(pound) positive changes in corporate structure or market
perception
The fund typically sells a stock when its dividend yield declines below the S&P
Industrials Index, when it achieves a below-average score on the model, shows
deteriorating business fundamentals or declining momentum, or falls short of the
manager's expectations.
INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT (SEE BACK COVER).
Concepts to understand
DIVIDEND: a distribution of earnings to shareholders, usually paid in the form
of cash or stock.
VALUE INVESTING: a method of selecting stocks that appear underpriced. The
"value" characteristics of these companies can include higher-than-average
dividend yields, or lower-than-average price-to-earnings or price-to-book
ratios.
<PAGE 2>
MAIN RISKS
Because different types of stocks tend to shift in and out of favor depending on
market and economic conditions, emphasis on high-dividend-yielding stocks can
cause the fund's performance to be lower or higher than that of other types of
funds (such as those emphasizing growth stocks). Stocks will fluctuate in price,
sometimes dramatically. This means that the value of your investment in the fund
will go up and down, and that you could lose money.
Stocks with high dividend yields typically possess the characteristics of
"value" stocks. Value stocks generally are subject to the risk that their
instrinsic value may never be realized. Also, while investments in
high-dividend-yielding stocks may provide some downside protection over time,
the fund may produce more modest gains than riskier stock funds as a trade-off
for this potentially lower risk.
Investments in foreign securities could carry additional risks such as exposure
to changing currency exchange rates, changing political climates, a lack of
adequate company information, political instability, and less liquidity.
Debt securities also carry risk. Their prices tend to move inversely with
changes in interest rates, and also are affected by changes in the credit rating
or financial condition of the issuer.
Under adverse market conditions, the fund could invest some or all of its assets
in money market instruments. Although the fund would do this only in seeking to
avoid losses, it could have the effect of reducing the benefit from any upswing
in the market.
Other potential risks
The fund, at times, may invest in certain derivatives, including options,
futures and foreign currencies. It may also sell short. When employed, these
practices are used primarily to hedge the fund's portfolio but may be used to
increase returns; however, there is the risk that such practices sometimes may
reduce returns or increase volatility. Derivatives can be illiquid, and a small
investment in certain derivatives could have a potentially large impact on the
fund's performance.
The Fund
<PAGE 3>
PAST PERFORMANCE
The two tables below show the fund's annual returns and its long-term
performance. The first table shows you how the fund's performance has varied
from year to year. The second compares the fund's performance over time to that
of the Wilshire Large Company Value Index, an unmanaged index reflecting the
performance of the largest 750 stocks composing the Wilshire 5000 Index that
meet certain statistical criteria for being a "value" stock. Both tables assume
reinvestment of dividends and distributions. As with all mutual funds, the past
is not a prediction of the future.
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Year-by-year total return AS OF 12/31 EACH YEAR (%)
N/A N/A N/A N/A N/A N/A N/A 19.63 25.51 10.97
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
BEST QUARTER: Q2 '97 +15.93%
WORST QUARTER: Q3 '98 -8.12%
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Average annual total return AS OF 12/31/98
Inception
1 Year (12/29/95)
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FUND 10.97% 18.49%
WILSHIRE LARGE COMPANY
VALUE INDEX 11.25% 20.29%*
* FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 12/31/95 IS USED AS THE
BEGINNING VALUE ON 12/29/95.
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
<PAGE 4>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the table below. Annual fund operating expenses are paid
out of fund assets, so their effect is included in the share price. The fund has
no sales charge (load) or Rule 12b-1 distribution fees.
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<TABLE>
Fee table
ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.75%
Shareholder services fee 0.25%
Other expenses 1.09%
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TOTAL ANNUAL FUND OPERATING EXPENSES 2.09%
Fee waiver and/or expense reimbursements (0.84%)
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NET OPERATING EXPENSES* 1.25%
* THE DREYFUS CORPORATION HAS AGREED, UNTIL OCTOBER 31, 1999, TO WAIVE RECEIPT
OF ITS FEES AND/OR ASSUME THE EXPENSES OF THE FUND SO THAT EXPENSES (EXCLUDING
TAXES, BROKERAGE COMMISSIONS, EXTRAORDINARY EXPENSES, INTEREST EXPENSES,
COMMITMENT FEES ON OFFERINGS AND THE SHAREHOLDER SERVICES FEE) DO NOT EXCEED
1.00%.
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Expense example
1 Year 3 Years 5 Years 10 Years
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<S> <C> <C> <C>
$127 $655 $1,124 $2,421
</TABLE>
This example shows what you could pay in expenses over
time. It uses the same hypothetical conditions other
funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in
expenses. The figures shown would be the same whether
you sold your shares at the end of a period or kept
them. Because actual return and expenses will be
different, the example is for comparison only. The
one-year number is based on net operating expenses. The
longer-term expenses are based on total annual fund
operating expenses.
Concepts to understand
MANAGEMENT FEE: the fee paid to the investment adviser for managing the fund's
portfolio and assisting in all aspects of the fund's operations.
SHAREHOLDER SERVICES FEE: a fee paid to the fund's distributor for shareholder
account service and maintenance.
OTHER EXPENSES: fees paid by the fund for miscellaneous items such as transfer
agency, custody, professional and registration fees.
The Fund
<PAGE 5>
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages one of the nation's
leading mutual fund complexes, with more than $121 billion in more than 163
mutual fund portfolios. Dreyfus is the primary mutual fund business of Mellon
Bank Corporation, a broad-based financial services company with a bank at its
core. With more than $350 billion of assets under management and $1.7 trillion
of assets under administration and custody, Mellon provides a full range of
banking, investment and trust products and services to individuals, businesses
and institutions. Its mutual fund companies place Mellon as the leading bank
manager of mutual funds. Mellon is headquartered in Pittsburgh, Pennsylvania.
The Dreyfus asset management philosophy is based on the belief that discipline
and consistency are important to investment success. For each fund, the firm
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide each fund
with a distinct, stable identity, and offers the potential for measuring
performance and volatility in consistent ways.
Timothy M. Ghriskey, CFA, Senior Portfolio Manager and Head of Value Equities at
Dreyfus, has managed the fund since its inception. He joined Dreyfus in July
1995 after ten years as an analyst and money manager for Loomis Sayles & Co.,
and today manages several other funds at Dreyfus.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
<PAGE 6>
FINANCIAL HIGHLIGHTS
This table describes the fund's performance for the fiscal periods indicated.
"Total return" shows how much your investment in the fund would have increased
(or decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been independently audited by Ernst & Young
LLP, whose report, along with the fund's financial statements, is included in
the annual report.
<TABLE>
YEAR ENDED OCTOBER 31,
1998 1997 1996(1)
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<S> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 17.28 13.89 12.50
Investment operations:
Investment income -- net .32 .32 .23
Net realized and unrealized gain (loss)
on investments .87 3.67 1.38
Total from investment operations 1.19 3.99 1.61
Distributions:
Dividends from investment income -- net (.31) (.32) (.22)
Dividends from net realized gain
on investments (1.29) (.28) --
Total distributions (1.60) (.60) (.22)
Net asset value, end of period 16.87 17.28 13.89
Total return (%) 7.17 29.34 12.93(2)
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RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.25 1.27 1.08(2)
Ratio of net investment income to
average net assets (%) 1.82 1.98 1.76(2)
Decrease reflected in above expense ratios
due to actions by Dreyfus (%) .84 1.36 1.05(2)
Portfolio turnover rate (%) 168.02 80.43 98.84(2)
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Net assets, end of period ($ x 1,000) 4,465 4,314 2,858
(1) FROM DECEMBER 29, 1995 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1996.
(2) NOT ANNUALIZED.
</TABLE>
The Fund
<PAGE 7>
Your Investment
ACCOUNT POLICIES
Buying shares
YOU PAY NO SALES CHARGES to invest in this fund. Your price for fund shares is
the fund's net asset value per share (NAV), which is generally calculated as of
the close of trading on the New York Stock Exchange (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. The fund's investments are generally 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.
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Minimum investments
Initial Additional
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REGULAR ACCOUNTS $2,500 $100
$500 FOR
TELETRANSFER
INVESTMENTS
TRADITIONAL IRAS $750 NO MINIMUM
SPOUSAL IRAS $750 NO MINIMUM
ROTH IRAS $750 NO MINIMUM
EDUCATION IRAS $500 NO MINIMUM
AFTER THE FIRST
YEAR
DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS
All investments must be in U.S. dollars. Third-party
checks cannot be accepted. You may be charged a fee for
any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.
Third-party investments
If you invest through a third party (rather than directly with Dreyfus), the
policies and fees may be different than those described here. Banks, brokers,
401(k) plans, financial advisers and financial supermarkets may charge
transaction fees and may set different minimum investments or limitations on
buying or selling shares. Consult a representative of your plan or financial
institution if in doubt.
<PAGE 8>
Selling shares
YOU MAY SELL SHARES AT ANY TIME. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. Any certificates representing fund shares being sold must be
returned with your redemption request. Your order will be processed promptly and
you will generally receive the proceeds within a week.
BEFORE SELLING RECENTLY PURCHASED SHARES, please note that if the fund has not
yet collected payment for the shares you are selling, it may delay sending the
proceeds for up to eight business days or until it has collected payment.
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Limitations on selling shares by phone
Proceeds
sent by Minimum Maximum
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CHECK NO MINIMUM $150,000 PER DAY
WIRE $1,000 $250,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
TELETRANSFER $500 $250,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
(pound) amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days
(pound) requests to send the proceeds to a different payee or address
Written sell orders of $100,000 or more must also be signature guaranteed.
A SIGNATURE GUARANTEE helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.
Your Investment
<PAGE 9>
ACCOUNT POLICIES (CONTINUED)
General policies
UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.
THE FUND RESERVES THE RIGHT TO:
(pound) refuse any purchase or exchange request that
could adversely affect the fund or its operations,
including those from any individual or group who, in the
fund's view, is likely to engage in excessive trading
(usually defined as more than four exchanges out of the
fund within a calendar year)
(pound) refuse any purchase or exchange request in excess of
1% of the fund's total assets
(pound) change or discontinue its exchange privilege, or
temporarily suspend this privilege during unusual market
conditions
(pound) change its minimum investment amounts
(pound) delay sending out redemption proceeds for up to
seven days (generally applies only in cases of very
large redemptions, excessive trading or during
unusual market conditions)
The fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).
Small account policies
To offset the relatively higher costs of servicing smaller accounts, the fund
charges regular accounts with balances below $2,000 an annual fee of $12. The
fee will be imposed during the fourth quarter of each calendar year.
The fee will be waived for: any investor whose aggregate Dreyfus mutual fund
investments total at least $25,000; IRA accounts; accounts participating in
automatic investment programs; and accounts opened through a financial
institution.
If your account falls below $500, the fund may ask you to increase your balance.
If it is still below $500 after 30 days, the fund may close your account and
send you the proceeds.
<PAGE 10>
DISTRIBUTIONS AND TAXES
THE FUND USUALLY PAYS ITS SHAREHOLDERS dividends from its net investment income
quarterly, and distributes any net capital gains that it has realized once a
year. Your distributions will be reinvested in the fund unless you instruct the
fund otherwise. There are no fees or sales charges on reinvestments.
FUND DIVIDENDS AND DISTRIBUTIONS ARE TAXABLE to most investors (unless your
investment is in an IRA or other tax-advantaged account). The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or take them in cash. In general,
distributions are federally taxable as follows:
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Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
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INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
The tax status of your dividends and distributions will be detailed in your
annual tax statement from the fund.
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Except in tax-advantaged accounts, any sale or exchange of fund shares may
generate a tax liability.
The table at right also can provide a guide for your potential tax liability
when selling or exchanging fund shares. "Short-term capital gains" applies to
fund shares sold or exchanged up to 12 months after buying them. "Long-term
capital gains" applies to shares sold or exchanged after 12 months.
Your Investment
<PAGE 11>
SERVICES FOR FUND INVESTORS
Automatic services
BUYING OR SELLING SHARES AUTOMATICALLY is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application or by
calling 1-800-645-6561.
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For investing
DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.
DREYFUS PAYROLL For making automatic investments
SAVINGS PLAN through a payroll deduction.
DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.
DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another
(not available for IRAs).
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For exchanging shares
DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
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For selling shares
DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds.
Dreyfus Financial Centers
Through a nationwide network of Dreyfus Financial Centers, Dreyfus offers a full
array of investment services and products. This includes information on mutual
funds, brokerage services, tax-advantaged products and retirement planning.
Our experienced financial consultants can help you make informed choices and
provide you with personalized attention in handling account transactions. The
Financial Centers also offer informative seminars and events. To find the
Financial Center nearest you, call 1-800-499-3327.
<PAGE 12>
Exchange privilege
YOU CAN EXCHANGE $500 OR MORE from one Dreyfus fund into another (no minimum for
retirement accounts). You can request your exchange in writing or by phone. Be
sure to read the current prospectus for any fund into which you are exchanging.
Any new account established through an exchange will have the same privileges as
your original account (as long as they are available). There is currently no fee
for exchanges, although you may be charged a sales load when exchanging into any
fund that has one.
Dreyfus TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the Dreyfus TeleTransfer privilege. You can set up TeleTransfer
on your account by providing bank account information and following the
instructions on your application.
The Dreyfus Touch((reg.tm))
FOR 24-HOUR AUTOMATED ACCOUNT ACCESS, use Dreyfus Touch. With a touch-tone
phone, you can easily manage your Dreyfus accounts, obtain information on other
Dreyfus mutual funds and get current stock market quotes.
Retirement plans
Dreyfus offers a variety of retirement plans, including traditional, Roth and
Education IRAs. Here's where you call for information:
(pound) for traditional, rollover, Roth and Education IRAs, call 1-800-645-656
(pound) for SEP-IRAs, Keogh accounts, 401(k) and 403(b) accounts, call
1-800-358-0910
Your Investment
<PAGE 13>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
The Dreyfus Family of Funds
P.O. Box 9387, Providence, RI 02940-9387
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to: The Dreyfus Family of Funds P.O. Box 105,
Newark, NJ 07101-0105
By Telephone
WIRE Have your bank send your
investment to The Bank of New York, with these instructions:
* ABA# 021000018
* DDA# 8900276398
* the fund name
* your Social Security or tax ID number
* name(s) of investor(s)
Call us to obtain an account number. Return your application.
WIRE Have your bank send your investment to The Bank of New York, with these
instructions:
* ABA# 021000018
* DDA# 8900276398
* the fund name
* your account number
* name(s) of investor(s)
ELECTRONIC CHECK Same as wire, but insert "1111" before your account number.
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.
WITHOUT ANY INITIAL INVESTMENT Check the Dreyfus Step Program option on your
application. Return your application, then complete the additional materials
when they are sent to you.
ALL SERVICES Call us to request a form to add any automatic investing service
(see "Services for Fund Investors"). Complete and return the forms along with
any other required materials.
Via the Internet
COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.
<PAGE 14>
TO SELL SHARES
Write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see "Account
Policies -- Selling Shares").
Mail your request to: The Dreyfus Family of Funds P.O. Box 9671, Providence, RI
02940-9671
WIRE Be sure the fund has your bank account information on file. Call us to
request your transaction. Proceeds will be wired to your bank.
TELETRANSFER Be sure the fund has your bank account information on file. Call
us to request your transaction. Proceeds will be sent to your bank by electronic
check.
CHECK Call us to request your transaction. A check will be sent to the address
of record.
DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request a form to add the plan.
Complete the form, specifying the amount and frequency of withdrawals you would
like.
Be sure to maintain an account balance of $5,000 or more.
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS FAMILY OF FUNDS
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
Your Investment
<PAGE 15>
INSTRUCTIONS FOR IRAS
TO OPEN AN ACCOUNT
In Writing
Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.
Mail your application and a check to:
The Dreyfus Trust Company, Custodian P.O. Box 6427, Providence, RI 02940-6427
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.
Mail in the slip and the check (see "To Open an Account" at left).
By Telephone
WIRE Have your bank send your investment to The Bank of New York, with these
instructions:
* ABA# 021000018
* DDA# 8900276398
* the fund name
* your account number
* name of investor
* the contribution year
ELECTRONIC CHECK Same as wire, but insert "1111" before your account number.
TELEPHONE CONTRIBUTION Call to request us to move money from a regular Dreyfus
account to an IRA (both accounts must be held in the same shareholder name).
Automatically
WITHOUT ANY INITIAL INVESTMENT Call us
to request a Dreyfus Step Program form. Complete and return the form along with
your application.
ALL SERVICES Call us to request a form to add an automatic investing service
(see "Services for Fund Investors"). Complete and return the form along with any
other required materials.
All contributions will count as current year.
Via the Internet
COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.
<PAGE 16>
TO SELL SHARES
Write a letter of instruction that includes:
* your name and signature
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
* whether the distribution is qualified or premature
* whether the 10% TEFRA should be withheld
Obtain a signature guarantee or other documentation, if required.
Mail in your request (see "To Open an Account" at left).
DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request instructions to establish
the plan.
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS TRUST CO., CUSTODIAN
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
Your Investment
<PAGE 17>
For More Information
Dreyfus Equity Income Fund A Series of Dreyfus Debt and
Equity Funds
-----------------------------
SEC file number: 811-4748
More information on this fund is available free upon
request, including the following:
Annual/Semiannual Report
Describes the fund's performance, lists portfolio
holdings and contains a letter from the fund's manager
discussing recent market conditions, economic trends and
fund strategies that significantly affected the fund's
performance during the last fiscal year.
Statement of Additional Information (SAI)
Provides more details about the fund and its policies. A
current SAI is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference (is
legally considered part of this prospectus).
To obtain information:
BY TELEPHONE Call 1-800-645-6561
BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request to [email protected]
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from:
SEC
http://www.sec.gov
DREYFUS
http://www.dreyfus.com
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 1999, Dreyfus Service Corporation 042P0399
<PAGE>
DREYFUS DEBT AND EQUITY FUNDS
DREYFUS CORE BOND FUND
DREYFUS EQUITY INCOME 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 PREMIER REAL ESTATE MORTGAGE FUND
(Class A, Class B, Class C, Class R and Class T Shares)
DREYFUS SHORT TERM HIGH YIELD FUND
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1999
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Dreyfus Core Bond Fund, Dreyfus Equity Income Fund, Dreyfus High Yield
Securities Fund, Dreyfus Premier High Yield Debt Plus Equity Fund, Dreyfus
Premier Real Estate Mortgage Fund and Dreyfus Short Term High Yield Fund,
each dated March 1, 1999 (each, a "Fund," and collectively, the "Funds") of
Dreyfus Debt and Equity Funds (the "Company"), as each may be revised from
time to time. To obtain a copy of the Prospectus of Dreyfus Core Bond Fund,
Dreyfus Equity Income Fund, Dreyfus High Yield Securities Fund or Dreyfus
Short Term High Yield Fund, please write to the Fund at 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144, or call toll free 1-800-645-6561.
In New York City, call 1-718-895-1206; and outside the U.S. call
516-794-5452. Also, you can call your financial adviser.
For a copy of the Prospectus of Dreyfus Premier High Yield Debt Plus
Equity Fund or Dreyfus Premier Real Estate Mortgage Fund, please call your
financial adviser, or you can write to the address above, or call 1-800-554-
4611.
The most recent Annual Report to Shareholders for each Fund is a
separate document supplied with this Statement of Additional Information,
and the financial statements. accompanying notes and report of independent
auditors appearing in the Annual Report are incorporated by reference into
this Statement of Additional Information.
TABLE OF CONTENTS
Page
Description of the Company and Funds B-3
Management of the Company B-18
Management Arrangements B-18
How to Buy Shares B-18
Distribution Plan and Shareholder Services Plan B-18
How to Redeem Shares B-49
Shareholder Services B-18
Determination of Net Asset Value B-18
Dividends, Distributions and Taxes B-18
Portfolio Transactions B-18
Performance Information B-18
Information About the Company and the Funds B-18
Counsel and Independent Auditors B-18
Appendix B-18
DESCRIPTION OF THE COMPANY AND FUNDS
The Company is a Massachusetts business trust that commenced operations
on October 1, 1986. Each Fund is a separate portfolio of the Company, an
open-end management investment company, known as a mutual fund. Each of
Dreyfus Core Bond Fund, Dreyfus Equity Income Fund, Dreyfus High Yield
Securities Fund and Dreyfus Short Term High Yield Fund is a diversified
fund, which means that, with respect to 75% of the Fund's total assets, the
Fund will not invest more than 5% of its assets in the securities of any
single issuer. Each of Dreyfus Premier High Yield Debt Plus Equity Fund and
Dreyfus Premier Real Estate Mortgage Fund (collectively, the "Dreyfus
Premier Funds") is a non-diversified fund, which 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 Investment Company Act of 1940, as amended (the
"1940 Act").
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.
Certain Portfolio Securities
The following information supplements and should be read in conjunction
with each Fund's Prospectus.
Corporate Debt Securities. (All Funds) Corporate debt securities
include corporate bonds, debentures, notes and other similar instruments,
including certain convertible securities. Debt securities may be acquired
with warrants attached. Corporate income-producing securities also may
include forms of preferred or preference stock. The rate of interest on a
corporate debt security may be fixed, floating or variable, and may vary
inversely with respect to a reference rate. The rate of return or return of
principal on some debt obligations may be linked or indexed to the level of
exchange rates between the U.S. dollar and a foreign currency or currencies.
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. (All Funds, except Dreyfus Premier Real Estate Mortgage
Fund) 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. A 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. (All Funds) From time to time, a Fund may hold common
stock sold in units with, or attached to, debt securities purchased by the
Fund. A Fund also may hold common stock received upon the conversion of
convertible securities. Dreyfus Premier Real Estate Mortgage Fund may
invest directly in the common stocks of issuers that primarily invest or
deal in real estate. Dreyfus Premier High Yield Debt Plus Equity Fund and
Dreyfus Equity Dividend Fund are not restricted in the kinds of common stock
each may purchase.
Participation Interests. (All Funds, except Dreyfus Equity Income
Fund) Each of these Funds 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. 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. 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. (All Funds, except Dreyfus Equity Income Fund
and Dreyfus Premier Real Estate Mortgage Fund) 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, the
interest from which, in the opinion of bond counsel to the issuer, is exempt
from Federal income tax. 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 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. Municipal obligations bear fixed,
floating or variable rates of interest, which are determined in some
instances by formulas under which the Municipal obligation's interest rate
will change directly or inversely to changes in interest rates or an index,
or multiples thereof, in many cases subject to a maximum and minimum.
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 obligation 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.
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.
A 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.
A 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. (All Funds, except Dreyfus Equity Income
Fund) 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"), adjustable rate
mortgages, real estate investment trusts ("REITs"), or other kinds of
mortgage-backed securities, including those with fixed, floating and
variable interest rates, those with interest rates 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.
Residential Mortgage-Related Securities-A Fund may invest in
mortgage-related securities representing participation interests in pools of
one- to four-family residential mortgage loans issued or guaranteed by
governmental agencies or instrumentalities, such as the Government National
Mortgage Association ("GNMA"), the Federal National Mortgage Association
("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"), or issued
by private entities. Similar to commercial mortgage-related securities,
residential mortgage-related securities have been issued using a variety of
structures, including multi-class structures featuring senior and
subordinated classes.
Mortgage-related securities issued by GNMA include GNMA Mortgage Pass-
Through Certificates (also know 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 certificates
also are supported by the authority of GNMA to borrow funds from the U.S.
Treasury to make payments under its guarantee. Mortgage-related securities
issued by 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. Fannie Maes are guaranteed as to timely payment of principal and
interest by FNMA. Mortgage-related securities issued by FHLMC include FHLMC
Mortgage Participation Certificates (also known as "Freddie Macs" or "PCs").
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.
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 constructed 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.
Subordinated Securities-A 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.
Collateralized Mortgage Obligations ("CMOs") and Multi-Class Pass-Through-
Securities-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-A Fund also may invest in stripped
mortgage-backed securities which 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 IO 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 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.
Private Entity Securities-These mortgage-related securities are issued by
commercial banks, savings and loan institutions, mortgage bankers, private
mortgage insurance companies and other nongovernmental 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.
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.
Asset-Backed Securities. (All Funds, except Dreyfus Equity Income
Fund) 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. These securities include debt securities and
securities with debt-like characteristics. 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. A 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 a 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.
Zero Coupon Securities. (All Funds, except Dreyfus Equity Income Fund)
A Fund may invest in zero coupon U.S. Treasury securities, which are
Treasury Notes and Bonds that have been stripped of their unmatured interest
coupons, the coupons themselves and receipts or certificates representing
interests in such stripped debt obligations and coupons. Zero coupon
securities also are issued by corporations and financial institutions which
constitute a proportionate ownership of the issuer's pool of underlying U.S.
Treasury securities. A zero coupon security pays no interest to its holders
during its life and is sold at a discount to its face value at maturity.
The market prices of zero coupon securities generally are more volatile than
the market prices of securities that pay interest periodically and are
likely to respond to a greater degree to changes in interest rates than
non-zero coupon securities having similar maturities and credit qualities.
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, including 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.
High Yield-Lower Rated Securities. (All Funds, except Dreyfus Equity
Income Fund) A Fund may invest in higher yielding (and, therefore higher
risk) debt securities, including mortgage-related securities. These
securities include those rated below Baa by Moody's Investors Service, Inc.
("Moody's") and below BBB by Standard & Poor's Ratings Group ("S&P"), Fitch
IBCA, Inc. ("Fitch") and Duff & Phelps Credit Rating Co. ("Duff," and with
the other rating agencies, the "Rating Agencies") and as low as the lowest
rating assigned by the Rating Agencies. 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" for a general description of securities ratings.
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 or interest and principal payments, they do not evaluate the
market value risk of such obligations. Although these ratings may be an
initial criterion for selection of portfolio investments, the Manager also
will evaluate these securities and the ability of the issuers of such
securities to pay interest and principal. The Fund's ability to achieve its
investment objective may be more dependent on the Manager's credit analysis
than might be the case for a fund that invested in higher rated securities.
With respect to each of Dreyfus High Yield Securities Fund, Dreyfus
Premier High Yield Debt Plus Equity Fund and Dreyfus Short Term High Yield
Fund, the average distribution of investments of the Fund in corporate bonds
(excluding preferred stock, convertible preferred stock and convertible
bonds) by ratings for the fiscal year ended October 31, 1998, and for
Dreyfus Premier High Yield Debt Plus Equity Fund for the period June 29,
1998 (commencement of operations) through October 31, 1998, calculated
monthly on a dollar-weighted basis, was as follows:
Dreyfus High Moody's or S&P, Fitch or Duff Percentage
Yield
Securities Fund
Aaa AAA 0.4%
Ba BB 4.0%
B B 43.7%
Caa CCC 6.5%
NR NR 25.2%*
79.8%**
* These unrated securities 25.2% have been determined by The Dreyfus
Corporation to be of comparable quality to securities: BB - .2%, CCC -
22.2%, and CC - .1%.
** The Fund also owns equity securities - 1.1%, convertible preferred
stocks - CCC: 1.4%, preferred stocks - AAA .6%, preferred stocks - BB: 0.1%,
preferred stocks - B: 6.0%, preferred stock - CCC: 11.5% and convertible
bonds - B: 1.5%. Approximately (-2.0%) of the Fund's assets were invested
in cash or cash equivalents.
Dreyfus Premier Moody's or S&P, Fitch or Duff Percentage
High Yield Debt
Plus Equity Fund
Aaa AAA 36.4%
Ba BB 0.6%
B B 21.6%
Caa CCC 3.0%
NR NR 7.4%*
69.0%**
* These unrated securities 7.4% have been determined by The Dreyfus
Corporation to be of comparable quality to securities: B: 3.4% and CCC:
4.0%.
** The Fund also owns equity securities - 17.6%, convertible preferred
stocks - CCC: 8.2%, preferred stocks - CCC: 2.7% and convertible bonds - B:
3.7%. Approximately (-1.2%) of the Fund's assets were invested in cash or
cash equivalents.
Dreyfus Short Moody's or S&P, Fitch or Duff Percentage
Term High Yield
Fund
Aaa AAA 0.2%
Ba BB 7.3%
B B 66.8%
Caa CCC 10.7%
NR NR 8.0%*
93.0%**
* These unrated securities 8.0% have been determined by The Dreyfus
Corporation to be of comparable quality to securities: BB: 0.4%, B: 5.0%,
CCC: 2.6%
** The Fund also owns equity securities - 0.1%, convertible preferred
stocks - B: 0.2%, preferred stocks - CCC: 1.9%, convertible bonds - A: 1.0%,
convertible bonds - BB: 0.1%, and convertible bonds - B: 5.0%.
Approximately (-1.3%) of the Fund's assets were invested in cash or cash
equivalents.
Dreyfus Premier Moody's or S&P, Fitch or Duff Percentage
Real Estate
Mortgage Fund
Aaa AAA 33.9%
A A 5.2%
Baa BBB 22.5%
Ba BB 14.6%
B B 3.4%
NR NR 34.2%*
113.8%**
* These unrated securities 34.2% have been determined by The Dreyfus
Corporation to be comparable quality to securities - A: 1.2%, BBB: 6.2%, BB:
2.2%, B: 18.9%, and CCC: 5.9%.
** The Fund also owns equity securities of 22.1%. Approximately (-35.9%)
of the Fund's assets were invested in cash or cash equivalents.
Dreyfus Core Moody's or S&P, Fitch or Duff Percentage
Bond Fund
Aaa AAA 36.4%
Aa AA 1.5%
A A 6.9%
Baa BBB 21.3%
Ba BB 16.8%
B B 6.3%
NR NR 3.9%*
93.1%**
* These unrated securities 3.9% have been determined by The Dreyfus
Corporation to be of comparable quality to securities - BBB: 2.9%, BB: 0.9%,
and B: 0.1%
** The Fund also owns equity securities - 0.5%, convertible preferred
stocks - AAA: 0.4%, convertible preferred stocks - BBB: 0.1%, convertible
preferred stocks - A: 0.4%, convertible preferred stocks BB: 1.6%, preferred
stocks - CCC: 6.5%, convertible bonds - A: 0.7%, convertible bonds - BBB:
2.3%, and convertible bonds - B: 2.7%. Approximately (-8.3%) of the Fund's
assets were invested in cash or cash equivalents.
The actual distribution of each of these Funds' corporate bond
investments by ratings on any given date will vary, and the distribution of
the Fund's investments by ratings as set forth above should not be
considered as representative of the Fund's future portfolio composition.
American Depositary Receipts. (Dreyfus Equity Income Fund and Dreyfus
Premier High Yield Debt Plus Equity Fund only) Each of these Funds may
invest in 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. Generally, ADRs in registered
form are designed for use in the United States securities markets. ADRs may
be purchased 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.
Foreign Government Obligations; Securities Of Supranational Entities.
(All Funds, except Dreyfus Equity Income Fund) A 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.
Illiquid Securities. (All Funds) A 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. These securities may include securities that are not
readily marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, repurchase agreements providing for
settlement in more than seven days after notice, and certain privately
negotiated, non-exchange traded options and securities used to cover such
options. As to these securities, the Fund is subject to a risk that should
the Fund desire to sell them when a ready buyer is not available at a price
the Fund deems representative of their value, the value of the Fund's net
assets could be adversely affected.
Money Market Instruments. (All Funds) When the Manager determines that
adverse market conditions exist, a Fund may adopt a temporary defensive
position and invest some or all of its assets in money market instruments,
including U.S. Government securities, repurchase agreements, bank
obligations and commercial paper.
Investment Techniques
The following information supplements and should be read in conjunction
with each Fund's Prospectus.
Duration. (All Funds, except Dreyfus Equity Income Fund) 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 Core Bond Fund and Dreyfus Short Term
High Yield Fund only) Dreyfus Core Bond Fund typically will maintain an
average effective maturity ranging between five and ten years. However, to
the extent the maturity of the Fund's benchmark index is outside this range
at a particular time (generally, this may occur during other than usual
market conditions), the Fund's average effective maturity also may fall
outside such range. Under normal market conditions, the average effective
portfolio maturity of Dreyfus Short Term High Yield Fund is expected to be
three years or less. For purposes of calculating average effective
portfolio maturity, a security that is subject to redemption at the option
of the issuer on a particular date (the "call date") which is prior to the
security's stated maturity may be deemed to mature on the call date rather
than on its stated maturity date. The call date of a security will be used
to calculate average effective portfolio maturity when 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. (All Funds) Leveraging (that is, buying securities using
borrowed money) exaggerates the effect on net asset value of any increase or
decrease in the market value of a Fund's portfolio. 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. For borrowings
for investment purposes, the 1940 Act requires a 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 holdings 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.
A 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, a Fund's borrowings generally will be
unsecured.
Although Dreyfus Equity Income Fund may borrow money for leveraging as
described above, it currently intends to borrow money only for temporary or
emergency (not leveraging) purposes, in an amount up to 15% of the value of
its total assets (including the amount borrowed) valued at the lesser of
cost or market, less liabilities (not including the amount borrowed) at the
time the borrowing is made. While borrowings exceed 5% of its total assets,
Dreyfus Equity Dividend Fund will not make any additional investments.
Short-Selling. (All Funds) In these transactions, a Fund sells a
security it does not own 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 Core Bond
Fund, Dreyfus Equity Income Fund, Dreyfus High Yield Securities Fund, and
Dreyfus Short Term High Yield 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. (All Funds) A 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, a 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.
Derivatives. (All Funds) A Fund may invest in, or enter into,
derivatives, such as options and futures, swaps (as to swaps, with respect
to all Funds, except Dreyfus Core Bond Fund and Dreyfus Equity Income Fund),
mortgage-related securities and asset-backed securities (except to Dreyfus
Equity Income Fund), 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.
Although neither the Company nor any Fund will be a commodity pool,
certain derivatives subject the Funds to the rules of the Commodity Futures
Trading Commission which limit the extent to which a Fund can invest in such
derivatives. A Fund may invest in futures contracts and options with
respect thereto for hedging purposes without limit. However, no Fund may
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.
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 on
exchanges located outside the United States, such as the London
International Financial Futures Exchange, the Deutsche Termine Borse 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 Manager's
ability 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 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. In addition, 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.
Each Fund, except Dreyfus Premier 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.
A 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. (All Funds, except Dreyfus Core Bond Fund and Dreyfus
Equity Income Fund) 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) Each of these Funds 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 invest up to 5% of its assets,
represented by the premium paid, in the purchase of call and put options. A
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. 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.
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 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. Each Fund, except Dreyfus Premier Real
Estate Mortgage 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 Income 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.
Each Fund, except Dreyfus Core Bond Fund, may purchase cash-settled
options on swaps in pursuit of their respective investment objective.
Equity index swaps in which Dreyfus Equity Income 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 Roll Transactions. (Dreyfus Core Bond Fund and Dreyfus Premier
Real Estate Mortgage Fund only) To enhance current income, each of these
Funds may enter into forward roll transactions with respect to
mortgage-related securities. In a forward roll transaction, the Fund sells
a mortgage-related security to a financial institution, such as a bank or
broker-dealer, and simultaneously agrees to purchase a similar security from
the institution at a later date at an agreed upon price. The securities
that are purchased will bear the same interest rate as those sold, but
generally will be collateralized by different pools of mortgages with
different pre-payment histories than those sold. During the period between
the sale and purchase, the Fund will not be entitled to receive interest and
principal payments on the securities sold. Proceeds of the sale typically
will be invested in short-term instruments, particularly repurchase
agreements, and the income from these investments, together with any
additional fee income received on the sale will be expected to generate
income for the Fund exceeding the yield on the securities sold. Forward
roll transactions involve the risk that the market value of the securities
sold by the Fund may decline below the purchase price of those securities.
The Fund will set aside in a segregated account of the Fund permissible
liquid assets at least equal to the amount of the repurchase price
(including accrued interest).
Forward Commitments. (All Funds) A 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.
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.
Foreign Currency Transactions. (All Funds, except Dreyfus Premier Real
Estate Mortgage Fund) A Fund may enter into foreign currency transactions
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, a 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. A Fund's success in these transactions will depend principally on
the ability of the Manager 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.
Investment Considerations and Risks
High Yield-Lower Rated Securities. (All Funds, except Dreyfus Equity
Income Fund) Each of these Funds may invest in securities rated below
investment grade such as those rated Ba by Moody's BB by S&P, Fitch and
Duff, including in securities with the lowest rating assigned by the Rating
Agencies. They may be subject to certain risks with respect to the issuing
entity and to greater market fluctuations than certain lower yielding,
higher rated 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 securities may be relatively less sensitive to
interest rate changes than higher quality securities of comparable maturity,
because of their higher coupon. This higher coupon is what the investor
receives in return for bearing greater credit risk. The higher credit risk
associated with below investment grade 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. 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. These Funds will
rely on the Manager's judgment, analysis and experience in evaluating the
creditworthiness of an issuer.
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.
Mortgage-Related Securities. (All Funds, except Dreyfus Equity Income
Fund) Mortgage-related securities are complex derivative instruments,
subject to both credit and prepayment risk. Although they may provide
opportunities for enhanced total return, you should be aware that the lower
rated mortgage-related securities in which the Fund may invest are likely to
be more volatile and less liquid, and more difficult to price accurately,
than more traditional debt securities. 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.
Mortgage-related securities generally are subject to credit risks
associated with the performance of the underlying mortgage properties and to
prepayment risk. 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 a 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, 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 a Fund's mortgage-related
securities to decrease broadly, the Fund's effective duration, and thus
sensitivity to interest rate fluctuations, would increase. Commercial real
property loans, however, often contain provisions that reduce the likelihood
that such securities will be prepaid. The provisions generally impose
significant prepayment penalties on loans and in some cases there may be
prohibitions on principal prepayments for several years following
origination.
Real Estate-Related Equity Securities. (Dreyfus Premier Real Estate
Mortgage Fund only) 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.
An investment in the Fund will generally be subject to the risks
associated with real estate. These risks include declines in the value of
real estate, risks related to general and local economic conditions,
overbuilding and increased competition, increases in property taxes and
operating expenses, changes in zoning laws, casualty or condemnation losses,
variations in rental income, changes in neighborhood values, the appeal of
properties to tenants and increases in interest rates. The value of
securities of companies that service the real estate industry will also be
affected by these risks.
The Fund's use of leverage may increase fluctuations in its net asset
value and increase the gain or loss on your investment.
Foreign Securities. (All Funds) 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 foreign securities usually are held
outside the United States, a Fund investing in such securities 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 payment of principal and interest on the foreign securities to
investors located outside the country of the issuer, whether from currency
blockage or otherwise. Moreover, foreign securities held by a Fund may
trade on days when the Fund does not calculate its net asset value and thus
affect the Fund's net asset value on days when investors have no access to
the Fund.
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 Funds 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.
Simultaneous Investments. (All Funds) Investment decisions for each
Fund are made independently from those of the other investment companies
advised by the Manager. If, however, such other investment companies desire
to invest in, or dispose of, the same securities as a 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.
Investment Restrictions
Each Fund's investment objective is a fundamental policy, 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. In addition, the Funds
have adopted certain investment restrictions as fundamental policies and
certain other investment restrictions as non-fundamental policies, as
described below.
Dreyfus Equity Income 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, 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 Core Bond Fund only. The Fund has adopted investment
restrictions numbered 1 through 10 as fundamental policies, which cannot be
changed without approval by the holders of a majority (as defined in the
1940 Act) of the Fund's outstanding voting shares. Investment restrictions
numbered 11 through 14 are not fundamental policies 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. 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.
4. 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.
5. 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.
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, 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 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.
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 permitted under the 1940 Act.
10. Purchase securities on margin, but the Fund may make margin
deposits in connection with transactions in options, forward contracts,
futures contracts, including those relating to indices, and options on
futures contracts or indices.
11. 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.
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 securities of other investment companies, except to the
extent permitted under the 1940 Act.
14. 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 Premier
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 Premier
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 relating 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 Premier 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
tend 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 relating 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
relating 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.
MANAGEMENT OF THE COMPANY
The Company's Board is responsible for the management and supervision
of each Fund. The Board approves all significant agreements with those
companies that furnish services to the Fund. These companies are as
follows:
The Dreyfus Corporation Investment Adviser
Premier Mutual Fund Services, Inc. Distributor
Dreyfus Transfer, Inc. Transfer Agent
Mellon Bank, N.A. Custodian
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 also is
a director of The Noel Group, Inc., a venture capital company (for
which, from February 1995 until November 1997, he was Chairman of the
Board), The Muscular Dystrophy Association, HealthPlan Services
Corporation, a provider of marketing, administrative and risk
management services to health and other benefit programs, Carlyle
Industries, Inc. (formerly, Belding Heminway Company, Inc.), a button
packager and distributor, Century Business Services, Inc., (formerly,
International Alliance Services, Inc.), a provider of various
outsourcing functions for small and medium sized companies, and Career
Blazers, Inc. (formerly, Staffing Resources, Inc.), a temporary
placement agency. 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 55 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
62 years old and his address is Box 654, Eastham, Massachusetts 02642.
ROSALIND GERSTEN JACOBS, Board Member. Marketing and Merchandising
Consultant. From 1977 to 1998 a 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 73 years old and her address is 19 East 72nd
Street, New York, New York 10021.
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 Wile Magazine.
Ms. Dunst is 59 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 70 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 also 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 69 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 68
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 71 years old and his address is 2626 Sycamore Canyon,
Santa Barbara, California 93108.
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, 1998, 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, 1998, were as follows:
Total Compensation From
Aggregate Company and Fund
Name of Board Compensation From Complex Paid to Board
Member Company* Member
Joseph S. DiMartino $6,250 $619,660 (99)
David W. Burke $5,000 $233,500 (51)
Rosalind Gersten Jacobs $5,000 $ 84,000 (20)
Diane Dunst $4,500 $ 37,750 (10)
Jay I. Meltzer $4,500 $ 34,000 (10)
Daniel Rose $4,500 $ 76,250 (21)
Warren B. Rudman $4,500 $ 82,000 (18)
Sander Vanocur $5,000 $ 76,250 (21)
____________________
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $887 (Dreyfus Core Bond Fund), $193
(Dreyfus Equity Income Fund), $573 (Dreyfus High Yield Securities
Fund), $21 (Dreyfus Premier High Yield Debt Plus Equity Fund), $228
(Dreyfus Premier Real Estate Mortgage Fund) and $2,791 (Dreyfus Short
Term High Yield 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 41 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, she 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.
MICHAEL S. PETRUCELLI, Vice President, Assistant Secretary and Assistant
Treasurer. 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 Investment Services. He is 37 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. From August
1995 to April 1997, she was an Assistant Vice President with Hudson
Valley Bank, and from September 1990 to August 1995, she was Second
Vice President with Chase Manhattan Bank. She is 30 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 34 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 and Manager of Client Services and Director of Internal Audit
at The Boston Company, Inc. He is 43 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 36 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. He is 29 years old.
CHRISTOPHER J. KELLEY, Vice President and Assistant Secretary. Vice
President and Senior Associate General Counsel of the Distributor and
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 34 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 26 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 37
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 February 8, 1999.
As of February 8, 1999, the following shareholders were known by the
Company to own 5% or more of the outstanding voting securities of the
indicated Fund: Dreyfus Equity Income Fund: APT Holdings Corporation,
Wilmington, DE (69.44%); Mark N. Jacobs and Susan R. Jacobs, Short Hills, NJ
(6.62%); Dreyfus High Yield Securities Fund: Charles Schwab & Co. Inc.
Reinvest Account, San Francisco, CA (18.45%); Charles Schwab & Co. Inc. Cash
Account, San Francisco, CA (10.57%); Richard Family Trust, Calabasas, CA
(6.83%); Dreyfus Short Term High Yield Fund: Charles Schwab & Co. Inc.
Reinvest Account, San Francisco, CA (12.31%); Dreyfus Premier Real Estate
Mortgage Fund: Class A - MBCIC, c/o Mellon Bank, Wilmington, DE (82.14%);
Class B, Class C, Class T, and Class R - Premier Mutual Fund Services Inc.,
Boston, MA (100.00%) each; Dreyfus Premier High Yield Debt Plus Equity
Fund: Class A - MBCIC, c/o Mellon Bank, Wilmington, DE (98.94%); Class B -
MBCIC, c/o Mellon Bank, Wilmington, DE (90.64%); Class C - MBCIC, c/o Mellon
Bank, Wilmington, DE (98.77%); Class T - MBCIC, c/o Mellon Bank, Wilmington,
DE (100.00%). 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 ARRANGEMENTS
Investment Adviser. The Manager is a wholly-owned subsidiary of Mellon
Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). Mellon is a publicly owned multibank holding company
incorporated under Pennsylvania law in 1971 and registered under the Federal
Bank Holding Company Act of 1956, as amended. Mellon provides a
comprehensive range of financial products and services in domestic and
selected international markets. Mellon is among the twenty-five largest
bank holding companies in the United States based on total assets.
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") dated August 24, 1994, as amended December 6,
1995, 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 Core Bond Fund on August 3, 1994, and was last
approved by the Company's Board as to each Fund, except 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 5, 1998. With respect to Dreyfus Equity Income Fund, Dreyfus
High Yield Securities Fund, Dreyfus Short Term High Yield Fund and Dreyfus
Premier Real Estate Mortgage Fund, the Agreement was approved by such Fund's
initial shareholder on January 2, 1996, March 25, 1996, August 16, 1996 and
September 30, 1997, respectively. 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:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment
Officer and a director; Thomas F. Eggers, Vice-Chairman - Institutional and
a director; Lawrence S. Kash, Vice Chairman and a director; Ronald P.
O'Hanley III, Vice Chairman; J. David Officer, Vice Chairman and a director;
William T. Sandalls, Jr., Executive Vice President; 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; Theodore
A. Schachar, Vice President; Wendy Strutt, Vice President; William H.
Maresca, Controller; James Bitetto, Assistant Secretary; Steven F. Newman,
Assistant Secretary; and Mandell L. Berman, Burton Borgelt, Steven G.
Elliott, Martin C. McGuinn, Richard W. Sabo, 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 Income Fund are Timothy Ghriskey and Douglas Ramos. Michael Hoeh,
Roger King, John Koerber, C. Matthew Olson, and Gerald E. Thunelius each are
portfolio managers for Dreyfus Core Bond Fund, Dreyfus High Yield Securities
Fund, Dreyfus Premier High Yield Debt Plus Equity Fund, Dreyfus Premier Real
Estate Mortgage Fund, and Dreyfus Short Term High Yield 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 Company. The Manager may pay the Distributor for
shareholder services from the Manager's own assets, including past profits
but not including the management fees paid by the Funds. The Distributor
may use part or all of such payments to pay Service Agents (as defined
below) in respect of these services. The Manager also may make such
advertising and promotional expenditures, using its own resources, as it
from time to time deems appropriate.
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, Class B, Class C and Class
T shares of each of the Dreyfus Premier Funds are subject to an annual
distribution fee, and Class A, Class B, Class C and Class T shares of each
of the Dreyfus Premier Funds and shares of each other Fund 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
Income 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 Premier 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 Core Bond Fund's
average daily net assets. For the fiscal years and/or periods ended October
31, 1996, 1997 and 1998, as applicable, the management fees payable by each
indicated Fund, the amounts waived by the Manager, and the actual net fees
paid by each Fund, were as follows:
<TABLE>
Name of Fund Management Fee Payable Reduction in Fee Net Fee Paid
1996 1997 1998 1996 1997 1998 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dreyfus Core $1,829,326 $1,670,431 $1,726,911 $0 $0 $0 $1,829,326 $1,6770,431 $1,726,911
Bond Fund
Dreyfus Equity $ 15,722(1) $ 27,673 $ 35,187 $15,722 $ 27,673 $35,187 $0 $0 $0
Income Fund
Dreyfus High $ 72,715(2) $ 425,180 $1,188,069 $72,715 $279,698 $0 $0 $ 145,492 $1,188,069
Yield
Securities Fund
Dreyfus Premier N/A N/A $ 23,351(5) N/A N/A $23,351 N/A N/A $0
High Yield Debt
Plus Equity Fund
Dreyfus Premier N/A $ 5,784(3) $ 82,802 N/A $ 5,784 $82,802 N/A $0 $0
Real Estate
Mortgage Fund
Dreyfus Short $ 18,501(4) $ 527,739 $1,289,838 $18,501 $15,583 $0 $0 $ 511,886 $1,289,838
___________________________
(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.
(5) For the period June 29, 1998 (commencement of operations) through
October 31, 1998.
</TABLE>
As to Dreyfus Core Bond Fund, Dreyfus Equity Income Fund, the Dreyfus
High Yield Securities Fund, and Dreyfus Short Term High Yield 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.
Distributor. Premier Mutual Fund Services, Inc., located at 60 State
Street, Boston, Massachusetts 02109, serves as each Fund's distributor on a
best efforts basis pursuant to an agreement with the Company which is
renewable annually.
With respect to Dreyfus Premier High Yield Debt Plus Equity Fund, for
the fiscal period June 29, 1998 (commencement of operations) through
October 31, 1998, the no amounts were retained by the Distributor from
sales loads on Class A shares or from contingent deferred sales charges
("CDSC") on Class B shares, and $645 was retained from the CDSC on Class C
shares.
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 a Fund, including past profits or any other source available
to it.
The Distributor, at its expense, may provide promotional incentives to
dealers that sell shares of funds advised by the Manager which are sold
with a sales load, such as the Dreyfus Premier Funds. In some instances,
those incentives may be offered only to certain dealers who have sold or
may sell significant amounts of shares.
Transfer and Dividend Disbursing Agent and Custodian. Dreyfus
Transfer, Inc. (the "Transfer Agent"), 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, the Transfer Agent 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, the
Transfer Agent receives a monthly fee computed on the basis of the number
of shareholder accounts it maintains for each Fund during the month, and is
reimbursed for certain out-of-pocket expenses.
Mellon Bank, N.A. (the "Custodian"), the Manager's parent, One Mellon
Bank Center, Pittsburgh, Pennsylvania 15258, acts as custodian of the
investments of each Fund. Under a custody agreement with the Company, the
Custodian holds each Fund's securities and keeps all necessary accounts and
records. For its custody services, the Custodian receives a monthly fee
based on the market value of the Funds' assets held in custody and receives
certain securities transactions charges.
HOW TO BUY SHARES
Applicable to all Funds, except the Dreyfus Premier Funds
General. Fund shares are sold without a sales charge. You may be
charged a fee if you effect transactions in Fund shares through a securities
dealer, bank or other financial institution. Stock certificates are issued
only upon your written request. No certificates are issued for fractional
shares. The Fund reserves the right to reject any purchase order.
The minimum initial investment is $2,500, or $1,000 if you are a client
of a securities dealer, bank or other financial institution which maintains
an omnibus account in the Fund and has made an aggregate minimum initial
purchase for its customers of $2,500. Subsequent investments must be at
least $100. However, the minimum initial investment is $750 for Dreyfus-
sponsored 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"), 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. For full-time or part-time employees of the Manager or
any of its affiliates or subsidiaries, directors of the Manager, Board
members of a fund advised by the Manager, including members of the Fund's
Board, or the spouse or minor child of any of the foregoing, the minimum
initial investment is $1,000. For full-time or part-time employees of the
Manager or any of its affiliates or subsidiaries who elect to have a portion
of their pay directly deposited into their Fund accounts, the minimum
initial investment is $50. The Fund reserves the right to offer Fund shares
without regard to minimum purchase requirements to employees participating
in certain qualified or non-qualified employee benefit plans or other
programs where contributions or account information can be transmitted in a
manner and form acceptable to the Fund. The Fund reserves the right to vary
further the initial and subsequent investment minimum requirements at any
time.
Fund shares also are offered without regard to the minimum initial
investment requirements through Dreyfus-Automatic Asset Builderr, Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan pursuant
to the Dreyfus Step Program described under "Shareholder Services." These
services enable you to make regularly scheduled investments and may provide
you with a convenient way to invest for long-term financial goals. You
should be aware, however, that periodic investment plans do not guarantee a
profit and will not protect an investor against loss in a declining market.
Shares are sold on a continuous basis at the net asset value per share
next determined after an order in proper form is received by the Transfer
Agent or other entity authorized to receive orders on behalf of the Fund.
Net asset value per share is determined as of the close of trading on the
floor of the New York Stock Exchange (currently 4:00 p.m., New York time) on
each day the New York Stock Exchange or the Transfer Agent is open for
business. For purposes of computing net asset value per share, options will
be valued 15 minutes after the close of trading on the floor of the New York
Stock Exchange. Net asset value per share is computed by dividing the value
of the Fund's net assets (i.e., the value of its assets less liabilities) by
the total number of shares outstanding. The Fund's investments are valued
based on market value or, where market quotations are not readily available,
based on fair market value as determined in good faith by the Fund's Board.
For further information regarding the methods employed in valuing the Fund's
investments, see "Determination of Net Asset Value."
For certain institutions that have entered into agreements with the
Distributor, payment for the purchase of Fund shares may be transmitted, and
must be received by the Transfer Agent, within three business days after the
order is placed. If such payment is not received within three business days
after the order is placed, the order may be canceled and the institution
could be held liable for resulting fees and/or losses.
Applicable to the Dreyfus Premier Funds only
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 the Manager or any of its affiliates or
subsidiaries, directors of the Manager, Board members of a fund advised by
the Manager, including members of the Company's Board, or the spouse or
minor child of any of the foregoing may purchase Class A shares directly
through the Distributor. Subsequent purchases may be sent directly to the
Transfer Agent or your Service Agent.
Dreyfus Premier Real Estate Mortgage Fund offers Class R shares to
institutional investors acting for themselves or in a fiduciary, advisory,
agency, custodial or similar capacity for qualified or non-qualified
employee benefit plans, including pension, profit-sharing, SEP-IRAs and
other deferred compensation plans, whether established by corporations,
partnerships, non-profit entities or state and local governments
("Retirement Plans"). The term "Retirement Plans" does not include IRAs or
IRA "Rollover Accounts." Class R shares may be purchased for a Retirement
Plan only by a custodian, trustee, investment manager or other entity
authorized to act on behalf of such Retirement Plan. Institutions effecting
transactions in Class R shares for the accounts of their clients may charge
their clients direct fees in connection with such transactions.
When purchasing Dreyfus Premier Fund shares, you must specify which
Class is being purchased. Stock certificates are issued only upon your
written request. No certificates are issued for fractional shares. The
Company reserves the right to reject any purchase order.
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 the relevant Fund's Prospectus and this Statement of
Additional Information, 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 Company
reserves the right to offer Fund shares without regard to minimum purchase
requirements to employees participating in certain qualified or non-
qualified employee benefit plans or other programs where contributions or
account information can be transmitted in a manner and form acceptable to
the Company. The Company reserves the right to vary further the initial and
subsequent investment minimum requirements at any time.
The Code imposes various limitations on the amount that may be
contributed to certain Retirement Plans. These limitations apply with
respect to participants at the plan level and, therefore, do not directly
affect the amount that may be invested in a Fund by a Retirement Plan.
Participants and plan sponsors should consult their tax advisers for
details.
Fund shares also may be purchased through Dreyfus-Automatic Asset
Builderr, Dreyfus Government Direct Deposit Privilege or Dreyfus 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.
Fund shares are sold on a continuous basis. Net asset value per share
is determined as of the close of trading on the floor of the New York Stock
Exchange (currently 4:00 p.m., New York time), on each day the New York
Stock Exchange is open for business. For purposes of determining net asset
value, options and futures contracts will be valued 15 minutes after the
close of trading on the floor of the New York Stock Exchange. Net asset
value per share 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.
Each 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 Company's Board. For further information regarding the
methods employed in valuing the Funds' investments, see "Determination of
Net Asset Value."
If an order is received in proper form by the Transfer Agent or other
entity authorized to receive orders on behalf of the Fund by the close of
trading on the floor of the 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 floor of
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 floor of 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 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 by the close of its
business day (normally 5:15 p.m., New York time) will be based on the public
offering price per share determined as of the close of trading on the floor
of the 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 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.
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:
Total Sales Load Class A Shares
As a % of As a % of
Amount of Transaction offering price net asset value
per share per share
Less than $50,000 5.75 6.10
$50,000 to less than $100,000 4.50 4.70
$100,000 to less than $250,000 3.50 3.60
$250,000 to less than $500,000 2.50 2.60
$500,000 to less than $1,000,000 2.00 2.00
$1,000,000 or more -0- -0-
For shareholders of Dreyfus Premier Real Estate Mortgage Fund who
beneficially owned Class A shares of the Fund prior to December 24, 1998,
the public offering price for Class A shares of Dreyfus Premier Real Estate
Mortgage Fund is the net asset value per share of that Class.
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. This
provision does not apply to a shareholder of Dreyfus Premier Real Estate
Mortgage Fund who owned Class A shares of the Fund prior to December 24,
1998. 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 scale of sales loads applies to purchases of Class A shares made by
any "purchaser," which term includes an individual and/or spouse purchasing
securities for his, her or their own account or for the account of any minor
children, or a trustee or other fiduciary purchasing securities for a single
trust estate or a single fiduciary account trust estate or a single
fiduciary account (including a pension, profit-sharing, or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Code) although more than one beneficiary is involved; or a group of accounts
established by or on behalf of the employees of an employer or affiliated
employers pursuant to an employee benefit plan or other program (including
accounts established pursuant to Sections 403(b), 408(k), and 457 of the
Code); or an organized group which has been in existence for more than six
months, provided that it is not organized for the purpose of buying
redeemable securities of a registered investment company and provided that
the purchases are made through a central administration or a single dealer,
or by other means which result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering
price of Class A shares of the Dreyfus Premier Funds. The example assumes a
purchase of Class A shares of the relevant Dreyfus Premier Fund aggregating
less than $50,000, subject to the schedule of sales charges set forth above
at a price based upon the net asset value of the Fund's Class A shares as of
October 31, 1998:
Dreyfus
Premier Dreyfus
High Yield Premier Real
Debt Plus Estate
Equity Fund Mortgage Fund
Net Asset Value per Share $10.27 $12.09
Per Share Sales Charge
Class A-5.75% of offering price (6.10% of
net asset value per share) $ 0.63 $0.74
Per Share Offering Price to the Public $10.90 $12.83
Full-time employees of NASD member firms and full-time employees of
other financial institutions which have entered into an agreement with the
Distributor pertaining to the sale of Fund shares (or which otherwise have a
brokerage related or clearing arrangement with an NASD member firm or
financial institution with respect to the sale of such shares) may purchase
Class A shares for themselves directly or pursuant to an employee benefit
plan or other program, or for their spouses or minor children, at net asset
value, provided they have furnished the Distributor with such information as
it may request from time to time in order to verify eligibility for this
privilege. This privilege also applies to full-time employees of financial
institutions affiliated with NASD member firms whose full-time employees are
eligible to purchase Class A shares at net asset value. In addition, Class
A shares are offered at net asset value to full-time or part-time employees
of the Manager or any of its affiliates or subsidiaries, directors of the
Manager, Board members of a fund advised by the Manager, including members
of the Company'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, 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.
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 Manager or its
affiliates. The purchase of Class A shares of a Fund must be made within 60
days of such redemption and the shareholder must have either (i) paid an
initial sales charge or a contingent deferred sales charge or (ii) been
obligated to pay at any time during the holding period, but did not actually
pay on redemption, a deferred sales charge with respect to such redeemed
shares.
Class A shares also may be purchased at 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
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).
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 in the relevant Dreyfus Premier Fund's
Prospectus and in this Statement of Additional Information under "How to
Redeem Shares--Contingent Deferred Sales Charge--Class B Shares." The
Distributor compensates certain Service Agents for selling Class B 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.
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. Class B shares that have been
acquired through the reinvestment of dividends and distributions will be
converted on a pro rata basis together with other Class B shares, in the
proportion that a shareholder's Class B shares converting to Class A shares
bears to the total Class B shares not acquired through the reinvestment of
dividends and distributions.
Class C Shares. The public offering price for Class C shares is the
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 R Shares. The public offering for Class R shares is the net
asset value per share of that Class.
Class T Shares. The public offering price for Class T shares is the
net asset value per share of that Class plus a sales load as shown below:
Total Sales Load Class T Shares
As a % of As a % of
Amount of Transaction offering price net asset value
per share per share
Less than $50,000 4.50 4.70
$50,000 to less than $100,000 4.00 4.20
$100,000 to less than $250,000 3.00 3.10
$250,000 to less than $500,000 2.00 2.00
$500,000 to less than $1,000,000 1.50 1.50
$1,000,000 or more -0- -0-
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. 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 a Dreyfus Premier
Fund (assuming ineligibility to purchase Class R shares with respect to
Dreyfus Premier Real Estate Mortgage Fund) generally will find it beneficial
to purchase Class A shares rather than Class T shares.
The scale of sales loads applies to purchases of Class T shares made by
any "purchaser," as defined above under "Class A Shares."
Set forth below is an example of the method of computing the offering
price of Class T shares of the Dreyfus Premier Funds. The example assumes a
purchase of Class T shares of the relevant Dreyfus Premier Fund aggregating
less than $50,000, subject to the schedule of sales charges set forth above
at a price based upon the net asset value of the Fund's Class T shares as of
October 31, 1998, in the case of Dreyfus Premier High Yield Debt Plus Equity
Fund, or its initial offering date (December 28, 1998), in the case of
Dreyfus Premier Real Estate Mortgage Fund:
Dreyfus Premier Dreyfus Premer
High Yield Debt Real Estate
Plus Equity Fund Mortgage Fund
Net Asset Value per Share $10.26 $11.47
Per Share Sales Charge
Class T-4.50% of offering price (4.70%
of net asset value per share) $ 0.48 $ 0.54
Per Share Offering Price to the Public $10.74 $12.01
Right of Accumulation--Class A or Class T Shares. Reduced sales loads
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 Manager which are sold with a sales load and shares acquired
by a previous exchange of such shares (hereinafter referred to as "Eligible
Funds"), by you and any related "purchaser" as defined above, where the
aggregate investment, including such purchase, is $50,000 or more. If, for
example, you previously purchased and still hold Class A or Class T shares
of a Dreyfus Premier Fund, or shares of any other Eligible Fund, or
combination thereof, with an aggregate current market value of $40,000 and
subsequently purchase Class A or Class T shares of such 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 at the time of purchase you or your Service Agent must
notify the Distributor if orders are made by wire, or the Transfer Agent if
orders are made by mail. The reduced sales load is subject to confirmation
of your holdings through a check of appropriate records.
Applicable to All Funds
Dreyfus TeleTransfer Privilege. You may purchase shares by telephone
if you have checked the appropriate box and supplied the necessary
information on the Account Application or have filed a Shareholder Services
Form with the Transfer Agent. The proceeds will be transferred between the
bank account designated in one of these documents and your Fund account.
Only a bank account maintained in a domestic financial institution which is
an Automated Clearing House member may be so designated.
Dreyfus TeleTransfer purchase orders may be made at any time.
Purchase orders received by 4:00 p.m., New York time, on any business day
that the Transfer Agent and the New York Stock Exchange are open for
business will be credited to the shareholder's Fund account on the next
bank business day following such purchase order. Purchase orders made
after 4:00 p.m., New York time, on any business day the Transfer Agent and
the New York Stock Exchange are open for business, or orders made on
Saturday, Sunday or any Fund holiday (e.g., when the New York Stock
Exchange is not open for business), will be credited to the shareholder's
Fund account on the second bank business day following such purchase order.
To qualify to use the Dreyfus TeleTransfer Privilege, the initial payment
for purchase of 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 "How to Redeem Shares--
Dreyfus TeleTransfer Privilege."
Reopening an Account. You 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
Class B, Class C and Class T shares of each Dreyfus Premier Fund are
subject to a Distribution Plan, and Class A, Class B, Class C and Class T
shares of each Dreyfus Premier Fund and the shares of each other Fund are
subject to a Shareholder Services Plan.
Distribution Plan. (Dreyfus Premier Funds 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
each Dreyfus Premier Fund pursuant to which the Fund pays the Distributor
for distributing such shares at an annual rate of .75% of the value of the
average daily net assets of Class B and Class C shares, and .25% of the
value of the average daily net assets of 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 initially was approved by the
Board, as to Dreyfus Premier High Yield Debt Plus Equity Fund, at a meeting
held on May 6, 1998, and was last approved as to Dreyfus Premier Real Estate
Mortgage Fund, at a meeting held on November 4, 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.
For the fiscal year ended October 31, 1998, Class B, Class C, and Class
T shares of Dreyfus Premier High Yield Debt Plus Equity Fund were charged
$9,368, $2,425, and $767, respectively, pursuant to the Distribution Plan.
All of these amounts were paid to Service Agents for distribution. The
Distribution Plan was not in effect for Dreyfus Premier Real Estate Mortgage
Fund during the fiscal year ended October 31, 1998.
Shareholder Services Plan. (All Funds) The Company has adopted a
Shareholder Services Plan as to Class A, Class B, Class C and Class T shares
of each of the Dreyfus Premier Funds, 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 such shares a fee at the annual rate of
.25% of the value of the average daily net assets of the shares. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding a Fund, 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 Service Agents in respect of
these services.
A quarterly report of the amounts expended under the Shareholder
Services Plan (including as to each relevant Class of Dreyfus Premier High
Yield Debt Plus Equity Fund and Dreyfus Premier Real Estate Mortgage 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 August 5, 1998 (as to
Dreyfus Premier Real Estate Mortgage Fund, the Plan was approved on such
date only with respect to shares which were reclassified as Class A shares,
effective December 24, 1998). As to Dreyfus Premier Real Estate Mortgage
Fund's Class B, Class C and Class T Shares, the Shareholder Services Plan
was so approved on November 4, 1998. As to Dreyfus Premier High Yield Debt
Plus Equity Fund, the Shareholder Services Plan was initially approved 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, 1998, $719,546, $11,729, $456,950
and $496,092 was charged the Company with respect to Dreyfus Core Bond Fund,
Dreyfus Equity Income Fund, Dreyfus High Yield Securities Fund and Dreyfus
Short Term High Yield Fund, respectively, pursuant to the Shareholder
Services Plan. As to Dreyfus Premier Real Estate Mortgage Fund, for the
fiscal year ended October 31, 1998, $31,847 was charged to the Company
pursuant to the Shareholder Services Plan (reflecting amounts for shares
reclassified as Class A shares effective December 24, 1998). As to Dreyfus
Premier High Yield Debt Plus Equity Fund, for the fiscal year on October 31,
1998, $7,784 was charged to the Fund, of which $3,085, $3,123, $809, and
$767 was attributable to Class A, Class B, Class C and Class T Shares,
respectively.
HOW TO REDEEM SHARES
Redemption Fee. (Dreyfus High Yield Securities Fund only) The Fund
deducts a redemption fee equal to 1% 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, 1998, redemption fees retained by Dreyfus High Yield
Securities Fund amounted to $409,632.
Prior to December 24, 1998, Dreyfus Premier Real Estate Mortgage Fund
also charged a 1% redemption fee on shares (which were reclassified as Class
A shares effective December 24, 1998) held for six months or less. For the
fiscal year ended October 31, 1998, no redemption fees were retained by
Dreyfus Premier Real Estate Mortgage Fund.
Dreyfus High Yield Securities Fund will not charge a redemption fee 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.
Contingent Deferred Sales Charge--Class B Shares. (Dreyfus Premier
Funds only) A CDSC payable to the Distributor is imposed on any redemption
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 held by you at the time of redemption.
If the aggregate value of 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.
In circumstances where the CDSC is imposed, the amount of the charge
will depend on the number of years for 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 purchased six years prior to the redemption;
and finally, of amounts representing the cost of shares held for the longest
period of time within the applicable six-year period.
For example, assume an investor purchased 100 shares at $10 per share
for a cost of $1,000. Subsequently, the shareholder acquired five
additional shares through dividend reinvestment. During the second year
after the purchase the investor decided to redeem $500 of the 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% (the applicable rate in the second year
after purchase) for a total CDSC of $9.60.
Contingent Deferred Sales Charge--Class C Shares. (Dreyfus Premier
Funds only) 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. (Dreyfus Premier Funds only) 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 70 1/2
in the case of an IRA or Keogh plan or custodial account pursuant to
Section 403(b) of the Code, and (e) redemptions pursuant to the Automatic
Withdrawal Plan, as described below. If the Company's Board determines to
discontinue the waiver of the CDSC, the disclosure herein will be revised
appropriately. Any Fund shares subject to a CDSC which were purchased
prior to the termination of such waiver will have the CDSC waived as
provided in the Fund's Prospectus or this Statement of Additional
Information at the time of the purchase of such shares.
To qualify for a waiver of the CDSC, at the time of redemption you
must notify the Transfer Agent or your Service Agent must notify the
Distributor. Any such qualification is subject to confirmation of your
entitlement.
Redemption Through a Selected Dealer. (Dreyfus Premier Funds only) 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. (Dreyfus Premier Funds only) 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, your 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.
Wire Redemption Privilege. (All Funds, except Dreyfus Premier Funds)
By using this Privilege, you authorize the Transfer Agent to act on wire,
telephone or letter redemption instructions from any person representing
himself or herself to be you, or a representative of your Service Agent,
and reasonably believed by the Transfer Agent to be genuine. 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 you have specified on the Account Application or Shareholder
Services Form, or to a correspondent bank if your bank is not a member of
the Federal Reserve System. Fees ordinarily are imposed by such bank and
borne by you. Immediate notification by the correspondent bank to your
bank is necessary to avoid a delay in crediting the funds to your bank
account.
If you have access to telegraphic equipment you 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
If you do not have direct access to telegraphic equipment you may have
the wire transmitted by contacting a TRT Cables operator at 1-800-654-7171,
toll free. You should advise the operator that the above transmittal code
must be used and you 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 "Stock Certificates; Signatures."
Dreyfus TeleTransfer Privilege. (All Funds) You may request by
telephone that redemption proceeds 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 ("ACH") member
may be designated. 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. You should be
aware that if you have selected the Dreyfus TeleTransfer Privilege, any
request for a wire redemption will be effected as a Dreyfus TeleTransfer
transaction through the ACH system unless more prompt transmittal
specifically is requested. Redemption proceeds will be on deposit in the
your account at an ACH member bank ordinarily two business days after
receipt of the redemption request. See "How to Buy Shares--Dreyfus
TeleTransfer Privilege."
Stock Certificates; Signatures. (All Funds) 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.
Redemption Commitment. (All Funds) 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 such 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 and is a fundamental policy of each Fund
which may not be changed without shareholder approval. 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. (All Funds) 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.
Small Account Fee. (All Funds) To offset the relatively higher costs
of servicing smaller accounts, a Fund will charge regular accounts with
balances below $2,000 an annual fee of $12. The valuation of accounts and
the deductions are expected to take place during the last four months of
each year. The fee will be waived for any investor whose aggregate Dreyfus
mutual fund investments total at least $24,000, and will not apply to IRA
accounts or to accounts participating in automatic investment programs or
opened through a securities dealer, bank or other financial institution, or
to other fiduciary accounts.
SHAREHOLDER SERVICES
Fund Exchanges. (All Funds) You may purchase, in exchange for shares
of a Fund, shares of certain other funds managed or administered by the
Manager, to the extent such shares are offered for sale in your state of
residence. Shares of a Dreyfus Premier Fund may be exchanged only for
shares of the same Class of such other funds, except that Class T shares of
a Dreyfus Premier Fund may be exchanged for Class A shares of the other
funds. Dreyfus High Yield Securities Fund deducts a redemption fee equal to
1% of the net asset value of Fund shares exchanged where the exchange occurs
less than six months following the issuance of such shares. Shares of other
funds (including the same Class of other funds, or Class A shares of such
funds in the case of Class T shares of a Dreyfus Premier Fund) purchased by
exchange will be purchased on the basis of relative net asset value per
share as follows:
A. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
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, you or, with respect to
the Dreyfus Premier Funds, your Service Agent acting on your behalf, must
notify the Transfer Agent of their prior ownership of fund shares and their
account number.
With respect to each of the Dreyfus Premier Funds, 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 Manager. 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 Dreyfus Auto-Exchange Privilege,
Dreyfus Dividend Sweep and the Automatic Withdrawal Plan.
To request an exchange, you or, with respect to the Dreyfus Premier
Funds, your Service Agent acting on your behalf, must give exchange
instructions to the Transfer Agent in writing or by telephone. If you did
not purchase your Dreyfus Premier Fund shares through a Service Agent, you
may give exchange instructions directly to the Transfer Agent. The Fund
automatically gives you the ability to issue exchange instructions by
telephone, unless you check the applicable "No" box on the Account
Application, indicating that you specifically refuse this Privilege. By
using the Telephone Exchange Privilege, you authorize the Transfer Agent to
act on telephonic instructions from any person representing himself or
herself to be you, or a representative of your Service Agent, and reasonably
believed by the Transfer Agent to be genuine. Telephone exchanges may be
subject to limitations as to the amount involved or the number of telephone
exchanges permitted. Shares issued in certificate form are not eligible for
telephone exchange. No fees currently are charged shareholders directly in
connection with exchanges, although the Fund reserve 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.
Exchanges of Class R Shares of Dreyfus Premier Real Estate Mortgage
Fund held by a Retirement Plan may be made only between the investor's
Retirement Plan account in one fund and such investor's Retirement Plan
account in another fund.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made.
Dreyfus Auto-Exchange Privilege. (All Funds) Dreyfus Auto-Exchange
Privilege permits you to purchase, in exchange for shares of the Fund,
shares of another fund in the Dreyfus Premier Family of Funds or the Dreyfus
Family of Funds. Shares of a Dreyfus Premier Fund may be exchanged only for
shares of the same Class of such other fund, except that Class T shares of a
Dreyfus Premier Fund may be exchanged for Class A shares of the other fund.
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. You will be notified if your account falls below the amount
designated to be exchanged under this Privilege. In this case, your 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.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. Shares may be exchanged only between
accounts having identical names and other identifying designations. The
Fund reserves the right to reject any exchange request in whole or in part.
The Fund Exchanges service or Dreyfus Auto-Exchange Privilege may be
modified or terminated at any time upon notice to shareholders.
Dreyfus-Automatic Asset Builderr. (All Funds) 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.
Dreyfus Government Direct Deposit Privilege. (All Funds) Dreyfus
Government Direct Deposit Privilege enables you to purchase Fund shares
(minimum of $100 and maximum of $50,000 per transaction) by having Federal
salary, Social Security, or certain veterans', military or other payments
from the U.S. Government automatically deposited into your Fund account.
You may deposit as much of such payments as you elect.
Dreyfus Payroll Savings Plan. (All Funds) Dreyfus Payroll Savings Plan
permits you to purchase Fund shares (minimum of $100 per transaction)
automatically on a regular basis. Depending upon your employer's direct
deposit program, you may have part or all of your paycheck transferred to
your existing Dreyfus account electronically through the Automated Clearing
House system at each pay period. To establish a Dreyfus Payroll Savings
Plan account, you must file an authorization form with your employer's
payroll department. It is the sole responsibility of your employer, not the
Distributor, Dreyfus, the Fund, the Transfer Agent or any other person, to
arrange for transactions under the Dreyfus Payroll Savings Plan.
Dreyfus Step Program. (All Funds, except the Dreyfus Premier Funds)
The Dreyfus Step Program enables you to purchase Fund shares without regard
to the Fund's minimum initial investment requirements through Dreyfus-
Automatic Asset Builderr, Dreyfus Government Direct Deposit Privilege or
Dreyfus Payroll Savings Plan. To establish a Dreyfus Step Program account,
you must supply the necessary information on the Account Application and
file the required authorization form(s) with the Transfer Agent. For more
information concerning this Program, or to request the necessary
authorization form(s), please call toll free 1-800-782-6620. You may
terminate your participation in this Program at any time by discontinuing
your participation in Dreyfus-Automatic Asset Builder, Dreyfus Government
Direct Deposit Privilege or Dreyfus Payroll Savings Plan, as the case may
be, as provided under the terms of such Privilege(s). The Fund may modify
or terminate this Program at any time.
Dreyfus Dividend Options. (All Funds) Dreyfus Dividend Sweep allows
you to invest automatically your dividends or dividends and capital gain
distributions, if any, from the Fund in shares of another fund in the
Dreyfus Family of Funds, or shares of the same Class (or Class A in the case
of Class T shares) of certain other funds in the Dreyfus Premier Family of
Funds, of which you are a shareholder. Shares of other funds purchased
pursuant to this privilege will be purchased on the basis of relative net
asset value per share as follows:
A. Dividends and distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that
are offered without a sales load.
B. Dividends and distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds
sold with a sales load, and the applicable sales load will be
deducted.
C. Dividends and distributions paid by a fund that charges a
sales load may be invested in shares of other funds sold with
a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered
Shares exceeds the maximum sales load charged by the fund
from which dividends or distributions are being swept,
without giving effect to any reduced loads, the difference
will be deducted.
D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be
imposed upon redemption of such shares.
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.
Automatic Withdrawal Plan. (All Funds) 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. Withdrawal payments are the proceeds from sales of Fund shares,
not the yield on the shares. If withdrawal payments exceed reinvested
dividends and distributions, your shares will be reduced and eventually may
be depleted. The Automatic Withdrawal Plan may be terminated 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.
Certain 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.
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 shareholders account will be subject to a CDSC on the
amounts exceeding 12% of the initial account value. Withdrawals of Class
A or Class T shares subject to a CDSC and Class C shares under the
Automatic Withdrawal Plan will be subject to any applicable CDSC.
Purchases of additional Class A or Class T shares where the sales load is
imposed concurrently with withdrawals of Class A or Class T shares
generally are undesirable.
Letter of Intent--Class A and Class T Shares. (Dreyfus Premier Funds
only) By signing a Letter of Intent form, which can be obtained by calling
1-800-554-4611, you become eligible for the reduced sales load applicable
to the total number of Eligible Fund shares purchased in a 13-month period
pursuant to the terms and conditions set forth in the Letter of Intent. A
minimum initial purchase of $5,000 is required. To compute the applicable
sales load, the offering price of shares you hold (on the date of
submission of the Letter of Intent) in any Eligible Fund that may be used
toward "Right of Accumulation" benefits described above may be used as a
credit toward completion of the Letter of Intent. However, the reduced
sales load will be applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in
the Letter of Intent for payment of a higher sales load if you do not
purchase the full amount indicated in the Letter of Intent. The escrow
will be released when you fulfill the terms of the Letter of Intent by
purchasing the specified amount. If your purchases qualify for a further
sales load reduction, the sales load will be adjusted to reflect your
total purchase at the end of 13 months. If total purchases are less than
the amount specified, you will be requested to remit an amount equal to
the difference between the sales load actually paid and the sales load
applicable to the aggregate purchases actually made. If such remittance
is not received within 20 days, the Transfer Agent, as attorney-in-fact
pursuant to the terms of the Letter of Intent, will redeem an appropriate
number of Class A or Class T shares of the Fund held in escrow to realize
the difference. Signing a Letter of Intent does not bind you to purchase,
or the Fund to sell, the full amount indicated at the sales load in effect
at the time of signing, but you must complete the intended purchase to
obtain the reduced sales load. At the time you purchase Class A or Class
T shares, you must indicate your intention to do so under a Letter of
Intent. Purchases pursuant to a Letter of Intent will be made at the then-
current net asset value plus the applicable sales load in effect at the
time such Letter of Intent was executed.
Corporate Pension/Profit-Sharing and Retirement Plans. (All Funds) 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, SEP-IRAs, Rollover IRAs
and Education IRAs), 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) for all Funds, except the Dreyfus Premier Funds,
please call 1-800-645-6561; for IRAs (except SEP-IRAs) for the Dreyfus
Premier Funds, please call 1-800-554-4611; or for SEP-IRAs, 401(k) Salary
Reduction Plans and 403(b)(7) Plans, please call 1-800-322-7880.
If you wish to purchase Fund shares in conjunction with a Keogh Plan, a
403(b)(7) Plan or an IRA, including a SEP-IRA, you may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares.
All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may
not be made in advance of receipt of funds.
The minimum initial investment for corporate plans, Salary Reduction
Plans, 403(b)(7) Plans and SEP-IRAs with more than one participant, is
$2,500 with no minimum for subsequent purchases. The minimum initial
investment 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.
You 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
Valuation of Portfolio Securities. Each Fund's investments are valued
each business day using available market quotations or at fair value.
Substantially all of a 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 purchased by Dreyfus Equity
Income Fund, Dreyfus Premier High Yield Debt Plus Equity Fund and Dreyfus
Premier Real Estate Mortgage 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 and Dreyfus Premier Real Estate Mortgage
Fund, the per share net asset value of each Class of shares of these Funds
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
Management believes that each Fund has qualified as a "regulated
investment company" under the Code for the fiscal year ended October 31,
1998. 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. If a Fund did not qualify as
a regulated investment company, it would be treated for tax purposes as an
ordinary corporation subject to Federal income tax. The term "regulated
investment company" does not imply the supervision of management or
investment practices or policies by any government agency.
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 dividends or distributions 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.
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 988 and 1256 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 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 by a broker of shares of a Fund or other funds advised by the
Manager or its affiliates 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.
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.
The aggregate amount of transactions during the last fiscal year in
securities effected on an agency basis through a broker for, among other
things, research services, and the commissions and concessions related to
such transactions were as follows:
Transaction Amount Commissions & Concessions
Dreyfus Equity Income Fund $4,832,537 $5,704
Dreyfus Premier High Yield $123,481 $ 655
Debt Plus Equity Fund
The Company contemplates that, consistent with the policy of obtaining
the most favorable net price, brokerage transactions may be conducted
through the Manager or its affiliates, including Dreyfus Brokerage Services,
Inc. ("DBS") At a meeting held on November 4, 1998, the Company's Board
adopted procedures in conformity with Rule 17e-1 under the 1940 Act to
ensure that all brokerage commissions paid to the Manager or its affiliates
are reasonable and fair. Because procedures had not been adopted during
such time, no amounts were paid to DBS (or any other such entity) for the
fiscal year ended October 31, 1998.
The following table summarizes the brokerage commissions, and gross
spreads and concessions on principal transaction amounts, for each Fund for
the past three fiscal years ended October 31, 1998 (as applicable). None of
the foregoing amounts were paid to the Distributor.
<TABLE>
Brokerage Commissions Gross Spreads and Concessions
1996 1997 1998 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Dreyfus Core Bond Fund $28,188 $41,764 $274,824 $1,421,838 $217,238 $0
Dreyfus Equity Income $10,205(1) $11,048 $ 16,945 $ 2,875(1) $ 1,637 $ 2,501
Fund
Dreyfus High Yield $ 5,740(2) $17,136 $172,013 $ 133,243(2) $266,750 $0
Securities Fund
Dreyfus Premier High N/A N/A $0(3) N/A N/A $0(3)
Yield Debt Plus Eqity
Fund
Dreyfus Premier Real N/A $ 3,000(4) $ 28,985 N/A $0 $15,063
Estate Mortgage Fund
Dreyfus Short Term $ 250(5) $ 80 $0 $ 18,500(5) $ 52,200 $0
High Yield 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 June 29, 1998 (commencement of operations) through
October 31, 1998.
(4) For the period September 30, 1997 (commencement of operations) through
October 31, 1997.
(5) For the period August 16, 1996 (commencement of operations) through
October 31, 1996.
</TABLE>
PERFORMANCE INFORMATION
The 30-day yield for the Funds set forth below, as of October 31, 1998, was
as follows:
Name of Fund 300-day Yield
Dreyfus Core Bond Fund 6.96%
Dreyfus High Yield Securities Fund 19.71%
Dreyfus Short Term High Yield Fund 14.08%
The 30-day yield for each Class of shares (as applicable) of the
Dreyfus Premier Funds, as of October 31, 1998, is set forth below. During
the period, the Manager waived a portion of the management fee and/or
absorbed a portion of each such Fund's expenses. Absent such arrangements,
each yield would have been lower, as reflected in the column entitled "30-
day Net Yield."
Name of Fund 30-day Yield 30-day Net Yield
Dreyfus Premier High Yield
Debt Plus Equity Fund
Class A 9.42% 8.94%
Class B 9.25% 8.75%
Class C 9.27% 8.77%
Class T 9.31% 8.83%
Dreyfus Premier Real
Estate Mortgage Fund
Class A 10.77% 10.26%
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.
The average annual total return for the one-, five-, and ten-year
periods ended October 31, 1998, or since the Fund's commencement of
operations (as indicated), for each Fund (and Class of shares), was as
follows:
Average Annual Total Return
Name of Fund Since
One Year Five Years Ten Years Inception
Dreyfus Core Bond Fund 3.74% 6.27% 9.43% N/A
Dreyfus Equity Income 7.17% N/A N/A 17.09
Fund
Dreyfus High Yield (16.28)% 6.17(2) N/A 6.17
Securities Fund
Dreyfus Premier High Yield
Debt Plus Equity Fund
Class A N/A N/A N/A (50.32)
Class B N/A N/A N/A (47.99)
Class C N/A N/A N/A (43.13)
Class T N/A N/A N/A (48.50)
Dreyfus Premier Real
Estate Mortgage Fund (2.12)% (.59)%(4) N/A 4.94
Class A
Dreyfus Short Term High (2.18)% 6.48(5) N/A 6.48
Yield Fund
______________________
(1) For the period December 29, 1995 (commencement of operations) through
October 31, 1998.
(2) For the period March 25, 1996 (commencement of operations) through
October 31, 1998.
(3) For the period September 30, 1997 (commencement of operations) through
October 31, 1998.
(4) For the period August 16, 1996 (commencement of operations) through
October 31, 1998.
For Class A shares of Dreyfus Premier Real Estate Mortgage Fund, the
foregoing assumes the deduction of the maximum front-end sales load from the
hypothetical initial investment at the time of purchase, although no sales
load was applicable to such shares as of October 31, 1998.
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.
The total return for each Fund indicated below for the period since the
Fund's commencement of operations through October 31, 1998 was as follows:
Name of Fund Total Return
Dreyfus Core Bond Fund 193.50%(1)
Dreyfus Equity Income Fund 56.54%(2)
Dreyfus High Yield Securities Fund 16.84%(3)
Dreyfus Short Term High Yield Fund 14.88%(4)
______________________
(1) For the period October 3, 1986 (commencement of operations) through
October 31, 1998.
(2) For the period December 29, 1995 (commencement of operations) through
October 31, 1998.
(3) For the period March 25, 1996 (commencement of operations) through
October 31, 1998.
(4) For the period August 16, 1996 (commencement of operations) through
October 31, 1998.
The total return for each Fund indicated below for the period since the
Fund's commencement of operations through October 31, 1998 was as follows:
Aggregate Total
Aggregate Total Return Since
Return Since Inception Based on
Inception Based on Maximum Offering
Net Asset Value Price for Class A
Name of Fund (without deduction and Class T or
of maximum Sales Deduction of Maximum
Load or Applicable) CDSC for Class B and
Class C
Dreyfus Premier High Yield
Debt Plus Equity Fund
Class A (16.38)%(1) (21.17)%(1)
Class B (16.64)%(1) (19.93)%(1)
Class C (16.64)%(1) (17.46)%(1)
Class T (16.44)%(1) (20.20)%(1)
Dreyfus Premier Real
Estate Mortgage Fund
Class A 5.40%(2) (.64)%(2)
(1) For the period June 29, 1998 (commencement of operations) through
October 31, 1998.
(2) For the period September 30, 1997 (commencement of operations) through
October 31, 1998.
During these periods, with respect to each Fund, other than Dreyfus
Core Bond Fund, certain fees were waived, and/or certain expenses were
borne, by the Manager, without which the returns would have been lower.
Class B, Class C, Class R and Class T shares of Dreyfus Real Estate
Mortgage Fund were not being offered as of October 31, 1998, so performance
information is not provided for such Classes.
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 each of the Dreyfus Premier Funds) 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, any applicable redemption fee, or, as to
each of the Dreyfus Premier Funds, 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
each of the Dreyfus Premier Funds. 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.
On October 27, 1998, shareholders of Dreyfus Core Bond Fund approved a
proposal for the Fund to pursue an investment objective of maximizing total
return. Prior to the implementation date of these changes on November 15,
1998, the Fund's investment objective was to maximize current income.
Accordingly, performance for periods prior to November 15, 1998 reflects the
Fund being managed pursuant to its prior investment objective.
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 COMPANY AND THE FUNDS
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 the Dreyfus Premier
Funds, and have equal rights as to dividends and in liquidation. Shares
have no preemptive or subscription rights and are freely transferable.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for a Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Board members
or the appointment of auditors. However, the holders of at least 10% of the
shares outstanding and entitled to vote may require the Fund to hold a
special meeting of shareholders for purposes of removing a Board member from
office. Fund shareholders may remove a Board member by the affirmative vote
of two-thirds of the Fund's outstanding voting shares. In addition, the
Board will call a meeting of shareholders for the purpose of electing Board
members if, at any time, less than a majority of the Board members then
holding office have been elected by shareholders.
The 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 shareholders
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.
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.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an
investment company, such as the Company, will not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each series affected by such matter. Rule 18f-2
further provides that a series shall be deemed to be affected by a matter
unless it is clear that the interests of each series in the matter are
identical or that the matter does not affect any interest of such series.
However, the Rule exempts the selection of independent accountants and the
election of Board members from the separate voting requirements of the Rule.
Each Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculating on short-term
market movements. A pattern of frequent purchases and exchanges can be
disruptive to efficient portfolio management and, consequently, can be
detrimental to the Fund's performance and its shareholders. Accordingly, if
the Fund's management determines that an investor is following a market-
timing strategy or is otherwise engaging 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 or the Dreyfus Premier 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 a 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 any
exchange request is refused, the Fund will take no other action with respect
to the shares until it receives further instructions from the investor. The
Fund may delay forwarding redemption proceeds for up to seven days if the
investor redeeming shares is engaged in excessive trading or if the amount
of the redemption request otherwise would be disruptive to efficient
portfolio management or would adversely affect the Fund. The Fund's policy
on excessive trading applies to investors who invest in the Fund directly or
through financial intermediaries, but does not apply to the Dreyfus Auto-
Exchange Privilege, to any automatic investment or withdrawal privilege
described herein, or to 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.
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.
COUNSEL AND INDEPENDENT AUDITORS
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 independent auditors of the
Company.
APPENDIX
Description of S&P, Moody's, Fitch and Duff ratings:
S&P
Bond Ratings
AAA
Bonds rated AAA have the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA
Bonds rated AA have a very strong capacity to pay interest and repay
principal an 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 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 Rating
The ratings represent Fitch's assessment of the issuer's ability to
meet the obligations of 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 F1+.
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, 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.