- ------------------------------------------------------------------------------
DREYFUS PREMIER GNMA FUND
CLASS A, CLASS B AND CLASS C SHARES
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
- ------------------------------------------------------------------------------
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Dreyfus Premier GNMA Fund (the "Fund"), dated May 1, 2000, as it may be revised
from time to time. To obtain a copy of the Fund's Prospectus, please write to
the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or call
1-800-544-4611.
The Fund's most recent Annual Report and Semi-Annual Report to
Shareholders are separate documents 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 Fund....................................................B-2
Management of the Fund.....................................................B-7
Management Arrangements....................................................B-11
How to Buy Shares..........................................................B-14
Distribution Plan and Shareholder Services Plan............................B-20
How to Redeem Shares.......................................................B-21
Shareholder Services.......................................................B-25
Determination of Net Asset Value...........................................B-30
Dividends, Distributions and Taxes.........................................B-30
Portfolio Transactions.....................................................B-31
Performance Information....................................................B-32
Information About the Fund.................................................B-34
Counsel and Independent Auditors...........................................B-36
Year 2000 Issues...........................................................B-36
DESCRIPTION OF THE FUND
The Fund is a Massachusetts business trust that commenced operations on
January 29, 1987. The Fund is an open-end management investment company, known
as a mutual fund. The Fund is a diversified fund, which means that, with respect
to 75% of its total assets, the Fund will not invest more than 5% of its assets
in the securities of any single issuer.
The Dreyfus Corporation (the "Manager") serves as the Fund's investment
adviser.
Dreyfus Service Corporation (the "Distributor") is the distributor of the
Fund's shares.
Certain Portfolio Securities
The following information supplements and should be read in conjunction
with the Fund's prospectus.
Ginnie Maes. It is a fundamental policy of the Fund that it will invest at
least 65% of the value of its net assets (except when maintaining a temporary
defensive position) in GNMA Certificates (popularly called "Ginnie Maes"). The
Fund will invest in Ginnie Maes only of the "fully modified pass-through" type
which are guaranteed as to timely payment of principal and interest by the
Government National Mortgage Association ("GNMA"), a U.S. Government
corporation.
Ginnie Maes are created by an "issuer," which is a Federal Housing
Administration ("FHA") approved mortgagee that also meets criteria imposed by
the GNMA. The issuer assembles a pool of FHA, Farmers' Home Administration or
Veterans' Administration ("VA") insured or guaranteed mortgages which are
homogeneous as to interest rate, maturity and type of dwelling. Upon application
by the issuer, and after approval by the GNMA of the pool, the GNMA provides its
commitment to guarantee timely payment of principal and interest on the Ginnie
Maes backed by the mortgages included in the pool. The Ginnie Maes, endorsed by
the GNMA, then are sold by the issuer through securities dealers.
The GNMA is authorized under the National Housing Act to guarantee timely
payment of principal and interest on Ginnie Maes. This guarantee is backed by
the full faith and credit of the United States. The GNMA may borrow U.S.
Treasury funds to the extent needed to make payments under its guarantee.
When mortgages in the pool underlying a Ginnie Mae are prepaid by
mortgagors or by result of foreclosure, such principal payments are passed
through to the certificate holders. Accordingly, the life of the Ginnie Mae is
likely to be substantially shorter than the stated maturity of the mortgages in
the underlying pool.
Ginnie Maes bear a stated "coupon rate" which represents the effective
FHA-VA mortgage rate at the time of issuance, less 0.5%, which constitutes the
GNMA's and issuer's fees. For providing its guarantee, the GNMA receives an
annual fee of 0.06% of the outstanding principal on certificates backed by
single family dwelling mortgages, and the issuer receives an annual fee of 0.44%
for assembling the pool and for passing through monthly payments of interest and
principal.
Payments to holders of Ginnie Maes consist of the monthly distributions of
interest and principal less the GNMA's and issuer's fees. The actual yield to be
earned by a holder of a Ginnie Mae is calculated by dividing interest payments
by the purchase price paid for the Ginnie Mae (which may be at a premium or a
discount from the face value of the certificate). Monthly distributions of
interest, as contrasted to semi-annual distributions which are common for other
fixed interest investments, have the effect of compounding and thereby raising
the effective annual yield earned on Ginnie Maes.
The Fund may purchase other securities issued or guaranteed by, or
exchangeable for securities issued or guaranteed by, the U.S. Government or
issued by its agencies or instrumentalities that are backed by the full faith
and credit of the U.S. Government. For temporary defensive purposes, the entire
portfolio may be so invested. Securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities include U.S. Treasury
securities, which differ in their interest rates, maturities and times of
issuance.
Investment Techniques
The following information supplements and should be read in conjunction
with the Fund's prospectus.
Leverage. 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 the 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 Investment Company Act of 1940, as amended (the"1940 Act"), requires the
Fund to maintain continuous asset coverage (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.
The Fund may enter into reverse repurchase agreements with banks, brokers
or dealers. This form of borrowing involves the transfer by the Fund of an
underlying debt instrument in return for cash proceeds based on a percentage of
the value of the security. The Fund retains the right to receive interest and
principal payments on the security. At an agreed upon future date, the Fund
repurchases the security at principal plus accrued interest. Except for these
transactions, the Fund's borrowings generally will be unsecured.
To the extent the Fund enters into a reverse repurchase agreement, the
Fund will maintain in a segregated custodial account permissible liquid assets
at least equal to the aggregate amount of its reverse repurchase obligations,
plus accrued interest, in certain cases, in accordance with releases promulgated
by the Securities and Exchange Commission. The Securities and Exchange
Commission views reverse repurchase transactions as collateralized borrowings by
the Fund.
Forward Commitments. The Fund may purchase or sell Ginnie Maes 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 segregate 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-l/3% of its assets committed to purchase
securities on a forward commitment basis.
Ginnie Maes purchased on a forward commitment 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 basis may expose the Fund to risks because they may experience such
fluctuations prior to their actual delivery. Purchasing securities on a forward
commitment basis can involve the additional risk that the yield available in the
market when the delivery takes place actually may be higher than that obtained
in the transaction itself. Purchasing securities on a forward commitment basis
when the Fund is fully or almost fully invested may result in greater potential
fluctuation in the value of the Fund's net assets and its net asset value per
share.
Forward Roll Transactions. To enhance current income, the Fund may enter
into forward roll transactions with respect to Ginnie Maes. In a forward roll
transaction, the Fund sells a Ginnie Mae to a financial institution, such as a
bank or broker-dealer, and simultaneously agrees to repurchase a similar
security from the institution at a later date at an agreed upon price. The
securities that are repurchased will bear the same interest rate as those sold,
but generally will be collateralized by different pools of mortgages with
different prepayment histories than those sold. During the period between the
sale and repurchase, the Fund will not be entitled to receive interest and
principal payments on the securities sold. Proceeds of the sale will be invested
in short-term instruments, particularly repurchase agreements, and the income
from these investments, together with any additional fee income received on the
sale, will generate income for the Fund exceeding the yield on the securities
sold. Forward roll transactions involve the risk that the market value of the
securities sold by the Fund may decline below the purchase price of those
securities. The Fund will set aside in a segregated account permissible liquid
assets at least equal to the amount of the repurchase price (including accrued
interest).
Investment Considerations and Risks
Mortgage Related Securities. Although certain mortgage-related securities,
such as Ginnie Maes, are guaranteed by a third party or otherwise similarly
secured, the market value of the security, which may fluctuate, is not secured.
If a mortgage-related security is purchased at a premium, all or part of the
premium may be lost if there is a decline in the market value of the security,
whether resulting from changes in interest rates or prepayments on the
underlying mortgage collateral. As with other interest-bearing securities, the
prices of certain mortgage-related securities are inversely affected by changes
in interest rates. However, although the value of a mortgage-related security
may decline when interest rates rise, the converse is not necessarily true,
since in periods of declining interest rates the mortgages underlying the
security are more likely to be prepaid. For this and other reasons, a
mortgage-related security's stated maturity may be shortened by unscheduled
prepayments on the underlying mortgages, and, therefore, it is not possible to
predict accurately the security's return to the Fund. Moreover, with respect to
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 prepayment effectively may lengthen a mortgage-related security's
expected maturity which generally would cause the value of such security to
fluctuate more widely in response to changes in interest rates. Were the
prepayments on the Fund's mortgage-related securities to decrease significantly,
the Fund's effective duration, and thus sensitivity to interest rate
fluctuations, would increase.
Use of Derivatives. Mortgage-related securities are a form of
derivative. Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular derivative and the
portfolio as a whole. Derivatives permit the Fund to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Fund can increase or decrease the level of
risk, or change the character of the risk, of its portfolio by making
investments in specific securities.
Derivatives may entail investment exposures that are greater than their
cost would suggest, meaning that a small investment in derivatives could have a
large potential impact on the Fund's performance.
If the Fund invests in derivatives at inopportune times or judges market
conditions incorrectly, such investments may lower the Fund's return or result
in a loss. The Fund also could experience losses if its derivatives were poorly
correlated with its other investments, or if the Fund were unable to liquidate
its position because of an illiquid secondary market. The market for many
derivatives is, or suddenly can become, illiquid. Changes in liquidity may
result in significant, rapid and unpredictable changes in the prices for
derivatives.
Simultaneous Investments. Investment decisions for the Fund are made
independently from those of other investment companies advised by the Manager.
If, however, such other investment companies desire to invest in, or dispose of,
the same securities as the Fund, available investments or opportunities for
sales will be allocated equitably to each investment company. In some cases,
this procedure may adversely affect the size of the position obtained for or
disposed of by the Fund or the price paid or received by the Fund.
Investment Restrictions
The 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 Fund has adopted
investment restrictions numbered 1 through 9 as fundamental policies. Investment
restriction number 10 is not a fundamental policy and may be changed by a vote
of a majority of the Fund's Board members at any time. The Fund may not:
1. Purchase common stocks, preferred stocks, warrants or other equity
securities, or purchase corporate bonds or debentures, state bonds, municipal
bonds or industrial revenue bonds.
2. 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).
3. Sell securities short or purchase securities on margin or write
or purchase put or call options or combinations thereof.
4. Underwrite the 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.
5. Purchase or sell real estate, real estate investment trust securities,
commodities, or oil and gas interests, provided that the Fund may purchase
Ginnie Maes without limitation.
6. Make loans to others, except through the purchase of debt
obligations referred to in the Prospectus.
7. Invest more than 25% of its assets in securities of issuers in any
industry, provided that there shall be no limitation on the purchase of Ginnie
Maes or other securities issued, guaranteed or backed by the U.S. Government, as
described in the Prospectus.
8. Invest in companies for the purpose of exercising control.
9. Invest in securities of other investment companies, except as they may
be acquired as part of a merger, consolidation or acquisition of assets.
10. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except to the extent necessary to secure permitted borrowings.
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 that restriction.
MANAGEMENT OF THE FUND
The Fund's Board is responsible for the management and supervision of the
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
Dreyfus Service Corporation........... Distributor
Dreyfus Transfer, Inc................. Transfer Agent
Mellon Bank, N.A...................... Custodian
Board members and officers of the Fund, together with information as to
their principal business occupations during at least the last five years, are
shown below.
Board Members of the Fund
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 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, Inc.), a button packager and distributor,
Century Business Services, Inc. (formerly, International Alliance
Services, Inc.), a provider of various outsourcing functions for small and
medium sized companies, and QuikCAT.com, Inc. a private company engaged in
the development of high speed movement, routing, storage and encryption of
data across all modes of data transport. For more than five years prior to
January 1995, he was President, a director and, until August 1994, Chief
Operating Officer of the Manager and Executive Vice President and a
director of the Distributor. From August 1994 to December 31, 1994, he was
a director of Mellon Financial Corporation. He is 56 years old and his
address is 200 Park Avenue, New York, New York 10166.
CLIFFORD L. ALEXANDER, JR., Board Member. President of Alexander &
Associates, Inc., a management consulting firm. From 1977 to 1981, Mr.
Alexander served as Secretary of the Army and Chairman of the Board of
the Panama Canal Company, and from 1975 to 1977, he was a member of the
Washington, D.C. law firm of Verner, Liipfert, Bernhard, McPherson and
Alexander. He is a director of American Home Products Corporation, IMS
Health, a service provider of marketing information and information
technology, The Dun & Bradstreet Corporation, MCI WorldCOM, and Mutual
of America Life Insurance Company. He is 66 years old and his address
is 400 C Street, N.E., Washington, D.C. 20002.
PEGGY C. DAVIS, Board Member. Shad Professor of Law, New York University School
of Law. Professor Davis has been a member of the New York University law
faculty since 1983. Prior to that time, she served for three years as a
judge in the courts of New York State; was engaged for eight years in the
practice of law, working in both corporate and non-profit sectors; and
served for two years as a criminal justice administrator in the government
of the City of New York. She writes and teaches in the fields of evidence,
constitutional theory, family law, social sciences and the law, legal
process and professional methodology and training. She is 57 years old and
her address is c/o New York University School of Law, 40 Washington Square
South, New York, NY 10012.
ERNEST KAFKA, Board Member. A physician engaged in private practice specializing
in the psychoanalysis of adults and adolescents. Since 1981, he has served
as an Instructor at the New York Psychoanalytic Institute and, prior
thereto, held other teaching positions. He is Associate Clinical Professor
of Psychiatry at Cornell Medical School. For more than the past five
years, Dr. Kafka has held numerous administrative positions, including
President of The New York Psychoanalytic Society, and has published many
articles on subjects in the field of psychoanalysis. He is 67 years old
and his address is 23 East 92nd Street, New York, New York 10128.
NATHAN LEVENTHAL, Board Member. President of Lincoln Center for the Performing
Arts, Inc. Mr. Leventhal was Deputy Mayor for Operations of New York City
from September 1979 to March 1984, and Commissioner of the Department of
Housing Preservation and Development of New York City from February 1978
to September 1979. Mr. Leventhal was an associate and then a member of the
New York law firm of Poletti Freidin Prashker Feldman and Gartner from
1974 to 1978. He was Commissioner of Rent and Housing Maintenance for New
York City from 1972 to 1973. Mr. Leventhal served as Chairman of Citizens
Union, an organization that strives to reform and modernize city and state
government from June 1994 until June 1997. He is 57 years old and his
address is 70 Lincoln Center Plaza, New York, New York 10023-6583.
The Fund has a standing nominating committee comprised of its Board
members who are not "interested persons" of the Fund, as defined in the 1940
Act. The function of the nominating committee is to select and nominate all
candidates who are not "interested persons" of the Fund for election to the
Fund's Board.
The Fund 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
to each Board member by the Fund and by all funds in the Dreyfus Family of Funds
for which such person was a Board member (the number of which is set forth in
parenthesis next to each Board member's total compensation)* during the year
ended December 31, 1999 is as follows:
Total
Compensation from
Aggregate Fund and Fund
Name of Board Compensation from Complex Paid to
Member Fund ** Board Members
- --------------------------- $6,250 $642,177 (189)
Joseph S. DiMartino
Clifford L. Alexander, Jr. $5,000 $ 85,378 (43)
Peggy C. Davis $5,000 $ 68,378 (29)
Ernest Kafka $5,000 $ 68,378 (29)
Saul B. Klaman*** $5,000 $ 68,378 (29)
Nathan Leventhal $5,000 $ 68,378 (29)
- -------------------------------
* Represents the number of separate portfolios comprising the investment
companies in the Fund Complex, including the Fund, for which the Board
member serves.
** Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $743 for all Board members as a group.
*** Emeritus Board Member as of January 18, 2000.
Officers of the Fund
STEPHEN E. CANTER, President. President, Chief Operating Officer, Chief
Investment Officer and a director of the Manager, and an officer of
other investment companies advised and administered by the Manager.
Mr. Canter also is a Director or an Executive Committee Member of the
other investment management subsidiaries of Mellon Financial
Corporation, each of which is an affiliate of the Manager. He is 54
years old.
MARK N. JACOBS, Vice President. Vice President, General Counsel and
Secretary of the Manager, and an officer of other investment companies
advised and administered by the Manager. He is 53 years old.
JOSEPH CONNOLLY, Vice President and Treasurer. Director - Mutual Fund Accounting
of the Manager, and an officer of other investment companies advised and
administered by the Manager. He is 42 years old.
STEVEN F. NEWMAN, Secretary. Associate General Counsel and Assistant
Secretary of the Manager, and an officer of other investment companies
advised and administered by the Manager. He is 50 years old.
MICHAEL A. ROSENBERG, Assistant Secretary. Associate General Counsel of the
Manager, and an officer of other investment companies advised and
administered by the Manager. He is 40 years old.
JANETTE E. FARRAGHER, Assistant Secretary. Assistant General Counsel of the
Manager, and an officer of other investment companies advised and
administered by the Manager. She is 37 years old.
WILLIAM MCDOWELL, Assistant Treasurer. Senior Accounting Manager - Taxable Fixed
Income of the Manager, and an officer of other investment companies
advised and administered by the Manager. He is 41 years old.
The address of each officer of the Fund is 200 Park Avenue, New York, New
York 10166.
The Fund's Board members and officers, as a group, owned less than 1% of
the Fund's shares of beneficial interest outstanding on April 3, 2000.
The following entities owned of record 5% or more of the Fund's shares
outstanding on April 3, 2000: Class A - None; Class B - NFSC FEBO #04J-97891,
Clay Township General Fund, Connie S. Turner, Treasurer, P.O. Box 4710, Algonac,
MI 48001-10.09%; MLPF & S for the Sole Benefit of its Customers, A/C 97AH3, 4800
Deer Lake DR E Fl 3, Jacksonville FL 32246-6484 - 9.44%; and Class C - MLPF & S
for the Benefit of its Customers, A/C 97780, 4800 Deer Lake DR E Fl 3,
Jacksonville, FL 32246-6484 - 34.09%; Prudential Securities, Inc. FBO Mr. Frank
G. Farina, IRA DTD 06/30/98, 19840 Frenchmans CT, Fort Myers, FL
33903-9064-5.82%; Dorothy Mantell & Edmund H. Mantell JTWROS, 5 Carthage LN,
Scarsdale, NY 10583-7507-5.77%.
MANAGEMENT ARRANGEMENTS
Investment Adviser. The Manager is a wholly-owned subsidiary of Mellon
Bank, N.A., which is a wholly-owned subsidiary of Mellon Financial Corporation
("Mellon"). Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international markets.
Mellon is among the twenty-five largest bank holding companies in the United
States based on total assets.
The Manager provides management services pursuant to a Management
Agreement (the "Agreement") between the Fund and the Manager. The Agreement is
subject to annual approval by (i) the Fund's Board or (ii) vote of a majority
(as defined in the 1940 Act) of the outstanding voting securities of the Fund,
provided that in either event its continuance also is approved by a majority of
the Board members who are not "interested persons" (as defined in the 1940 Act)
of the Fund or the Manager, by vote cast in person at a meeting called for the
purpose of voting on such approval. The Agreement is terminable without penalty,
on 60 days' notice, by the Fund's Board or by vote of the holders of a majority
of the Fund's outstanding shares, or, upon not less than 90 days' notice, by the
Manager. The Agreement will terminate automatically 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; J. David Officer, Vice Chairman and a director; Lawrence S. Kash,
Vice Chairman; Ronald P. O'Hanley III, Vice Chairman; William T. Sandalls,
Jr., Executive Vice President; Stephen R. Byers, Senior Vice President; Mark
N. Jacobs, Vice President, General Counsel and Secretary; Diane P. Durnin,
Vice President-Product Development; Patrice M. Kozlowski, Vice
President-Corporate Communications; Mary Beth Leibig, Vice President-Human
Resources; Ray Van Cott, Vice President-Information Systems; Theodore A.
Schachar, Vice President--Tax; Wendy Strutt, Vice President; Richard Terres,
Vice President; William H. Maresca, Controller; James Bitetto, Assistant
Secretary; Steven F. Newman, Assistant Secretary; and Mandell L. Berman,
Burton C. Borgelt, Steven G. Elliott, Martin C. McGuinn, Richard W. Sabo and
Richard F. Syron, directors.
The Manager's Code of Ethics (the "Code") subjects its employees' personal
securities transactions to various restrictions to ensure that such trading does
not disadvantage any fund advised by the Manager. In that regard, portfolio
managers and other investment personnel of the Manager must preclear and report
their personal securities transactions and holdings, which are reviewed for
compliance with the Code and are also subject to the oversight of Mellon's
Investment Ethics Committee. Portfolio managers and other investment personnel
of the Manager who comply with the Code's preclearance and disclosure procedures
and the requirements of the Committee may be permitted to purchase, sell or hold
securities which also may be or are held in fund(s) they manage or for which
they otherwise provide investment advice.
The Manager maintains office facilities on behalf of the Fund and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. 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 Fund. 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 or promotional
expenditures, using its own resources, as it from time to time deems
appropriate.
The Manager manages the Fund's portfolio of investments in accordance with
the stated policies of the Fund, subject to the approval of the Fund's Board.
The Manager is responsible for investment decisions, and provides the Fund with
portfolio managers who are authorized by the Board members to execute purchases
and sales of securities. The Fund's portfolio managers are Michael Hoeh, Roger
King, John V. Koerber, Joan Olivero, Matt Olson and Gerald E. Thunelius. The
Manager also maintains a research department with a professional staff of
portfolio managers and securities analysts who provide research services for the
Fund and for other funds advised by the Manager.
All expenses incurred in the operation of the Fund are borne by the Fund,
except to the extent specifically assumed by the Manager. The expenses borne by
the Fund include without limitation, the following: taxes, interest, brokerage
fees and commissions, if any, fees of Trustees who are not officers, directors,
employees or holders of 5% or more of the outstanding voting securities of the
Manager, Securities and Exchange Commission fees, state Blue Sky qualification
fees, advisory fees, charges of custodians, transfer and dividend disbursing
agents' fees, certain insurance premiums, industry association fees, outside
auditing and legal expenses, costs of independent pricing services, costs of
maintaining the Fund's existence, costs attributable to investor services
(including, without limitation, telephone and personnel expenses), costs of
preparing and printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders, costs of
shareholder reports and meetings, and any extraordinary expenses. In addition,
Class B and Class C shares are subject to an annual distribution fee and shares
of each Class are subject to an annual service fee. See "Distribution Plan and
Shareholder Services Plan."
As compensation for the Manager's services to the Fund, the Fund has
agreed to pay the Manager a monthly management fee at the annual rate of 0.55%
of the value of the Fund's average daily net assets. For the fiscal years ended
December 31, 1997, 1998 and 1999, the management fees paid by the Fund amounted
to $767,175, $740,305, and $711,592, respectively.
The Manager has agreed that if in any fiscal year the aggregate expenses
of the Fund, exclusive of taxes, brokerage fees, 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 to the extent required by state law. 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 the Fund's net assets increases.
Distributor. The Distributor, a wholly-owned subsidiary of the Manager
located at 200 Park Avenue, New York, New York 10166, serves as the Fund's
distributor on a best effort basis pursuant to an agreement with the Fund which
is renewable annually.
From August 23, 1994 through March 21, 2000, Premier Mutual Fund Services,
Inc. ("Premier") acted as the Fund's distributor. For the fiscal years ended
December 31, 1997, 1998 and 1999, Premier, as distributor, retained $2,823,
$6,341 and $19,533 respectively, from sales loads on Class A shares. For the
same periods, Premier retained $103,487, $70,252 and $93,196, respectively, from
contingent deferred sales charges ("CDSCs") on Class B and $0, $1,905 and
$12,911, respectively, from CDSCs on Class C.
The Distributor may pay dealers a fee based on the amount invested through
such dealers in Fund shares by employees participating in qualified or
non-qualified employee benefit plans or other programs where (i) the employers
or affiliated employers maintaining such plans or programs have a minimum of 250
employees eligible for participation in such plans or programs or (ii) such
plan's or program's aggregate investment in the Dreyfus Family of Funds or
certain other products made available by the Distributor to such plans or
programs exceeds $1,000,000 ("Eligible Benefit Plans"). Generally, the fee paid
to dealers will not exceed 1% of the amount invested through such dealers. The
Distributor, however, may pay dealers a higher fee and reserves the right to
cease paying these fees at any time. The Distributor will pay such fees from its
own funds, other than amounts received from 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. 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 Fund's transfer and dividend
disbursing agent. Under a transfer agency agreement with the Fund, the Transfer
Agent arranges for the maintenance of shareholder account records for the Fund,
the handling of certain communications between shareholders and the Fund and the
payment of dividends and distributions payable by the Fund. For these services,
the Transfer Agent receives a monthly fee computed on the basis of the number of
shareholder accounts it maintains for the Fund during the month, and is
reimbursed for certain out-of-pocket expenses.
Mellon Bank, N.A. (the "Custodian"), One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258, acts as custodian of the Fund's investments. Under a custody
agreement with the Fund, the Custodian holds the 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 Fund's assets held in custody and
receives certain securities transaction charges.
HOW TO BUY SHARES
General. Class A shares, Class B shares and Class C 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 Fund'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.
When purchasing 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 Fund 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 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. The initial investment must be accompanied by the Account
Application. The Fund reserves the right to offer Fund shares without regard to
minimum purchase requirements to employees participating in certain qualified 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 may be purchased through Dreyfus-Automatic Asset
Builder(R) and Dreyfus Government Direct Deposit Privilege 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 of
each Class 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. Net asset value per share of each Class is
computed by dividing the value of the Fund's net assets represented by such
Class (i.e., the value of its assets less liabilities) by the total number of
shares of such Class outstanding. The Fund's investments are valued each
business day by an independent pricing service approved by the Fund's Board and
are valued at fair value as determined by the pricing service. The pricing
service's procedures are reviewed under the general supervision of the Fund's
Board. For further information regarding the methods employed in valuing the
Fund's investments, see "Determination of Net Asset Value."
If an order is received in proper form by the Transfer Agent or other
entity authorized to receive orders on behalf of the Fund by the close of
trading on the floor of the 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
---------------------------
As a % of As a % of Dealer's
offering net asset Reallowance as
price per value per a % of
Amount of Transaction share share Offering Price
- --------------------- ------------ ------------- ----------------
Less than $50,000................ 4.50 4.70 4.25
$50,000 to less than $100,000.... 4.00 4.20 3.75
$100,000 to less than $250,000... 3.00 3.10 2.75
$250,000 to less than $500,000... 2.50 2.60 2.25
$500,000 to less than $1,000,000. 2.00 2.00 1.75
$1,000,000 or more............... -0- -0- -0-
A CDSC of 1% will be assessed at the time of redemption of Class A shares
purchased without an initial sales charge as part of an investment of at least
$1,000,000 and redeemed within one year of purchase. The Distributor may pay
Service Agents an amount up to 1% of the net asset value of Class A shares
purchased by their clients that are subject to a CDSC. Letter of Intent and
Right of Accumulation apply to purchases of Class A shares 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 (including a pension, profit-sharing
or other employee benefit trust created pursuant to a plan qualified under
Section 401 of the Internal Revenue Code of 1986, as amended (the "Code"))
although more than one beneficiary is involved; or a group of accounts
established by or on behalf of the employees of an employer or affiliated
employers pursuant to an employee benefit plan or other program (including
accounts established pursuant to Sections 403(b), 408(k), and 457 of the Code);
or an organized group which has been in existence for more than six months,
provided that it is not organized for the purpose of buying redeemable
securities of a registered investment company and provided that the purchases
are made through a central administration or a single dealer, or by other means
which result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering
price of the Fund's Class A shares. The example assumes a purchase of Class A
shares 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 Class A shares
on December 31, 1999:
NET ASSET VALUE per Share $14.23
Per Share Sales Charge - 4.5%
of offering price (4.7% of
net asset value per share) $ .67
Per Share Offering Price to
the Public $14.90
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 Fund's Board, or the spouse or
minor child of any of the foregoing.
Class A shares are offered at net asset value without a sales load to
employees participating in Eligible Benefit Plans. Class A shares also may be
purchased (including by exchange) at net asset value without a sales load for
Dreyfus-sponsored IRA "Rollover Accounts" with the distribution proceeds from a
qualified retirement plan or a Dreyfus-sponsored 403(b)(7) plan, provided, 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 funds
advised by Founders Asset Management LLC ("Founders"), an affiliate of the
Manager, 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 funds advised by
Founders, 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 the Fund must be made within 60
days of such redemption and the shareholder must have been subject to an initial
sales charge or a contingent deferred sales charge with respect to such redeemed
shares.
Class A shares also may be purchased at net asset value, subject to
appropriate documentation, by (i) qualified separate accounts maintained by an
insurance company pursuant to the laws of any State or territory of the United
States, (ii) a State, county or city or instrumentality thereof, (iii) a
charitable organization (as defined in Section 501(c)(3) of the 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 under "How to Redeem Shares." The Distributor compensates
certain Service Agents for selling Class B and Class C shares at the time of
purchase from the Distributor's own assets. The proceeds of the CDSC and the
distribution fee, in part, are used to defray these expenses.
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."
Right of Accumulation--Class A Shares. Reduced sales loads apply to any
purchase of Class A shares, shares of other funds in the Dreyfus Premier Family
of Funds which are sold with a sales load, shares of certain other funds advised
by the Manager or Founders which are sold with a sales load, and shares acquired
by a previous exchange of such shares (hereinafter referred to as "Eligible
Funds"), by you and any related "purchaser" as defined above, where the
aggregate investment, including such purchase, is $50,000 or more. If, for
example, you have previously purchased and still hold Class A shares of the
Fund, or of any other Eligible Fund or combination thereof, with an aggregate
current market value of $40,000 and subsequently purchase Class A shares of the
Fund, or an Eligible Fund having a current value of $20,000, the sales load
applicable to the subsequent purchase would be reduced to 4% of the offering
price. All present holdings of Eligible Funds may be combined to determine the
current offering price of the aggregate investment in ascertaining the sales
load applicable to each subsequent purchase.
To qualify for reduced sales loads, at the time of a 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.
Using Federal Funds. The Transfer Agent or the Fund may attempt to notify
you upon receipt of checks drawn on banks that are not members of the Federal
Reserve System as to the possible delay in conversion into Federal Funds and may
attempt to arrange for a better means of transmitting the money. If you are a
customer of a Selected Dealer and your order to purchase Fund shares is paid for
other than in Federal Funds, the Selected Dealer, acting on your behalf, will
complete the conversion into, or itself advance, Federal Funds generally on the
business day following receipt of your order. The order is effective only when
so converted and received by the Transfer Agent. An order for the purchase of
Fund shares placed by you with sufficient Federal Funds or a cash balance in
your brokerage account with a Selected Dealer will become effective on the day
that your order, including Federal Funds, is received by the Transfer Agent.
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 ("ACH") 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 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 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 your 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 and Class C shares are subject to a Distribution Plan and Class A,
Class B and Class C shares are subject to a Shareholder Services Plan.
Distribution Plan. 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 Fund's Board has adopted such a
plan (the "Distribution Plan") with respect to the Fund's Class B and Class C
shares, pursuant to which the Fund pays the Distributor for distributing each
such Class of shares a fee at the annual rate of 0.50% of the value of the
average daily net assets of Class B and 0.75% of the value of the average daily
net assets of Class C. The Fund's Board believes that there is a reasonable
likelihood that the Distribution Plan will benefit the Fund and holders of its
Class B and Class C 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 the Fund's
Class B or Class C 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 Fund's Board, and by the Board members
who are not "interested persons" (as defined in the 1940 Act) of the Fund 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 cast in person at a meeting called for the purpose of voting on the
Distribution Plan. 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 December 31, 1999, the Fund paid $88,629 and
$8,984 with respect to Class B and Class C shares, respectively, pursuant to the
Distribution Plan.
Shareholder Services Plan. The Fund has adopted a Shareholder Services
Plan, pursuant to which the Fund pays the Distributor for the provision of
certain services to the holders of the Fund's Class A, Class B and Class C
shares a fee at the annual rate of 0.25% of the value of the average daily net
assets of each such Class. The services provided may include personal services
relating to shareholder accounts, such as answering shareholder inquiries
regarding the Fund and providing reports and other information, and services
related to the maintenance of 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, 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 Fund's Board, and by the Board
members who are not "interested persons" (as defined in the 1940 Act) of the
Fund 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. The Shareholder Services Plan and
related agreements are 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. As to each Class, the Shareholder Services Plan is
terminable 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 December 31, 1999, the Fund paid $331,231,
$44,314 and $2,995 with respect to Class A, Class B and Class C shares,
respectively, pursuant to the Shareholder Services Plan.
HOW TO REDEEM SHARES
Contingent Deferred Sales Charge--Class B Shares. A CDSC payable to the
Distributor is imposed on any redemption of Class B shares which reduces the
current 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 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 from the time you purchased the Class B shares
until the time of redemption of such shares. Solely for purposes of determining
the number of years from the time of any payment for the purchase of Class B
shares, all payments during a month will be aggregated and deemed to have been
made on the first day of the month.
The following table sets forth the rates of the CDSC for Class B shares,
except for Class B shares purchased by shareholders who beneficially owned Class
B shares on November 30, 1996:
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
- ------------------------------------------------------------------------------
The following table sets forth the rates of the CDSC for Class B shares
purchased by shareholders who beneficially owned Class B shares on November 30,
1996:
Year Since CDSC as a % of Amount
Purchase Payment Invested or Redemption
Was Made Proceeds
- ------------------------
First 3.00
Second 3.00
Third 2.00
Fourth 2.00
Fifth 1.00
Sixth 0.00
- ------------------------------------------------------------------------------
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 (five years for shareholders beneficially owning
Class B shares on November 30, 1996); then of amounts representing the cost of
shares purchased six years (five years for shareholders beneficially owning
Class B shares on November 30, 1996) 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 (five years for shareholders beneficially
owning Class B shares on November 30, 1996).
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. A CDSC of 1% payable to
the Distributor is imposed on any redemption of Class C shares within one year
of the date of purchase. The basis for calculating the payment of any such CDSC
will be the method used in calculating the CDSC for Class B shares. See
"Contingent Deferred Sales Charge--Class B Shares" above.
Waiver of CDSC. The CDSC 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 Fund'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. If you are a customer of a Selected
Dealer, you may make redemption requests to your Selected Dealer. If the
Selected Dealer transmits the redemption request so that it is received by the
Transfer Agent prior to the close of trading on the floor of the New York Stock
Exchange (currently 4:00 p.m., New York time), the redemption request will be
effective on that day. If a redemption request is received by the Transfer Agent
after the close of trading on the floor of the New York Stock Exchange, the
redemption request will be effective on the next business day. It is the
responsibility of the Selected Dealer to transmit a request so that it is
received in a timely manner. The proceeds of the redemption are credited to your
account with the Selected Dealer. See "How to Buy Shares" for a discussion of
additional conditions or fees that may be imposed upon redemption.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of shares held by shareholders. Repurchase orders received by dealers
by the close of trading on the floor of the New York Stock Exchange on any
business day and transmitted to the Distributor or its designee prior to the
close of its business day (normally 5:15 p.m., New York time) are effected at
the price determined as of the close of trading on the floor of the New York
Stock Exchange on that day. Otherwise, the shares will be redeemed at the next
determined net asset value. It is the responsibility of the Selected Dealer to
transmit orders on a timely basis. The Selected Dealer may charge the
shareholder a fee for executing the order. This repurchase arrangement is
discretionary and may be withdrawn at any time.
Reinvestment Privilege. Upon written request, you may reinvest up to the
number of Class A or Class B 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 shares if such shares
were subject to a CDSC, your account will be credited with an amount equal to
the CDSC previously paid upon redemption of the Class A or Class B shares
reinvested. The Reinvestment Privilege may be exercised only once.
Dreyfus TeleTransfer Privilege. 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 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 $500,000 within any 30-day period.
Redemption proceeds will be on deposit in your account at an ACH member bank
ordinarily two business days after receipt of the redemption request or, at your
request, paid by check and mailed to your address. See "How to Buy
Shares--Dreyfus TeleTransfer Privilege."
Share Certificates; Signatures. Any certificates representing Fund shares
to be redeemed must be submitted with the redemption request. Written redemption
requests must be signed by each shareholder, including each holder of a joint
account, and each signature must be guaranteed. Signatures on endorsed
certificates submitted for redemption also must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies, and savings associations,
as well as from participants in the New York Stock Exchange Medallion Signature
Program, the Securities Transfer Agents Medallion Program ("STAMP") and the
Stock Exchange 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. The Fund has committed itself to pay in cash all
redemption requests by any shareholder of record, limited in amount during any
90-day period to the lesser of $250,000 or 1% of the value of the Fund's net
assets at the beginning of such period. Such commitment is irrevocable without
the prior approval of the Securities and Exchange Commission. In the case of
requests for redemption in excess of such amount, the Board reserves the right
to make payments in whole or in part in securities or other assets in case of an
emergency or any time a cash distribution would impair the liquidity of the Fund
to the detriment of the existing shareholders. In such event, the securities
would be valued in the same manner as the Fund's securities are valued. If the
recipient sold such securities, brokerage charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or the
date of payment postponed (a) during any period when the New York Stock Exchange
is closed (other than customary weekend and holiday closings), (b) when trading
in the markets the Fund ordinarily utilizes is restricted, or when an emergency
exists as determined by the Securities and Exchange Commission so that disposal
of the Fund's investments or determination of its net asset value is not
reasonably practicable, or (c) for such other periods as the Securities and
Exchange Commission by order may permit to protect the Fund's shareholders.
SHAREHOLDER SERVICES
Fund Exchanges. Clients of certain Service Agents may purchase, in
exchange for Class A, Class B or Class C shares of the Fund, shares of the same
Class of another fund in the Dreyfus Premier Family of Funds, shares of the same
class of certain funds advised by Founders, or shares of certain other funds in
the Dreyfus Family of Funds, to the extent such shares are offered for sale in
such client's state of residence. Shares of the same Class of such funds
purchased by exchange will be purchased on the basis of relative net asset value
per share as follows:
A. Class A shares of funds purchased without a sales load may be
exchanged for Class A shares of other funds sold with a sales load,
and the applicable sales load will be deducted.
B. Class A shares of funds purchased with or without a sales load may
be exchanged without a sales load for Class A shares of other funds
sold without a sales load.
C. Class A shares of funds purchased with a sales load, Class A
shares of funds acquired by a previous exchange from Class A
shares purchased with a sales load, and additional Class A shares
acquired through reinvestment of dividends or distributions of
any such funds (collectively referred to herein as "Purchased
Shares") may be exchanged for Class A shares of other funds sold
with a sales load (referred to herein as "Offered Shares"), but
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.
D. Class B or Class C shares of any fund may be exchanged for the
same Class of shares of other funds without a sales load. Class
B or Class C shares of any fund exchanged for the same Class of
shares of another fund will be subject to the higher applicable
CDSC of the two exchanged funds and, for purposes of calculating
CDSC rates and conversion periods, will be deemed to have been
held since the date the Class B or Class C shares being exchanged
were initially purchased.
To accomplish an exchange under item C above, your Service Agent acting on
your behalf must notify the Transfer Agent of your prior ownership of such Class
A shares and your account number.
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, your Service Agent acting on your behalf must give
exchange instructions to the Transfer Agent in writing or by telephone. The
ability to issue exchange instructions by telephone is given to all Fund
shareholders automatically, unless 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 (including over The Dreyfus Touch(R) automated
telephone system) 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
reserves the right, upon not less than 60 days' written notice, to charge
shareholders a nominal administrative fee in accordance with rules promulgated
by the Securities and Exchange Commission.
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 shares of the same Class of the fund into which the exchange is
being made.
Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege permits
you to purchase (on a semi-monthly, monthly, quarterly or annual basis) in
exchange for Class A, Class B or Class C shares of the Fund, shares of the same
Class of another fund in the Dreyfus Premier Family of Funds, shares of the same
Class of certain Funds advised by Founders, or shares of certain other funds in
the Dreyfus Family of Funds, of which you are a shareholder. 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 Dreyfus 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 1-800-554-4611. The Fund reserves the right to reject any
exchange request in whole or in part. Shares may be exchanged only between
accounts having identical names and other identifying designations. The Fund
Exchanges service or the Dreyfus Auto-Exchange Privilege may be modified or
terminated at any time upon notice to shareholders.
Dreyfus-Automatic Asset Builder(R). Dreyfus-Automatic Asset Builder
permits you to purchases 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. 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 Dividend Options. Dreyfus Dividend Sweep allows you to invest
automatically your dividends or dividends and capital gain distributions, if
any, from the Fund in shares of the same Class of another fund in the Dreyfus
Premier Family of Funds, shares of the same Class of certain funds advised by
Founders, or shares of certain other funds in the Dreyfus Family of Funds, of
which you are a shareholder. Shares of the same Class 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 with respect to Class A shares by a
fund may be invested without imposition of a sales load in Class A
shares of other funds offered without a sales load.
B. Dividends and distributions paid with respect to Class A shares by a
fund which does not charge a sales load may be invested in Class A
shares of other funds sold with a sales load, and the applicable
sales load will be deducted.
C. Dividends and distributions paid with respect to Class A shares
by a fund that charges a sales load may be invested in Class A
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), but 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 with respect to Class B or Class C
shares by a fund may be invested without imposition of any
applicable CDSC in the same Class of shares of other funds and the
relevant Class of shares of such other funds will be subject on
redemption to any applicable CDSC.
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 ACH member may be so designated. Banks may charge a fee for this
service.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits you to
request withdrawal of a specified dollar amount (minimum of $50) on either a
monthly or quarterly basis if you have a $5,000 minimum account. 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. Automatic Withdrawal
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.
No CDSC with respect to Class B shares will be imposed on withdrawals made
under the Automatic Withdrawal Plan, provided that the amounts withdrawn under
the plan do not exceed on an annual basis 12% of the account value at the time
the shareholder elects to participate in the Automatic Withdrawal Plan.
Withdrawals with respect to Class B shares under the Automatic Withdrawal Plan
that exceed on an annual basis 12% of the value of the shareholder's account
will be subject to a CDSC on the amounts exceeding 12% of the initial account
value. Withdrawals of Class A 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 shares where the sales load is imposed concurrently with
withdrawals of Class A shares generally are undesirable.
Letter of Intent--Class A Shares. By signing a Letter of Intent form,
which can be obtained by calling 1-800-554-4611, you become eligible for the
reduced sales load applicable to the total number of Eligible Fund shares
purchased in a 13-month period pursuant to the terms and conditions set forth in
the Letter of Intent. A minimum initial purchase of $5,000 is required. To
compute the applicable sales load, the offering price of shares you hold (on the
date of submission of the Letter of Intent) in any Eligible Fund that may be
used toward "Right of Accumulation" benefits described above may be used as a
credit toward completion of the Letter of Intent. However, the reduced sales
load will be applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in the
Letter of Intent for payment of a higher sales load if you do not purchase the
full amount indicated in the Letter of Intent. The escrow will be released when
you fulfill the terms of the Letter of Intent by purchasing the specified
amount. If your purchases qualify for a further sales load reduction, the sales
load will be adjusted to reflect your total purchase at the end of 13 months. If
total purchases are less than the amount specified, you will be requested to
remit an amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If such
remittance is not received within 20 days, the Transfer Agent, as
attorney-in-fact pursuant to the terms of the Letter of Intent, will redeem an
appropriate number of Class A shares of the Fund held in escrow to realize the
difference. Signing a Letter of Intent does not bind you to purchase, or the
Fund to sell, the full amount indicated at the sales load in effect at the time
of signing, but you must complete the intended purchase to obtain the reduced
sales load. At the time you purchase Class A shares, you must indicate your
intention to do so under a Letter of Intent. Purchases pursuant to a Letter of
Intent will be made at the then-current net asset value plus the applicable
sales load in effect at the time such Letter of Intent was executed.
Corporate Pension/Profit-Sharing and Personal Retirement Plans. The Fund
makes available to corporations a variety of prototype pension and
profit-sharing plans, including a 401(k) Salary Reduction Plan. In addition, the
Fund makes available Keogh Plans, IRAs (including regular IRAs, spousal IRAs for
a non-working spouse, Roth IRAs, IRAs set up under a Simplified Employee Pension
Plan ("SEP-IRAs"), Rollover IRAs and Education IRAs) and 403(b)(7) Plans. Plan
support services also are available.
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 $1,000
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 you should consult a tax adviser.
DETERMINATION OF NET ASSET VALUE
Valuation of Portfolio Securities. The Fund's investments are valued each
business day using available market quotations or at fair value as determined by
one or more independent pricing services (collectively, the "Service") approved
by the Fund's Board. The Service may use available market quotations, employ
electronic data processing techniques and/or a matrix system to determine
valuations. The Service's procedures are reviewed by the Fund's officers under
the general supervision of the Board. Expenses and fees, including the
management fee (reduced by the expense limitation, if any) and fees pursuant to
the Shareholder Services Plan and, with respect to the Class B and Class C
shares only, the Distribution Plan, are accrued daily and are taken into account
for the purpose of determining the net asset value of the relevant Class of
shares. Because of the difference in operating expenses incurred by each Class,
the per share net asset value of each Class will differ.
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 the Fund has qualified as a "regulated investment
company" under the Code for the fiscal year ended December 31, 1999. The Fund
intends to continue to so qualify if such qualification is in the best interests
of its shareholders. As a regulated investment company, the Fund pays no Federal
income tax on net investment income and net realized capital gains to the extent
that such income and gains are distributed to shareholders. If the 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
dividend or distribution and all future dividends and distributions payable to
you in additional Fund shares at net asset value. No interest will accrue on
amounts represented by uncashed distribution or redemption checks.
Any dividend or distribution declared and paid shortly after your purchase
may have the effect of reducing the aggregate net asset value of your shares
below the cost of your investment. Such a distribution would be a return on
investment in an economic sense although taxable as stated in the Prospectus. In
addition, the Code provides that if a shareholder has not held his shares for
more than six months and has received a capital gains dividend 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 received.
Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gain or loss. However, 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.
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, 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.
PORTFOLIO TRANSACTIONS
Portfolio securities ordinarily are purchased from and sold to parties
acting as either principal or agent. Newly-issued securities ordinarily are
purchased directly from the issuer or from an underwriter; other purchases and
sales usually are placed with those dealers from which it appears that the best
price or execution will be obtained. Usually no brokerage commissions, as such,
are paid by the Fund for such purchases and sales, although the price paid
usually includes an undisclosed compensation to the dealer acting as agent. The
prices paid to underwriters of newly-issued securities usually include a
concession paid by the issuer to the underwriter, and purchases of after-market
securities from dealers ordinarily are executed at a price between the bid and
asked price. No brokerage commissions have been paid by the Fund to date.
The Fund's annual portfolio turnover rate for the current fiscal year is
not expected to exceed 500%. A portfolio turnover rate of 100% is equivalent to
the Fund purchasing and selling all of the securities in its portfolio once in
the course of a year. Higher portfolio turnover rates usually generate
additional brokerage commissions and transaction costs (which, however, the Fund
typically does not incur when it purchases portfolio securities) and the
short-term gains realized from these transactions are taxable to shareholders as
ordinary income.
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.
Transactions are allocated to various dealers by the Fund's portfolio
managers in their best judgment. The primary consideration is prompt and
effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected for research, statistical or
other services to enable the Manager to supplement its own research and analysis
with the views and information of other securities firms and may be selected
based upon their sales of shares of the Fund or other funds advised by the
Manager or its affiliates.
Research services furnished by brokers through which the Fund effects
securities transactions may be used by the Manager in advising other funds it
advises and, conversely, research services furnished to the Manager by brokers
in connection with other funds the Manager advises may be used by the Manager in
advising the Fund. Although it is not possible to place a dollar value on these
services, it is the Manager's opinion that the receipt and study of such
services should not reduce the overall expenses of its research department.
PERFORMANCE INFORMATION
Current yield for the 30-day period ended December 31, 1999 was 5.39% for
Class A, 5.13% for Class B and 4.86% for Class C. Current yield is computed
pursuant to a formula which operates, with respect to each Class, as follows:
the amount of the Fund's expenses with respect to such Class accrued for the
30-day period (net of reimbursements) is subtracted from the amount of the
dividends and interest earned (computed in accordance with regulatory
requirements) by the Fund with respect to such Class during the period. That
result is then divided by the product of: (a) the average daily number of shares
outstanding during the period that were entitled to receive dividends, and (b)
the maximum offering price per share in the case of Class A or the net asset
value per share in the case of Class B or Class C 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 1, 5 and 10 year periods ended
December 31, 1999 for Class A was -3.77%, 6.07% and 6.73%, respectively. The
average annual total return for Class B for the 1, 5 and 6.96 year periods ended
December 31, 1999 was -3.59%, 6.19% and 5.17%, respectively. The average annual
total return for the 1 and 4.21 year periods ended December 31, 1999 for Class C
was - 0.99% and 4.62%, respectively. Average annual total return is calculated
by determining the ending redeemable value of an investment purchased at net
asset value (maximum offering price in the case of Class A) per share 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
provides that in the case of Class A the maximum sales load has been deducted
from the hypothetical initial investment at the time of purchase or in the case
of Class B or Class C the maximum applicable CDSC has been paid upon redemption
at the end of the period.
The total return for the period January 29, 1987 (commencement of
operations) through December 31, 1999 for Class A was 155.36%. Based on net
asset value per share, the total return for Class A was 167.34% for this period.
The total return for Class B for the period from January 15, 1993 (commencement
of initial offering of Class B shares) through December 31, 1999 was 42.05%. The
total return for Class C for the period October 16, 1995 (commencement of
initial offering of Class C shares) through December 31, 1999 was 20.95%. Total
return is calculated by subtracting the amount of the Fund's net asset value
(maximum offering price in the case of Class A) per share at the beginning of a
stated period from the net asset value per share at the end of the period (after
giving effect to the reinvestment of dividends and distributions during the
period), and dividing the result by the maximum offering price 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 shares or
without giving effect to any applicable CDSC at the end of the period for Class
B or Class C shares. In such cases, the calculation would not reflect the
deduction of the sales load with respect to Class A shares or any applicable
CDSC with respect to Class B or Class C shares, which, if reflected, would
reduce the performance quoted. The total return for Class B shares takes into
consideration a conversion to Class A shares after six years. Since the periods
covered for Class B and Class C are beyond the period for which a CDSC would be
applied, no CDSC is factored into the aggregate total return quoted above for
Class B and Class C.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., Morningstar, Inc., Bank Rate MonitorTM, N. Palm
Beach, Fla. 33408, Moody's Bond Survey Bond Index, Lehman Brothers Mortgage
Backed Bond Index, Salomon Smith Barney Corporate Bond Rate-of-Return Index,
Bond Buyer's 20-Bond Index and mortgage trade and other publications. In
addition, data may be used in comparing the difference in yields between Ginnie
Maes and comparable term Treasury Notes (which are direct obligations of the
U.S. Government).
From time to time, the Fund may compare its performance against inflation
with the performance of other instruments against inflation, such as short-term
Treasury bills (which are direct obligations of the U.S. Government) and
FDIC-insured bank money market accounts. In addition, advertising for the Fund
may indicate that investors may consider diversifying their investment
portfolios in order to seek protection of the value of their assets against
inflation.
From time to time, Fund advertisements may include 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. Advertising
material for the Fund also may include biographical information relating to its
portfolio managers and may refer to, or include commentary by a 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.
From time to time, advertising materials may refer to studies performed by
the Manager or its affiliates, such as "The Dreyfus Tax Informed Investing
Study" or "The Dreyfus Gender Investment Comparison Study" or other such
studies.
INFORMATION ABOUT THE FUND
Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. Fund shares
have no preemptive or subscription rights and are freely transferable.
Under Massachusetts law, shareholders, under certain circumstances, could
be held personally liable for the obligations of the Fund. However, the Fund's
Agreement and Declaration of Trust ("Trust Agreement") disclaims shareholder
liability for acts or obligations of the Fund and requires that notice of such
disclaimer be given in each agreement, obligation or instrument entered into or
executed by the Fund or a Trustee. The Trust Agreement provides for
indemnification from the Fund's property for all losses and expenses of any
shareholder held personally liable for the obligations of the Fund. Thus, the
risk of a shareholder's incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund itself would be unable
to meet its obligations, a possibility which management believes is remote. Upon
payment of any liability incurred by the Fund, the shareholder paying such
liability will be entitled to reimbursement from the general assets of the Fund.
The Fund 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.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the 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 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. 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 an exchange request is refused, the Fund will take no other
action with respect to the Fund 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 the 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.
To offset the relatively higher costs of servicing smaller accounts, the
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 $25,000,
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.
The Fund sends 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 Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the shares
being sold pursuant to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as independent auditors of the Fund.
YEAR 2000 ISSUES
The Fund could be adversely affected if the computer systems used by the
Manager and the Fund's other service providers do not properly process and
calculate date-related information from and after January 1, 2000. The Manager
has taken steps designed to avoid year 2000-related problems in its systems and
to monitor the readiness of other service providers. In addition, issuers of
securities in which the Fund invests may be adversely affected by year
2000-related problems. This could have an impact on the value of the Fund's
investments and its share price.
